10 tips for secondhand-car buyers

 

1. The higher the mileage, the more parts will need replacing. From past experience, parts start wearing out at around the 60,000-70,000km mark. These can be relatively inexpensive like brake pads and fuel filters, but could steadily get bigger like a transmission overhaul, a new radiator or new A/C compressor. Get a copy of the car's periodic maintenance schedule to know what you're getting into.

2. You can't be cheap. You can be thrifty, yes, but delaying replacement of worn parts will cost you more. This is especially true for the cooling system where delaying a needed replacement will only create a domino-like effect. Take it from someone who held off on a new radiator several years ago until it finally cracked, causing the engine to shut down, and costing me a small fortune in not just a new radiator but an engine overhaul as well.

3. Have two budgets: one for the initial purchase of the car, another to make it truly roadworthy. My rule of thumb is you should have a "fix-it" budget that's at least 20% of the purchase price. So if you buy the car for P500,000, you should have a budget of at least P100,000 for parts that will need to be replaced. If you don't have this "fix-it" budget, I guarantee you will be very stressed when the temperature needle starts climbing, when the mechanic tells you it needs new rack ends, a new A/C compressor, a new this or a new that. (On the bright side, since the maintenance issues won't have the frequency of monthly payments for a brand-new car, it won't be painful all the time).

4. Research on the car. Talk to friends who have owned a particular model that you're eyeing, and Google the car's reputation. "Forewarned is forearmed," as they say. To get a feel for the market price of the car you're looking for, visit some used-car dealerships. Also, check the Internet for the cost of parts, and list down several shops that stock up on your prospective car's parts.

5. Inspect the vehicle thoroughly. Check the car in daylight so you can see the paint quality. Spots that don't quite match the other panels are a clue that it has been bent, scratched, touched up with body filler ("masilya") or putty, and painted over. These are generally minor issues, but check the engine bay and look for signs of filler; this is a clue that the car has been involved in a front-end collision (not good!). I got this tip from a dealer friend who told me what to look for in a particular van; after checking the body, I noticed the paint under the hood was especially new for a 10-year-old vehicle! I walked away. For the interior, tug on the seatbelts to see if they work, try out the seats if they still have cushioning, and check the instrument panel if all the gauges and lights work. Test the A/C at both its lowest and highest settings, and see how long it takes to cool the vehicle. See if the wipers and windshield washer work, too.

6. Check the tires. Mismatched tires should set off alarm bells in your head. It's not that you can't afford new rubber. If the previous owner was too cheap to at least replace these basic items in pairs, then what does that say about the other maintenance concerns?

7. Ask for the service records. Whether it's the log that's issued to every car, or an orderly collection of receipts gathered by the seller from having it maintained outside the casa, you need to have this information.

8. Test-drive. Aside from the usual drive around the neighborhood, some simple tests will reveal some things you'll need to know. Turn the steering at full lock left and right, and listen for knocking/tugging sounds; these indicate problems with the steering. Do a brief, full-throttle acceleration and listen to the engine and transmission for strange noises. Do a simulated panic stop to see how well the brakes work, or if the car tends to steer to the left or right. If you're not experienced enough to discern what a particular noise could indicate, hire a mechanic to come along with you so he can tell you what could be wrong with the car. List down all of these "issues" and evaluate whether you still want the car, and if you are willing to fix these problems. If you decide that you can handle them, you can mention these to the seller when it's time to negotiate the final price.

9. Consider the seller's disposition. You'll have to do a bit of psychology here when you meet up to check the car. Is the person unusually eager to sell you his car already, or quite cool about the whole thing, and possibly even reluctant? How good are you at spotting a liar? Don't be afraid to ask a direct question (politely, of course), like: "Has this car been flooded or crashed?" Look him straight in the eye. If he's evasive or has shifty eyes, then be on your guard no matter how enticing the car looks. Ask about the car's service history, and look for consistency in his answers. One time, I called a seller to ask about a van and he gave me a story about it being the family car and he just wanted to sell it because he needed a bigger one. When I came over to inspect it, another person (his nephew, he claims) said the van in question was actually owned by a Korean and they were reselling it!

