5 Tips for Buying a Used Car
According to a January 2015 USA Today article, new cars sold for $31,831 on average in 2014. The average used car sold for right around $16,335. It’s generally accepted that buying a used vehicle is more affordable than buying new. New cars are subject to depreciation, generally losing 70% of their resale value in the first four years of ownership.
However, the US recession that started in 2007 put even used car ownership out of reach of many people. With people unable to afford to buy new, there was a higher than usual demand for used cars and prices increased by around 20% as a result. Keeping used car prices low is contingent on there being sufficient turnover of new cars. When people stopped buying new cars in 2007, the result was high demand for used cars and low supply.
Though the industry has largely recovered and used car prices are dropping again, experts don’t anticipate prices reaching pre-recession levels again anytime soon. They report a 6% increase in the supply of used cars in 2014, but also an influx of millennials and driver population growth in 2016 and 2017 that will keep used car demand high.
As a result of this higher cost and competition in the used car space, it’s more important than ever to do your research, be very clear about what you want and need, and be strategic in how you execute your car buying plan.
Tips for Buying a Used Car
#1 Have a plan B
Having the ability to just get in the car and go where you want when you want seems like a basic necessity for many of us, and in many parts of the country where public transportation options are limited, it may seem impossible to function without a car. There are many modern alternatives to car ownership besides traditional public transportation:
- Private car sharing services like Hourcar and Car2Go
- Private “taxi” services like Uber
- Carpool assistance services in which some city’s transit programs help get commuters connected to others to set up carpools. Check your city’s transit services online and see if they provide this opportunity (if they don’t, suggest it!).
- Telecommute – if you work in front of a computer all day, see if you can work remotely. Working from home a few days a week can make it easier to share a single vehicle in your household, saving on the costs of owning and maintaining a car.
The advantage of having a “plan B” when you’re considering buying a used car is it means you’re not desperate. Car sales staff can smell desperation and if you walk in feeling like you have to walk out with a car in order to get you to your job the next day, you may end up being subject to some high pressure sales tactics and paying more than you should.
#2 Private Party Sales Can be Great When Done Right
The old-fashioned classified ads, or Craigslist, can still be a great way to find a quality used vehicle for a great price. Follow these basic tips:
- Try to get the VIN number ahead of time and run a Carfax report on any used car you are considering purchasing. If you cannot get the VIN number ahead of time, modern-day smartphone technology makes it easier than ever to do an on-site check.
- Meet the seller in a public location during daylight hours. Learn what to look for when evaluating a used car.
- Bring along a friend or family member, if possible someone that has car maintenance experience. Maybe your local mechanic would be willing to meet up with you and a buyer or agree to have you test drive the vehicle to his shop to evaluate a vehicle you are considering.
- Don’t buy the same day. Don’t bring cash or a cashier’s check. You can always make a follow-up appointment the next day (ideally at the DMV to transfer the title) if everything checks out. It reduces the pressure on you to know you won’t be buying. It also sets the expectation with a seller that you won’t be carrying a large amount of money when you meet initially. If you get a bad feeling about a prospective seller, even if the car seems to check out, proceed with caution.
#3 Check insurance rates with your insurance agent
Insurance rates can vary widely between different car makes, models and manufacture years. Once you’ve narrowed in on a few specific candidates or a couple of makes and models you are interested in, have your insurance agent provide you some insights to see if any of the options have a strategic advantage from an insurance standpoint. You may end up paying a lot less in insurance costs for a sedan over an SUV for example.
Buying a used car can seem like a big undertaking, but arming yourself with some knowledge, bringing in experts when necessary, and having a solid “plan B” all go a long way in empowering you to make a smart car buying decision.
NOTICE: This blog and website are made available by the publisher for educational and informational purposes only and is subject to change. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.