Some people are new car people. Some people are used car people. I have only purchased three new cars in my life. The last new car I bought was in 1995, when I bought a brand spanking new Saturn SW2 with only about fifty miles on the odometer. It was a lemon. I haven’t purchased a new car since.
My first car was a twelve year old 1966 Plymouth Valiant that I purchased in 1978 for $275. I bought it from another student while I was still in undergraduate school at the University of Michigan. It was a great starter car. No power steering or power brakes. The transmission was a three speed manual with the shifter on the steering column. It had a slant 6 engine that ran and ran. The only option was an AM radio. I took very good care of that Valiant and it took me where I needed to go. I sold it four years later for $250.
It is interesting how what goes around, comes around. After buying a few new cars, and a few cars off three to five year leases, I have gravitated back to the ten to twelve year old vehicles. I have found that if you properly maintain the vehicle, you can have five to ten years of worry free reliable transportation, without the huge cost and depreciation of a new car. I generally look for vehicles with 80,000 to 130,000 miles on them.
For example, we bought my wife Emily’s current daily driver, a 1996 Volvo 850GLT station wagon in 2007 on ebay.com for $2,900. At the time, it had 130,000 miles on it. It has been down south, out east and all over the Midwest. After driving it for seven years, it now has 190,000 miles on it and we are thinking about replacing it. A recent blue book check indicates it’s worth about $2,800. The car has only depreciated $100 in seven years.
Before looking for an actual vehicle to buy, you should do a little homework. Research the make, model and sub-model of the vehicle in which you are interested. What options are available? What are the approximate blue book values? See what’s out there initially by looking online through listing websites such as cars.com or auction websites such as ebay.com.
My first choice has been to deal with a local reputable new car dealer who sells the make of car I am thinking of buying. If you are not in a hurry, have a used car salesperson keep an eye out for the car you want at the price point you want, and that the dealer may be taking in on trade. I have been able to pick up very nice one owner used vehicles this way when the dealer’s customers buy new cars and trade in their old ones.
When buying a used vehicle nowadays, you are not limited to buying local. You can also buy online through the listing or auction sites. I’ve had successful purchases through both cars.com and ebay.com. I stick to sellers within about 300 miles of me to keep the shipping costs under $500. If buying online, check the reviews of the seller first to make sure you are dealing with someone reputable.
For example, in 2004 I bought a 1998 Ford Ranger 4X4 with 110,000 miles through cars.com from a seller in South Lyon, Michigan for $4,500. I had the truck inspected by a local Novi mechanic recommended by a family member who lives in the area. Since it was only about 100 miles away, I took a second driver and picked up the truck myself. This was the kids’ learning vehicle and my hunting truck. I sold the truck last year for $3,000 after the kids were out of the house and the truck started approaching 200,000 miles. I replaced the Ranger with a one owner 2004 Honda Pilot with 130,000 miles on it that I picked up for $8,500 from a local dealer who took it in on trade.
When you find a car in which you are interested, it is important to have the vehicle inspected before buying it. It is well worth the $100 or $200 to pay for the inspection, if it saves you from making a $5,000, $10,000 or more mistake.
If I am buying locally, even if I am buying from a dealer, I have my local mechanic or a different local dealer inspect the vehicle. If buying online, I locate a new car dealer who sells the make of car at which I am looking and who is nearby the seller. I have found most sellers are willing to take the vehicle to be inspected because it means a possible sale.
It is critical that the inspection is a mechanical inspection by someone who puts the car on a hoist, checks the suspension and pulls all the wheels off to check the brakes. Be careful of some online inspection services, such as those offered on ebay.com. They are better than nothing. However, they are visual inspections only which do not check brakes, suspension or other mechanicals, which are common and expensive wear items on used vehicles.
For example, I am currently replacing my daily driver, a 1999 Volvo V70XC which has 240,000 miles on it, with a single owner 2004 Honda CR-V which has 96,000 miles. I found the Honda on cars.com for sale by a used car dealer in Cleveland, Ohio for $9,500. I had a local Cleveland Honda dealer inspect the vehicle for $125. Not only did the dealer do a complete inspection, they took care of three recall items that had never been addressed by the prior owner.
Prior to buying a used vehicle, always check the title/repair history of the vehicle through a service such as carfax.com. If you are buying from a dealer, they will usually provide the report to you free of charge. However, if you are buying from a private party, you can purchase the reports yourself online for $40 or $50. To do so, you will need the vehicle identification number.
When buying a ten to twelve year old car, I buy the car for cash so there is no loan payment. Even when you get the vehicle inspected, budget $1,000 to $2,000 for unforeseen repairs in the first few months. I have found that if I get the vehicle up to snuff right away, I will have reliable transportation and lower repair costs later.
If you do your homework and regularly maintain the vehicle, you can keep repair costs down. Our vehicles have regular oil changes and tire rotations every 5,000 miles on the 5,000 miles. When I get new tires, I pay extra to get 70,000 to 90,000 mile tires and get the extended warranty which includes rotations, flat repairs and replacement for premature tire failure.
With regular maintenance, I usually have about two major repairs per year, one at about $1,000 and one about $500. When I take our vehicles in for service, I have the mechanic also look over the vehicles for any other repairs needed. By keeping the vehicles maintained, I do not hesitate to take them cross country, which I periodically do. When I start to take a vehicle in more often than a couple of times per year, or the repair costs start increasing, then it’s time to think about replacing the vehicle.
If you are not a new car person, it’s ok to be a used car person. By doing your homework and regularly maintaining your vehicle, you can have safe, affordable, reliable transportation for many years to come.
By: Matthew Wallace CPA, JD
Published edited April 27, 2014 in The Times Herald newspaper, Port Huron, Michigan as: Buying a used vehicle can be a good deal