How to Buy a Used Car In This Crazy Market
This market is crazy and you can really get yourself in a sticky situation if you spend too much on a car.
The average car payment is $725 which is unaffordable for most Americans.
In fact, I think that number is insane.
There’s no greater money suck than a depreciating asset.
So if you NEED a car I am going to show you how to buy a quality used whip. I have personally never owned a new car. I love buying used ones. My current vehicle is a F-150 XLT that I bought with 13,000 miles on it for $25,000.
But first, why should we buy used?
- Less Depreciation: New cars typically depreciate rapidly in the first few years, with some models losing up to 40% of their value in the first year. In contrast, used cars have already undergone significant depreciation, meaning their value remains relatively stable over time.
- Better Value for Money: Since used cars have already depreciated, buyers often get more car for their money, potentially affording a nicer car with more features than if they were to buy new. Just like my $25,000 F-150 that is worth more now 5 years later than when I bought it. Like I said, this market is nuts.
- Lower Purchase Price: Used cars generally have a lower upfront cost compared to new cars, making them more accessible to a wider range of budgets.
- Lower Insurance Costs: Insurance premiums are typically lower for used cars as they are valued less than new cars.
- Reduced Financing Costs: If financing is necessary, the lower purchase price of used cars usually results in lower financing amounts and interest payments.
The current used car market may seem overwhelming, but acquiring a reliable used car within your budget is still achievable. This guide will navigate you through the optimal methods to purchase a preloved vehicle, ensuring you make a well-informed decision without any regrets.
Step 1: Establish Your Budget
Before embarking on your car-buying journey, determine your affordability. I like the 2-4-7 rule.
- 20% Down
- 4 years or less on your car note
- 7% or less of your income is spent on car payments each year.
This keeps you grounded and ensures you don’t blow a big bankroll and paralyze your future self.
Step 2: Identify the Right Car
After setting a budget, identify a vehicle that aligns with your lifestyle and financial capability. Evaluate various vehicle types and their intended purposes, prioritizing needs over wants.
Consider factors like cargo space, passenger capacity, fuel economy, and environmental impact. Eliminate unnecessary features and technologies to save costs.
Step 3: Explore Your Options
With a clear understanding of your needs and budget, start exploring various platforms to compare options and prices. Some reputable places to start your search include:
- CarMax
- Edmunds
- Cars.com
- Carvana
- Craigslist
- Autotrader
- Independent used car dealerships
Step 4: Determine the Car’s Value
After narrowing down your options, assess whether the chosen used car is priced fairly. Utilize resources like Kelley Blue Book for realistic price ranges and purchase a Vehicle History Report for detailed information on the car’s history. Consider ownership costs, recall history, and insurance quotes to make an informed decision.
Step 5: Conduct a Personal Inspection
Even without mechanical knowledge, conducting a preliminary inspection can reveal obvious issues. Check fluid levels, tire conditions, paint job, interior wear, and functionality of features. A detailed inspection list from the Department of Motor Vehicles can guide you through this process.
If you are buying from an individual look to see how clean the car is. Do they maintain the car and keep meticulous records? All of this stuff matters.
Step 6: Test-Drive the Car
You want to take the car out for a drift session.
A test drive is crucial to evaluate the car’s performance and identify any underlying issues. Choose a varied route and pay attention to the car’s response to different terrains and speeds.
Assess the car’s feel, noise, sight, and smell during the drive to ensure it meets your expectations.
Step 7: Obtain a Mechanic’s Inspection
Regardless of the car’s apparent condition, a professional inspection is indispensable. A trustworthy mechanic can reveal potential problems and validate the car’s reliability. Opt for a garage inspection or a mobile inspection, depending on your preference and the seller’s cooperation.
This should not be skipped. Spend a few hundred bucks so you don’t have to spend a few thousand later.
Step 8: Negotiate the Price
Negotiation can be daunting, but it’s a crucial step to secure a fair deal. Arm yourself with research, be patient, and don’t hesitate to walk away if the deal doesn’t feel right. Use any identified issues or damages as leverage to lower the asking price, keeping in mind the potential repair costs.
Conclusion:
Buying a used car is a financially savvy decision, but it requires meticulous research, inspection, and negotiation. By following this comprehensive guide, you can navigate the used car market effectively, ensuring you secure a reliable vehicle that suits your needs and budget without any regrets.
Want me to do a podcast episode on this to dive deeper? Reply to this email and tell me.
