Many people have major fears of buying a used car, they will walk in a dealership and simply go for a new car. Well, lets look at why some of us get to drive BMW, Mercedes and Audi for the price of your Toyota Camry.
Here are some facts you should know before we discuss why:
– American cars hold the worst resale value
– Aftermarket warranties are not as effective as manufacturer’s warranties
– Car depreciate for a total of five years, no matter the miles
– After five years, it becomes a cash car, and mileage does matter
– 0% financing deals are simple lies that save you nothing in the end
– Dealers make money from all ends: the car, financing, warranty, etc
So now lets see how you can buy a much better car for much less money and enjoy all the same benefits as a new car. First, lets look at what happens when you buy new. You buy an average new car for $30,000 and the minute you drive it off the lot, its worth $5,000 less, so you now lost $5,000 in less than an hour. That is a bad investment. Then comes the fact that you probably financed your car for a miserable 7% rate despite your great credit. Even better, you purchased an extended warranty for $3,000 and so you now have a $600 car payment for 5 years a for a well loaded Toyota Camry for example.
If that seems like a good deal to you then by all means enjoy your Toyota Camry! For the rest of you that wonder how some people that make $40,000 a year drive a one year old BMW for $300 a month, then read on…
So the same scenario applies. You are looking for the same Toyota Camry, it’s a 2008 Toyota Camry fully loaded that sells for $30,000 new, but you are smarter. Before you go in to buy the car you want you do the following:
– You research your car and why you should buy that year or model using sources like Edmunds.com
– You secure financing on your own, knowing the fact that excellent credit gets you a 5-6% rate no matter what the lending climate
– You do enough research to know aftermarket warranties are useless
– You search Autotrader.com, Cars.com, and Ebay.com for what used cars with less than 10,000 miles of the exact same model, color and options are selling for within a 300 mile radius of your home
– If you want to be extra smart you will remember that you should buy a car at least 3 years old, and with low miles below 25,000 miles
– Finally, you secure a friend with a lot of experience in cars, or with buying cars, so they can come and check out the car with you
You walk in the same new car dealership, but go to the used car section where you already researched and found the same looking car model year 2007, with 10,000 miles. The price is $19,000, and you negotiate it down $1000 from the advertised web price which is usually too much.
You get the car for $18,000, you don’t get the extended warranty, because the original warranty is still valid and until it is, then you can always purchase an extended warranty later, one that you can study and choose, not the crap the dealer sells you. Now you got the same car that was inspected, accident free and in most cases certified to be under warranty additional years at no cost.
Since you secured your own financing at lets say 5.5%, now you can have the same car, more warranty and potentially more options for $375 a month. Wait, that means you could have two for the price of one, well almost.
The best buy for cars are those that are 3 years old, import brand and/or have recently had a recent model change. In other words, lets use the Acura TL as an example, the new one came out recently but is very new and no discounts or incentives are given by Acura, so the best buy would be finding one that is a 2007, fully loaded, low miles and certified. This can be had for $15,000 compared to $38,000 new.
The reality is “knowledge is power” when dealing with cars and car repair, the more you know the more you have the ability to win, dealers are in the business to make money from everything, so don’t trust them, believe them or think they are your friend. Dealers will try to make every penny they can from you, so go in there be prepared and do not be afraid to walk out without a car, until you feel like you are getting a great deal.