The Best Tips for Buying a Used Car

THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLOSURE FOR MORE INFO.

 

used carI have never bought a vehicle from a dealership.  In fact, I’ve never even stepped foot into a dealership with the intention to buy a vehicle.  Since I turned 16 and started to drive, I have been a car owner.  In fact, I’ve owned eight different cars so far, from an Isuzu Amigo to a Lexus LS400.  Each time I bought a car, it was either through family (thanks Dad) or through purchasing the vehicle directly from an owner through a private party sale.

 

Growing up, my Dad only bought used cars.  As most of you know, many of our parent’s values end up becoming our own values.  Anytime my Dad was searching for his next used car, I was always right there with him, helping to scour the Classifieds section.  

 

To me, it was loads of fun trying to find an amazing vehicle for my Dad at a great price.  I garnered a ton of experience looking through ads, so when it came my time to buy my own vehicle, I didn’t even think about buying a new car.  I went straight to the Classifieds.  

 

One of the reasons that I opt for used cars is because of depreciation.  On average, the minute you drive off the lot, the vehicle loses 9% of its value.  This is astounding.  A friend of mine tried returning his vehicle after driving it for 30 days and realizing it wasn’t the car for him.  The dealership did not offer him close to what he was expecting and hoping for.  In fact, they offered him 20% less than what he had paid.  My friend thought he could return it like a pair of pants and get a full refund.  While he was shocked, he still took the offer because he just hated the vehicle.  All that to say, he doesn’t buy brand-new cars anymore!

 

Depreciation

On average, a new car loses 19% of its original value after the first year.

After 2 years… it drops by 31%.

After 3 years… it drops by 42%.

After 4 years… it drops by 51%.

After 5 years… it drops by 60%.  

 


Source: How Fast Does A New Car Lose Value

 

And that is why I love to buy cars that are older than five years old.  On average, the typical U.S. car owner holds onto a new car for 6.5 years.  That means that I should theoretically be able to purchase a car for 60%+ less than what the owner originally paid for it.

 

I don’t know about you, but seeing those depreciation figures is very unpleasant.  I suppose that is why I’ve never really valued cars.  I’ve always looked at them as something to get me from point A to point B.  I’d rather save that money and invest in appreciating assets.

 

Great Deals

used carOf the eight cars that I’ve ever owned, only one of them, a Saab 9-3, has been a complete lemon.  I ended up selling it three months after purchasing it, once I had replaced both the clutch and the transmission.

 

Other than that Saab, I’ve been able to find some great deals through private party purchase.  I typically end up driving them for a few years before selling them for.  

 

With Craigslist today, I find that it’s even easier to spot a great deals.  I always check Consumer Reports and J.D. Power to determine which vehicles are most reliable.  It shouldn’t shock you to find out that Lexus makes some of the most reliable vehicles.  As a result, I’ve owned three different Lexuses over the years. I love that these cars rarely spend any time in the shop.  It make for a much more enjoyable experience!

 

So, what are my secrets to buying great used cars?

 

Know Your Price

used carThe first thing I always do is figure out how much money I am willing to spend on a specific car.  The Kelley Blue Book website is a great resource to get a feel for what that vehicle is currently selling for.  Typically for private party sales, there are four different prices quote categories.  

 

KBB Categories

“Excellent” is the highest amount someone should theoretically spend on the vehicle.  This means that the car looks brand new and is free from any defects.  Less than 5% of cars fall into this category.  “Good” is the next highest.  It should describe a vehicle that is free from any major defects.  The only issues should really be minor cosmetic ones.  Most cars without any big issues should fall into this area.  The final two areas are “Fair” and “Poor”.  Fair means that there are some mechanical issues, while Poor suggests a poor running condition.  I don’t even bother looking for vehicles in this range because I don’t have the mechanical acumen or the excess money to rehabilitate them.

 

When trying to figure out what price I should be paying, I always look at “Good” condition of the vehicle price.  That is the type of car that I ideally want and can afford.  Plus, it gives me some wiggle room on negotiating down on a price.  

 

So once I have determined the price that I’m going to pay based on the Kelley Blue Book value, I start to comb through the ads.  

 

Mileage

used carI always try to find vehicles that have been driven less than 12,000 miles a year.  That means if it’s a 2010 model, that the vehicle should have less than 84,000 miles total on it.  I’ve found that vehicles with lower miles tend to have less problems and have been a bit more gently cared for.  As a result, there is also usually less wear and tear on the vehicle.

