How to Save Money by Buying a Used Car


find a cheap car nowThere are two cars in our driveway, a 2012 Prius C and a 1969 Datsun 510 wagon. Many people are surprised when I say that the smartest, and most financially savvy car we bought, was our Datsun wagon. While a 44-year old car isn’t for everyone, there are many benefits to buying a used or second-hand car. After reading this, you’ll want to find a cheap car now.

Depreciation

New cars lose their value when you drive them off the lot. Why? Because they’re not shiny and new anymore. This means that if you drive a car past the sidewalk and try to sell it to someone walking down the street, you cannot get the purchase price you paid. By purchasing a used car that has fully depreciated, the value of your car is fairly fixed. If you need to sell your car, you may be able to recoup what you spent.

Initial Investment

Due to the aforementioned depreciation, the amount of money you have to pay for a used car is not significant. You can often find a car in running condition with heat/air conditioning that has been reasonably maintained for $2000 or less in the US.

Repairs

Many people shy away from older cars as the fear of high miles leads them to worry about significant repairs. On the other hand, older cars may offer a do-it-yourself approach for the mechanically inclined. For example, repairs on the wagon require a trip to the auto parts store and a bit of grease on our hands. In contrast, if anything breaks on the Prius it’s at the very least a trip to the dealership, and a very expensive trip if it’s out of warranty.

Insurance

Auto insurance is not just based on your driving record, it’s based on the cost to replace the car you drive. By driving a cheap car you may find that after you consider your deductible, it doesn’t even make sense to have comprehensive or collision coverage. Your insurance agent could help you save a significant amount every month by running the numbers.

Since a cheap used car can be the financially smart choice, how should you find a cheap car now?

Like any other purchase, decide what your needs are, and eliminate any vehicles that don’t, regardless of how good a deal it may be. Look for cars that have a clean title, have been maintained, get good mileage and are within your budget.

Readers: Have you ever purchased a used vehicle?  What advice would you give someone in the market for a used car?

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27 Responses to How to Save Money by Buying a Used Car

  1. John S @ Frugal Rules 01/10/2013 at 5:19 am #

    Good tips. I would recommend taking the car to a trusted mechanic to look it over before purchase. They might charge you a small fee, but it’s well worth it in the case something is caught.

  2. Jamie Dickinson @ YourSavingAngels 01/10/2013 at 6:35 am #

    My wife and I have gone down the route of leasing our car now. We can’t afford to buy a decent used car and are fed up of expensive repairs. Although we are quite lucky to live opposite a taxi garage which do all our work for us and only charge for parts.

    • Paul 01/10/2013 at 7:28 pm #

      Wow, repairs for the cost of the parts! I keep my cars for around 10 years so leasing does not appeal to me. So far, it has been much cheaper than leasing or buying new.

  3. Alex 01/10/2013 at 8:30 am #

    I’m a big fan of used cars. Except for some exceptional circumstances, they seem to be the best bet for value.

    • Paul 01/10/2013 at 7:29 pm #

      I agree with you Alex. Just make sure you have it checked out by a reputable mechanic before you buy.

  4. Midlife Finance 01/10/2013 at 10:02 am #

    I drove around a 1982 Subaru wagon for a few years. I paid $500 for it and sold it for $500. It was a piece of junk, but I only drove it locally at relatively low speed. Now that I have a kid, I’m opting for a safer vehicle.

    • Paul 01/10/2013 at 7:13 pm #

      My brother and I bought a 1969 Olds Cutlass in High School for $350. What a rust bucket that car was but we had a blast with it! Well worth the money!

  5. Grayson @ Debt Roundup 01/10/2013 at 10:08 am #

    Nice tips. I purchased a new car in 2011, but I also have a 22 year old Jeep that I keep around. I pay almost nothing for the insurance on the Jeep, but the new car is quite expensive. I usually don’t advocate purchasing a new car, but I decided to do it anyway.

    • Paul 01/10/2013 at 7:20 pm #

      I have an 11 year old Ford F150 that is still running strong. I have no immediate plans on replacing it but I will buy used when I am ready.

  6. Kyle @ Rather-Be-Shopping.com 01/10/2013 at 10:43 am #

    Good advice. I would add to the repairs tips that the biggest thing to look has to do with the timing belt. That is by far the most expensive repair with cars built in the past 20 years. Typically done every 100,000 miles. Make sure you know what you are buying and if the timing belt has been replaced recently or not. Could be a deal breaker if it hasn’t.

