Five Tips To Avoid Blowing Thousands On A Used Car
Jul 31, 2013
-
Buying a used car is always a chancy proposition. But used vehicles can also present a huge savings to those who are watching their dollars. It can be a happy experience, but only if you use the right tools and don't make mistakes that can cost you thousands of dollars that would look much better in your bank account than the used car sales-person's.
This story was inspired by a reader who recently asked us for advice on whether she could sell her 2009 Toyota Corolla, buy a cheaper car and clear some cash to pay some bills. We looked into it, and the news wasn't good. Because she overpaid for the car in 2011, she is upside-down in her loan by $2,000.
Here are the tools and mistakes to avoid:
Photo Credit: dno1967b -
1. We understand that sometimes you just absolutely want a specific car like a BMW 3 Series or Cadillac CTS-V. But if what you are looking for is reliable wheels at a good value, then have an open mind and a list of maybe five possibles. Our reader, Mary R. from Michigan decided she wanted a Toyota Corolla and nothing else when she could have been cross-shopping a half dozen comparable cars to get the best value and potentially give her local seller competition and an incentive to bring the price down. In this case, Mary should have also been shopping comparables like Ford Focus, Honda Civic, Chevy HHR, Subaru Impreza, Hyundai Elantra.
-
3. Use some savvy about choosing your car. There are very reliable cars that were either unpopular with the public, or stuffed into rental car fleets. These are the cars that depreciate the fastest, meaning that you can still enjoy a lot of life these cars have to give, but at a deep discount to the prices charged for more popular cars.
Examples of these quick depreciating and marginally popular vehicles Mary could have chosen include any of the cars we mentioned above as comps to the Corolla. The comparable Chevy HHR with the same 65,000 miles as the Corolla has a trade-in value of $8,301 and a retail price of $11,476. That's $400 less than the Corolla, but I'd bet that the price to drive it off the lot could be hammered down by another $800 at least, for a $1,200 discount to the Corolla. The comparable Hyundai Elantra has a trade-in of $8,645 and a retail price of $11,870.
Look for lower mileage even if you get a car that is a year older. If this is a car you figure to drive until it drops, I would look for a car with low miles even if it is a little bit older. For example, Felicia B. from Bernardsville, NJ asked us to hep her find a good used car. We directed her to a 2006 Acura MDX with 70,000 miles on it, and one owner. The suggested Kelley Blue Book retail value was $17,328, and the dealer trade-in value was only $13,178. We advised her to offer $14,200, and that was what she was able to get it for. That was a better value for her money that a 2009 she looked at with 100,000 miles. That car's suggested retail price was $24,394 and even the trade in price the dealer paid was around $19,000. She plans to drive the car until it gives up the ghost, so taking the lower mileage on the older car was a much better fit for her budget and we helped her get a great price on that car. -
5. Let's say you are ready to make the first contact with a dealer on a car you are interested in. Visit the dealer and test drive the car. When you talk to the dealer, who will be trying hard to close you that day, stand firm and tell him you are looking at two other cars at two other dealerships. You will let him know after you drive the other two how you feel about the car. This usually starts the conversation about discounting off the asking price because he or she doesn't want you to shop elsewhere. Thank him or her, but assure them you are going to look at two other cars before signing on the dotted line. At the same time, assure the sales person you are definitely in-market and have to get a new car, and you aren't just window shopping.
Understand the dynamic here. He or she wants to sell that car, and you want it at the best possible price. He or she negotiates every day, so they are good at it. You do it once every few years, if that often, so use these tools to narrow the experience gap.
If saving potentially a couple thousand dollars is important go and check at least two other cars, and repeat the process. Insist they contact you by email to make it simpler. And don't be afraid to play one off the other. "I like the Corolla, I really do. But frankly, the other car I am looking at has more equipment and the discount off the sticker is better than you are offering, and value for my dollar is very important to me." You never need tell the salesperson you are working what the other vehicles are. Just say they are "very comparable."