 

Clean Title

I also check to make sure that the title is clean and that the vehicle has not been salvaged.  If it’s been salvaged, that means that the vehicle has been considered a total loss, but the owner decided to repair it.  Personally, I don’t want to deal with a vehicle that may not have been put back together correctly.

 

Questions to Ask

Once I have determined if the car passes those basic criteria, I have a list of questions that I always ask a potential seller.

 

  1. Are you the original owner?

 

I have found the more owners a vehicle has, the higher the chance that the vehicle is a lemon.  Plus you can’t really be sure of all of the problems associated with a vehicle if there have been multiple owners.  Being able to speak with the original owner makes it much easier to obtain the service records to know the complete history of the car.

 

  1.  Has the car ever been smoked in?

 

My Dad bought an old Buick from an estate sale when I was a kid.  He got a steal of a deal on the it because the previous owner frequently smoked cigars in the car.  The car reeked, but my Dad was convinced that he could get the smell out.  Well, he tried every home remedy and chemical and still was not able to completely get rid of the smell.  I would get headaches every time I rode in it.  My family rejoiced when my Dad got rid of it.  Needless to say, it’s important for me to make sure that the car hasn’t been smoked in.

 

  1.  used car 2017 things to doHas the car ever been in an accident?

 

An accident can be a big indicator of frame damage.  Personally, I look for vehicles that have never been in an accident because it means there’s less of a chance that there was a sloppy repair done.  On top of that, since I always obtain a Carfax report when buying a vehicle, I want to know if the seller is being honest with me.  If they tell me that the vehicle has never been in an accident, but the Carfax says it was, I can confidently walk away.

 

  1.  Was the car garage-kept?

 

Living on the East Coast, a garage-kept car is ideal.  It lessens the chances that the car has sat under the scorching sun or in heaps of snow for long periods of time.  Plus, if the vehicle has been garage-kept, the lesser the chance of rust.

 

  1.  used carDoes the car have any rust?

 

Pictures can be deceiving.  Always ask about rust before going out to see the vehicle.  I once drove a long way to look at a car.  When I looked at the underside of the carriage, I found so much rust.  After wasting all that time, I learned my lesson.

 

  1.  Why are you selling it?

 

I like hearing why people are selling the vehicle.  Living in the DC area, I typically hear that people are either moving overseas, downsizing since they’re retiring, or upgrading because of a growing family.

 

I don’t think anyone would be stupid enough to say that they are selling the car because it’s a lemon.  But, I do think the question is open-ended enough that you should receive some helpful insight.

 

Inspecting the Vehicle in Person

If I receive sufficient answers to all of those questions, I feel pretty confident about the vehicle.  Then comes the fun part; I get to see the vehicle in person.  I’m not a gear-head though, so it’s not like I can pop the hood and know everything that I’m looking at.  

 

But, here are some tips that I’ve gathered along the way while inspecting a vehicle in person.

 

Superficial Problems May Indicate More Serious Issues

used carAlways walk around the car and inspect it for any dents or gaps in the body.  You can tell if a car has been in an accident if the body shop did a poor job in putting it back together.  There might be gaps on the hood, or something along those lines.  While walking around the car, also look for any rust, paint problems and scratches.

 

Tires

used carBring a penny with you.  Place Abe’s head upside down in the tread, and that will let you know if there is still tread in the tire.  If Abe’s forehead is covered, you’re good to go.  If not, the tires are balding and need to be replaced.

 

Leaks

Make sure that you pop the hood and look underneath for any types of leaks or corrosion.  If you see any dark brown oil stains, this will let you know that there is a leak somewhere, which can be costly.

 

In addition, if you pull out the oil filler cap and you see any foaming, run.  This means that a head gasket is leaking, which is a big expense to deal with.

 

Timing Belt

Finally, check the timing belt.  These usually last between 60-100k miles, if it is not a steel timing chain.  A steel timing chain should never need replacing.  

 

Seeking an Expert

used carIf you feel uncomfortable trying to assess a vehicle on your own, it is easy to contact a local mechanic or take the vehicle elsewhere to get an inspection.  Typically, it’s a nominal cost.  In my area it runs around $100, and they’ll comb over the car to let you know if there will be any problems down the road.  

