Buying a Used Car?

[jIM_Ohio]

Just about any car built after 2000 should go to 200k miles without a major repair (if maintained). Tolerances and oil technology have come a long way.

Spoken like someone which did not own a 2000 Ford Focus

[littleroc02us]

Any time I have looked at new vs used, there was not enough off the price to make it worth the 3-4 less years I could drive the used car.

Here is a way that I would suggest looking at buying New vs. Used. I used the car at my job and for personal use for around 16k miles a year. I started off by looking at your typical cars such as the Toyota Camry, Honda Accord and Nissan Altima. All nice cars, but what I found out is that if you do some research you'll find that Used Honda's tend to be quite pricy. What it takes is a good negotiator and calculator. We went around to the car dealerships here in the Twin Cities, but they wouldn't negotiate even though I had $10,000 cash and would walk out the door with the car for that amount on a 2005 Nissan Altima with 67k. My wife and I thought that would be a great deal, but they would rather us walk out than to negotiate. Most dealerships around the Twin Cities have a no negotiation, lowest price offer. So, what I did was went to a small car dealership with a good reputation and found a wonderful car. Here is how I came to my decision.

I had $10,000 in cash to buy a car. The Model that I found was a Mitsubishi Galant ES that I fell in love with. I could go new, but the 2010 model msrp'd for over 24k. A used model, 2007 with 49k was listed at $9800. I was able to negotiate with the owner to $10,000 for everything, tax, license, etc.... He even gave us a $20 for dinner that night. The car came with the 60k warranty on engine problems and 100k on Drive train. Basically, I would have no car payment and reliable car.

If I would have gone with the new Mitsubishi Galant, I would have paid 24k @ 8% tax, a 60 month interest loan at 4.5% with my Credit Union and the monthly payment would be $296.79 after my $10,000 down payment.

So, if I compare these two cars and say I drive the used car for 5 years and the new car for 8 years, that would mean both cars would end up with an 8 year driving period from the time both cars were new. My vehicle expense for the 2007 Galant per year would be $2000. For the new car, if I drove it for 8 years, my vehicle expense would be $17807, which calculates to $3474 a year.

Yes there will be repairs by both models eventually. I have only spent $200 on alignment and brakes so far in the first year of ownership and there will be more to come I'm sure, but according to my math, I have $1474 (taking the new vs. used card yearly difference)to spend on repairs or to pocket and invest. In conclusion, I would always go with used because if you save for the car and pay cash, then you have the ability to invest the difference and achieve compound interest. When you buy new, you have a monthly payment that isn't making any money, because your paying into a liability instead of an asset. That is the key, the only way you get wealthy is to put your money into assets and not liabilities. Cars are liabilities.

[cypher1]

Cars are liabilities.

Cars are definitely liabilities, and all this debate of new vs used is clearly related to need vs want. Owning a car varies between different ages, purposes and needs, or in other words: priorities. For example, myself: I drive avg 340-360 miles a week, yet I live 15 min away from work, so most miles used on the weekends since I'm further away from my family/friends to socialize. I love cars, but don't have the need for status like some other friends, driving mostly 10yr old cars. By putting on more miles each year I have higher risk of maintenance/repairs, wear and tear, lowering the overall value of my vehicles. That is why I choose to avoid payments, can do my own repairs. But with newer cars, i'd just decrease the value of vehicle quicker than others. On the opposite side, is my mom, who drives maybe 120? miles a week, and has barely any maintenance annually besides oil changes and tire rotations. I'm just saying that depending on the lifestyle and priorities, having families or not, increased commuting for work, will have to be factored in on new vs used. Likewise, I don't believe in purchasing any extended warranty on any car, but I'd understand if others got for peace of mind, which is a whole new topic.

[greenskeeper]

Spoken like someone which did not own a 2000 Ford Focus

what happened to the focus?

[elessar78]

Greenskeep, with the money to be made off financing is there a disincentive for dealerships to settle for a crash transaction? For example, I heard on DR that Sears makes more money as a credit card issuer than they do as a retailer. Could the same be true for cars?

