Just picture the scene. You are happily earning a nice six figure salary, your mortgage repayments under well under control or non-existent, the kids are self-sufficient or have't arrived on the scene as yet, and every three years you get to trade in your old car and renew your lease with your new dream car. I'm not talking a Porsche GT2 here (that's pushing the reality just a bit), but a nice new STi or Evo, perhaps a Falcon F6 or HSV Clubsport, or maybe something more European such as a BMW 335i or Audi S4.
For some its a reality, but for others its just dream that does't match the economic reality that they find themselves in. Large mortgage or rent repayments, rising costs such as fuel and utilities and kids that bleed you of every cent means that a new car just is't in the pipeline, and your vehicle is called upon to do its duty year after year after year. The rising repair and maintenance bills means that its time to trade in and move on, but a new car just is't possible. A second-hand car (or pre-loved if you are feeling more optimistic) is the only option.
And thats where I find myself. Single income, three kids (two under two) and a Sydney mortgage means that although my wife and I are nowhere near the poverty line, purchasing a new car to replace our 13 year old Ford Laser that has faithfully served as a family car since we were married simply is't feasible.
But the good news is that if you know what you are doing, getting a second-hand car does't have to be a second-best option.
Tips on buying a second-hand car
There is one major drawback of buying a new car - it devalues at least 5% the moment you drive it out of the dealer. Within three years, if you drive a car that holds it resale well (such as a Subaru, most Toyotas, and many Europeans), the car will still be worth about 65% of what you paid new. However, fleet cars such as the Falcon, Commodore or Mitsubishi 360 can be as low as 40-50% of their original value. Cars, especially new cars, and not a good financial investment.
As new cars depreciate most with the first three to four years, it therefore stands to reason that from a financial point of view, this is also the best time to buy. Many leases expire around this time, so there are many suitable cars in the marketplace. Furthermore, with more and more manufacturers offering a 5 year warranty, it is becoming easier to pickup a 3-4 year old car that still has 1-2 years of manufacturers warranty, which is great for piece of mind.
Next, always research what can you want before making any offers. Work out what you need the car for and how you intend to use it, and then there possible, narrow down the make and model that you want. It gives you a much greater bargaining power when you know exactly what you are after. This is perhaps easier said than done, but at least narrow your options. If you have friends or family that have cars similar to what you are thinking of purchasing, then try to take one for a drive and check it out before entering the market.
As an example, for me, I am completely sold on the idea of permanent all wheel drive. And as I already own one Subaru, and my Mum, Dad, brother and even parent-in-laws all own one, then it meant that if there was a Subaru that would do the job, then I was getting one. This car was going to be a family car for at least five years, so had to cope with three children up to the age of ten. As I refuse to drive Tribeca (which is just Subaru's very ugly version of a Toyota Torago), it was out. The Impreza is too small and we already have one, so scratch it too. I needed a car that was not too low to assist with my wife's bad back when getting the kids in and out of the car, so scratch the Liberty too. That left the Outback and Forester, and considering that I was planning to do some occasional offroad driving out the back of Bathurst and like the easy boot access of the Forester, then that was the way to go.
So which model? The XT would be fantastic, but price and the fact that I have proven myself completely incapable of not modifiying a turbo-charged car ruled it out. The X model is OK, but I like the improved road-holding of the self-levelling suspension in the XS and the alloy wheels, so the XS it was. Both my wife and I find automatics dull and boring (especially the Subaru 4 speed found in the Forster as opposed say to the Ford 6 speed ZF), so a manual it was. The last decision was the year model. The MY06 (released August 2005) was my preference as it just on three years old and had a slightly revised look to the MY05, and it also scored a revised engine with an additional 9kw and 3Nm over the previous model. However price for good models was above budget, so it was ruled it out. The MY04 was also an option, but the MY05 XS came with a much improved 7 speaker setup and side air bags which the MY04 lacked and was important to me, so the MY05 it was. There - a Subaru MY05 Forester XS was what I was after - and I had't even entered the market yet!
How did I do all this research? Well, both my parents have a Forester, so I knew how they drove. But all the model details were found online at Redbook - arguably the best research tool available. Many people think that Redbook only gives a guide on pricing (which it does), but it also lists in detail the specifications of all models, and unlike other website it is nearly always accurate. I also checked the NRMA website for car reviews.
The next move is to ascertain good pricing for the car you are after based upon the kms it has done. The best way to do this is to look up the recommended price range on Redbook, and then monitor large car sale sites such as Drive and Carsales for a week or two to ascertain pricing ranges. Never rely on eBay for pricing as it is seldom accurate, and unless you are desperate, do't buy off eBay either. Remember eBay is like any other auction - once you commit to buy then you have no option out. More on this later.
With all research complete, does one purchase via a dealer or privately? There are pros and cons for both. With a dealer, the pros are that they are bound by state fair trading laws, so you are largely protected against repossession of the car due to problems with the previous owner. Fair trading (at least in NSW) also means that dealers must give a 3 month warranty on any car that is less than 10 years old and has done less than 160,000km. Dealers can also offer third-party warranty on the car for up to five years, in addition to any manufacturer warranty that may or may not remain on the car.
