I haven't bought a new car in years, and I most likely never will again. It does not mean I buy clunkers, or ancient wrecks. I know what kind of car I want -- in my case, a compact SUV -- and I look for one that is two to three years old, with acceptable mileage. My last two were ex-rental cars, and I bought them from reputable dealers. I know I'll get a better price buying privately, but the dealers I know feel less risky, and the hassle factor is much lower. But if you are confident, by all means buy privately.
- Depreciation means a three-year-old used car can cost nearly half as much as the same new model
- Most of the depreciation happens in the first two to three years and the value will drop more slowly after that
- I get a much better car for the price
- My insurance premiums are lower because of the lower cost
- Have you seen the prices of new cars now?
But as new car prices go up, so do those of used cars. Even if you can get a clean used car for $20K, that is still a lot of money for a car with little or no warranty left on it. Which means you have to do some common sense checks before you pay for it. I'm not asking you to play at being a mechanic (I certainly am not) but I do suggest you have a mechanic check it out as a last step.
Here are the four main checks I do before buying a used car.
Get a vehicle history report
What happened to the car before you found it
You can get a comprehensive report on the history of the car, listing the number of owners, whether it's been in major accidents, information on recalls, detailed maintenance and repairs info, a check that the mileage on the odometer is correct, and more.
There are three major agencies that provide this service, Carfax, AutoCheck, and Bumper. All three are paid for services, with the first two offering a sliding scale on multiple checks. Edmunds did a comparative test on these, and found Carfax the most comprehensive, even though it was more expensive. You can get this for free, but you get what you pay for.
Most dealers will provide one of these reports for free on any car you are interested in, but for private transactions, you will have to pay. However, even $50 is cheap for peace of mind when paying that much for a car.
Look at the condition outside and in to spot any hidden costs
The exterior
Walk around the car slowly and look at everything. Are the body panels all aligned, and do the colors match? Is there rust anywhere -- a disqualifier in most cases? Are the fenders straight, is the grille in one piece, are all the bits of trim on the body and around the headlights and such still there? Minor scratches or trolley dings will be acceptable, anything more substantial will be a red flag.
Look at the windshield, the side windows, the rear window, and wing mirrors. There should be no cracks or major chips, and the rubber molding around the glass should be in good shape. Look at the tires, including the spare wheel, and make sure they are still in good shape. Another red flag is if the thread on one of the tires is worn on one side only -- this could be alignment issues, or signs of deeper damage.
The interior
The inside of the car is really important. Bad upholstery, buttons or dials that don't work, seat belts that don't lock, and even the smell of the car can indicate expensive trouble ahead. So get in, take a deep sniff. If it smells moldy or damp, walk away.
Look at everything, and try everything. Do the seats slide back and forth as they are supposed to? Can you adjust the angle of the seat back? Are there car mats on the floor, and what is underneath them? Do the sunscreens fold down properly?
The interior extends beyond the cabin. Open the hood and look at the engine. You might not be a mechanic, but the fluids of the engine should remain inside it. If there are oily spots anywhere on the engine, that is probably an expensive issue. Ditto frayed electrical cables, or a residue on the contacts of the battery.
Look at the condition of the trunk, the carpeting, and the gas pistons that hold the trunk open. Make sure the car tools like the wheel spanner and jack are still there. You will quickly get a feel about the condition of the car.
Make sure everything works
Just because it's there, doesn't mean it's working
Little things that don't work and need replacing can cost a lot of money. Parts are hideously expensive, but you can get some peace of mind by being active. You are the buyer, and the seller should give you space to check out what you are buying.
Poke, wiggle, and press everything to make sure it is firmly fixed and actually works. The money you save on buying a used car can be quickly swallowed up by replacing worn or damaged components.
Poke everything you can see to that can be poked. Turn every dial, knob, handle, and stalk to feel they work and don't make scritchy sounds. Go further and ask the seller to turn on the lights, brights, indicators, brake lights, and reverse lights while you watch from outside. Make sure the wipers wipe, the windows wind up and down, and the central locking works. Ask the seller to start the car and listen how easily or not it starts. Watch the exhaust pipe -- if smoke, black or white, comes out, or any fluid -- say thanks, and leave.
Take it for a test drive
Drive it and have it checked
You buy a car to drive, to test drive this one. Listen to the sound of the engine, the brakes, and for any excessive creaks. See how it handles around corners, any wobbling can mean bad shocks.
Find a safe spot and brake hard, and see how that works. Don't just drive around the block, take it for a couple of miles and get a feel for how things work, and if you are prepared to live with that vibration or this wobble for a long time.
Have it checked by a mechanic
Once you're satisfied with everything you have seen and experienced, tell the seller you will take the car to a nearby mechanic. You should pre-arrange this before you go and look at the car, and the workshop should be close to the seller's location. We tend to buy cars near where we live, so that should work.
On your way to the seller's place, pop into a reputable looking workshop and ask the manager what they would charge to look at a car you are thinking of buying. They would probably charge you $50, or even do it for free to generate goodwill and possibly get a new customer. A good mechanic can quickly spot issues we mere mortals cannot: a leaky seal here, an electrical issue there. If the problems are minor, get a quote to fix them and negotiate that off the asking price.
If you do the checks I mentioned here, you will have a good chance of getting a great car at a fair price. As long as you don't keep it for more than two or three years, you can keep your used car ownership in the sweet spot.