With a few exceptions – it really doesn’t matter what car you buy. There is no secret list of good or bad used cars, because any car could be a good car FOR THE RIGHT PRICE. So if a model is unreliable – it will have a worse reputation, which will lower the going rate. If you want a more reliable car – you will have to pay more, and even then there is no guarantee that your specific car will be trouble-free. Even behind the most reliable brand dealership there is a service department, and they do stay busy. While most people go for the same brands and models that have good reputation – it might make sense to go for the cars that are not recommend by any guides, because you might get much more value for your money.
More expensive (luxury and performance) brands and models will be more prone to problems, and they will cost more to fix, but they provide a better driving experience, safety and image, so at least you do get something for your money. If you don’t care for anything other than basic transportation – go for the cheap brands and models.
Buy privately or from a dealer? A franchise dealer or a used car lot? A private seller is a gamble. It could be a nice car that the owner is trying to maximize the value by selling it themselves instead of trading it at the dealer. Or it could be a nightmare car that they are trying to get rid of because it might fall apart at the next light.
So your best bet will be a franchise dealer that specializes in the brand you are buying, preferably Certified Pre-Owned, if it’s an option. CPO programs vary by brand, and they are not a 100% guarantee, but they should give you some assurance together with an extension of warranty. A dealer provides you a better assurance that you are not buying a problematic car. A dealer is required to make sure a car is safe, and a dealer has a reputation to maintain. If a dealer has a car with issues – he can easily dump it through an auction, and it will become someone else’s problem.
Next best thing is a franchise dealer that has an off-brand car, which was most likely traded in. The dealer was probably able to take it in trade for an amount low enough for them to recondition the car and sell it for some profit. Again, the dealer will be unlikely to go through the problem with a bad car that can come back to haunt them with issues.
Then there is the used car lot. Your risk is higher, those lots go out of business all the time, so you have very little recourse, but you will be paying less. Remember those cars that reputable dealers don’t want to deal with and send to an auction? Used car lots buy out these cars, patch them up, and sell them for as much as they can. Your last options is a private seller. A private seller is a gamble. It could be a nice car that the owner is trying to maximize the value by selling it themselves instead of trading it at the dealer. Or it could be a nightmare car that they are trying to get rid of because it might fall apart at the next light.
It is a common advice to have any used car pre-inspected by an independent mechanic. Overall it is a good idea, with a few exceptions and footnotes:
If the car is still in warranty or is certified – inspection is an overkill, and the only thing you can get out of it is find out whether the car has been in an accident. If a used car in warranty has any major mechanical issues – it will be fixed under warranty. Don’t be surprised of a dealer refuses to let you inspect a car like that.
Some dealers don’t allow pre-inspections at all. They might not want to take the car off the lot for half a day for you to decide not to buy it or to come back with unreasonable offers. In the meantime – there could be a serious buyer with cash in hand on the lot.
The mechanic doing the inspection might have an agenda that is different from yours – he might want to justify his pay by pointing out too many problems. He might hope for you to still buy it and to bring it to him for more work. Then how can you tell what issues are normal and are to be expected in a used car? You can take any car off the road, run it through an inspection, and the mechanic will recommend on average $1,500 in repairs, which you can ignore and still drive the car for a few good years. Bottom line – again, used car is a risk, and you have to decide what is the right balance of risk, and the price you are willing to pay.
Private purchase: unless you have cash in hand – it will be difficult to put a purchase with financing. You CAN get a loan on a privately bought car, but it requires some work. You have to get a general approval, then you will have to get the actual loan for the actual car, and the bank will decide the amount based on the book value of the car, you will have to coordinate this with the seller and the bank, and until the seller gets paid – he can back out of it at any time, and you are back to the start.
Then there is another risk of dealing with a stranger and large amount of money. Don’t expect the seller to accept anything other than cash or a cashiers check. Meet in a public, well lit place, like a bank. Before you make the purchase – refer to your state DMV website for exact instructions on what paperwork is required to transfer the ownership and to register the car. Does it have to be smogged? Do you have to have a clear title? How can you verify that the car is paid off? Do you have to pay sales tax? If you are buying out of state – you will have to check both states to make sure you are in compliance. Sounds scary? It is. This is why dealers charge more.
Once you decide on the model and brand – browse online listings. You have no business going to a dealer without having an idea of what you want to buy. Right now my favorite source is Autotrader – they provide a lot of tools that let you narrow your search down, and 99% of dealers list their inventory there.
Make sure that you are looking at cars that are within your budget, and not hope to negotiate a lower price before you even look at the car. If you can’t afford the asking price – you can’t afford it.
