Used Car Buying Strategies
How to Leverage the Top Car Buying Service to Save Thousands - Buying a car doesn't have to be Hard. Learn how to leverage the top online new car buying services & save! Top 40 New Car Buying Tips - Follow these tips and avoid costly mistakes.10 Car Buying Mistakes - These mistakes can will drain your wallet.Top 6 Dealer Selling Systems - Being aware of these can provide you with more buying power.
used car buying strategies
Bob Lotich, CEPF is a Certified Educator in Personal Finance and has over 15+ years experience writing about Biblical personal finance and is the best-selling author of Simple Money, Rich Life and has been named a top 20 social influencer in personal finance. His writing has been featured on Forbes, The Huffington Post, Yahoo Finance, CBN, Crosswalk, Patheos and others. He has been a full-time writer since 2008 and loves uncovering financial wisdom in the Bible as well as discovering the best tools and strategies to help you put more money in your pocket.
But many Americans make big mistakes buying cars. Take new car purchases with a trade-in. A third of buyers roll over an average of $5,000 in debt from their last car into their new loan. They're paying for a car they don't drive anymore. Ouch! That is not a winning personal finance strategy.
"The single best advice I can give to people is to get preapproved for a car loan from your bank, a credit union or an online lender," says Philip Reed. He's the autos editor at the personal finance site NerdWallet. He also worked undercover at an auto dealership to learn the secrets of the business when he worked for the car-buying site Edmunds.com. So Reed is going to pull back the curtain on the car-buying game.
So Reed says having that preapproval can be a valuable card to have in your hand in the car-buying game. It can help you negotiate a better rate. "The preapproval will act as a bargaining chip," he says. "If you're preapproved at 4.5%, the dealer says, 'Hey, you know, I can get you 3.5. Would you be interested?' And it's a good idea to take it, but make sure all of the terms, meaning the down payment and the length of the loan, remain the same."
So at the dealership, Reed and Van Alst both say, the first step is to start with the price of the vehicle you are buying. The salesperson at the dealership will often want to know if you're planning to trade in another car and whether you're also looking to get a loan through the dealership. Reed says don't answer those questions! That makes the game too complicated, and you're playing against pros. If you negotiate a really good purchase price on the car, they might jack up the interest rate to make extra money on you that way or lowball you on your trade-in. They can juggle all those factors in their head at once. You don't want to. Keep it simple. One thing at a time.
"Concerning the extended factory warranty, you can always buy it later," says Reed. "So if you're buying a new car, you can buy it in three years from now, just before it goes out of warranty." At that point, if you want the extended warranty, he says, you should call several dealerships and ask for the best price each can offer. That way, he says, you're not rolling the cost into your car loan and paying interest on a service you wouldn't even use for three years because you're still covered by the new car's warranty.
"We're actually living in a golden age of used cars," says Reed. "I mean, the reliability of used cars is remarkable these days." Reed says there is an endless river of cars coming off three-year leases that are in very good shape. And even cars that are older than that, he says, are definitely worth considering. "You know, people are buying good used cars at a hundred-thousand miles and driving them for another hundred-thousand miles," says Reed. "So I'm a big fan of buying a used car as a way to save money."
NPR has a personal finance Facebook group called Your Money and Your Life. And we asked group members about car buying. Many said they were shocked by how much money some other people in the group said they were spending on cars. Patricia and Dean Raeker from Minneapolis wrote, "40 years of owning vehicles and our total transportation purchases don't even add up to the cost of one of the financed ones these folks are talking about."
Even if you buy a slightly newer used car than the Raekers', the couple raises a great point. What else could you be spending that car payment money on? And if you can cut in half what you might otherwise spend, that's a lot of extra money for your retirement account, your kids' college fund or whatever else you'd rather be doing with that money.
Buying used has not been immune to the price increase. The monthly payment for a used vehicle in the fourth quarter of 2022 was $526, according to Experian. But buying used is still less expensive than buying new. So as you explore your car-buying options, keep these tips in mind to get the best deal.
