Since Danielle is pregnant, we figured we'll need a bigger car within the next 5 months. No, this doesn't mean we're selling out and getting a big SUV. But we at least needed something with four doors, so we bought her a used 2005 Acura TL. (See photo.) I hadn't bought a car in awhile, but over my relatively short 13 years of driving I've either bought or helped buy 11 vehicles. (7 cars and 4 motorcycles.) Here's a list of my recommendations when buying a car:
- Determine what you want - You don't need to know the specifics, but it's a good idea to have a general sense of what you want in your new car. Do you want an SUV? Pickup truck? 4-door sedan? Sports car? Think about what suits your needs. From that, come up with a list of 4 or 5 models that you like within that category then go test drive them. You may be able to eliminate some once you see them in person or if some are outside your budget. I like to keep a spreadsheet with the pros and cons about what I liked and disliked about each model. Usually, I end up with 1 or 2 that are clearly at the top of my list.
- Rank what's important - After you know the models, if you are buying used, then you should rank the features in order of importance. Since you aren't buying a new car, you don't get to choose all the individual options and you'll likely need to compromise. Maybe you can get the blue one but it doesn't have a navigation system. Or you can get one with navigation but it's got to be black, it's $3,000 more, and has more miles. So think about what's most important. Here are some categories to consider: year, mileage, color, safety, fuel economy, leather interior, features (CD changer, navigation, sunroof, etc.), manual/automatic, horsepower/engine size.
- Avoid buying new - A new car is not usually a good move financially. As soon as you put the first 100 miles on it, it's depreciated at least 10%. Let someone else take that initial depreciation hit so that you don't have to. I've found that buying used cars around three years old are your best bet. This is because they often still have some of the factory warranty remaining (which is transferable to the new owner) and they typically have low mileage so they're still in good condition. They've also already depreciated a fair bit so you can get a good car that's relatively new for a decent price. Most leases are for three years so dealers will have cars around this age on their lots. Lease returns can be a great buy since they are typically well cared for and the leasee is required to stay under a certain number of miles per year.
- Do your research - Find out what this particular car is worth. Check the online sources like kbb.com, edmunds.com, and even get some "comps" of cars actually for sale on sites like craigslist.org or autotrader.com. Be sure to enter all the details of the car you are looking at in order to get a good estimate of it's value. It's also a good idea to check the CarFax which tracks a vehicles history of accidents and thefts. To research fuel economy and safety ratings check out fueleconomy.gov and safercar.gov.
- If buying from a dealer - buy at the end of the month (or even better, the end of the year!) Dealers have sales quotas to meet and in a poor economy they can be motivated just to sell another vehicle to help make their numbers. Buying at the end of the month, end of the quarter, or end of the year gives you an advantage in the negotiation process. The dealer is more likely to make concessions during these times.
- Ask lots of questions - This is especially true if you are buying from a private party. (Dealers often won't know much about the history of a car.) Here are some questions to get started: Why are you selling it? How long have you had it? Are you the first owner? How far was your commute? Was it garaged? Has it ever been in any accidents? Does it need or has it had any major service recently? Are there any problems? Do you have receipts or records of the maintenance work? Their answers can reveal a lot about whether you should buy the car or not. One hint, if the owner has a folder or binder of all the receipts this is a good sign because it shows they're organized and keep good records. People like this are usually responsible and take good care of their cars. Also, higher end cars are usually owned by people who have the money to take proper care of them. If someone can afford an $80,000 Porsche, the chances are they didn't skip the oil changes to save money. The contrary is also true, a cheaper car like a Toyota Corolla is more likely to be owned by someone with less money and may not have gotten all the service work it needed. Watch out for cars that are known status symbols (like BMWs) because often people stretch themselves to buy the car and then don't have enough money to properly maintain it.
- Get everything in writing - Don't completely trust someone selling the car when they say that they'll "throw in the custom stereo" or "include a new set of tires." Be sure to get promises like these in writing, especially when working with a dealer. Once you sign their contract, they aren't obligated to give you anything that wasn't stated in the contract.
- Don't ever pay asking price - Everyone expects to negotiate when buying (or selling) a car so never pay the asking price. You'd be surprised at how flexible some individuals (and dealers) can be with asking price. I've paid between $2,000 to $10,000 less than the asking price on every car I've bought. You won't know if they'll take the offer unless you ask and the worst they can say is "No." But before you make an offer, have a maximum in mind that you'd be willing to pay for the car and don't be afraid to walk away if you get to that max. (I've had a dealership manager stop my car in the parking lot as I was leaving to make a counter-offer when I walked away.) I'm not going to cover the details of negotiation here (entire books have been written on the subject) but remember that you always want to negotiate when buying a car.
- Pay cash - I like paying cash because it keeps things simple. When you start to throw financing into the mix, dealers will often try to pull a fast one on you. They'll go back and forth between quoting the price in monthly payments and quoting the total price of the car. They also use the "well, if you can do it for price X, that's only $20 more dollars per month in terms of your payment." Meanwhile, this sneaky tactic can have you paying thousands more for the car even though it doesn't sound like much on a monthly basis. When paying cash you can negotiate purely on the price of the car (plus taxes and registration) so you know what you're getting and how much you're getting it for.
- Get the car checked out by a pro - If you are buying a car with over 40,000 miles it might not be a bad idea to take it to a reputable shop to have it checked out. Most places will do a "pre-purchase" type of inspection for around $150. If you are serious about the car, this is a good investment to ensure you don't get a vehicle that's been abused. I mentioned over 40,000 miles because you'd have to do something really bad to hurt a car in fewer miles than that.
- Look the car over yourself - This is one of my favorites. Check out the tire tread, check under the hood. Is it clean? Does it look like the car was well taken care of? Can you tell if someone was smoking in the car? Is the ashtray dusty from cigarettes? Look over the body of the car very closely. (By the way, never inspect or test drive a car at night, you'll miss things.) I find that you don't notice every detail about a car until the first time that you wash it yourself. So pretend like you're washing the car. This will force you to look over every inch of the car and notice any chips, scratches, or dents. (I even make the swirly motion with my hand as I do my fake-wash while inspecting the car.)
- Evaluate the mileage - Does the car's condition seem appropriate for the mileage on it? Anything under 30k should feel almost brand new. Remember that most cars need to have the timing belt replaced somewhere around 70k-100k. This is an expensive ($500-$1500) job so if the car is near that mileage you should ask if it's already been done.
- Evaluate the options - Does the car have the options you want? How does it's price compare to similarly equipped cars? Be sure to consider mileage and other differences so that you aren't comparing apples to oranges.
- Evaluate the color choices - Do you have a favorite color? When buying used you can't always be picky. Is this something you're willing to compromise on? If not, keep waiting until you find one in the color you want but be ready to make trade-offs in terms of mileage, options, or price.
- Don't forget about tax - Tax on a big ticket item like a car can really add up so remember to factor that in. You don't pay the tax to the seller, you pay it to the DMV. (With a dealer you'll often pay the tax to them since they'll handle all the paperwork, but with a private party you won't.)
