Purchasing a Vehicle: A Real Life Experience

[Chett]

Purchasing newer items is suppose to be fun. Aren't we suppose to get excited about replacing something old, and getting something new and shiny? I've had the opposite reaction over the past few weeks as I look for a new truck.

Let me set the scene. For the past three years Melissa and I have had three vehicles. A Corolla, that is our main commuter for work, an Xterra that was purchased as a secondary vehicle for longer family trips and days when my wife and I couldn't ride to work together, and an older Dodge truck that we use as our "farm" truck. As I've wrote our home is located on a small farm. We burn wood for heat during the winter to save money and with all the remodeling we have done on our home a truck was a necessity.

About a month ago the transmission in my farm truck went out. I priced new transmissions but the cost of a new transmission wasn't worth the investment in my old truck. We also decided we didn't need three vehicles and could simply replace the Xterra with a newer (notice I didn't say new) truck. So, three weeks ago we sold our Xterra and for the past three weeks we have been getting by with one vehicle as I have attempted to find the best deal possible on a used truck.

Why Used?

I have had several friends tell me about a good friend of theirs who can get me a "great deal" on a new truck. First let me make this clear: A CAR PURCHASE IS NOT AN INVESTMENT. Investments are things you put money in, where you expect them to increase in value over time. Obviously a car does not fit that description. I've learned my lesson on purchasing new and the depreciation backlash that awaits new car owners. A new car depreciates the minute you drive it from the showroom floor. In the first year of ownership, a new car can lose up to 20 percent of its value, and by the fifth year, you can expect your car to depreciate by over 65 percent. A used vehicle, after it's third year, depreciates at a much slower rate. So, if possible look for a car that is at least three years old, with low miles, chances are you will lose less money on your purchase over time.

Private Sellers First: Dealerships Last

I have nothing personal against auto dealers, I just want to get the best deal for my money and typically that isn't going to happen on the lot of a dealership. When purchasing a vehicle from a dealership they will usually try to sell the car for full retail price, and often times they sell used vehicles for more than the retail value. They are able to do this because they do their own financing and can overlook the fact that you are "upside down" in your loan (owing more on your vehicle than it's worth) from day one. You will almost always find a better buy when buying from a private seller.

Twenty years ago the network between people trying to sell a used car, and those trying to purchase them was very limited. Outside of the classified ads in a news paper, there were few ways to search for the vehicle you wanted, so most people ended up at Larry's Fine Pre-Owned Cars. Obviously that is not the case today. We have tools such as Craig's List, Auto Trader, and Ebay to help buyers and sellers connect with the exact product we are looking for. Obviously you may have to go a little further, wait a little longer, and be more patient to find the vehicle you like, but if you can visualize the thousands of dollars you are keeping for yourself it is worth it.

People are leery of purchasing used because they don't know the history of the vehicle and are afraid of what they don't know. Again modern tools help take the fear out of buying used. I found a used truck an individual had for sale with the exact features I was looking for. It was priced about $4000 under what most dealerships were asking for the same vehicle. The truck was in good condition, and had low miles for the age of the truck. I asked the seller what he knew about the history of the truck and there was little he could tell me beyond the fact that he bought it used from a dealership. I wanted to make sure I wasn't purchasing a truck that survived Hurricane Katrina so I ran a Carfax report. For about $30 I was able to gain peace of mind, knowing the truck had a clean history with no previous damage. (You may want to ask the seller to provide the Carfax report and if you're trying to sell used vehicle of your own, it's always a good idea to run your own and advertise in your listing that you will provide a copy of the Carfax report.)

For most people a vehicle is the second largest purchase they will make in their lives. It is one of the few things we spend so much money on that actually decrease in value. Making a smart decision when buying can be time consuming and frustrating at times, but the less you pay for your vehicle, the less money you have sunk into an asset that does down in value over time. Buying a used car from an individual is the best way I've found to cut my losses in a vehicle purchase.

Do you have any experiences or tips for purchasing a vehicle new or used?