How To Get A Good Deal On A Used Car
You want to buy a used car? Good for you! A new car will depreciate about 10% the moment it leaves the lot, and another 20% within its first year. After three years, the average car is worth about 60% of what it was when new. That might be depressing news for the original owner, but it represents a screaming deal for the prudent used-car buyer.
That one- to three-year-old car will likely still be under the manufacturer’s warranty, and unless it’s been abused, is likely to offer many more years of good service. The average vehicle on the road was 11.4 years old, according to the research R.L. Polk did in 2013. Also, consider that the used car marketplace is huge — about 40 million used vehicles change hands each year, dwarfing the 16 million in new car sales.
So, how do you make sure you get a good deal? To the Internet! (For more, see: The Complete Guide to Buying a Used Car: How to Negotiate Prices.)
“Do everything you can before physically going to buy the car,” said Philip Reed, a senior consumer advice editor at automotive review site Edmunds. That means researching what make and model you’re interested in, and how much they sell for in your area. By researching specific vehicles that have the features and mileage you’re looking for, you introduce competition to the car-buying process. A seller might not match the lowest price you find, but it can’t hurt to ask.
Edmunds is a good resource for auto shoppers. It, along with Kelley Blue Book and National Automotive Dealers Association track new and used car purchases to provide granular pricing information. “We collect tens of thousands of transactions per week from wholesale auctions, dealers both large and small, vehicle registration data, listing data, and other sources,” said Alec Gutierrez, senior analyst for Kelley Blue Book of his organization’s process. “This data is then cleansed, normalized, and run through a statistical modeling process.”
Some of the automotive magazines — particularly the largest, Car and Driver — are also useful for their lengthy backlog of reviews with a slant towards driving enthusiasts. (For more, see: Just What Factors into the Value of Your Used Car?)
Check It Out
Once you’ve determined what you want to buy, and what they sell for, it's time to check out the car, take it for a test drive, and make sure everything the seller says about it is true. Get the vehicle history report (Carfax and AutoCheck are two popular choices) to confirm the odometer reading, ownership history and reports of accidents and flood damage. (For more, see: 10 Tips for Buying a Car Online.)
When shopping, note that dealers usually charge at least 10% more than private sellers. Most people selling cars aren’t professional salespeople, and are not as skilled at haggling. Also, they might be moving, or, having purchased a new car, need to make space in the driveway. Before you hand a private seller your money make sure they’ve signed the title (also called the pink slip) over to you. You’ll also need to insure the car before you drive it away. It’s a less structured process than buying from a dealer, but if you’re looking to save as much as possible, and if you trust the seller, a private party purchase could work. (For more, see: How to Get the Best Deal When Buying or Selling a Car.)
Sure, it's a markup, but that dealer’s markup can come with substantial advantages. First off, it’s a lot easier to shop a range of cars from a dealer’s lot than schlepping all over town to cross-shop individual sellers. Dealers are also more likely to clean and perform a basic inspection of a car, plus they’re governed by Federal Trade Commission rules as well as state and local regulations. “If you buy from an established business, it has a reputation to uphold,” Reed said. “In many instances, they’ll also offer some sort of warranty — even if it’s only for 30 days.” He noted though, that buyers should ask how warranties will be honored and where any needed repairs will be made.
If you want a used car, but are nervous about reliability, you might want to look into factory-certified offerings. (For more, see: The Complete Guide to Buying a Used Car: What to Look For in a Used Car.)
Certified pre-owned (CPO) are offered by most luxury brands, such as Lexus, Lincoln and Mercedes-Benz, but also mainstream makes such as Nissan and Chevrolet. CPO vehicles are thoroughly inspected, any maintenance issues are addressed, and they are cosmetically sound — no shredded interiors, bashed fenders or missing trim. When talking to a dealer (by their nature, certified cars are sold through dealers, not private individuals) about a certified car, have them show you its inspection report, which will list all of the areas checked, whether or not there were any recalls on the model, and even details such as tire thread depth and the thickness of the brake pads. CPO cars tend to have less wear and tear. Mercedes, for instance, will only certify cars six years old or less, with fewer than 75,000 miles. The German brand then adds a year and unlimited miles to whatever initial warranty is left, plus 24-hour roadside assistance, trip-interruption protection, and service loan cars. (For more, see: Cars That Depreciate in Value the Most.)
You pay extra for CPO cars, however. “There’s usually a $1,000 premium,” Reed said. “But you’re getting the cream of the (used car) crop. It turns used-car buying into a new-car-buying experience.”
Like new cars, CPO vehicles are best purchased at the end of the month, when dealers are looking to make quotas and are more receptive to haggling. Regular used car sales are not generally cyclical this way, though timing can still be employed. For instance, if you live in an area that gets a lot of snow, you’ll likely get a better deal on a convertible in the fall and winter months. Conversely, there’s usually an uptick in all sales around April, when people blow their tax refunds, so avoid shopping then, if possible. (For more, see: 5 Tips for Dealing with Car Dealers.)
Don't Count out the Discontinued, Slow Selling
Buying a car that’s been discontinued or slow selling is another good option. Dealers have a finite amount of space, and will heavily discount these vehicles to make way for new models. I bought my 2006 PT Cruiser convertible in 2007 at slightly over half the $30,000 list price. It only had 12 miles on the odometer and was a used car in name only, but after months languishing on the dealer’s lot, he was ready to make a deal.
Recently discontinued models include the Subaru Tribeca, a mid-sized seven-seat SUV that never sold well, Honda’s Insight hybrid, and Toyota’s FJ Cruiser, a hard-core off-roader. If any of these vehicles appeal to you, you should be able to get a good price on any leftover (but basically new) models stuck on dealer lots. Some continuing models are also worth looking at, as leftover 2014 editions will be discounted to make way for the incoming 2015s. In particular, note that the best-selling vehicle in America — Ford’s F-Series pickup truck is getting a major overhaul for the 2015 model year. Leftover 2014 models are heavier and less aerodynamic than the incoming trucks, but saving hundreds on the purchase price should make up for that. On the opposite end of the automotive spectrum is the gorgeous, 10-cylinder Viper. It’s been selling so poorly that Dodge has discounted the starting price by $15,000 on 2015 and remaining 2014 editions.
The Bottom Line
If you know what you want and what it should cost, you’re halfway there. Check NADA, Kelley Blue Book or Edmunds for pricing information. Both dealers and private sellers have their advantages and disadvantages, but thoroughly inspect and test drive any car prior to purchase, and get its vehicle history report. For a nearly new used car, CPO programs and leftover models are worth a look. (For more, see: 5 Ways to Buy a Used Car.)