The Case For Buying Your Next Car Secondhand

Written by David M. Grice    Friday, 13 February 2009

IT TOOK A LOT OF LATE NIGHT pizzas at the office, but your career is hitting its stride and you've finally got the wherewithal to buy a new car. We're not talking Yugo here. We're talking about a new machine that shows off your elegant taste, your lust for high performance, your eye for fine design. A car to be seen climbing out of. But how about a car that shows off your intelligence instead? A used car. I know: Buying yesterday's wheels has always been a trade off between certain savings and uncertain quality. But as the new car market has evolved improved quality, infrequent model changeovers and the recent surge in new car leasing the used market has also emerged from its Neanderthal era. Today, buying a two or three year old car instead of a new one is more than frugal. It's wise. Here's the case: Figures from J.D. Power & Associates, the market information firm widely respected for its new car quality studies, show that the average new car transaction price the money you settle on when all the negotiating ends is between $18,500 to $19,000 and climbing. Yet according to the Kelley Blue Book, a major guide to used car prices, the average new car's wholesale value the highest trade in allowance you can expect to receive from a new car dealer drops to 60% to 70% of its original sticker price in the first two years. The depreciation curve then flattens, even though most of the car's useful life, typically eight years, remains. So if you buy the car once those two years are past, you let someone else carry the car through its most expensive years. (See the table on the next page.) Okay, you say, but you're not prepared to settle for yesterday's styling and amenities just to save a few bucks. Well, you don't have to. Japanese makes typically go four years between new models, and Detroit waits six to eight years. As a result, if you can see the difference between Kathryn Cristaldi's '94 Toyota Corolla (at right) and the '96 version, or between the '94 Ford Probe (see the next page) and its '96 counterpart, you're seeing things. They are virtually indistinguishable. But aren't you just buying someone else's repair headache? Not really; just about every maker is now turning out longer lasting, more reliable vehicles. Ron Clogg, manager of automotive forecasting at J.D. Power & Associates, says, "With the quality improvements we've seen in recent years, I'd have no qualms buying a two to three year old car." What's more, the three year, 36,000 mile warranties that come with new cars are transferable to second owners. To find the nearly new car that's right for you, you'll need to do a little research. Review the Consumer Reports annual April auto issue. (You'll find it at your library or on various on line services, including Prodigy, CompuServe and America Online.) Also check out two books published yearly the Consumer Reports Used Car Buying Guide (Consumer Reports, $8.99) and The Used Car Book by Jack Gillis (HarperPerennial, $12.95). For price guidance, consult the editions of Kelley Blue Book's 1989 1995 Used Car Values or the N.A.D.A. [National Automobile Dealers Association] Official Used Car Guide that show the estimated trade in prices and retail prices (that is, what the dealer got it for and what he wants you to pay for it) of vehicles in your region. These editions are available in banks, insurance offices and libraries; those sold on newsstands do not carry the wholesale prices, which you will need if you want to follow the negotiating tips below. You'll find the best selection of nearly new cars at new car dealerships. Roughly two out of three new car transactions involve a trade in, and dealers retail the newer vehicles themselves. Dealers also get to resell the vehicles that they leased to new car customers once the lease period is up. The surge in new car leases a few years back is resurfacing today as a burst of late model off lease used cars, reports Art Spinella of CNW Marketing Research in Bandon, Ore. A two year old car that had been leased by a private individual or family may be among the lowest mileage, highest quality used vehicles you'll find. So called program cars from daily rental fleets like Hertz and Avis usually have high mileage for their age and have been driven and possibly abused by hundreds of people. But even program cars are cream puffs compared with refugees from corporate fleets. They tend to be high mileage, high wear and tear vehicles that have been poorly maintained by people too pressed for time to get regular service for a "company car." So before you commit to a deal, ask for a brief written history of the car. If a dealer won't give it to you, buy something else. Once you've located the car you want, the horse trading begins. Tell the salesperson you have a feel for both the wholesale price and the asking prices in your market, and that you expect to give them a profit but not to finance their next Hawaiian vacation. Then offer 15% below the asking price, which will probably be a few hundred dollars above their wholesale purchase price and bite your tongue: The next person who talks will lose. When they counter with a higher number, bump your offer to not over 90% of their asking price. If they won't accept it, say you've got an appointment at a competitor and leave. But give them your phone number; they'll usually call. Any offer you make to a dealer or individual owner should be contingent on the vehicle's passing a thorough inspection, including a body integrity check for accident damage and a compression test on all cylinders. Visible corrosion, ominous engine or transmission noises or accident damage are deal killers. But anything else is a negotiating point that you can use to drive down the price even further or at least to get the problem fixed at the agreed upon price. And that, in the end, can turn a good deal even better.

Last Updated ( Friday, 13 February 2009 )