Used car and truck prices are set to rise in 2012, according to the National Automobile Dealers Association (NADA). Rising demand and declining supply will increase prices by an average of 1.8%. This would be the third year in a row in which used car prices have risen; last year, prices jumped 3%.
The good news is trade-ins fetch more, too. And even with the rise in used vehicle prices, buying a “pre-owned” car still offers a ton of value compared to buying a new car, especially when you do it right.
Depending on the model and your local market, buying a car that’s one to three years old and with few miles on it can save you 20 percent to 50 percent over a brand-new auto.
I like buying pre-owned vehicles from dealerships, because those institutions are governed by state-level “lemon laws” that incentivize them to impose a higher standards on the condition of the vehicle they are selling. Lemon laws do not generally apply to private transactions between individuals.
Look at a few examples below. The suggested retail prices are from Edmunds.com and the pre-owned prices come from a credit union auto buying service and a well-known Mercedes-Benz dealer in California:
With a little negotiation, buying a slightly older vehicle, one with slightly more miles, or buying through a private party can save you even more. The drawback is you never really know what you’re getting when you buy a pre-owned car. However, with a few basic precautions mentioned below, you can be rewarded with many years of driving satisfaction and save some real bucks.
Get the Facts about the Used Car, before You Buy
The first part of your due diligence should be to run a vehicle identification number (VIN) report. The VIN is a unique 17-digit serial number tied to the car. It is stamped or written on many parts of the vehicle, but the easiest spots to find it are on the dashboard near the windshield or on the sticker plate glued on the inside edge of the driver’s door.
Two of the oldest and most popular VIN checking companies are Carfax and AutoCheck. Carfax being the oldest, AutoCheck backed by Experian. Both own very large VIN databases that can give you clues on the car’s previous owners, true mileage, and any reported damage or accidents the car has suffered.
Along with these two options you can find dozens of smaller competitors with varying degrees of quality and cost, as well as use government resources that give free, but not extensive, VIN reports.
The problem is that these methods are neither foolproof, nor 100% accurate. Just as personal credit reports tend to be rife with errors, vehicle history reports have just as many, if not more, errors and omissions. The main reason is because not all insurance companies, mechanics, tow companies, and law-enforcement agencies report to these services, nor are they required to do so.
When buying through a private party, watch out for VIN scams. The most common one that affects you is when a thief pulls off a legitimate VIN plate from a similar make and model car and attaches it to the stolen one he’s trying to sell you.
Most reputable dealers and credit union auto-buying services will offer you either a Carfax or AutoCheck report at no cost. However, it’s known that sellers sometimes show you a “modified” VIN report.
If it makes you feel more comfortable, pull your own report. The last place you want to discover a VIN discrepancy is when you’re trying to get plates and a title at the motor vehicle registry, and you’ve already plunked down your purchase money. Many states now make you jump through various regulatory hoops to prove that your vehicle’s VIN is correct, but it’s actually for your own protection.
Where to Buy a Used Car
In most cases, you’ll be able to get the best price by buying directly from a private party. To eliminate as many tripwires as possible, consider using a referral to find that diamond in the rough. Perhaps a neighbor or your trusted mechanic has the inside scoop on a high-quality used car.
Next would be an auto-buying service through your credit union. These companies pride themselves on good service and fair prices, and they don’t want to ruin the relationship with the credit union. Plus, if anything goes wrong you can always ask your credit union to get involved and help you out.
An associate from California recently bought a pre-owned car through his credit union’s auto buying service. The price fit his budget, but more importantly it came with important warrantees.
The first was a five-day, 500-mile Love-It-Or-Return-It-for-Any-Reason guarantee (even if he changed his mind on the color). Next was a five-month, 5,000 mile power-train warranty, which covers listed repairs with no deductible. And an extended 100,000 mile warranty was also available for purchase.
More Options for Smarter Used Car Buying
Whatever you do, take it for a test drive. Make sure it’s solid and feels right to you.
Other options include buying from a dedicated used-car dealer, used cars from a new car dealership, used cars from a rental agency, online through eBay motors or its competitors, and even at live auto auctions. In each case, remember to run a VIN report!
One of the nation’s largest used car marketplaces is eBay with over 81,000 vehicles listed as of today. I typed in my own zip code and found 3,808 listings within 50 miles of my home, including auto dealers as well as private-party sellers. That’s a lot of selection!
A friend who has done extensive trading on eBay tells me that the key is looking for sellers with high positive feedback scores and getting an independent inspection on the vehicle at a nearby dealership or major auto service chain, which should run under $100 in most cases. If you take these precautions and stick with vehicles with low miles and all original equipment, eBay can give you a great value with minimal downside risk.
Touch the Car, Kick the Tires, Know What You’re Buying…
If it’s not possible to take the car to a mechanic for a pre-sale inspection, consider hiring a mobile mechanic. You can find one online by typing in “mobile mechanic” and your city. He’ll drive over and complete a pre-purchase vehicle inspection on the spot. In most cases, the fee is still under $100, well worth the investment.
The good news is if you’re looking for a new car, your trade-in will fetch a better price. And if you’re looking for a high value pre-owned vehicle, following the steps above will help you avoid a lot of the hassles and mistakes, stretch your dollars further, and enable you to enjoy the drive more.