 

Personally, I’d rather pay $100 extra for an independent mechanic’s time to look over a car than a dealership’s mechanics, but that’s just me.

 

Final Price

If the vehicle is up to your standards after all of that, I always ask the buyer if they are flexible on the price.  The worst they can say is no.  If they say yes, that’s when you can start to negotiate to a price that you both feel comfortable with.

 

Once you reach a deal, I always go to the bank to get a certified bank check.  That way you’re not carrying a wad of cash with you.  

 

Title and Bill of Sale

When you complete the transaction, make sure that you receive the signed title from the owner as well as receive a Bill of Sale.  In case you’re wondering, you can find a sample Bill of Sale from the DMV here.  

 

After you register the car with the DMV, make sure to add the car to your insurance policy, and you’re good to go.  I’ve had a lot of luck buying used cars using the process I described above.  I hope it will be helpful for you too!

 

So readers, have you bought a used car before?  Do you have any other useful tips or tricks?  Share below.

Mustard Seed Money

Welcome to the website. A mustard seed is a very small seed but astonishingly grows very large over time. My hope is that through your financial journey that your small investment in time, money and faith will grow beyond anything that you could ever imagine.

43 Comments

  1. This post provides SO much helpful information! Mr. FAF and I bought a new car at my FIL’s suggestion (request) after we had our son because he was worried about the safety of our $1.5k beat-up Toyota Corolla. But we have decided next time we will look at used cars first. I will definitely reference your post then.
    Ms. Frugal Asian Finance recently posted…How Frugality Brought Us Together As A CoupleMy Profile

    • I can definitely understand the safety aspect of some of the newer cars. Thankfully most of the newer used cars that I’ve bought have had those same safety features.

  2. My first car was a fourteen year old Corolla. I got it for free from a family friend and spent about $1800 fixing it to make it road worthy. I got about four great years out of that car and I really enjoy owning it.

    I have never bought a use car before, but I have bought two new vehicles from the dealers. I don’t really like the process as it takes too long and there’s just too much
    Acting from the sales people.

    My two car purchasing experience was kind of so-so. I would definitely recommend that people do their homework and shop with another person.
    Leo T. Ly @ isaved5k.com recently posted…Basic Investment ConceptsMy Profile

  3. Thanks for the great car buying tips. I too only buy used, but certified used from dealers. Another way to save money is to expand the area where you are looking. I expanded it from 25 miles from my zip code to 100. I ended up saving about $4k because I was will to drive 2 hours to buy the car.
    Dave recently posted…Stocks: Buy Low, Sell HighMy Profile

  4. For a few years now I’ve been strongly against buying new cars. Depreciation is crazy. Most newer models easily go over 150k miles so even if you buy something with 10-20k miles on it, it will have depreciated quite a bit and still last you many years….win win 🙂
    SMM recently posted…Simple Fund Comparison – SCHD VS VIGMy Profile

  5. Great Tips. Last year we bought a “new to us” truck (2013) for over 50% less than the original sticker price. Huge savings that took months of searching and test drives, but well worth it. My wife’s 2005 vehicle is approaching 160,000 miles and will need to be replaced in the next few years, but I have already started searching. This will help to narrow down the make and model when the times comes.

    BTW – Great Firebird picture on the main page. My dad has a 1969 one same fire engine red color.
    fibythecommonguy recently posted…DIY Fence BuildMy Profile

  6. We usually buy new cars and keep it for 10+ years. We did purchase a 2 year old car once at a significant discount and kept it for 10 years. Looks like buying a 5 year old car 60% discount is really good option.

    Typically, do you buy two year old or five year old cars? Is there a rule of thumb you use in terms of the age of the car?

    • We normally buy cars that are five years or older. Mainly because it fits into the price range that we’re looking to buy. Plus they depreciate a lot less quickly 🙂

  7. My first two cars were used, but unfortunately the second one was a lemon and it really “soured” me on the experience. Since I’m not mechanically inclined, I want to make sure I have a reliable ride. But you can’t argue with the depreciation numbers. You’ve outlined a great process for finding a good used car!
    Gary @ Super Saving Tips recently posted…The Money Quiz That Can Change Your LifeMy Profile

    • Thanks Gary for stopping by!!! I can definitely understand why buying a lemon would turn you off. I’ve had one of those as well and chalked it up to bad luck at the time. I got rid of that in a hurry and was able to find another more reliable more quickly 🙂

  8. My first car was new and it is a Camry. I plan to drive that thing over 200,000 and own it for a long, long time. I didn’t mind buying it new with the intent to hold for a while. That being said, we just purchased a certified used car for my wife (also a Toyota). After that experience, I don’t think I am ever going to buy a new car again and will continue to go this route going forward. One thing to mention is that you should give yourself plenty of time to buy a car if it is used. If you wait till the last second, you may not get the deal you want or the inventory may not have the right car available. A ton of information is available, so you should know instantly if the price is good or not.

