BE SMART WHEN BUYING YOUR NEXT CAR
Let me start by saying I have a weird fascination with car shopping. In particular, I like looking for old cars, that I can fix up and make into something better than they already are. That could be an old 4runner asking to be lifted and made into a rock crawler, or just a sedan that has seen better days. It’s kind of a hobby of mine. However, I know most people aren’t like me. Most people hate car shopping. Most people like new cars. Most people don’t enjoy spending hours online researching cars. Most people simply want to buy a car that fits their needs, and wont give them any problems. Because most people who know me, are well aware of my hobby with cars, I get a lot of questions about car shopping. Here are my overall suggestions and pointers for buying a car.
YOU PROBABLY SHOULDN’T BUY A BRAND NEW CAR
I include the word probably in that section because there is a group of people who should absolutely be buying and enjoying new cars. If you have no consumer debt, and your net worth is over $1 million, please, go buy something shiny. If that does not describe you, please keep reading.
The biggest reason you should not be looking at anything brand new, is because you are still very much in the wealth building phase of life, and the last thing you should do is sink your money into an asset that is going DOWN in value. Most new cars lose somewhere from 30-50% of their value within the first three years of ownership. That means your $40,000 purchase is now only worth $20,000. Not the type of investment I like to put my money into. Let someone else take that depreciation hit and look for a 3-5 year old car that has already lost the majority of its value.
The most common pushback I get on that sentiment goes something like this “I want a new car because I know it won’t give me any problems, and it has a warranty. The reality is modern cars are built to last, and not just Hondas and Toyotas. Most modern cars are expected to last over 200,000 miles. So pretending the only way to buy a reliable car is to buy brand new is simply not true. As far as new car warranties, they are great. Hopefully you never need to use it though. But here is the thing, that warranty and security cost you something like $10,000-$20,000 in the example above. A brand new engine and transmission would cost you half of that. It’ just not worth it.
PAY CASH
Hands down the most common question I get is “How much should I spend on a car?” Answer; how much cash do you have? I hate car loans. Hate, hate, hate them. I’ve seen way too many friends get sucked into the trap of auto loans, and then just continually roll their old loans into their new cars and never actually own anything. Usually they are going backwards to the point where they are so underwater they can’t get out.
Buy what you can with the cash you have now. Keep saving. Because you bought something older that isn’t depreciating as fast, once you have more saved up, sell your car, add the proceeds to your savings, and buy a nicer car. Keep moving up this way. It works better than jumping in over your head and taking years to dig out.
BUY FROM PRIVATE SELLERS
I have nothing against car dealerships. But since we have established you aren’t buying new, and you’re paying cash, they have very little value to offer you. They won’t be ordering in your dream car, and they won’t be helping with your loan. They will however charge you more for the same used car, that a private seller would charge. You will likely save 10-20% buying private, and all you’re giving up is some basic services you likely didn’t need.
Lookup the model of car you are interested in on craigslist or a local classified service and set up a time to go view the car. If you want to know what things to look for, keep reading.
WHAT TO CHECK ON A USED CAR
Before you go to look at a car do your research on Kelly Blue Book and get an idea of the cars value.
You will need to bring two tools with you to do these checks. A flashlight, and some paper towels.
Check the oil. Remove the oil cap and shine your flashlight into the engine to look for any sludge or debris.
Check the transmission fluid. You should find a second dipstick lower in the engine bay. remove this and wipe it on your paper towel. It should be red. If it’s brown or silver you have transmission problems.
Check the coolant. open the coolant reserve tank NOT THE RADIATOR CAP, and see what color the fluid is. It should either be pink, or green.
Open the air filter housing and see if its dirty.
Check the tires to see if they are wearing evenly. A bad alignment will result in one edge of a tire going bald faster.
Get on the ground and shine your flashlight at the bottom of the engine. Look for any oil leaks. This will be evidenced by areas that look extremely dirty, and wet.
When you’re driving the car turn off the stereo and shut off the AC/heater. you want to be able to hear everything. Find an open area and make a tight circle to both the left and right. Listen for any popping noises coming from the wheels that could indicate a bad bearing or ball joint.
Listen to the engine checking for any ticking or knocking. Ticking is fixable, knocking spells disaster.
The last thing to look at is all of the electrical systems. Push every button in the car, and turn every knob to ensure everything works fine.
If all of that checks out, you are good to go. If anything is amiss, use it as leverage while negotiating the price.
SELLING YOUR CAR
Similar to buying a car, start by getting an idea of the cars value on KBB. The next thing you’ll want to do is clean the car. inside and out like never before. Clean cars sell for more than dirty cars, even if the dirty car is newer with less miles. Once it’s clean take pictures of the car to put on your ad. The more the better. 20 or more should get the job done.
Once the ad is live start setting appointments with interested parties. hold your ground on price. At the end of the day, they went out of their way to come see the car. They wouldn’t be there if they didn’t want it, and they don’t want to go all the way home feeling like they wasted their time.