Now, the biggest issue that brings the most questions: the price. One thing you are to realize is that the market has changed a lot in the last few years, and if you haven’t bought a car in a while – it will be a different experience, and the good news is that it is easier and much less stressful that it used to be.
while there were classified listings in newspapers, most people shopped by visiting dealers, because there were no tools that would let you cross-shop and compare live inventory between different dealers. It was easier to go to a dealer lot, browse available cars, pick one, and hope to negotiate a deal. You could use a guide like Kelley Blue Book to gage whether the price was good or not, but in the end – you had to make a decision to buy there or to move to the next dealer, and if other dealers would not work out – by the time you got back the car could be sold. It takes a lot of time, and used car shoppers don’t have a lot of time to spare.
Since you can go online, narrow down available inventory by age, mileage, distance and even options – you see right away what is the going rate, and who offers the lower price. Dealers started to realize that if their asking price is higher than average – phones don’t ring, and cars don’t sell. When before they could hope to get people in and lower the price – now no one even comes in, because trying to negotiate thousands off a price against a professional salesman is just as fun as having your teeth pulled. First they learned to check the market before pricing out a car and to keep adjusting pricing of unsold cars to match the market rate. Next evolution was introduction of software services that do that for dealers. They use it when they take cars in trade or buy them at auctions, when they price cars, when they adjust prices to move aged inventory. The data is out there, all the software does is put it together. Let’s say the dealer has to take a car in trade. He punches the details of the car in the system: year, model, mileage, options. The system pull available matching inventory listed within 200 miles, calculates average and median price, calculates back how much the dealer has to pay for the car so that after reconditioning and assumed profit – they can price it below market average. Also the system will check auction history, and it will show how much similar cars sold at dealer auctions in the last weeks, so the dealer can see how much they car hope to get at an auction or buy similar cars.
Profit margins are lower, and there is much less room for negotiation. Dealers simply can’t afford pricing cars high, hoping that someone will just bump into it and pay the price.
Dealers adjust pricing all the time, so if a car sat on a lot for a long time – it doesn’t matter much, as long as it is priced competitively. If you found the lowest priced car – others will find it too, and dealers don’t need to discount it any lower.
Once you found one or a few potential cars that match your requirements and price – you are ready to contact the dealer. It would be nice to be able to continue shopping and negotiating from your couch, get the best price, have the dealer tell you everything about the car and hold it until you will make up your mind and find time to go and buy it – but in reality things are a bit more complicated. Dealers have no interest in giving you more information than what they have to in order to get you in the door. Most dealers will post photos, videos, car history reports, but in the end you will have to do your due diligence in person – check out the car and drive it. If the dealer priced the car right – he doesn’t have to commit to a lower price over the phone or email, because it is obvious that you are already interested, and they definitely have no interest in taking the car off the market on the off chance that you will actually show up, agree to the car and buy it.
Your goal is to make sure that the car is actually still there, that it is ready and not still going through service or body work, to confirm options that are important to you, and to make a solid appointment. You want to make sure that you are meeting with a specific sales person, and not just a generic appointment set by a call center agent, that you know who you are meeting, exact time, and that the car will be actually there. Statistically about half of appointments show up, so dealers don’t put a lot of faith in them, and they might not even bother checking that the car and the sales person is ready and available – you want to make sure your appointment is different. Confirm it one day before, and one hour before.
You could ask them about the price – what is the lowest price they will see it for, or whether they will negotiate, but be ready for vague, non-committal answers or for simple refusal to discuss it. Don’t put much faith in promises made remotely, and don’t bother making offers. Your best chance on getting a lower price is in person, once you saw the car and ready to buy it.
When you are there in person – check that you are looking at the actual car you saw on line – same VIN. Make sure it has the advertised options – websites and software make mistakes, it is your responsibility to check it before purchase. Test-drive it. Seriously – drive it before you move forward. It doesn’t matter if your cousin has one like that. It is not enough if you drove one at another dealership – drive the car you are considering buying. Make sure that are no warning lights, everything works, and it drives well.
Are you ready to own it now? There are 3 answers to this question: you are ready to own it now for the asking price (it doesn’t mean you are going to pay it), you are ready to own it for some price, or you are not ready no matter what – either there is something wrong with the car, or you feel that you have to see and try something else before making a buying decision. If you are not ready own it – state so, thank the sales person for their time and leave. It might be harder than it sounds, you might have to have to talk to a manager, but you just have to stay calm, don’t get baited by promises of some incredible deal, and repeat that you are not ready to own this car at any price. They might through numbers at you – don’t put much faith in them, they have no obligation in honoring them.
If you are ready to own it – say so, and be ready to sit down to talk numbers. Hopefully you did your research, you know what the market rate is, how much similar specific cars in the vicinity are priced. You should know what guides like KBB, Edmunds and NADA say a car like that should be priced.
They are just that – guides. You can use them to your advantage, but don’t get emotionally attached to what they say, because KBB is not going to sell you a car or buy one from you. In the end market rate and your desire to own the car will determine what the price will be. Guides vary from one to another – how would you know which one is right? Some cars will sell well below the guides value because of market conditions, some will sell for much more, because it is a unique car, desirable configuration or low mileage. The only thing a guide will really determine is the amount you can finance, because a bank will not lend you more than a specific percentage of the “book value”.
