Buying A Used Vehicle In The Internet Age

Meet my recently-purchased "newer" vehicle, Mike, a 2006 Ford F-150.

My old van, Quartermain, hit the 275,000 miles mark late last year and I decided that it was time for something newer. He was still running reasonably well, but getting to the point where he'd soon be due for major mechanical work, and it made no sense to put thousands of dollars into a vehicle that had a market worth of less than $1000. Plus, I needed a truck.

I've always bought used vehicles, starting with my first $1,000 Datsun when I was 15.  But I'd had Quart for more than ten years and when I decided to start shopping, I found that the internet has brought a lot of changes to this particular chore, making things easier for buyers, sellers and, unfortunately, scammers. 

Well, it took some time and effort to find Mike, and I had to learn a lot. I thought I'd pass on what I already knew about buying a used vehicle, plus what I learned about car shopping on the internet.

First of all, why buy used?

In a word, money. 

A new car can lose 20-30% of its value the second you drive it off the dealer's lot. It's just the nature of the beast. A car a few years old with less than a 100,000 miles on it can easily be half the price of a comparable new car.

For example, Mike, before taxes and title, cost $8,900. A comparable new F-150 in my zip code costs $18,000 plus. Mike was four years old and had 70k miles on him when I made the deal. Because I bought him used, with, as my mechanic put it, just enough miles on him to be fully broken in, I saved $9,000+. Add in the fact that I was able to pay cash, avoiding interest on financing, and the savings are probably $10,000 plus.

Or to put it another way, I was able to afford a much better vehicle because I bought one used. Indeed, I was able to buy the vehicle I really needed, with some of the features I wanted as well,  because I bought used. 

Unless you've got enough money to buy whatever you want--in which case, why are you reading this blog?--the first job when buying any vehicle, new or used, it to decide what you can afford to pay and how much that will get you in terms of what you want and what you need. 

Sit down and figure it out. What do you need? How many passengers do you need to carry? Do you need a car that doesn't use much gas? Do you need a vehicle that can tow? Or carry cargo?  If so, how much?

Then list what you want. A/C? (In my part of Texas, that's a need.) Power door locks, windows, mirrors? Cloth seats? A GPS system? A lot of power? A certain paint color? A fancy sound system?

When you buy used, you often have to make compromises. That's just part of the deal. What you're willing to be flexible on is up to you.

In my case, I needed a truck, so I could carry round bales of hay, and it needed to be able to tow at least 5000 lbs. My small trailer, loaded with a full-sized horse, weighs 2500 lbs, but you never tow at the maximum, so I wanted double that capacity.  I didn't need power anything, other than steering and brakes, I could care less about a GPS or sound system and a three-passenger bench seat was fine. I didn't want to pay for more power than I needed, so a F 150,  Dodge 1500, Chevy Silverado or GMC Sierra would work, though smaller trucks like  an S-10 or Ranger might be a little underpowered.

I wanted a truck that was a nice color--green, burgundy, blue--that had a tow package, so I wouldn't have to buy one, and that had no more than 90,000 miles on it.  I also wanted some room behind the seat, so I could stow everything from groceries to pony harness.

Having made those two lists--needs and wants--you now need to get some idea of what all that will cost.


A good place to start is with Blue Book, www.bluebook.com.  This is the online version of the venerable price guide for both new and used cars. You can enter a type of vehicle--sedan, truck, van, mini van--or a specific car model and year, mileage and your zip code, plus a whole list of options and it will provide you with three possible prices. The first is the Trade In value of  the car you have in mind; in other words, how much you'd get for such a vehicle if you traded it in for a new car. The second is the Private Party price, or how much you might expect to pay for this model if you brought it from an owner. The third is the Retail or Dealer price or how much it's going to cost you to drive into a used car dealership and simply say "I want that."

This range will give you some idea of what you can afford, including what you might have to give up in the way of  "wants" to fit your budget.

Next, it's time to start shopping. But shopping for a good used vehicle is more a process of elimination than a matter of picking a winner. We'll talk about that in Part II.

Insurance: Disaster versus Annoyance

My father, who was pretty savvy about money, once told me, "You always insure for the disaster, not for the annoyance."

What did he mean by that? 

Don't use insurance to avoid minor financial blows, only the ones that are going to knock you down and out.