One way to get around some of the risks of buying used is to shop for a certified pre-owned (CPO) vehicle. Typically found at dealerships and rental companies, these vehicles are specially inspected and approved by the manufacturer.
In general, buying CPO means that your car will have good parts, low mileage and proper maintenance. CPO vehicles are typically properly cared for and accident-free. These vehicles can also come with an additional vehicle warranty for long-term quality assurance.
I started pricing out new vs. used models. What I found was that cars that were within a year old were selling for just slightly less than new cars (about 10-15%). Even cars that were 2-3 years old were selling for just 15-25% less than their new 2012 counterparts.
If I could get the best car value now, and knowing what I found out about used car prices, it is very possible (if not certain) that I could get the Malibu now and sell it for more than what I bought it for later in the year while it was still under full bumper-to-bumper warranty.
We actually found someone to trade vehicles with. We have a 2007 Camry and wanted a Ridgeline, they had a Ridgeline and wanted a car because of their commute. They agreed to do a straight trade to avoid dealing with a dealer. We get a truck thats worth several thousand more than our car and they get the fuel efficiency without the hassle of buying and selling or going to a dealer.
There is always the option of leasing and then buying the car at the end of the contract. The automakers allocate a certain amount of the cost of a car to advertising but with leases they often consider the lease as the advertising and reduce the car price appropriately.
You can bid on certain words other dealers frequently use when trying to convince online shoppers to buy a car, as one part of a keyword strategy. Google used to have a rule against bidding on competitor keywords, but they lifted the rule across the entire platform and you can now buy them at will.
The buy-from-home experience is still a small segment of the market, especially for used vehicles. Most buyers are more comfortable test-driving a vehicle and giving it a thorough inspection (or having a mechanic inspect it). But even if you ultimately end up at the dealer, you have the opportunity to do research, comparison shop and get prequalified for financing online, all of which gives you the information to strengthen your negotiating position with the dealer.
A million or more used vehicles are listed at sites such as KBB (opens in new tab) and Autotrader (opens in new tab) (both owned by Cox Automotive), Cars.com (opens in new tab), CarGurus.com (opens in new tab), and TrueCar (opens in new tab). Dealers provide most listings, with some private-party offerings mixed in (except at TrueCar). Start your research at one of these large marketplaces, but also check out the other venues listed on the next page.
As you decide on which vehicles to shop, check their reliability and repair records at Consumer Reports (opens in new tab) and Nadaguides.com (opens in new tab). KBB and Autotrader have top-10 lists of used cars and SUVs, updated monthly.
Going through the prequalification process is a good way to get a general idea of rates available. If you end up at the dealer, ask if you can get a better deal on financing. Also, check bank and credit union rates. Recently, 60-month used-car loans averaged about 4.2%, according to Bankrate.com (opens in new tab).
Buy from home/delivery: Within 60 miles of some stores. Choose a car online and request delivery. A CarMax team member will call to walk you through the steps for buying online and help you complete the documentation.
You may have been drawn to the idea of buying a car online thanks to sites like TrueCar or Carvana, which can help you buy new or used cars over a computer without personally interacting with a dealership salesperson. These sites can offer a variety of vehicles from different manufacturers and at different price points. However, if you've done your research and narrowed down your list to one or two possibilities, it might be easiest or cheapest to stick with the traditional dealership. Simply track down the contact information for the internet sales department (most dealerships have one), and fire off an email to them asking for quotes on the vehicles you're interested in.
If you're going with a third-party service and a test drive is important to you, bear in mind that not all online car services can accommodate test drives. In the case of a new car, you can still drive one at a local dealership, but it won't be the car you're buying and it's probably the exact kind of hassle you're shopping online to avoid. And in the case of a used car you can't see or drive, you'll be taking some serious chances.
CARFAX is the standard for used vehicle history reports. The service provides a detailed report of how many owners a car has had (though this can also include sales or transfers between different dealerships) and how many accidents a car has been in. Just be aware a CARFAX isn't always accurate or complete due to clerical and insurance errors. 041b061a72