The landscape for buying cars is changing.

New and used car prices are going out of sight. Demand for dependable, newer vehicles is still high and supply is low. As a result, people are overspending for basic, dependable transportation.

If you think the only option is to buy a new or slightly used car to get dependability, then you’re throwing money away. The peace of mind of having a new car with factory warranty has a huge price tag in depreciation.

I help friends and family stay in they’re old beaters for as long as possible. Over the years, I have established some simple rules to get the BEST value out of an automobile used for basic transportation.

Rules to Save Money on Used Cars:

• Buy a Japanese compact for commuting. Toyota Corolla, Honda Civic, Mazda 3 or 5. Stay away from Nissan.
• Establish a relationship with an honest mechanic. Bring a prospective used car to the mechanic before buying.
• Cars between 100K and 130K miles are typically the best value. Manufacturer warranties run out after 100K and prices take a dip. This applies to quality vehicles only. If you insist on domestic, buy under 100K miles. Get the warranty. You’ll likely need it.
• Consider gas mileage as a cost of ownership. If you’re trying to be cheap, get an economy car instead of the Chevy 2500.
• If you’re buying from a private seller, have cash ready for the best deal. Don’t expect the seller to hold the car with no money down! It just don’t work that way.
• Rust is the devil. Stay away from rust buckets no matter how cheap.
• Consider how much you drive. If you put less than like 6000 miles on a vehicle per year, you don’t need to spend the same money as someone who puts 15K miles on a car per year. For example, my retired step mother had a car lease for $300/month and drove about 300 miles each month. She was essentially paying $1/mile for the car, which is very high! Someone putting 1200 miles on the same car would be paying $.25/mile which is pretty good. Depending on how much you drive, you may be able to get something a little older or maybe with more miles to keep cost/mile down.

Once you bought the used car:

• Maintain the car! Check the fluids! Oil changes, alignments, tires, brakes – keep up on things. Have the mechanic look it over each time he is doing scheduled maintenance.
• Wash your car frequently including the underside This is extremely important for those of us in the snow belt where the roads are salted!
• Listen for any new noises and watch the lights and gauges. Report clunks, ticks, vibrations to your mechanic. If your car is running hot on the temperature gauge – stop running it! Nearly 100% of the time that people have serious problems with their used cars, there are signs or signals that are ignored.
• Get AAA. This will give you peace of mind.
• If the car is worth over a $1500, keep Comprehensive Insurance on it. It’s relatively cheap and protects you from theft, vandalism, fire and animal damage.

Once in a lifetime deals

“I paid $500 for this car and drove it for the past 2 years and haven’t put hardly anything into it.”

This statement lacks a lot of data. First, how much do you drive the car? Do you put 15,000 miles per year on it? Does it run well or are there all kinds of noises? Do you maintain everything? Does it have good brakes, tires, etc. or are you driving it into the ground? Did you buy it from a relative or a friend?

Sure, the statement is a comment of a person’s acumen in buying a vehicle and virtue signals how good they are at obtaining cheap transportation, but more data is needed. Let’s take a drive…

For those of you looking for that kind of deal, I can honestly tell you they are near non-existent unless 1) you have a relative doing you a favor, 2) you find someone that is too busy or too lazy to sell a car on Marketplace.

A decent running car that 1) is semi-reliable, 2) will pass inspection and 3) doesn’t require substantial work is worth at least $2000. (You might be able to find a Chevy of Ford passenger vehicle for less, but you take your chances.)

That being said, you may be able to catch someone prior to trading their car in for a new car. Dealerships don’t give much for used cars and people trade cars in for the lack of hassle (See ‘too busy or too lazy’ above).

How most people buy cars

Having a car failure can be a huge headache. Perhaps you’ve suffered from PTSD because of a previous breakdown. To reduce the risk of potential breakdown, people spend large amounts of money. The result is a large portion of the population just buys or leases new cars. They typically pay $350- $600 per month and don’t worry about it. But that’s $4200-$7200 per year. Most of the time, that money is thrown away in depreciation.

In this market, you can find a reliable, well maintained Toyota, Honda or Mazda compact sedan with between 100-130K miles and that is around 10 years old for between $10-15K.

Depending on how many miles you put on the vehicle, it will not depreciate much per year – maybe $1000. With brakes, tires and oil changes you might be out another $600 per year. So total year’s expense will be around $1600. This is a savings of $2600 per year NOT CONSIDERING THE SAVINGS IN INSURANCE.

The Sweet Spot

So let’s say your car’s paid off, still runs well and is not a safety concern. You have no more payments and you switched over to just ‘Liability Insurance’.

Congratulations. This is the sweet spot. The car has already paid for itself. Now you’re trying to milk it for everything you can.

Some people get rid of these cars saying “it’s nickel and diming me to death”. Really? You’re worried about nickels and dimes, when a new economy car is $26,000?

This is where math pays off. If you’re putting less than $1000 per year into the car, you’re still ahead from getting a new used car ($1600 from above). If the drivetrain is solid and the car is not rusty it’s likely a keeper. Expect the following repairs and maintenance:

• Oil and Fluid changes
• Tires
• Spark plugs, wires, and coils
• Brakes – pads and rotors
• Exhaust work including catalytic converters
• Wheel bearings
• Ball joints, control arms
• Alignments
• Radiators

Also, there’s a big advantage to “knowing what you have” in a vehicle. Whenever you buy something different, you inherit the previous owner’s headaches. Having history with a car increases reliability.

If you allow for $1000 per year for “nickel and dime” expenses, keeping the car will be an easier decision. Just keep up on all the repairs such as tires, brakes, alignments, oil changes, etc.

When it’s time to say good-bye

Being emotionally attached to a rust bucket is expensive and potentially unsafe.

My general rule is that if the car needs major work and is not worth more than the work performed AFTER it is done, then it may be time to let go.

And if the car is unsafe, get rid of it.

Here’s an example: A 2003 Subaru Outback has 200K and needs a replacement engine. Ron can replace the engine for $2000. The car is likely worth around $1500 when fixed. If you scrap the car, you’ll get $400.

Time to say good-bye? Possibly. But if the car is perfect other than the engine, are you going to be able to find a good used replacement for $2400? Could you get another 2 years out of the car after the engine is put in?

But if it’s a rust bucket, sell it.

Keep in mind with the high mileage, the transmission could go next or you could get a bunch of ‘nickel and dime’ items that keep you dumping money into the car. Wouldn’t take much to push you over the $1000 per year threshold to own something newer and more reliable.

Running a car into the ground

Sounds cruel, but often it makes a lot of sense.

Say you have an older POS that is running fine. It might have another inspection or two left in it. There are a bunch of non-safety issues wrong with the car. It’s a little noisy, a window motor is bad, there’s no A/C…

But you keep on driving it until that major expense hits.

I know a lot of people that do this successfully. They save thousands. The trick is you really have to be in tune with your car and have a good mechanic. You have to know what repairs to do to keep it going and which ones to ignore.

Funny story: A friend was running their 2009 Subaru into the ground and when the repairs really started piling up, she started looking for a new used replacement. She was shocked at the prices so she decided to spend $2000 to have her car completely gone through. New head gaskets, clutch, suspension, exhaust, etc. She’ll easily get another couple years out of the car AND it will still be worth much more than before the repairs.

Spares

If you’re depending on rickety old cars to get you around, have at least one spare. Rental cars, should you need one, are expensive.

I have two spares and they’re both trucks. I also have a tow dolly should anything go wrong with my primary beater, I can go get it.

Good luck.

Ron