You are sitting down against the sale person, and you get into the dreaded negotiation. First – you don’t have to negotiate. If you found the lowest priced car, you think the price is fair, you are ready to buy, you want to get it over with before the car gets sold – you could just buy it. But no one likes to leave money on the table, and if you are up to it – you can make a run for it. Here is how to make it simple and easy:
State that you are ready to buy it now. Be ready to discuss financing, tell them how much down payment you have, fill out the credit application. This shows commitment, and it indicates to the sales person and their manager that they are close to selling something, it gets them involved in the process.
Same something in the lines of: “I am ready to buy this car now, but the price is too high. I am willing to pay this much, and this is why: …”
There are only two valid reasons to why you are offering less: You either have research to show why the car should be sold for less (market rate, cheaper similar car being sold nearby, lower book value), or this is simply what you can afford. Things salespeople don’t care for: cheaper cars sold 500 miles away, cheaper cars sold privately, supposed bad condition of the car you want to buy. Reasons like that mean nothing, they just show you as an inexperienced negotiator, and they annoy the dealer. You don’t want them annoyed, you want them anxious to sell you a car, not to fight you. Don’t make it personal.
Your offer should be reasonable, but with some margin built in to give up. Going up on your offer shows good faith, and it lets the dealer feel like they are winning.
It is normal for the sales person to “third party” use a real or imaginary decision maker like a manager. Don’t fight it, don’t insist on being in a hurry or talking to the manager. If you are to save a large sum of money – you will have to work for it, and a couple of hours is worth it even if you save only $500 of the sales price.
So you make or offer, and the sales person will either say that he will check with the manager, or that it is too low, in which case you tell them to still check with the manager.
The dealer makes the next move: they might accept your offer, they might make a counter offer, or they might say that it is too low. If they accepted, or make a counter offer that is agreeable to you – you are done. If their offer it too high, or there is no counter offer – you use your negotiation buffer to raise your offer, and state that this is your final offer, and see what happens.
I the dealer is not willing to budge, or they are not moving from their last offer – this is a decision point for you: you can accept the offer if your research shows that it is fair, or you can try your last resort – walking away. Politely explain that this is more that you think you should pay or can afford, tell them to contact you if they change their mind, and leave. They might catch you at the door, out on the parking lot, or call you an hour or a day later. Or they might let you leave. If they let you leave and didn’t contact you – you know your offer was too low. If you do this right, stay calm and appear reasonable – it will likely not come to that.
Process of financing, trade, dealer fees, paperwork – it will be the same as a new car purchase, except for one thing: warranty. Read thoroughly to understand what comes with the car. If it is a CPO – make sure you have proof the car is certified. Most brands will post conditions of their CPO programs on their website. If it is not certified and out of warranty – does the dealer offers any kind of warranty? Is there any kind of return policy? Do you have to pay for it? Is there a return/restocking fee? If they offer you a service contract – extended warranty – read through it. Can it be cancelled? Can it be purchased later? If it is not in writing – it is not real.
99% it is not worth it. Out of state purchase creates issues with paperwork. You shouldn’t not buy a used car sight unseen without driving it. You don’t have any leverage in negotiation, because when you contact the dealer from 500 miles away – it tells the dealer that one of two things is happening: they either have the cheapest car within 1,000 miles, or they have the only car within 1,000 miles that you want. I might go through the motions of working out the paperwork to ship you the car out of state, but if a local customer shows up ready to take delivery – you best believe I will rather sell the car to him.
If a dealer refuses to provide a vehicle history reports such as Carfax or Autocheck –either walk away or consider getting your own. Don’t buy a car without it.
If a dealer doesn’t post a price – don’t bother. This means that this will be a grind, and the dealer is stuck in the eighties.
Fees: there should be no fees added to a price of a used car. Destination fee, handling fee, reconditioning fee, CPO fee – all of these are tricks, signs that you should not even be dealing with the dealer, let alone pay them.
You should know the advertised price of the car the day you shop for it, get it off the dealer’s website, print it out. You should not have to negotiate just to get the Internet price.
There should not be any requirements for rebates to qualify for, the Internet price should not be “after X amount down”, or any other conditions to get the advertised price. Any of those are signs telling you to walk away. Dealers that use these tricks will not learn unless enough people will stop giving them their money.
Finally, remember that you are buying a used car to save money, but there is a reason it is cheaper than a new car. In most cases – used cars are sold as is, because even a perfect car can suddenly develop issues. A car might through a warning light just as you leaving the dealership, and you are at the mercy of the good will of the dealer. We have a saying: “If you bought a car “as is”, drove it off the lot, and it broke in two halves – you own both halves”. There is no Lemon Law in regards to used cars. A pre-inspection is not a guarantee.
Think about these things when you are making decisions and browsing for cars – it might make sense to pay more now to avoid paying later, and it might make sense to pay for a peace of mind.