I'm watching a commercial for a major insurance company. A lady has come into a "store" to buy "customized auto insurance," so customized that there's a little picture of her on the box. (Yes, in this admittedly amusing fantasy world, insurance comes in a box.) She wants "a lot" of insurance (a little "gas tank" style dial appears, showing almost full)  but, no, she wants "a little less" (the gas tank dials itself back to three-quarters full) "a little less"(we're now down to a little bit above half) "and a low deductible."

It's an amusing commercial, pleasant and friendly. However, this is not the way you should buy insurance...of any type.

Let's face it. As I've said elsewhere, most of us only have so much money to spend on insurance. We need to be careful to spend it wisely.

As an example, let's talk about auto insurance. 

There are two main types. One covers repairing damage to or the loss of your car; the other involves damage to everything else, including people.  (You can also buy insurance to pay your medical bills if you're injured in a crash, and insurance to pay you if the other driver is at fault, but has no money and no insurance.) 

Collision insurance repairs or replaces your car if it's involved in a crash: you run into another car, a lamp post or a 2000 lb Brahma bull. (Don't laugh; I once saw one strolling down the Texas road on which I lived; I called the sheriff, and he sent someone to round it up.)  Comprehensive insurance covers just about anything else that might damage your car--a tree falls on it, a tornado takes it to Oz, a graffiti artist uses it for a canvas or someone steals it. 

Collision and Comprehensive almost always involve a deductible. You can choose the amount, usually starting at $500. The amount the insurance company will pay will be either the cost of repairing your car or the cost of replacing it--less the deductible--at your car's current market price.  Keep that last phrase in mind; we'll come back to it later .(To prevent people from trashing their own car when they need money, some insurers will always pay less than the replacement cost. Check your policy.) 

The second kind of insurance is liability insurance. This is insurance to cover damage that you are responsible for, especially if you are judged negligent in some way. You hit someone's car or run into their house (it happens!) or hit them because of those worn tires, or because you didn't see a stop sign, or because you were texting someone and this insurance provides money to repair or replace their damaged car or property, for medical bills or to pay damages if you are sued  Most states now require drivers to have a minimum amount of liability insurance. Drive without it and you can be fined or even jailed.

And this is where the "annoyance" versus "disaster" situation shows up. 

Far too many people worry first and foremost about repairing their damaged car. They buy Collision & Comprehensive with a low deductible, and skimp on liability insurance. But a higher deductible--say $1,000-- means you'll only be out of pocket $500 more  if your car needs to be repaired. That's a financial annoyance.

You don't think so? Then skimp on liability insurance;  if you seriously injure or kill someone, you are now at risk for losing, not a car, but everything you own...and then some. That's a financial disaster.

Here's a hypothetical example.

Ruth and Amy both buy identical new cars that cost $18,000. They both budget the same amount of money to spend on car insurance.

Ruth buys C & C with the lowest possible deductible, $500, which means that if her car gets damaged, she's only out $500 to get it fixed or replaced.  A low deductible costs much more than a high deductible though,  so she opts for only $50,000 worth of liability insurance, the minimum her state requires.

Amy opts for C&C with a $1,500 deductible, which costs much less; with the savings, she buys $300,000 worth of liability insurance.

Five years into their car ownership, both are involved in major crashes. They aren't injured, but other people are. Both Ruth and Amy's cars are totaled.  Ruth was texting on her cell phone when she crashed; Amy failed to see a stop sign.

Both are sued by those injured for $350,000 in medical bills and damages.

Ruth contacts her insurance agent and is stunned to find that they will only pay her the current market price of her five-year-old car, approximately 40% of what she paid for it, less $500. The court awards those suing her a total of $250,000; her insurance carrier pays her $50,000, the full amount of her liability insurance. She has no savings,and owns no property other than her car; she will therefore spend decades paying off the additional $200,000. For her, this is a financial disaster.

Amy is paid $1,500 less than Ruth towards replacing her totaled car. But she has $300,000 of liability insurance, enough to make it worth the insurance company's while to negotiate with the lawyers of those who are suing her. They agree on a settlement of $190,000, which the insurance company pays. Amy is able to  buy a decent used car and goes on with her life.  Even if she'd had to pay $250,000, like Ruth, the insurance would have covered it.

Because she was willing to risk paying $1,000 more to replace her car, this has been a financial annoyance.   

