Typically drivers keep their new cars for three to five years which is a bonus for those of us who like to buy second hand cars. While the new car owners take the initial value hit as soon as their new car hits the bitumen, those in the pre-loved used car market can take advantage. New car buyers keep the auto industry in business while giving cheap used cars for everyone else.
Wise advice is to buy the cheapest used car that your ego will allow. So if you don’t need to be driving the latest model then keep the money in your pocket and take advantage of depreciation. According to Carfax.com a new car loses 10 per cent of its value in the first month alone and its value will continue to fall. As a guide allow 10% per year.
Depreciation strikes most in the first three years of a new car. So a car that is three years old with 40,000 miles on the clock will be worth 60-70% of the original new price. A car that is five years old with, say, 60,000 miles will cost 40-50% of new car price.
While there are certainly savings to be made on buying used cars, the downside is risk. The manufacturer’s warranty may have expired. Buying a used car from a dealer may provide some protection, but you pay for the privilege. Buying privately or at auction is the best chance of picking up a bargain but you may pick up a lemon too.
So lets go forth and explore ways to reduce the risk of buying a reliable pre-loved used car and a good price.
CASH, CASH, CASH
To get the best possible deal, whether it by at a dealership, privately or at auction, having cash to settle the deal will put you in the best position to negotiate on price. If you have a vehicle to sell beforehand, don’t trade it in (trade-ins are a better deal for the dealer) but rather sell it privately first. You will almost always come out ahead.
If you don’t have a car to sell first or have the cash then take out a loan. Dealers do offer finance so it may be convenient but do the math to make sure you are coming out in front.
CONDITION, CONDITION, CONDITION
The old adage in real estate of “location, location, location” has stood the test of time. So in the used car market condition is king. Sure, low miles is a good indicator of the condition of the car but make sure you look a bit further. Ask why the miles are low for an older car. And if you can’t verify the reason then walk away.
Check all service records as this will often show up any dodgy history. Make sure that there is a workshop stamp to verify the work done. Check that receipts match the service records and call the garage to confirm the history of the car.
The condition of the cabin will tell you a lot about the way the car has been maintained. If it is in good condition then generally this reflects that the rest of the car has been looked after too. If a car presents well, has been garaged, drives well and the paperwork stacks up then chances are you are onto a good one.
If a car passes the above tests then you have made good progress on finding your next car. However don’t hand over your hard-earned just yet. Always insist on taking any car you are thinking of buying for a test drive.
Test drives should be more than just taking the car around the block. Sure take it through some back roads to make sure it handles starts, stops and turns well. But you should also take the car out onto the highway and take it up to the speed limit. Listen for unusual noises. Does the steering pull one way or the other? Does the car shudder when applying the brakes with some force? If the car leaves you with some doubts after a test drive then best to walk away.
Also test out the air conditioning and any technology aspects of the car. If these don’t work then the car may be fine to drive but they will be expensive to fix later on.
To take further risk out of buying a used car, why not engage the services of a professional mechanic to give the car a thorough check over. They should be able to advise you on any aspects of the car that are letting it down and tell you what it would cost to fix. For a relatively small fee (especially in relation to the cost of the car) this advice is invaluable.
If you buy a car privately then you need to check if the car had been stolen, or there is money owing on it. Otherwise you could be the one holding the can. If you buy a stolen car or a car that is under finance it could be repossessed from you and you lose your money. Also check to make sure that the vehicle has not been assessed as a write-off.
If you buy from a dealer then you have guaranteed title.
If you want to own a new car from a dealer then you usually have to pay more than that car is really worth. After all, you’re not only paying for a vehicle, you’re also covering taxes, fees and the cost of running the dealership. So if you take the right steps and do your due diligence then buying pre-loved used cars can save you a load of dollars.