4. How to buy used/pre-owned car, PWF/FWF style

How to buy used/pre-owned car, PWF/FWF style

  • R

    When you do the financial argument, used (pre-owned) is probably the best value if you do want to buy a car (especially higher retail cost vehicles).

    I am sure others will chime in and some will find some rather difficult means to save even more, but I will try to cover the major categories that I come across.

    Times are changing fast. Some aspects of used car sales have made it better for the buyer, others have made it worse. I will try to cover some key categories for most buyers that I am seeing these days.

    First steps recommended:
    -Determine your max budget including tax, fees, warranty, etc… If this includes finance needs, consider that too, but don’t apply yet for any loans.
    -Determine which model, max number of acceptable miles, trim requirements (color, interior, features, etc.) year (I recommend you consider miles before model year). You might decide to pursue a few models, but the faster you get to just 1-2 models, the easier this process becomes. It is very possible that you will have to restart if you find the preferred models just don’t match up in the used market (inventory, cost, condition, etc.)
    -When considering your favorite models/years, visit edmunds/kbb/other review sites to read the reviews both from when the model came out and follow-up notes. Look at owner forums to determine common issues and how they were fixed. Especially for older cars, issues tend to happen commonly I think because of a design or other operational issue.

    Second:
    -Determine from what venue are you willing to buy the car and from how far away.
    -If you are afraid of the unknown or attributes or just not very good at researching all the details, you will likely want to buy from a franchise dealerships affiliated with a brand (even if not certified). They, as a group, are usually least willing to sell cars with any question marks (from damage to multiple owners). Even if they get these cars as trade-in, they are likely to list it auction rather than sell it on their lot.

    Third:
    -Give yourself a month if possible to find your car. You need to get a feel to see the type of inventory that comes on the market and the price points. You will quickly become savvy on the individual cars and know right away the issues that impact the car.

    Fourth:
    -If you need financing, take a look at what you can qualify for best. I think credit unions still offer the lowest rates, but not every one of them advertises such and some have rules (how you buy, how old and mileage). Internet lenders since the 2000s have done well here too, but are mostly targeted for those with excellent credit.
    -If you want a warranty (or some sort of service agreement), you have to decide what you are willing to take. Some folks only want coverage done by the manufacturer. This typically means buying a certified car or even a non-certified car from an affiliated dealer (such as buying a Lexus from a Toyota or Lexus dealer). Others are okay with third-party warranty. Some larger chains (like CarMax) have their own version which may or may not be useful. In general, warranties are priced based on risk and warranty companies are in the business to make money. A very expensive cost of a warranty may indicate bad risk history. My impression is that this is the biggest issue with buying used – the unknown aspect of what might happen with the car if you are not willing to handle repair bills (or DIY).
    -Doing the internet quoting concept like new cars works, but used cars are so much more varied and unique unfortunately. I found it near impossible to get franchised dealers to internet quote the warranty/service agreements because that is a profit for the finance office, but more reputable ones are not afraid because they know you are a more serious buyer.

    Finally:
    -While I will list some special topics below, here are some things I suggest.
    -Always test-drive any car you plan to buy. I recommend test driving new cars too. Sometimes a car doesn’t feel right even if it looks good on paper.
    -Focus on out the door price. Never negotiate on the car price before TTF (tax/title/fees). Even if this means you want a warranty/service agreement, get your quotes with this included. Don’t be shy here. All car sales dealers are used to this, but would never suggest as such.
    -Be ready to walk away. Just like a new car sales. In almost every case, you will find another car to try again and it won’t be your last chance. This is a big purchase for many, the fear to say no is surprising to me.

    Some of the big changes I have seen in the used car space in just the past year:
    -Price transparency. Just as you use sites to determine what to pay for a car, dealers are using the same site to price their cars to sell. This has helped reduced outrageous list prices, but it has also made it harder to distinguish good deals. I have noticed that the good deals out there are primarily for a few reasons: 1) Car has been sitting around (sites even tell you how long it has been for sale) 2) Car has some issues (condition/ownership history) 3) Car is not popular 4) Car was a low balled trade-in (margin)
    -Car history is now a given and free. Just a few years back, I had to pay for CARFAX reports. Now, every website usually has a link to a free CARFAX (or the lesser detailed AutoCheck). Use these car reports to determine if the history meets your threshold (lease/fleet return, multiple owners, damage, widely reported issues), but don’t expect them to be like title insurance. I hear CARFAX has only paid out for nine cars ever where there was some covered discrepancy. Of course, be afraid if a dealer or seller is not offering a free history (hiding some aspect). The market has spoken here, not offering this is just not worth the savings. I find most interesting that now almost ever car repair shop is reporting data to these companies.

    Websites I really like in this area:
    https://www.edmunds.com/ (still a leader I think)
    https://www.kbb.com/

    https://www.vehiclehistory.com/ (incredible site)

    https://www.autotrader.com/
    https://www.truecar.com/
    https://www.carsdirect.com/
    https://www.cars.com/
    https://www.cargurus.com/ (I really like how they look at car values to price.)
    (Note, I think these sites cover most of the licensed dealers inventory. I would run the search on all of the sites listed to get a full list of inventory out there. Private party can list here too, but you may need to use craigslist or ebay as well.)

    I am not going to list finance websites here, there are lots. Start with your local credit unions, then look at online lenders. Frankly, dealers almost never have better financing on used cars unless you are dealing with a manufacturer-sponsored lending (but again the better option is to take the cash rebate option if possible). I have begged dealers to offer me better rates to make some more money on a deal, but they have not been able to do so from what I already had (with a bit of disbelief at the rate I got from another lender). Try to only buy with what you can afford to pay monthly for 48 to 60 months loan (some would say don’t go above 36). 72 months has become too common.

    Intermediary private party (Shift, Vroom and others):
    These seem to be popping up. Essentially, letting someone else handle your private party sale. Now, these guys need sales, so they are doing some strange things.
    -Car is really not local to you. They tend to advertise too broadly.
    -Car is priced below others. They want to get the car sold. You should be comparing their price to other private party ads not dealer prices.
    -They promise that they did an inspection. In general, I would not trust it because there is really no long warranty with that inspection (beyond a few days return policy).

    Maybe one day, these companies will be more useful.

    Rental car sales (Hertz, Enterprise, Avis, etc.)
    -Usually these cars are driven harder in a shorter period of time.
    -Perhaps there are good deals, but I have not found as such.
    -Usually, the price tag is fixed, not negotiable (beyond a few hundred dollars). No fun.

    Private party or curb-side/parking lot sellers:
    -There are deals that exist here, but there are so many additional factors to watch for that this is only for the very experienced. I won’t go into the issues I have personally seen in these sales.

    Auctions (Manheim, others):
    -First, the concept of savings a lot of money is not so common anymore. You might be able to save an extra 1k to 2k, but it is work. This is most effective for hard to find cars, but usually a car would have listed somewhere before it went to auction. I think most sellers at auction have realized that is important because there is no need to go to auction to get the best demand if you list a car for sale on a well-seen website. Auction is a disposal situation for seller these days.

    Dealers with fixed price advertising:
    -These are spreading like wildfire with major dealership groups going this route along with those who have done this for a long time (CarMax, Sonic, etc.).
    -In general, you will pay more than if you find a seller/dealer who negotiates.
    -If you want a car from one of these places, the best tactic is to wait and see how much they drop the price of the vehicle (assuming you are not competing against a bunch of other interested buyers). An email request with a counteroffer price may be the best option with an indication to contact you when they lower the price to your requested amount (assuming your counteroffer is within the market prices).

    Buy Here, Pay Here:
    -In general, these places make money on cycling a car through a number of buyers (who default) or on very high interest costs
    -Sometimes, they have desirable cars to attract people, but almost always you should look elsewhere. It appears laws are starting to get better here, but these places may go out of business before they become the right places for the normal used car buyer.

    In an ideal world, attributes of used cars I like:
    -Lowest mileage you can afford for less wear and tear, even if older in year model. I find the year model seems to have a bigger impact than mileage even if the car has not been redesigned. However, redesigning seems to be a yearly concept now which might be a problem for used cars down the road.
    -One personal owner, not lease use. Now, this is a lot harder because I would argue too much car sales (when the new car price was over 30-40k) are lease nowadays. I frequently see one owner from a lease use (very normal).
    -Car stayed within region of original sale. Not a dealbreaker, but I can’t see how this hurts.
    -Has not been auctioned. However, I see a lot of larger group dealers avoiding auctions by moving cars rapidly among different dealerships to avoid this stigma. This is no better I think because there is a reason why the car is getting moved around and can’t be easily sold.
    -No bumper repairs. This is obvious, but a car can have a clean title and still have such repairs. Now, this might be an opportunity for a hot deal if the repairs were truly cosmetic. This depends on your risk profile.

    Best of luck,
    Rasheed

    9

  • Some private party tips. Buying from private parties is not for everyone. Not every detail will be covered so CYA. If you have a pal who knows cars & will help. This can help save money if buying from a private party. I’ll just throw out some tips. Besides knowing what you want, cash, meeting at the DMV or title transfer company etc. etc.

    I’m not going to explain every tip. Buy only from good neighborhoods. Inspect during the day. When meeting tell seller not to start the car, you want inspect the car when the engine is cold. Tires: all 4 same best, 2 types font axle rear axle ok, 3 or 4 different tires don’t buy. If the engine is too clean be suspicious. Check door jams, under hoods & trunk lids should be the same color as exterior. Check undercarriage car for drips or damage. Run fingers around the usual exterior to check for bad bondo repairs. Fluids: trans fluid should be red & clear not dark or muddy, antifreeze should be clear green, yellow or orange not cloudy, brake fluids not contaminants. Trans & oil sticks have no burn marks & not shiny or polished either,

    Missed a bunch of stuff just some tips hope it helps.

    As a USA citizen I have the right to criticize my government. My thanks for this is endless in magnitude.

    11
  • Global Moderator

    Good advice from both of you.

    0

  • Most used car sales are as-is/no warranty. It is on you as the buyer to thoroughly inspect the car. If you don’t know enough about cars, get a mechanic to do an inspection. If you don’t do this BEFORE you buy a used car, you have no right to complain about something on the car that was broken before you bought it.

    3

  • I’ve noticed that even those certified used cars sold by dealerships have ripped seat upholsteries, dings on doors and other cosmetic defects and worse, they’re marked up just a few hundreds less than the brand new ones on the lot. I’d be surprised if anyone would still buy them to save a few hundred bucks instead of the brand new one with full warranty and possibly get it at close to the price of certified used, depending on one’s negotiating skills.

    1 1 Reply
  • Global Moderator

    I have bought used cars through Craigslist and eBay (yes, eBay) throughout the years and have saved a ton of money.

    The key, if you aren’t a car guy (I’m not), is to pay a trusted mechanic to give it a thorough going over. $50 - 75 should do.

    I bought a 10 year old Toyota for about $2,500 that I sold last year for $1,300. It was 20 years old.

    I just bought another 10 year old Toyota for about $4,000. I will, God willing, have this one for 10 years as well with minimal yearly depreciation.

    YMMV but I find that buying 3 year old cars captures about 50% of the potential value, but buying reliable transportation at the 7-10 year mark grabs almost all of it. Naturally, you may want cooler-looking wheels, but I figure I’ve saved tens of thousands of dollars by buying older and paying a mechanic to do the inspection.

    3

  • @ma-barker said in How to buy used/pre-owned car, PWF/FWF style:

    I’ve noticed that even those certified used cars sold by dealerships have ripped seat upholsteries, dings on doors and other cosmetic defects and worse, they’re marked up just a few hundreds less than the brand new ones on the lot. I’d be surprised if anyone would still buy them to save a few hundred bucks instead of the brand new one with full warranty and possibly get it at close to the price of certified used, depending on one’s negotiating skills.

    Buyers with poorer credit buy these cars.

    As a USA citizen I have the right to criticize my government. My thanks for this is endless in magnitude.

    2

  • I bought a used car from a dealer that was listed below book value, because it wasn’t the kind of car the dealer sold, and they wanted it off the lot to make room for something else. They would buy lots of autos from auctions, most of them are stuff they sell, but sometimes there’s something that’s the odd man out, and they’d sell it below book value to get it off their lot. I found a coupon in the local advertising circular (Penny Saver) for $250 off any used car from the dealer. Went to look at the car, liked it, negotiated trade in, and after the price was calculated after trade-in value, I presented the coupon. The sales guy said, “Oh, you’re a smart one! Most people hand that to us right up front, then we negotiate trade in. But we already agreed on trade in, so you get the coupon on top of the trade-in value because you are so smart.” Basically, the trade-in they offer is less if you use the coupon. It didn’t say anywhere that they do this on the coupon, but apparently they do. I drove home a car that was nearly a $1000 below book value, and 6 years old. I drove that car for almost 12 years, and the only major fix was the timing belt. And even that I saved on, found the belt on eBay, and took it to the local mechanic, who said he couldn’t have bought that wholesale, for the price I paid on eBay. It was OEM too. Sold the car to a college kid (Sis’s BF’s nephew), who drove it another 6 years. Sooooo… see if the dealer has any coupons in any newspapers or advertising circulars, and read the wording on it (fine print). If it doesn’t say you have to present it up front, wait until after you’ve negotiated price minus any trade-in. Because I strongly suspect that many dealers reduce trade-in value if you present a discount coupon, and most people probably do present the coupon up front.

    5 1 Reply
  • O

    “When you do the financial argument, used (pre-owned) is probably the best value if you do want to buy a car (especially higher retail cost vehicles).”

    I’d like to comment that it’s often not always clear that used is a better choice than new, even for higher priced vehicles. (Not that OP implied that it is.) It’s important to think ahead about how long you plan to keep a car and if you are going by age of the car or how many years you own it.

    Also important is if you are going to always buy new or used. Let’s say you have 40 years of car purchases ahead. You may only need to buy 4 new cars to cover that time-frame but 5 or 6 used ones to bridge from now till then, which skews the math on overall cost.

    The repair record for a model is important, too. For example, I have read for years that BMWs have lots of expensive repairs after the warranty runs out. I have no experience with these so can’t vouch with personal stories. So, while buying used avoids lots of depreciation, a couple big repairs may negate these savings.

    Moreover, there’s the hassle of buying used if not going to a dealer. Unknown amount of time to invest looking at them. Individual sellers have been very willing to lie about how many owners there have been, where the car was previously registered, if it’s been in an accident, etc. An individual who purchases cars to resell one at a time and sells it before purchasing another (is this just called a small dealer?) didn’t really lie but certainly hid particulars about a car that I’m sure he knew about. It drove the best of the lot that I tested and I committed to buy as long as it got a good review from my mechanic. In three minutes the mechanic called me to look at the car and pointed out that it had been in a major accident and that it hadn’t been repaired properly. If you don’t know what you’re doing, ALWAYS have a trusted mechanic give a prospective car a thorough inspection!

    If going to a dealer, you’ll usually have to pay a good premium. CarMax is outrageous for the cars I’ve seen but I do know people who wouldn’t buy used anywhere else.

    With my last purchase, I finally got tired of dealing with dishonest people and bought new. While I couldn’t afford as nice of car, it’s worked out well financially compared to what I would have expected from the used purchase I was initially trying to make. However, I certainly will consider used again next time I’m in the market.

    Hope these comments add to the conversation.

    4

  • I might add this is not only true with some luxury cars. It is also true for other cars as well.

    I have bought 3 Civics over the years. In general unless there’s something hinky with the Civic the price difference between a new Civic & a 2 yr Civic <20k mi is negligible.

    As a USA citizen I have the right to criticize my government. My thanks for this is endless in magnitude.

    2

  • @sweetclover said in How to buy used/pre-owned car, PWF/FWF style:

    I bought a used car from a dealer that was listed below book value, because it wasn’t the kind of car the dealer sold, and they wanted it off the lot to make room for something else.

    I did this 18-months ago, I was looking for a Chevy Malibu for my oldest son.
    I wasn’t on any timeline, so I took my time to look. I found a 2012 Malibu at a Mazda dealership, my son and I went to go look at it because it almost seemed to good to be true at $1000k less than all the other ones I had seen.

    I asked the salesperson why it was cheaper and he told me exactly that… it was a trade-in and they didn’t want another brand on their lot.

    Personally, I like buying new but with 3 sons, we’ve purchased two used cars (and one motorcycle) for them. New makes sense for me… I still own and am the original buyer of my '86 Camaro and '02 Tahoe (each have about 70k miles on them), neither has had any problems.
    According to my boys, I’m not allowed to sell either one of my vehicles because they want them, lol.

    FW member since 10/2002

    2
  • S

    The one car I bought from a dealer was from a Porsche dealer. The car was received on a trade in and they only wanted to unload it quick as keeping it on the lot would lower their reputation, since it wasn’t comparable to a Porsche. All other cars purchased from Craigslist/newspaper ads. I normally spend at least a month looking over craigslist before something good comes around.

    1
 
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