Consider risks versus cost when you buy insurance....and buy protection for the financial disaster, not the financial annoyance.  

Take Care When Using Craigslist...Well, Just Take Care, Period

From the MTS Archives

I think Craigslist is a great site, but you do shop at your own risk. The "flagging" system helps somewhat, but you still need to be careful.

Case in point? After writing my previous post on hunting for used cars, (see below) I was rather idly browsing through a list of small trucks on Craigslist and, curious, sent emails requesting mileage info to the sellers of two suspiciously inexpensive vehicles, a Nissan Frontier and a Toyota Tundra.

Here's what I got back from "Mark Johnson" on the Frontier.

Hi, I am selling this car because I am being dispatched to the Gulf of Aden.I will be there for more than a year and I’ve cut the price because I must sell before July 30th.The car is in great condition, no rust, no electrical or mechanical problems. I have a clean title ready to be signed. It is still available for sale if interested, price as stated in the ad .The car is in the Billings MT, and in case it gets sold I will take care of shipping.Let me know if you are interested, email back.

Now, if you've ever used the car/trucks section of Craigslist, you'll notice a warning at the top about how any offer to ship a car is "100% fraudulent. So the Billings, MT bit was a red flag. I mean, who's going to sell a vehicle at a very cheap price and also offer to ship it free from Montana to Dallas?
But it got better. I opened the email reply to my inquiry about the Tundra, also listed with a suspiciously low price.

This time, the reply was from "George Lucas" --now there's an original name.

Hi, I am selling this car because I am being dispatched to the Gulf of Aden.I will be there for more than a year. I’ve cut the price because I must sell before July 25th.The car is in great condition, no rust, no scratches. I have a clean title ready to be signed. No electrical or mechanical problems. It is still available for sale if interested, price as stated in the ad ($3500) .The car is in the Dallas area. in case it gets sold I will take care of shipping.Let me know if you are interested, email back.
 

Yes, a late model Toyota Tundra for $3500. This time, he was offering to ship the car from Dallas, which is interesting for someone advertising in the Dallas/Fort Worth area....Dallas is 50 miles away and one would assume that the Tundra could be driven that far, no?

And don't you love the implication that he's in the military?

And for Pete's sake, you'd think he could change the pitch just a little bit, no?

I replied to both posts with the word SCAMMER in 36 point bold type. I tried to go back and flag the ads, but they were already gone; obviously, other people had no problem figuring out that this guy was a crook.
So watch for these people. They are out there, doing their best to ruin a good thing. Read those warnings on the uppper right of the Craigslist page so you'll know some of the tricks scammers pull. Then flag them if you find them.....and never let your hopes for a great deal override your good sense.

Before You Go Shopping for A New (Or Gently Used) Set of Wheels

For those of you checking out the “cash for clunkers” (CFC) option, a few extra pieces of information:

1) This option really only makes sense if you truly have an old clunker, something along the lines of Quartermain, my GMC van. (Don’t tell him I called him a clunker!) At 15 years old and 260,000+ miles, I doubt his trade in value would be over $2000, so it would make sense for me to use the CFC rebate option and get a $4500 allowance for a new van or truck. If you have a car that can be traded in or sold for more than the $3500-$4500 CFC allowance, you’d want to go that route. Any “clunker” used for the CFC incentive will be scrapped, so it’s an either-or deal: trade-in allowance or CFC rebate, but not both.

2) If you’re wondering what kind of mileage rating your potential “clunker” has—and if it will qualify you for the CFC rebate—try this website: http://www.fueleconomy.gov/. It provides info on mpg ratings for a variety of cars, new and used.

3) To check out the prices of new or used cars online, try these sites. (Remember, the CFC rebate can only be used for new cars.)

- http://www.edmunds.com/ provides prices, reviews and ratings of both new and used cars. There’s also a handy feature that lets you get an idea of how much any particular model will cost to own and operate over its lifetime and a Search feature that lets you find specific makes and models for sale in your area.

- http://www.motortrends.com/ also provides reviews and information on both new and used cars and a local Search feature. (Both the Edmunds and Motortrend sites seem to feature only cars being sold by dealers.) There’s also a page that will let you know what rebates or incentives are currently being offered by car manufacturers and dealers.

