5 Essential Tips for Buying a Used Car

By David Sterman
December 16, 2010

Buying or leasing a new car right out of the show room can really pump up the adrenaline.  And in the first few months of ownership, you’ll probably be smiling as you tool around in your newest toy.

But that smile may fade once the adrenaline wears off and you realize you could have had an even better car for the same money. Or you could have saved thousands of dollars simply by taking the keys with 30,000 miles already on the odometer.

These days, used cars have never been more reliable. And it’s not just Toyotas and Hondas that can rack up the miles without a hiccup. Just about every auto maker has sharpened their game. Nowadays, it’s hard to find a car that isn’t expected to go 150,000 or 200,000 miles with proper maintenance.

With that in mind, here are five steps you can take to ensure you get the biggest bang for your buck.

1. Slightly used is best.

As auto makers boost the quality of their cars, they’re offering ever-sweeter warranties. My 2008 Honda Accord comes with 5-year, 60,000 mile coverage. I bought it when it was roughly halfway through that warranty period, so I'm assured that if anything went wrong with the car, it was fixed by certified mechanics. And if trouble arises in the near-term, I’m still covered.

The price savings can be huge: A 2008 Honda Accord has a retail value of roughly $17,000 -- almost $10,000 less than a new version. In the past, I looked for deep bargains – cars that had 75,000 to 100,000 miles on the odometer. But I found that many of those cars had deferred maintenance or repairs, and I was soon shelling out yet more money to get the car working in proper order.

2. Pay up for a check-up.

If you’re serious about a certain car, ask to have your mechanic look it over. It costs $100 to $150 for an inspection, but your mechanic may spot real problems that cost 10 times as much. This is especially important if you’re looking at a higher-mileage used car that is out of warranty.

If your mechanic finds trouble, ask the seller to pay for the repair. If they balk, there are plenty of other used cars for you to look at.

3. Skip the ultra-bargains.

It’s tempting to buy a heavily discounted car with a range of minor, but fixable, problems. But chances are good more problems are lurking, and this is precisely the kind of car that will rack up hefty repair bills year after year. You’re better off spending more for a car that has been well-maintained and is in tip-top shape.

4. Know your style. 

Car makers offer distinctive traits. German cars tend to handle well, but may have a harsher ride than you like. American cars have smooth rides, but may not handle especially well. Japanese cars tend to operate very quietly and efficiently, but often lack a sense of panache and gusto. (The distinctions are narrowing but the stereotypes still hold true.)

Once you know what you want, you may want to test drive an example at a new car dealership to ensure that the car drives as you had hoped.

5. Watch the re-sale values.

A range of websites such as KBB.com and NADA.com can tell you the average sales price for cars by year and model and can clue you in as to how cars hold their value. A 2006 Chevy Impala goes for about $8,800, while a similar Honda Accord goes for $13,500, though both cars were comparably priced when new.

#-ad_banner_2-# Generally speaking, U.S. and Korean-made cars don’t hold their value as well as their Japanese and German rivals, though the gap is slowly starting to narrow. Some cars maintain their resale value year after year. A 2002 Porsche 911 could be had for about $30,000 in 2007. And it's worth just as much today. 

Then again, the companies with the poorest resale value may be the best bargains if you’re looking to get a good deal as a buyer. If you’re looking for deep bargains, check out the “orphan brands” like Saab, Pontiac, Oldsmobile, Saturn, Plymouth and Mercury. Once their parent companies decided to discontinue their brands, they plunged in value, even though they are substantially similar to their peers that survived.

The Investing Answer: So where are the biggest bargains today? Here’s a quick list of five deeply discounted cars that are generally reliable.

SUV -- 2006 Saturn Vue ($8,800)

Pick-Up -- 2006 Mitsubishi Raider extended cab, 4-wheel drive ($9,500)

Station Wagon -- 2004 Ford Taurus ($6,800)

Family Sedan -- 2006 Hyundai Azera ($9,500)

Convertible -- 2006 Mazda MX5 ($10,750)

Any one of these cars would likely provide an additional 100,000 miles of mostly trouble-free motoring if well-maintained.