Buying Used Cars

Hopefully, after digesting one of my previous posts, some readers have decided to explore the wonderful world of used cars. Congratulations on you big leap out of the man's propaganda campaign and into the more sensible Franco's Army...the frugal, non-football version (on a side note, I only joke about "the man" because I find it funny. I'm a true capitalist at heart). So what are the most important things to consider when buying a used car? I won't pretend that my list is exhaustive, but here a couple things that have done me well over the years.

The first thing I do when looking for a "new to me" car is check Consumer Guide for independent reviews on different makes and models. Make sure you know what you're getting into by researching and asking people who have owned the car (or at least a similar model) before you pull the trigger. I have a personal bias for German (excluding the JokesWagon) made automobiles because I like the way they handle and feel the engineering behind the car is superior to other automobile manufactures (I've definitely been drinking the Deutschland Kool-Aid). On the other hand, my extended family all (literally on my mom's side) drive Volvos, so it really is just a matter of personal preference. The one thing I would advise is to find a brand/model that has excellent resale value in the used market. For example, even if a BMW is 10 years old and has 130,000 miles on it, some kid going to college will think it is "cool" and will want it. It has been my experience that there is always a strong market for used BMWs selling around blue book value. This was not the case for Mrs. Frugal Franco's fancy-pants VW New Beetle, which had to be sold for 20% below blue book value last year.

The next thing I do is search for cars online. My favorite places to look for used cars are Craigslist, Autotrader, and Cars.com. I typically look for private seller listings because I'm always afraid that all the used cars at dealerships are lemons. I mean, why else would someone trade their car in at a dealership for the "trade in value" instead of selling it to another person? I'm sure there are a good number of people out there who aren't as frugal as me and turn the car in to avoid the hassle of having to sell it, but I still can't get past the lemon bias. Not to mention there are few things I can think of that are more unpleasant that haggling with a used a car dealer (okay, there a lot of things, but it's still not something I enjoy). I have only bought one car from a used car dealership and it is something I'm not likely to repeat. I have yet to try the "new" used car experience at places like Carmax where there is a set price based on the blue book value with no haggling. It sounds like a great concept so I would recommend this to people who just can't bring themselves to buy from a private party. For those that are willing to deal with a private party seller, I highly recommend the following:

• Look for single owner cars. This is the number one thing to look for when buying a used a car. The original owner remembers what that car looked and felt like when it was brand new. They also remember how much money they had to pay for it and therefore do everything possible to keep it looking and running like it did the first day they bought it. There are always exceptions to the rule, but you should be able to spot them as soon as you look at the car.
• Ask for maintenance records. If you are lucky enough to find a good deal on a single owner car, chances are they have all the maintenance records on the vehicle. Check to see if service was done at the dealership after the warranty expired (not a deal breaker but a good indication of how the owner treated the car) and if all the scheduled maintenance was done. On a side note, once I own the car, I hardly ever take it to the dealership and try to avoid the "routine maintenance" if everything is running smoothly, but when you are buying a car, these things are always nice to have (a double standard...I know).
• Push back the clock. A lot of people want to have the latest body style in whatever model car they end up choosing, but the truth of the matter is that manufacturers go years (usually 5-7) without making any major alterations to the way the car looks. I would target the earlier years of a model's 5-7 year lifespan and look for the "older" cars with low mileage and excellent maintenance.
• Take it to the mechanic. This one is really a last resort that I sometimes employ. If you find a car that meets the first two criteria, this step may be unnecessary. If something just doesn't fell right about the car or the person selling the car, then definitely take it to a mechanic or just walk away all together. The $100 you spend having a mechanic look the car over can be recouped in the negotiation phase if anything wrong is found on the car. Running a Carfax report is no substitute for having a professional mechanic look over the car. Not to long ago, I was helping my younger brother buy a car. We found a sweet deal on a convertible BMW that had a clean carfax report. Something didn't feel right about the seller, so I made him take it to a mechanic for an inspection. When the mechanic punched in the VIN number it came back that the car had been salvaged and was "reconditioned." Needless to say, the deal was off and Carfax dropped out of Frugal Franco's favor.
• Always ask why the person is selling the car. While we are on the subject of sketchy used car sellers, depending on where you live there is a growing contingent of semi-professional used car flippers. Typically, this person finds cars at auctions or that have been salvaged, does a shoddy job "fixing" them up, and then prices the car slightly below the market to attract some buyers (a Frugal Franco trap if ever I saw one). When you ask this person why they are selling the car, some will be honest and tell you they flip cars while others may tell you they are moving out of the country or some bogus story along those lines. I would highly recommend NOT purchasing a car from these types of people as the risk definitely outweighs the reward.

Remember, a car is not a good investment, so the more one can separate the need (a mode of transportation) of a car with the desire (I sure would look cool in that new car) to own one, the better off that person will be. For those that still can't get past the new car high or driving without a warranty, may I suggest looking for certified pre-owned vehicles or purchasing a used-car warranty (I'm unfamiliar with these, but think car insurance companies offer them). A certified pre-owned vehicle allows one to skip the worst part of the deprecation curve, while still enjoying a new(er) car with a manufacturer warranty. This is still a spendy option if you have to finace it, but it's the next best thing.

Ciao,

Franco