- http://www.craigslist.com/, the on-line "classified ad" site. Just make sure you select your local city or state in the right hand column before searching. Also, be cautious when responding to ads for “owner” sold cars; there are scammers out there who pose as car owners when they’re actually dealers, and even some who’ll try to pull a version of the classic Nigerian scam by promising to ship you a car if you’ll just send them the money. You'll also see a lot of ads repeating as they're posted day by day.

A few last suggestions:

- Do your comparison shopping before you actually start looking at cars. Knowing what your target make and model sells for in your area will help you know if you've really found a good deal.

- Before going to look at used cars (which are usually sold with little or no warranty) ask your mechanic to give you some tips on checking a car for basic defects, (oil leaks, worn shocks, etc.) so you can eliminate cars with obvious problems. Then ask his cost for examining a car that passes that initial once-over. Most mechanics will check a car for a reasonable fee, and knowing that you’ll have the car examined before you buy it will deter crooks who are trying to palm off a junker. I’ve never bought anything but used cars in almost forty years of driving and I’ve never had an honest seller refuse to let me have the car examined.

- Take a friend with you when you go to look at a car, especially if you’re buying one from a private owner. The presence of a witness will often come in handy and it's safer when there’s two of you.

- Check with your Department of Motor Vehicles and see how car titles are handled in your state. (Each state is different.) Make sure you learn the difference between a “clean” title (meaning that the seller owns the car outright ) and a title that shows that the car comes with some kind of lien that must be paid off before you’ll actually own the car.

- If you’ll have to get a loan to buy your car, check rates and fees with local banks, savings and loans and credit unions for the best terms and prices. If you find good financing, see if you can get prequalified for a loan. There’s nothing worse than finding the exact car you want at a great price and either having to accept a dealer’s high interest loan, or having the deal fall through because you can’t qualify for a loan.

Good luck!

Maybe You CAN Buy a New Car....Soon!

If you’ve been wishing you had enough down-payment cash to take advantage of the current dip in car prices, wait just a little longer. Your old fuel gulper may soon be your ticket to a great deal.

Congress has just passed a “cash for clunkers” bill that provides incentives for people to replace their gas guzzlers with higher mpg cars. Trade in a car getting 18 mpg or less and you can obtain a rebate voucher for $3500 that you can use to buy a car that gets at least 22 mpg. Find a car that gets at least 10mpg more than the one you have now and you can get a voucher for $4500.

Do you own a SUV, minivan or a pickup truck? Get a voucher for $3500 if you trade it in for something that gets at least 2 mpg more than what you’re driving now, or $4500 for one with a rating at least 5 mpg higher.

(There are a few more conditions involved. First, your gas guzzler must be over five years old, in working condition and registered for at least the past 120 days. So buying a wreck for a few bucks and having it towed to a car dealership ain't gonna work.)

Make a great deal on a new, high mpg car and that incentive could end up paying as much as one-third the cost. That could really shrink your monthly payments.

Now, if you want to pay a little more and effectively cut your gas costs in half, you might try one of these cars. Some of them boost ratings of 50 mpg or more.

Start by doing a little research now to determine what your needs are and what kind of car will meet them. But just make sure the President has signed this bill into law before you sign on the dotted line.

(Me? Though tempted, I’m not quite ready to trade in Quartermain. Yet.

Not...quite...yet.

Don't tell Quartermain I'm even thinking about it, or he'll wait until I'm on the most remote country road possible, in the middle of the night, when it's raining and I don't have my cell phone...and then he'll die on me. Just to teach me a lesson. Very touchy creatures, old cars.)

How Much Can You Save? Gas Costs

It's not always obvious how much you can save on a weekly, monthly or yearly basis by just changing certain of your buying habits. MoneyToSpare.net is all about making choices. What you spend your money on is entirely up to you....but you might want to think about what you could buy or how much debt you could pay off with savings like these .


Drive 10 miles less per day in a car that gets 14 mpg and you'll save 5 gallons per week, a savings of $11.25 at $2.25 per gallon. That's an average of $48.37 per month, and $580.50 per year. In three years, you'll have a 15% down payment for a low mileage, late-model used car. (Like the 2007 Hyundai Accent GLS 4D Sedan, 26K, $11,599, that I found on CarMax this evening.)