10. Be adventurous. It helps if you have the mindset of making this purchase a "project car." Once you've bought the car you like and fixed it up, there are many ways to make it a really nice and fun project. For example, you could get a five-year-old 4x4 truck for half the price of a brand-new Ford Ranger, fix it up and modify it, and have a lot of fun tearing up some trails without feeling guilty about scratching a brand-new truck. You could get a five-year-old FD Civic, free yourself from the constraints of the dealership service rates since it's out of warranty anyway, and modify it for track days. Still, even if this will be your only car for everyday driving, you have to have a bit of a "cowboy" spirit when it comes to the used-car experience. It may no longer have that new-car smell, but a good, used car can be a lot of fun if you know what you're getting into.

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15 Essential Tips to Get the Best Deal for Buying a Car

 

Important Tips for Buying a Car

Follow these tips for buying a new car, beginning well before you ever set foot in a dealership or complete your online vehicle purchase.

1. Do Your Research

The most important thing to know before you buy a car is that knowledge is power. It’s a mistake to arrive at a car lot without first researching the car you want to buy. You can find out just about anything you want to know about a car online. Edmunds.com, Consumer Reports, and Kelley Blue Book are great places to start researching cars in your price range.

Also, if you are considering buying a new car, your goal is to find the “invoice” price of the car, not the MSRP. The “invoice” price is what the dealer paid the manufacturer for the car. This research will come in handy once the price negotiations begin.

On the other hand, if you are thinking about buying a used car, research the recent resale prices for that specific car model. This data will give you major bargaining power. If you plan to trade in your current car, research market values for your vehicle, too. Knowing the value of your trade-in can also be a powerful bargaining tool.

2. Look into Pre-financing Options

Many people obtain financing from the car dealership, but this isn’t fiscally responsible. Dealership interest rates are typically much higher than loan rates obtained from banks and credit unions, even in a low-rate environment. Your bank or credit union is one of the best places to start researching car loan rates, and you can obtain “relationship discounts” that you won’t find anywhere else.

To source multiple financing quotes at once, use an aggregator like LendingTree, which compares up to five competing quotes at once. Use Credit Karma to check your credit score beforehand and get a sense of the interest rate you’re likely to qualify for. If your score comes in lower than you’d like, consider putting your car purchase on the back burner and working to rebuild your credit and pay off debt. While you’re at it, sign up for Experian Boost, a free program that may boost credit scores derived from your Experian credit report by considering beneficial information that usually has no impact on your credit score, like on-time utility payments.

Once you obtain a quote from any financial institution, get the quote in writing. You can then present this quote to the dealership and use it as leverage to negotiate a lower interest rate.

3. Shop Around

Unless there is an emergency situation, shop around before you buy a car. I have an established rule in place whenever I shop for a car: I always make sure that I walk out of at least one dealership. This way, I always know their rock-bottom price, often given to me just before I leave.

It might also make sense to explore out-of-town car dealerships. Dealerships price their vehicles differently depending upon their location.

Once you’ve settled on your vehicle make and model and know where you plan to purchase the car, use a reputable valuation resource like TrueCar to arrive at an accurate estimate of what you should actually pay for your new or used car. Double-check TrueCar’s pricing using at least one other reputable resource, like Kelley Blue Book. Both TrueCar and KBB (and some of their competitors) sell new and used cars, either directly or through partnerships with dealerships and direct-to-consumer sellers.

4. Utilize the Internet

It’s easier than ever to buy a car online, and the process has three significant benefits.

First, you completely avoid the hassle of dealing with annoying car salesmen. This is a self-evident benefit for many car buyers and could help you avoid a misstep that results in your paying more than you should.

Relatedly, you could end up with a much better final price due to the fundamentally different incentives inherent in the online car-buying process. Consider this: A salesperson on the showroom floor is trying to negotiate the highest price possible, since their commissions are based on a percentage of the sale price. On the other hand, an Internet sales manager typically makes a fixed salary and gets paid a bonus, based on volume.

Finally, purchasing a car online is more convenient than visiting multiple dealerships. At this point, virtually all reputable dealerships list current inventory on their websites and third-party sites, and they welcome Internet sales. And, as we’ve seen, non-dealer outlets like TrueCar, KBB, eBay Motors, and their direct-to-consumer sales partners are all excellent options with impressive new and used car inventories. You can also find used cars for sale on Craigslist, but be mindful of common Craigslist scams).

5. Buy a Car You Can Afford

If you are considering buying another car before your current vehicle is paid off, you need to seriously reassess whether or not you can really afford to buy another car. You don’t want to be saddled with an upside down car loan.

