Hey savvy readers! We have a great guest post today from Steve Boffa. He has worked in the automotive industry for 12+ years. He has some amazing advice on buying a used car and saving money in the process. Enjoy! – T$C
Buying a vehicle is a big decision, and to a lot of people, money plays the biggest factor in which vehicle they end up purchasing. One of the longest standing debates within the auto industry is whether or not you should buy a brand new vehicle or a used model. Each argument has their pros and cons, but if buying something affordable is your biggest deciding factor, then going the used car route is your best bet.
We all know that cars are a depreciating asset, but the level of depreciation during the first three years is approximately 40% to 50%. That means, if a brand new vehicle costs you $25,000, you’re looking at roughly $12,500 in depreciation cost over those three years. Whereas used cars that are older than three years depreciate at a lower rate. What does this mean? New cars are more expensive and lose their value a lot faster.
Yes, buying a used car comes with some risk, but the reality is with modern technology, build quality, and consumer rights, buying a used car has never been easier while being less of a risk.
Of course, buying a used car can still be an expensive acquisition, but there are things as a consumer that you can do to shed a few dollars off your purchase.
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Here are some savvy car saving tips that can help you save thousands of dollars on your used car purchase:
Negotiate with the dealer when buying a used car
This is the most obvious tip on the list, but also the most underrated. The art of negotiating can help save you thousands of dollars on your used vehicle. There are lots of current data to suggest that negotiating with car dealers during specific times can also work to your advantage. For example, there are peak times to purchase a vehicle, such as in the off-season, towards the end of the month or after a next generation model is released.
⦁ Off-season: Spring is the worst time to buy a vehicle as it is the start of the season for most dealerships. They have a lot less pressure to make a sale during these months, and inventory levels are fully stocked. Quotas need to be met, but not for a while.
⦁ End of the month: Each dealership and financial institution have a period of time at the end of the month where they focus on moving as much volume as possible. The reason is that they need to hit their monthly quotas, making this an optimal time to put your bargaining hat on.
⦁ Next generation models: Most car manufacturers release their next generation model every 4-5 years, making previous models an afterthought in many people’s eyes. For example, Toyota is going to their 12th generation model for their beloved Corolla. Once the 2018 Toyota Corolla is released, the price will drop in previous generations.
If you find that you are not a great negotiator, then bring somebody with you that is. Perhaps your wife, your sister, your uncle Bob, or even your grandma can get the job done. There is no shame in letting someone else fight the good battle for you if it means saving hundreds, or even thousands of dollars.
Consider going green
Being environmentally friendly usually comes with a cost, as these eco-friendly type vehicles are generally a bit more expensive. With that being said, the amount of savings accumulated over a longer period of time can offset the initial cost.
When factoring in savings in fuel economy, lower insurance premiums, and government rebates and tax credits (*edit: only new vehicles can receive government rebates*), for hybrid and electric cars, you can save yourself quite a bit of cash throughout the life-cycle of your purchase.
Besides saving money, the shift towards becoming more environmentally conscious is becoming more important.
Check the car history
Every used vehicle has their own story to tell and luckily we are able to read that story thanks to online tools such as CarFax and AutoCheck. If you are keen on buying from a specific dealer, make sure you come prepared with your historical documents to use as leverage for negotiating a fair price. If a vehicle has been in an accident, that should give you some additional leverage for negotiations and reduce the cost significantly.
By doing a VIN # search, you can tell a lot about a vehicle, and also determine if it is part of the lemon list of vehicles which have been repurchased by the manufacturer. The last thing you want to do is buy a vehicle with a poor history, then get stuck with expensive repairs shortly after driving off the lot.
Get pre-approved with a good interest rate
If you decide to finance your vehicle, you should not only negotiate the ticketed price, but you should aim to secure the lowest interest rate possible. This will reduce your monthly cost, and save you money throughout the course of your loan.
If you can get pre-approved before you walk onto the car lot, you might be able to shave a few points off the interest rate offered through the dealership. Used car interest rates generally run a bit higher than new ones depending on how old the vehicle is, and its mileage. Coming prepared and having a pre-approval promised by a financial institution is always a good situation to be in.
Buying a used car with a recall notice
This tip comes with some controversy, but this is a viable option for real bargain hunters. Vehicles that have had recall notices come with a risk, but they also come with a cheaper price tag. If you’re going to buy a vehicle that has had a recall notice, make sure the defect was repaired, and if it hasn’t, make sure you schedule it for repair.
If you recall a while back, GMC vehicles suffered from an ignition defect which resulted in 13 fatalities, and approximately 1.4 million vehicles being recalled. Did this stop people from buying these defective vehicles? Not exactly. Vehicle sales for the affected models were not impacted all that much because of how cheap they were to purchase.
Just remember, if a car has been subject to a recall, the dealer HAS to disclose this information to you, and whether or not the defect has been fixed.
Conclusion on buying a used car
At the end of the day, buying a used vehicle is the way to go if saving money is your biggest concern. It is much less risky than it used to be, and with the knowledge available through online tools and data, walking away with a discount on top of the added savings from buying used can help put money back in your pocket.
Have you bought a used car in the past?
What advice would you give someone looking for a used car?