Dealers are also able to trade your old car in, which is beneficial in two ways. One - they generally have numerous ex-lease cars so have a good range of cars, and second it can save you lots of hassle in selling your old car. Secondly, trading in your car might be the most hassle free option, but it is generally not the best financial option. A dealer will generally make lots of noise about giving you a great price on your new used car, but will offer you a pittance for trade-in. The rule of thumb is that you can normally as good as if not better deal on your new used car without a trade it, as well as getting 10-20% more for your old car by selling it privately.
Of course, the biggest con of purchasing through a dealer is the price - it is generally cheaper to purchase privately. Hence if your budget is tight, then you may have more luck find a car in your price range by purchasing privately. Another con of purchasing via a dealer is that some sales people (but not all) can be a bit unscrupulous and will do nearly anything to get a sale, and as such can put potential buyers under greate stress as they try many tactics to get the sale. When dealing with a car dealer, where possible research them on the Internet and see what feedback people have posted. If there is lots of negative feedback, then go elsewhere. Also, remember that car sales people work on commission and at the end of the month and generally more willing to do better deals.
Once you find the car you are after, there are a few things to do. First - you must get a REVS check. Regardless of whether you purchase privately or via a dealer, make sure you get the REVs certificate for the car you are purchasing to ensure that there is no finance owing. Also remember to get the certificate on the day of completion of sale and before you complete the sale.
If purchasing privately, also ensure you get a VCheck Standard (or alternatively the VCheck Plus which includes both VCheck Standard and REVs). VCheck unlike REVs checks the national write-off and stolen vehicle information database for all states except WA (the exclusion of WA is generally not an issue for the Eastern states due to the significant cost in moving stolen and/or damaged cars from the West to the East Coast). QLD residents can purchase a VCheck online from the QLD Deparment of Transport, whereas residents from other states need to use a registered VCheck provider such as Autocheck.
Lastly before purchasing, make sure you get the car checked by an independent source. In NSW, NRMA no longer hs a vehicle inspections division, however they do offer inspections via their affiliated workshops. Other options are to use AVI (where many of the NRMA vehicle inspection team moved to), or a trusted mechanic such as MRT (also a NRMA approved workshop) or any of MRT affiliates or resellers. Trained inspectors will not only provide a general health check on your car, but can most of the time also determine whether the car has been damaged in a crash and how good the repairs are. This is another reason to avoid purchasing a car at auctions as it is't possible to arrange an independent inspection of the car prior to purchase.
I recall when I was in the market for my Ford Laser back in 1997 and I found exactly what I was after beign sold privately in Sydney's southern suburbs. It looked immaculate, the owner said the car had never been involved in a major crash, the mileage was good and the price was excellent. I took it for a drive around the block with the owner and my wife in the car and noted an unual sound from the rear end. When I asked the owner and my wife whether or not they heard the same thing, they said they could't. I looked under the rear of the car, could't see anything, and put it down to pananoia. We put a deposit down and arranged for an NRMA inspection prior to finalising the sale. As it turned out, the car had been involved in a serious rear ender which had't been fixed properly, hence the noise. The owner of the car did't know anything about it as he had bought the car from a government auction. Needless to say, we did't proceed with the purchase.
When buying the car, always remember to negotiate as both dealers and private sellers are almost willing to sell below the advertised price. Be prepared to walk away if they wo't negotiate, you can alwasy come back! The price negotiations need to take into consideration when rego (and therefore third party insurance) expires as it can blow your budget if it is due in a month or two. Also be aware of (and the vehicle inspection will pick this up) the state of tyres, brake pads and brake rotors. If they are up for replacement soon, make sure the price you pay for the car takes this into account. Lastly, do't forget there will be stamp duty on the purchase - many have forgotten this and have been caught out when it comes to transferring the registration.
If you follow the advice above, you should be able to buy a used car with confidence and know you have covered all bases in ensuring that you get a good condition, reliable and value-for-money vehicle that suits your needs just as well as a new car, yet costs you less. For convenience, below is a summary of all the points made above.
- Best point to purchase a used car is when it is 3-4 years old
- Know what you want the car to be able to do in the foreseeable future (i.e. do't buy a 3 door city runabout as your only family car if you plan to have kids later in the year!)
- Always research what car you want before making any offers. Try to narrow down to the make and model
- Research pricing using online tools such as RedBook, Drive and CarSales
Pros of purchasing through dealer:
- Dealers subject to fair trading laws
- Car cannot be repossed if purchased through dealer
- Dealers can offer extended warranty through third-party companies in addition to the manufacturer's warranty
- Dealers can offer trade-ins
Cons of purhasing through dealer:
- Generally more expensive that private sale
- Some (but not all) car sales people will do almost anything to get a sale and can put potential buyers under greate stress
- Always get a REVS check, regardless of purchasing through a dealer or privately
- If purchasing privately, get a VCheck Standard in addition to REVS (or a VCheck Plus that includes REVS)
- Always get the car checked by an independent source such as NRMA affiliated mechanics, AVI, or a trusted mechanic such as MRT (also a NRMA approved workshop). Never rely upon your own judgement or the dealer or private seller
- Do't forget potential hidden costs such rego, tyres, brake pads and stamp duty