Sneaks and Scams: Auto Warranties

I just hung up on an automatic call, one of a dozen I’ve received in the last month telling me that my auto warranty is about to expire. Interesting, because Quartermain, my GMC van, is far beyond any legitimate warranty.

Yet I keep getting these calls, including at least two on my cell phone, which REALLY MAKES ME ANGRY because I have a prepaid phone and it costs me $1 for every day I use it. How the heck did these people get my cell phone number?

Well, what’s going on is the latest scam, and it seems I’m getting off lightly. According to MSNBC, a dozen or so companies are pitching these warranties and some of their victims (and I use that word deliberately) are getting called four or five times a day, even when they beg to have their number taken off whatever list the scammers are using.

Even people listed on the Do Not Call Registry are getting the pitches. Sometimes, the solicitation comes via postcard, wtih some recipients receiving a dozen a week.

And those who make the mistake of responding to these calls are finding out that—hardly surprising—the “warranties” offered are rip-offs, with expensive premiums and ridiculously limited coverage.

The first clue you are not dealing with a kosher company is when you ask that the paperwork be sent to you so you can look it over and the company says they can’t do that until you send a down payment.

(Never, ever, ever deal with someone who wants you to sign on the dotted line or send them money without letting you read a contract first. Never. Ever.)

The second is when you ask to speak to a supervisor and the caller hangs up. This also is not the behavior of a reputable company.

Reports are that these people often claim that they’re representing major automakers, and to prove it, they provide specific information, including registration numbers, for your car. This is also a lie. Ask for a callback number and tell them you’ll check with your local dealer. Then do it, before you agree to buy anything.

Extended warranties, even when offered by dealers, are rarely worth what they cost, but buying one from a auto-dialing company you’ve never heard off makes no sense at all. These crooks aren't worried about complaints filed with local regulators, so if you get a chance, write down their number and report it to the FTC. Maybe if we provide the Feds with enough info, they can shut these scammers down.

One Van: $9,000, Bought Used... 178,000 miles later.

Well, we made it.

Quartermain, my 1994 GMC Safari van, hit the 250,000 mile mark two days ago. (He's named after the hero of "King Solomon's Mines.")

I bought Quartermain used for $9,000, with 72,000 miles already on his odometer.

He was in good shape--I had my mechanic check him out before I bought him, since I was buying him "as is"--and he's been a solid vehicle. We've had our moments...for example, if I solemnly promise to wash and vaccum him and don't do it, he usually retaliates by flatting a tire on me, though I must say, he's always been gentleman enough to do it in my driveway or a parking lot, instead of while we're running down the road at 60 mph--but despite a few such idiosyncrasies, he's been pretty good at getting me from here to there and back again.

I, for my part, have changed his oil every 3,300 miles (it's easier to remember when an oil change is due when you do it at 10,000 miles, 13,300 miles, 16,600 miles, 20,000 miles, 23,300 miles and so forth.) I've checked his oil, transmission and anti-freeze levels on a reasonably regular basis. I changed his air filter myself once and found that I didn't like hanging upside down trying to unscrew his cowling (yep, he's that kind of van) so I had someone do it the next four or five times. We've also gone through two extra serpentine belts, changed before they snapped. (Much better idea to change before than after, believe me.)

I've had his radiator recored twice. I've just put on his third set of shocks, I've gone through perhaps four full sets of tires, replaced his starter and his compressor, and had his spark plugs and spark plug wires changed out twice. One new battery....or was it two?...I can't remember .

He currently needs some minor work on what my mechanic calls a vacuum problem with his heating and air conditioning system, the passenger power window doesn't work, (though the driver window will go up and down, though admittedly with a certain reluctance, and that's all I need) and he needs a new seat cover. Other than this, he chugs along pretty well, even with 4,000 pounds of trailer and ponies in tow. (He's rated for 6,000 lbs.) He even looks fairly good, probably because of those frequent washings.


Neither his engine nor his transmission have ever needed anything but routine maintenance. He shows no signs of rusting out. (I always wash out under the wheel wells.) His two passenger bench seats are in my closet, providing room behind the front seats to haul everything from landscape timbers to a Miniature Horse. (Cloud, my young gelding, has no problem jumping in through the side door.)

I drive him gently (see my article on "hypermiling") which is probably why his shocks, brakes, engine and transmission have lasted so long.

