Repeat after me: always buy used. Relax, it’s not embarrassing at ALL. Marissa Mayer, CEO of Yahoo, is worth an estimated $300 million…and she shuttles herself back and forth from work in an eighteen-year-old BMW.
Consumer Reports backs me up and says leasing is the MOST expensive way to get a car. Why? Because you’re essentially buying a used car at its new car price! New cars depreciate 15-20% the second you drive them off the lot. And they lose 70% of their value in the first four years.
You should ideally buy a car that’s four years old, if you can, because it’s already depreciated by the highest percentage it will go down. That means you will lose less by the time you sell it or trade it in. You will always lose something, but it will be substantially less than what you would lose if you leased or borrowed.
So you’re ready to buy your first set of (used) wheels? Here’s the first step: be super prepared. Look up car values on sites like carmax.com and kbb.com (Kelley Blue Book). When you find a car you like, check out its history on carfax.com, which can tell you if the car’s been in a major accident. Be armed with this info and you won’t be suckered.
Second step: always negotiate. Unless you are looking at some crazy exotic one-of-a-kind ride (which you shouldn’t be), cars are commodities. There are a ton of the kind you want or similar ones out there.
So, where are the best used cars?
- Car lots swollen with inventory. You can get your ballsy negotiating hat on and haggle to get a good deal because the dealer needs to move that inventory off the lot.
- Individuals. People selling used cars are usually more eager than lots to unload theirs.
- Repos. It sounds sketchy, but it’s not. Call your bank to find repossession auctions in your area.
- Police or government auctions. These are confiscated cars, so it’s a bit of a crapshoot, but the prices are often below book value. If you don’t know a lot about about engines and whatnot, bring a friend or mechanic who does.
The last step is simply that timing is everything. That means you should always buy at the end of the month. Most car dealerships work on a quota system, meaning that they have to sell a certain number of cars every month. In the last days of the month, the dealership will have greater incentive to knock down the price in order to move vehicles off the lot and meet their quota. Not to mention, admidst the holiday season, you can check year end sales events at local dealerships.
Seriously, don’t walk into the dealership if you haven’t done your homework, and I don’t mean knowing which car is best looking, but knowing which one has the best features, gas mileage, dependability, price—all that good, sometimes boring, stuff. Then, and only then, are you ready to face . . . cue ominous music…a car salesperson!
Let me sum up my feelings on cars: buy good used cars cheap. You might only be able to afford a jalopy, but that’s okay. Use it to death, putting aside the payments you would have been forking out for a loan or a lease.