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How to save on a used car

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Saving money on a used car isn’t just about spending as little as possible on the car itself. You want to get a good deal, and that means getting the right car that meets (and will continue to meet) your needs.

These needs vary as much as individuals (and cars!), So we don’t wade through who used car to buy, but rather tips and techniques that can help you save money when buying a used car.

Sounds “used car” cheap, law? (This is why dealers prefer to say “already owned.”) But the point is, when you consider the total cost of ownership (especially the cost of financing), for some models it may make more sense to ‘buy a new one. rather than a few years of use.

Generally speaking, this is the case with popular low-cost models like the Honda Civic, Jeep Wrangler or Toyota Tacoma. This is not the case for most luxury vehicles, where depreciation is more severe. Read more about this phenomenon here, and be sure to use the powerful buying tools from Edmunds and State Farm to really get in the numbers if you compare the new one with the recently used one.

The phenomenon of new is cheaper than used works (when it does not work at all) when comparing a new car to a lightly used model (3 years or less) that is funded. If the wheels are your goal and you’re willing to let the latest safety technology slip through, then a 7-year-old or older car will have you on the road with years and miles to go – at a four-figure cost.

“I think the sweet spot for non-enthusiasts is to buy a 7-11 year old car that has been conservatively driven and has an excellent maintenance history,” says Steven Lang, writer, car dealer second-hand and generalist. automotive scientist who runs a website called Dashboard Light. “You can keep this type of well-maintained car for $ 4,000 to $ 7,000 for about five to seven years. Sell ​​it for between $ 2,000 and $ 3,500 during tax season (mid-February to late May) and repeat the cycle.

“Spending between $ 2,000 and $ 3,500 every five to seven years on your transportation beats everyday life on a loss of $ 30,000 over 84 months,” Lang adds. “Or, a rental loss of $ 15,000 every every three years. “

Not all used cars will provide the kind of value proposition that Lang is touting. This is where the questions “what car” and “what kind of life has it led?” ” get in the game.

To make sure that the old car you are considering is less likely to need expensive repairs that will wipe out the savings, time to hit the books. Consumer reports is, of course, a great resource, with its user-driven reliability data (but you’ll need a subscription). JD Power’s annual reliability ratings are also valuable, although they target cars as young as 3 years old. Lang’s Dashboard Light site has a used car quality index, specifically aimed at older cars, rating them for the likelihood of powertrain (engine or transmission) problems.

Once you have targeted a particular model or models, you should also know the history (ownership, maintenance) of the particular used cars you are looking for. A history report (like one from CARFAX or Auto Check) is a must, and most used car dealers will provide one. If you are buying from an individual, you may have to pay yourself (around $ 40) or convince the potential seller that this is a good idea for both of you. Having said that, a CARFAX is not a writing. An evaluation by an independent mechanic of your eventual purchase ($ 100 to $ 150) is still almost always a must.

If this “reliability first” orientation to saving money on a used car sounds like the route to a Honda Accord or Toyota Camry, you are not wrong. But for some, these safe vanilla options lack spice, and the massive depreciation that many European luxury brands endure in their first three to five years can make a used Audi or BMW alluring. But a big reason behind this depreciation: they can be brutally expensive to repair.

The solution to making one of these value traps a better deal, says Ivan Drury, senior director of industry analysis for Edmunds.com, is to ask for an extended warranty. The quality of these extended warranties (which are essentially an insurance product) vary widely, and your best bet is that offered by the manufacturer on a car that has gone through the Former Owner Certification (CPO) process.

Another great option to get something flashy is to buy from CarMax and get coverage from their MaxCare warranty program (which gives you access to a wide range of repair shops). A retired CIA officer in Virginia named Chuck Banks built the Carmax Unicorn blog based on this strategy (which he himself followed). The goal: to find cars “unusual, reasonably priced, with reasonable mileage and by no means affordable, new, and which, with the MaxCare warranty, that ordinary but not rich car guys like me could afford to drive.” “.

Car price guides have been around for a long, long time (that’s why people use the term “book value” – because it was printed). Today there are many, many players in this field offering their judgment on used car values ​​- and whether a deal is good or not.

It probably won’t surprise you to know that their values ​​can vary, even for vehicles so common as to border on convenience, like a Toyota Camry or a Ford F-150. The answer is (sorry) more research: go beyond guides to check out what a particular model is actually selling for in listings from Edmunds, Kelly Blue Book (KBB), CarGurus, iSeeCars.com, Autotrader, and others. .

Look at the dealer listings for yourself, even if they are a little further away than you are willing to travel, remembering that they are showing the asking price, not what it would ultimately sell for. You’ll want to create a small spreadsheet to keep track of values ​​(and calculate averages or even more sophisticated calculations). A buyer who can prove to the seller that no one is paying the book value can negotiate a better deal.

Most people will have to pay a higher rate to finance a used car than a new one; this is one of the main reasons why a new car can sometimes be cheaper than a recent used model, assuming you will owe money on the car the entire time you own it.

The obvious solution favored by sophisticated buyers is: don’t finance; pay in cash. But that’s a big stretch for a lot of people.

Before you go to a dealership, check out what kind of financing you could get from your own bank or credit union – and get pre-approved. This serves several purposes:

  • Help you understand what you can afford, so you don’t buy “too many cars”
  • Familiarize yourself with current rates and loan terms (beware of longer loans that keep payments low but increase the lifetime cost of the car)
  • Let the dealership negotiations simplify you: you are there to discuss the price of a car, not your monthly bill.

How you go about buying a used car is at least as personal a choice as which car to buy. For every person convinced of being a master negotiator who is going to be “robbed”, there is someone for whom the no-bargain approach is the way to go.

The large used car store CarMax is a very popular no-haggle option for newer model used cars. The brand has gained dedicated fans – and complains about low ratings on the exchanges. Carvana and Vroom online sellers are also no-haggle options.

But if the price isn’t explicitly haggle-free, then haggle if your goal is to save money – and it is. Do your research on the price and always be prepared to walk away from a deal.

The car rental industry buys a lot of new cars and then, after about a year, resells them. Some are auctioned off and end up in the used car market, but others (rental companies will tell you they are the litter’s choice) are sold direct to the public by all of the major rental brands. of cars. And the prices (usually without haggling) are often quite good.

The usual concern: He was in the hands of a group of people who didn’t own him – and drove him accordingly. Among the counter-arguments: most people don’t really abuse rental cars, they are carefully maintained, and personal injury is usually repaired quickly (in part because rental companies are good enough to pass the cost. to the offending tenant). The usual caveats about obtaining a history report and independent mechanical assessment still apply. Learn more about the process here.

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