    • Paul 01/10/2013 at 7:22 pm #

      The cars we had specified to replace timing belt around 60k miles. Some vehicles have timing chains so you have to check the owners manual to know which type your vehicle has.

  7. Canadianbudgetbinder 01/10/2013 at 8:22 pm #

    Great tips Paul,
    I’ve always bought used cars and paid cash for them. I could never bring myself to buy a brand new vehicle knowing that as soon as you buy it is now considered a “used car” and the depreciation begins. Mind you not as fast as a used car but a used car even a couple years old is just as well as a new one. Mr.CBB

    • Paul 01/10/2013 at 8:37 pm #

      The truck that I own now is most likely the last new vehicle I will buy, unless I hit the lottery that is!

  8. John@MoneyPrinciple 01/11/2013 at 1:42 am #

    Good sense in general @Paul but we are just going the other way!

    We are selling our 2009 Merc A-class which is a nice car that we intended to keep but its petrol consumption was ridiculous at about 33mpg (Imperial gallons that is – 26mpUSgs) over its life with us.

    At 13,000 miles it is almost new but now in the UK it will need a test every year. Apart from petrol and insurance it costs £120 a year to tax. We are replacing it with a Skoda CitoGo 60 which uses half the petrol, is perfectly adequate for town and costs nothing to tax because it produces a lot less CO2.

    All in all we expect to save as spares are not a consideration for a new car. Yes older ones are good if you get one that has been looked after but short of buying it new and keeping it for 100 years, or inheriting it etc, you can’t really guarantee that….

  9. Michael @ So You Think You Can Save 01/11/2013 at 6:32 am #

    The only used car I’ve ever purchased has been from my parents so I knew exactly what I was getting into. I know others have had varying success. I think if you can buy from family or a close friend that you trust, you’re apt to have less problems (or at least more disclosure) than you would if buying from a private seller.

    • Paul 01/12/2013 at 8:10 pm #

      Carfax and an inspection by your mechanic is all you need. By used I’m talking about 2-3 years old, you miss the depreciation hit yet still have the manufacturers warranty to fall back on.

  10. Jefferson @SeeDebtRun 01/11/2013 at 7:47 am #

    we always aim to buy our cars slightly used, because of the quick depreciation when the cars are driven off the lot.. you can get a “like new” car with a $10k discount fairly easily..

    • Paul 01/12/2013 at 8:46 pm #

      I think that makes sense, thousands of dollars to be more accurate! Why wouldn’t you want to save that 20% depreciation hit the first year and buy a gently used car?

  11. Jules@Faithful With a Few 01/13/2013 at 5:53 pm #

    I have always bought used cars. I always make sure I take it to a mechanic to have it looked over. I actually turned down a car because the alignment was off and I wouldn’t have known had I just bought it. It saved me big headaches down the road.

  12. Kay Lynn 01/13/2013 at 6:13 pm #

    We keep our cars 12-16 years. My husband is driving a 1998 Ford Windstar we bought new and my car is a 2006 Hyundai Sonata. I would like to buy a used late-model car for our next purchase.

  13. Melissa 01/14/2013 at 6:37 pm #

    I like the concept of buying a used car, but I did it once and it was a disaster because the previous owner hadn’t maintained it. Now, we buy new but keep them for 10+ years. Right now our current car is 8.5 years old and has 112,000 miles on it.

    • Paul 01/14/2013 at 11:21 pm #

      Sorry to hear about your bad experience Melissa! I’m buying used for my next car, probably a Mazda MX-5. I’m planning on getting it checked by my mechanic and I’ve done my research so I know the issues with these cars. They have none!

  14. John@ WILDaboutFinance 01/15/2013 at 11:02 am #

    I’ve always found its the luck of the draw when buying a used car. If you get a good one, you save a fortune, if not you’ve just wasted a whole lot of cash paying for it to be repaired, presuming it can be.

  15. Insurance Hunter 02/20/2013 at 10:54 am #

    Buying a used car is a sound strategy if you are looking to save a few bucks. However, it could go south if you don’t put the time and effort into finding a reliable used car that has a good reputation. Do your homework and find a car that is not only affordable and good on insurance, but also one that is know to not break down very often.

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