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I 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!
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%.
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.
Of 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
The 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.
“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.
I 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.
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.
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.
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.
Has 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.
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.
Does 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.
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
Always 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.
Bring 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.
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.
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
If 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.
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!