For most people, something new is a lot better than something used, but there are advantages to buying a pre-owned car. Obviously, it will be cheaper. To begin with, you avoid the 30% depreciation that happens in the first year. On top of that, you gain the benefit of other consumer’s experience.
While purchasing a pre-owned car may be different than buying new, there are important similarities. Points made in our previous post on buying a new car are worth repeating, what looks great in the driveway may not be the best vehicle for you. Who will be driving the car? What is its primary purpose? What type of driving will it do? Has my situation changed? What happens if it’s down for service? How long do I intend to keep it? What features and options do I need?
Take the time to make a list.
There are many purchasing options for buying pre-owned vehicles. The most common are:
From a New Car Dealer
The new car dealer has a reputation to maintain. Most of his used cars have been thoroughly reconditioned; some will still have factory warranty. In almost every case a factory backed certified warranty is available, which gives you the comfort of a factory backed inspection process. But you will pay a premium for this, the cheapest cars will be found elsewhere. New car dealers often have lower than market interest rates for pre-owned vehicles that are certified and meet factory criteria.
From a Used Only Dealer There are three distinct types of used car dealers.
1. Most common is the traditional used car dealer who sources vehicles that are lower priced, generally from auctions. Their inventories are commonly made up of popular, high volume units. They focus on price competitiveness, minimal reconditioning, and volume. Usually their vehicles will be a grade lower in quality than offered by the new car dealer. The traditional used car dealer can assist you with competitive financing from various banking sources.
2. The second type of used car dealer is the buy here, pay here, or we can finance anyone dealer. They buy the cheapest vehicles available at auction, generally higher mileage units that look great but have had less maintenance, were involved in an accident, or have some other sort of gray history. Any reconditioning dollars are spent on appearance, with just enough on repairs to make the car pass the required provincial safety inspection. These dealers typical have much higher margins; they are attempting to lure buyers who have limited options due to their financial situations. Financing rates may range up to 30% annually.
3. The Specialized Pre-owned Car Dealer. These dealers focus on a particular segment of the market, typically higher end vehicles. They can help the consumer find top quality vehicles at prices that are less than what they would pay at a new car dealership. They are generally very knowledgeable about the market segment they work in, and have wide connections throughout the industry. Specialized dealers source premium cars from auctions, and use their connections to buy cars from other specialized dealers or new car dealers. They also offer financing from most banking sources at competitive market rates.
When buying used, it is more important than ever to check out the dealer’s reputation. Search for information on line, check on Facebook, ask friends and co-workers. Dealers with a history of selling bad cars will become obvious.
From the General Public
It is not easy to find a good used car that is being sold by an individual. Most folks are motivated to get rid of a car because it has become, or soon will become, a problem. Buying such a vehicle requires the utmost diligence. The vendor is usually in a hurry to complete the deal, and most are understandably reluctant to see their car disappear out of their driveway in the hands of a stranger, so taking the vehicle to a mechanic for an inspection becomes a problem. But unless you are expert at checking the condition of a used vehicle, or can bring someone with you who is, you are taking a huge chance buying under such circumstances.
Obtain an online report on the car, they are well worth the investment and could save you thousands. Try www.carfax.com or www.carproof.com. The report will reveal if the car has been in an accident or flooded, its recorded mileage, if it’s been a rental, even if the airbags have been deployed. You only need the VIN of the vehicle to start the process, and the answers are available almost immediately.
Importing Cars. This can be a viable option and may save you money, but only with higher priced vehicles. Don’t consider it if you only need a “beater” to get you through the winter. The paperwork can be frightful, and the vehicle must meet a number of conditions before it can be imported and licensed for the road. US Customs require three days notice to clear the car, it must be inspected to ensure it meets all Canadian safety requirements, and you must have proof that all recalls have been satisfied. For the little extra cost, consider using a broker for this job. They can remove all the pain, making sure the car meets all requirements before you purchase. And they have many more resources to call on to find the best vehicle at the best price.
Questions to ask:
- What’s the condition of the car and the mileage?
- How was the car used?
- Did it have regular oil changes and maintenance? Any receipts?
- Has the car been modified?
- Has the car had any mechanical problems?
- Is the car still under warranty?
- Can I test drive it? Have my mechanic look at it?
- Is the price negotiable?
These questions will help you arrive at an informed decision. Get as many answers as you can.