Used vehicles after just one year on the road typically sell for 20% to 30% less than they did new. They often sell for a small fraction of their original price after eight to 10 years, though many still have plenty of life left in them.
Buying your next car used could save you thousands of dollars — but some used cars are much better bargains than others. To get a great deal…
A used car’s price is driven in part by the reputation of its manufacturer. It’s rare to find bargains on used Hondas or Toyotas because these companies’ well-deserved reputations for quality ensure strong demand.
You’re more likely to find a bargain if you shop for a used Nissan, Mazda or Mitsubishi. These automakers score nearly as high as Honda and Toyota in reliability rankings, but lack their cachet. For an even bigger bargain, buy a used post-2003 Hyundai or post-2006 Kia. These Korean cars have become very reliable in recent years — Hyundai even has beaten Honda in some owner satisfaction surveys — but because of past quality problems, many used-car shoppers don’t trust them. That attitude reduces their prices on the secondary market.
Examples: A used 2004 Hyundai Elantra might sell for a little more than $6,000, 57% below the asking price for a new 2009 Elantra… while a comparable 2004 Toyota Camry would still fetch around $11,410, just 40% below the price of a new one.*
Alternate strategy: Because of automaker mergers and joint ventures, virtually the same vehicle occasionally is sold under different names by multiple carmakers. The version of these “twins” released by the less- respected automaker could be a bargain when purchased used.
Examples: The Pontiac Vibe is virtually identical to the Toyota Matrix, but Toyota’s superior reputation for quality means that used Vibes sometimes sell for hundreds less, despite a longer warranty… the Ford Fusion is essentially the same as a Mazda 6, but because of Ford’s lesser reputation for reliability, used Fusions can be found for as much as $1,000 less. Other virtual twins include the Hyundai Accent and the Kia Rio compact cars… the GMC Yukon Denali and the Cadillac Escalade SUVs… the Toyota Camry and the Lexus ES350… and the Hyundai Entourage and Kia Sedona minivans.
The high fuel costs of 2008 have ravaged the resale values of used large vehicles, though prices did rebound a bit after gas prices fell in late 2008.
Used gas guzzlers are not bargains if you drive a lot — any money you save up front will be spent later at the pump — but poor gas mileage won’t hurt you financially if you drive only a few thousand miles each year.
Example: If you drive just 3,000 miles a year, the difference in gas bills between a car that gets 15 miles per gallon (mpg) and one that gets 25 mpg is just $160 per year if gas costs $2 per gallon, or $280 if it rebounds back to $3.50. There currently are many more used SUVs, full-sized pickups and full-sized sedans on the market than there are buyers for these vehicles, so make lowball offers until you find a seller desperate enough to accept.
Vehicles tend to depreciate quickly in their first year on the road, then plateau in value somewhat for the following three to four years before dropping precipitously once again. Two ways to get the best deals…
Open the car’s hood and squeeze the hoses — does the rubber feel brittle? Eyeball the hoses — are there any cracks? When an older car’s rubber hoses are in good condition, it’s a good sign that the car has been well maintained. Still, it’s worth paying a mechanic $100 or so to give a used car that’s no longer under warranty a good thorough inspection before buying.
Ordinary car owners almost always offer lower prices on used cars than dealerships. Dealerships need to charge more to cover their overhead… and they are expert negotiators.
Used cars offered by private parties can be found in newspaper classifieds, on Web sites such as Craigslist.com and Autotrader.com, or posted on college and workplace bulletin boards. Also watch for “For Sale” signs in vehicle windows, particularly when these vehicles are parked next to homes that also are for sale or other vehicles for sale. Such sellers likely are either moving away or experiencing serious financial troubles. Either way, they might be anxious to sell fast and willing to consider a lowball offer.
On auction Web site eBay (www.motors.ebay.com), used cars often sell for barely more than their wholesale value — less than you are likely to pay anywhere else. The catch is that few of these vehicles will be located in your region. Either wait for one that is in your area or lower your bid by several hundred dollars to account for the cost of traveling to pick up the vehicle or having it shipped. You will have to make arrangements to have the car looked at by a mechanic. If that’s not possible, eBay car listings often give you a VIN number so that you can obtain a CarFax report. CarFax reports detail a vehicle’s history and can help weed out potential lemons. Cost: $39.99 for unlimited reports, www.carfax.com.
Before taking a test drive, you can look up the “true market value” (TMV) of any used vehicle that you consider on my Web site, Edmunds.com (click “Used Cars” then “Appraise”). Knowing how much other buyers have paid for similar vehicles will help you determine how much you should be willing to pay.
Make appointments to see at least three used cars before taking any of these cars for a test drive. It will be easier to walk away from a seller who refuses to meet your price if you know that other vehicles of interest to you are available.
If a seller seems anxious for you to come see his/her car, it could indicate a need to sell fast and a willingness to consider a lowball offer. If the mechanic you hire to examine the used vehicle gives it his thumbs-up, still ask him to list any minor mechanical issues or upcoming routine service bills. Mention these potential expenses to the seller and ask to reduce your purchase price accordingly.
*Used-car prices are estimated prices for base models with normal mileage and wear on used-car lots.