I mention all this just as an example of how you can buy a good used car, and by keeping up with routine maintenance and driving it with a little care, have a vehicle that will last a long, long time without major repairs. Quartermain cost me $9,000 cash some 11 years ago and I estimate repairs over the years equal around $3,000, for a total cost per year, other than routine maintenance, of about $1,110 per year. If I'd bought a similar van new, it would have cost me at least 30% more, or nearly $12,000.

Quart's original owner traded him in at 72,000 miles. Assuming he did that at similar intervals, he would have bought 3.5 vehicles by now. If he bought equivalent vans, he would have bought three so far at prices of about

$12,000
$18,000
$22,000

or about $52,000 total, with another purchase due in a year and a half.

A car bought new can easily depreciate in value 20% the instant you drive it off the lot, plus an addtional 12% or more per year. So if Quart's original owner traded in his vans every four years and got an average of 40% of the original value, he would have received $20,800 in trade-in credit. So he would have paid $31,200 net for those three vans and driven 216,000 miles. To drive the equivalent of my 250,000 miles, he would have paid an estimated $35,880.

Of course, we haven't included financing. I didn't rack up any financing charges, since I paid cash. If we assume 6% interest charged on an average of $3,000 per year for 11 years, we need to add another $1,980 to the cost, for a grand total of $37,860.

Now you may say that there'd be fewer repair costs with new vehicles, epecially those under warranty. Fair enough; we'll deduct my $3,000 in repairs, for a comparison cost of $34,860.

So Quartermain has hauled me, my Mini, bales of hay, sheets of plywood, landscape timbers and the occasional 4,000 lbs. of trailer and ponies for a cost of less than 5 cents per mile, including repairs, but not including gas and routine maintenance.

Quart's first owner has (hypothetically) paid nearly 14 cents per mile, almost three times as much.

Quite a difference, no? But let's make it even more interesting. Let's say that I take the $34,860 extra I haven't paid for transportation during the last 11 years and, as of today, start earning 6% interest on it and do that for the next 25 years. How much would I have in 2033?

$155,648.


Is a "new car" smell worth over $150,000? Or is it smarter to buy a good used car, maintain it properly, drive it gently and keep it until it racks up 250,000 miles..... or more? (I'm not planning to replace Quartermain any time soon.)

You decide. It's your money.

(Note: If you just have to have that smell, allow $200 or so for getting your newly-purchased used car cleaned at a detailer until it sparkles...and ask them to finish by spraying the car with "new car" scent. I'm for anything that keeps you happy.)

P.S. For those of you who wonder why Quart is a "he"....well, I'm a she. All my cars are "guys."

My thanks to the Carnival of Money Stories for including this post in this week's carnival.

Save on More Than Gas

“Hypermiling” is a term now in use for certain driving techniques designed to increase miles per gallon.

I think a lot of thriftmasters having been doing this, long before it had a name. Coasting up to red lights, accelerating as smoothly as possible, staying at or even slightly below the speed limit…it all does help get you further on a tank of gas. (One technique I think is a very bad idea, though, is switching from Drive to Neutral while the car is moving. It’s too easy to accidently slip into Reverse…and that will chew your transmission to pieces.)

Most hypermiling techniques, however, will save you money on more than gas.

Think about it. When you take your foot off the gas pedal and coast up to a stop sign or signal, you’re also decreasing wear and tear on your brakes, shocks and tires. Slow from 60 to 35 before braking and that’s 25mph less of inertia you have to overcome, meaning significantly less friction on your brakes and tires, and considerably less weight flung on your shocks.

Accelerate smoothly instead of shoving the gas pedal, and it’s a lot easier on your transmission. I have some friends who are “stompers” and you can definitely feel the jerk as the transmission shifts. Me? My goal is to pick up speed so smoothly that it’s actually hard to feel shifts. My old van seems to appreciate it, since at 247,600 miles he’s still running fine on his original automatic transmission, without any major repairs.(When the old man hits a quarter million miles, I’ll take a picture and post it.)

So if you want to save money, both on gas and maintenance, drive like a professional chauffeur. Their jobs depend on giving their clients a smooth, steady, quiet ride, not flinging them around with jackrabbit starts, lane weaving and hard braking. Treat your passengers—and your car—with the same consideration and watch both your gas and maintenance costs drop.