    This is a great list for any new car buyer! Thanks for putting it together.

    Bert
    Dividend Diplomats recently posted…Lanny’s Recent Stock Purchase – Delta Airlines (DAL)My Profile

  9. Cool Post with great tips.
    We prefer to buy demonstration cars as they are in a excellent state and sometimes offered at very attractive discounts. We want the car to keep a good resale value as we bring it into price negotiations when we buy the next car. We always pay in cash and try to get attractive features (e.g. Workshop insurance, breakdown service etc.) in addition to an attractive price.
    Cheers
    Financial Shaper recently posted…6 investments I made in 2017My Profile

    • Wow I’ve never bought a demo car but that makes a lot of sense. I can see why they’d be in such high demand and in great shape. I’ll have too look into that. Thanks for sharing!!!

  10. Very nice info graph. Crazy how fast it loses value. That is why I really categorize a vehicle as a liability because it doesn’t make you cash and it just decreases at a rapid rate. It is just kinda a necessity though depending on where you live. That is how most people go into debt. Take out a huge loan for a new car and within a few years the resell value is long gone and they are still spending years paying it off. Ends up costing them even more with interest on top of that. Just need to be smart about big ticket expenditures like that.
    Dividend Daze recently posted…Real Estate vs Dividends – What is better for Retirement Income?My Profile

  11. I’ve only had two cars in my life. I bought them both new at the dealer, but I kept them for several years. I gave up my car 4 years ago and don’t look back. Buying and maintaining cars is such a hassle, especially since I live in the city and only work two days a week. It just doesn’t make sense for me to own right now. However, I would consider a used fun car in the future sometime.
    Primal Prosperity recently posted…Thank you Mother Nature. You saved 2017.My Profile

    • That would be my wife’s dream!!! To never own a car and to walk everywhere. My wife is made for city living and I’m sure would be super jealous of your lifestyle.

  12. hey, mate
    Appreciated all the detailed and meaningful information about buying classified cars. A friend of mine, he deals in classified cars and I m in planning to buy second hand car from him. And your article helped me to gain a bit more knowledge about the car. appreciated it, keep it up.

  13. My little brother is about to start college and will need a vehicle to get around with. He’s looking at buying a used car to drive. I like your tip about finding a car that has been driven less than 12,000 miles a year. Finding a clean title also seems like a great way to getting a good used car.

  14. I like what you recommend about inspecting things like the quality of the tires, whether there are leaks, and even more complicated things like if there are belt squeals or fraying. It makes sense that it can be particularly important to check the belt if the car has relatively high mileage. Thanks for the post; these tips could really help me find a used car that could last me a long time and that won’t need constant repairs.

  15. Thanks admin for your valuable info.Your ideas and sharing both are simply outstanding.Your tips are really helpful to understand the importance of car buying process.
    First-time car buying decisions need to require some serious brainstorming to determine the best outcome. I was simply stumped on choosing the best car buying process which saves my time and money for me.Even tried a different online search but I failed.I found your article more interesting and useful as a tool which could help me explore my car buying ideas in this sector and help to get the creative juices flowing.

  16. Great article, I am a firm believer in buying used and with cash. I never have been able to get my head wrapped around spending thousands of dollars on a new vehicle or taking out a loan on an asset that depreciates year after year.

    • You and me both Kevin!!! While I thought it would be nice to have that new car smell the costs involved is not something that I am super interested in paying for. Maybe I can get a spray to make up for it 🙂

  17. Wow. Nice infographics you’ve listed there and very informative as well! It actually took me 3 times to re-read your article to understand everything. Thanks for sharing this with us and keep up the great work!

  18. My dad once told me ‘Before buying a used car don’t forget about an inspection’. So I did. When I bought my Mazda MX-5 (2010) last year in NZ I got a VINZ pre-purchase inspection, just to be sure that the car is roadworthy. It’s better than spend money on a repair.

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge