Buying a used car versus a new car can save you thousands of dollars. And if you approach it correctly, you’ll literally be in the ‘driver’s seat’ in terms of negotiating. While there’s no fail-safe approach, what I’m about to reveal will stack the odds significantly in your favor and you’ll profit in the long-term.
When you buy a new car, you literally lose 40 – 50% of the purchase price within the first five years! That’s a lot, especially when we often think that we’re making an ‘investment’ in our vehicles.
For example, Edmunds.com’s True Cost to Own calculator notes that a 2014 Honda Accord Sedan with an MSRP of $22,775 will depreciate $11,670 within 5 years – losing 51% of its value! And Hondas are considered good, reliable cars. A 2014 Nissan Pathfinder SUV with an MSRP of $30,095 will depreciate $15,578 within 5 years, again losing 51% of its value. A 2014 Ford Mustang Coupe with an MSRP of $23,335 will depreciate $11,317 – 48% of its value after 5 years. So losing significant value after the purchase of a new car crosses all categories – SUV, sedan, domestic or imported.
What to do, then? Purchase the car you want – but buy it used from a private seller – and after you’ve done your homework. You still get the car you want with most if not all of your desired add-ons, but at a significant cost savings. Here’s a quick checklist for making sure you find the right car at the best possible price!
1 – Evaluate Your Financials
Sit down and truly determine what your monthly budget can accommodate in terms of a car payment. There are a lot of websites for banks that can calculate what the monthly payment will be if you need a loan. A credit union, if you belong to one, is also a great place to start.
2 – Research
Second, research the value of the car you want to buy. You can look at various websites. KBB.com (Kelly Blue Book), Edmunds.com, or AutoTrader.com are good places to start. If you’re not totally sold on a particular model and remain somewhat flexible, your odds are greater of finding the best value in your price range. Got to ConsumerReports.com and check various cars’ reliability and resale value. If safety is of primary importance, you can also get crash test results from www.safercar.gov.
3 – Contact the Seller
When you contact the seller, you can save yourself a trip and a test drive if you ask the right questions. A few of the questions to ask are:
• Are you the original owner? If not, when did you buy the vehicle?
• Do you have maintenance records? Copies of receipts for repairs?
• What is the current mileage?
• Has it been in an accident?
• Why are you selling the vehicle?
• Is there any body damage or any mechanical issues that you know of?
• Do you have the title in your possession?
The owner, especially if it’s the original owner, should have records of repairs. If the seller is hesitant about possessing the pink slip or title, move on. You don’t want to deal with the hassles of purchasing a car without clear title.
4 – Negotiate
Yes, your seller has a listed price – but there is also the price that he/she will accept. You just need to discover what that ‘accepted’ price will be. My advice is don’t make a ridiculous low-ball offer, but also be willing to walk away if you feel the seller is truly asking too much for the car.
Perhaps offer 10% – 20% less than the asking price, depending upon how the car looks and drives. Also, make sure you only see the car during daylight hours. The evening light can blur or even hide many a defect.