A much better option is to wait until your current vehicle is paid off. Then set aside the money that used to pay for your monthly car payment in an interest-bearing account for one year, while continuing to drive your old car.

For example, if your previous car payment was $300 a month and you follow this strategy for just one year, you will then have more than $3,600 to use as a down payment on your next car. Just make sure that you’re not digging into your savings or your emergency fund to buy a top-of-the-line car. Buy within your means.

Pro Tip: If you’re not going to be driving your car every day, you can sign up for Turo. Turo is a car-sharing platform that allows you to earn extra money, helping you cover your monthly car payment, just by sharing it with other drivers. Sign up for Turo and see how much you could earn.

6. Negotiate Terms

To me, buying a car is either a chess match, or it’s a war. Next to buying a house, purchasing a new car is one of the most important investments you will make in life. In fact, you may be paying off this car for the next four, five, or six years.

Let the salespeople know up front that you’re not going to be taken for a ride. Do everything you can do to negotiate the car loan and knock the purchase price down. Start with a ridiculous number, and work backwards. If the salesperson gives you an offer that includes a monthly payment of a certain amount based on a 60-month loan, tell them you want the same payment with a 48-month loan.

Walk into the dealership with confidence, stick to your guns, and don’t feel bad about walking away from any offers.  It might also be helpful to practice your negotiation strategies and tactics to prepare.

7. Look at Both New and Used Cars

Buying a gently used car is regarded by many as the best way to save money when purchasing a vehicle. The logic here is that new cars depreciate considerably the moment they are taken home from the dealership.

In reality, buying a used car isn’t always the smartest choice from a financial standpoint. Used car pricing is sensitive to supply and demand, which can vary regionally, and to macroeconomic conditions (with used car prices tending to increase when the economy is weak).

Bottom line: Don’t write off a new car entirely, especially if you plan to hold onto your vehicle for the long term. Most depreciation occurs during the first five years of ownership, after which the net cost of ownership (of which depreciation is a major factor) declines significantly. The gap between the final lifetime cost of a gently used car retailing for $20,000 and a similar new car retailing for $25,000 isn’t as wide as you’d think.

8. Buy Based on Purchase Price, Not on Monthly Payments

Car dealers are notorious for offering a very attractive monthly payment to potential buyers. Do not be misled. If this “wonderful” payment is attached to a 72-month loan, then it’s really not that attractive at all.

Be sure to always negotiate based on the purchase price of the car, and not the monthly payment. Also make sure that you know the “full” purchase price of any car that you buy. There could be many extra, hidden costs factored into the price including various taxes, car preparation and delivery fees, and dealership costs that you won’t know about unless you ask.

9. Don’t Mention Your Trade-In or Special Discounts, If Any

You should play your cards close to you in all aspects of the car-buying process, especially when it comes to mentioning your trade-in. Do not mention your trade-in until the end of the buying process. Why? The dealer will likely use this information against you.

For example, let’s say you’re looking at a $22,000 car and the dealer’s rock-bottom price for the car you’re considering is $18,000 (although he won’t share this information with you). If you have a trade-in worth $2,000, the dealer might offer to give you the car for $20,000 plus the additional $2,000 for the trade-in, for a total purchase price of $18,000.

If you hadn’t mentioned your trade-in, you could have negotiated the price down to $18,000 and then told the dealer about the trade-in, resulting in a final purchase price of $16,000. Negotiate these two aspects of the car-buying process separately. First, negotiate the best possible deal you can get for the car you want to buy, then go to work on getting the most for your trade-in.

Likewise, don’t mention any special discounts you bring to the dealership. While this situation is less common, it does come into play for those who work in the auto industry – for example, autoworkers and their families typically qualify for very attractive “employee pricing” on new cars made by their employers – and for GM BuyPower credit card holders, whose accumulated rewards can dramatically reduce the net cost of a new car.

10. Factor in Insurance Costs

Factor costs for car insurance premiums into the purchase price of your car. The cost of insuring a car is a major factor in the overall cost of the vehicle. Get insurance premium quotes online from Allstate or Liberty Mutual. You’ll provide information about the car’s make and model and personal information including age, marital status, and driving record.

Sports cars have higher premiums than conventional cars, but some cars have higher insurance rates for other reasons as well. For example, the Honda Accord, Honda Civic, and the Toyota Camry are favorites among car thieves because of their higher resale values, and the insurance premiums for these cars can thus be more expensive.

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