[disneysteve]

I heard on DR that Sears makes more money as a credit card issuer than they do as a retailer. Could the same be true for cars?

For sure. The bulk of a dealership's income comes from the finance department and the service department. They are really not in the car selling business. That is only a small part of what they do.

[littleroc02us]

Just wanted to say that someday when my wife and I have a couple million net worth then I will buy a new car. It's not that I'm against the idea, it's that when you aren't there yet financially, making car payments is a drain on your wallet. Of course I will pay cash for the new car many years down the road when I do arrive at my first million. For now, I'm perfectly happy buying 3-4 year used and getting a great deal paying cash.

[Adriansane]

Buying used has more advantages than most might think. I have a friend that actually makes quite a bit of money from buying cars and selling them for a profit. It's all in what you buy, it's net worth, the condition of the car, and it's current street value. He recently made a 4,000.00 profit on a Acura Integra type R.

[cypher1]

Buying used has more advantages than most might think. I have a friend that actually makes quite a bit of money from buying cars and selling them for a profit. It's all in what you buy, it's net worth, the condition of the car, and it's current street value. He recently made a 4,000.00 profit on a Acura Integra type R.

Exactly! I also do the same thing for hobby first, investment second. I just picked up a clean 04 Acura TSX for $2500 from original owner which needs a new motor (low to no compression). I can buy another used motor for 1600-1700 with 50k miles on it and 1 year warranty, drop it in myself (saving 1000 in labor minimum, giving up 8-10hrs labor) or spend less than half that rebuilding the block and throwing back in with original head, etc. Was too good of a deal to pass up.

I look at investing in cars for the name+reputation+condition=how fast i can sell. Typically I stick to Honda/Acura models between 2-5k value. Targeting most buyers of college or adults looking for decent 4cyl commuters, much more marketable for name, less overhead to sit on for selling. Granted there are still people buying brand new cars (nothing wrong with that), used cars in this economy are still more appealing (greatly depending on location/affordability/price for buyers) IMO.

[disneysteve]

I knew a guy years ago who bought a "new" used car about every 6 months. While he owned it, he made minor repairs and cleaned it up and then resold it. He always made as much or more than he spent, so essentially, his cost of ownership was close to zero. If you have the time and ability, it is a great way to go.

[snafu]

cypher1: In our region re-selling cars as you describe is called Curbsiding and it's illegal. Have you checked the laws in your area? It could save you a mess of trouble and a great deal of $$$ in fines and legal costs.

[cypher1]

cypher1: In our region re-selling cars as you describe is called Curbsiding and it's illegal. Have you checked the laws in your area? It could save you a mess of trouble and a great deal of $$$ in fines and legal costs.

Not to hijack this thread but I feel I have to further explain where I'm coming from. Here is a definition of curbsiding from a random site:

"A curbstoner is a person who is actively and regularly engaged in the business of buying and selling of Automobiles or Products but Without a License the Proper Permits or Legally Established Place of Business. Persons who hold a Dealer License but do not operate from their licensed location may also be referred to as a Curbstoner. As you will soon see, most Curbstoners are "less than truthful" in their dealings. Curbstoners offer vehicles from any location they desire and often squat or trespass by parking on the property of others."

In the state of Minnesota last time I checked, (8 yrs ago) a consumer can report the sale of up to 5 vehicles under their name within the same year before requiring a dealership license for sales transactions. So if I purchase a vehicle(s) running or not, whether it from local or online, repair/clean up, pay for registration, tabs, insurance to drive under my name for the next 6-12 months, and decide to sell later on CL from my home, how is that curbsiding?

Now if I was ever able to sell more than 5 vehicles annually (Avg is 1-3 a year, most was 5, once) I would see the concern from a tax evasion/audit standpoint for not reporting profits. And I'd also be concerned for liability if I truly thought it was a real business and for not reporting to the government. So if I'm lucky of selling even a couple cars a year, that I do drive on daily basics, I really don't worry about being audited or feel my hobby is questionable with that regard.

I look at it as if I can buy something for $1500-2000, and hopefully make another 25-50% additional profit on top of what I've put into the car within 6-12 months, I can't complain. Let the audits begin!