There are few things in life more satisfying than shopping for a new car. The entire process is an adventure, especially if you are a first-time car buyer. While buying a new car may be fun, the glamour of it all quickly fades when you start to look at the numbers. Buying a brand new car isn’t the most sound financial decision. But with a wide variety of ways to secure a car loan these days, it is easy to see how so many new car buyers fall into this trap.
Used cars typically get a bad rap. The words ‘used car’ conjure up visions of dilapidated sedans, but nothing could be further from the truth. Now you can get the latest car tech AND save some serious money. Buying a used car is an excellent opportunity to make a wise investment and satisfy the flashy side of your personality as well.
A new car loses anywhere from 10-12% of its value the moment you drive it off the lot, and it doesn’t stop there. A new car will significantly continue to depreciate over the course of five years, dramatically impacting the trade-in or resale value of your vehicle.
Forego the unneeded financial hit. Allow the sticker shock to wear off on someone else’s watch, and then treat yourself to a much more affordable used car when the time is right. If you think about it, a car that is over five years old still has all of the newest technologies and safety features that any new car would have.
How to Buy a Used Car
Be Prepared to Negotiate – One of the best elements about buying a used car is being able to stretch those deal-making muscles. There is an art to haggling, but it isn’t exactly for everyone. The key to great negotiating is understanding how car dealers make their money. When you decide to buy a used car, take into account things like financing and the trade-in value of your current vehicle. From that estimation you should calculate your own price, then knock off 10-20%, and make that your first offer. Also, remember, cash is king! If you are making an all-cash offer, use that as leverage.
- Front end profit. Essentially selling the car for more than what they bought it for. Most car buyers know that the listing or sticker price isn’t the ‘real price’. At this stage, you have some flexibility to chip away at that inflated price point.
- Back end profit. The car dealer can turn a profit by selling you on things like extended warranties, lifetime wax, rustproofing, or even lock you into a financing plan.
- Trade-in value. A car dealer can include the trade-in value of a car and make money on the difference between the buying price and the selling price.
Car Inspection – Having an independent and thorough inspection is especially important when you are buying a used car. Find a trustworthy mechanic that is willing to be a part of the buying process. Obviously, your mechanic doesn’t need to ride along with you when you’re buying a used car, but it is wise to get them to look under the hood for you and run some basic tests before the sale is final. Don’t rely on the car dealer or private seller to fork over all the information about any pre-owned vehicle. Things like accident reports should be made available to you prior to purchase. Nevertheless, it is best you get an outside opinion regarding the car’s condition before you put your name on the dotted line.
Set a Budget – When buying a used car, know thy worth. You work hard for your money and you should aim to hang on to as much of your earnings as possible. While it may be difficult to come up with your best and final, you should have an idea of what your spending limit is, and stick to that like glue.