The $2000 Used Car… Gone for Good?

SEARCHING FOR THE ELUSIVE $2K USED CAR

I remember when $2’000 used cars were a thing. They were for sale in front yards everywhere and in good shape too! Hey, for $3’500.00 – $5’000 you could drive away in something really nice with low miles! I get calls all the time from folks still hunting that savory deal and I wonder, is it gone for good? With the average cost of a used car peaking at over $22’000 last summer it’s time to make way for the new standard…

The average cost of a new car in 1990 was about $9’500. This means after the first year’s depreciation (20-30%) and subsequent year’s (16-18% annually) we might buy her used in 1995 for around $2’000.00 – $3’500.00. The average price of a new car in 2020… $37’000. Over the next 5 years that car will lose around 60% of its value. If you don’t have a calculator handy that puts the price at around $14’500.00 used. Something really nice with low miles will cost around $20’000. Those are the facts and there are a couple good reasons why.

Quality: New car quality has increased and is still rising, they simply last longer. They’re still kicking like a mule at eleven plus years. This means that a five year old car has a long life ahead of it and the owner knows it. It’s price will reflect its longevity.

Supply and demand: Used cars are scarce these days compared to the 90’s. What’s the best way to drive the price of a product… control sales. With less inventory on the market, there is less competition and this is powerful leverage for sellers.

Larger more expensive vehicles: Increased SUV, truck, and crossover sales in recent years has led to less small, inexpensive vehicles on the used market and less means more for sellers. Since you’re not likely to find many of them for sale, they’re come at a premium. If you do find an inexpensive used car in great shape, move fast, it won’t be available long!

 

Are there any cheap used cars out there worth buying?

Of course there are, just harder to find. Best bet is to purchase from family or close friends that can guarantee the car’s history. 150’000 plus miles is fine as long as the car has been properly maintained and loved. Otherwise it’s anyone’s guess how long the car will last. Dealers can’t sell what they don’t have and there are so few of these rare birds available that dealers can’t find them either. The discerning used car dealer has a reputation to protect and must have a reasonable amount of confidence in each used car they sell. Often times cheap is just cheap and that doesn’t meet inventory standards.

 

The New Standard

What should you expect to pay for a reliable, well maintained used car today? For the features that most of us want with 60-80k miles you can expect to pay on average around $14’000-$18’000 for your 4 to 5 year old used vehicle. Yes, there are exceptions both higher and lower depending on the car and condition specifics but buyer beware, if it’s cheap it’s a heap! Have questions? Call or text (757) 560-4252 and ask for Mike Love, I have answers. Happy hunting folks!

TM Auto Wholesalers, Chesapeake Va

 

 

 

Sources:

Frio, Dan “Cheapest Used Cars” EDMONDS.COM December 10th, 2019 Web. Retrieved from: https://www.edmunds.com/vehicles/cheapest-new-cars/

Edgerton, Jerry “Cars Now Last Longer Than Ever.. Will Yours” CBSNews.com August 7, 2015 Web. Retrieved from: https://www.cbsnews.com/news/cars-now-last-longer-than-ever-will-yours/

Mattone, James “Used Car Prices at Highest Levels in Three Years” media.thinknum.com August, 2019 Web. Retrieved from: Mahttps://media.thinknum.com/articles/used-car-prices-are-at-highest-levels/

The ABC’s of Buying a Used Car

Used car shopping? It’s as simple as ABC with a good plan and the right tools!

Let’s break used car shopping into three parts; finding the right automobile for your needs, researching it, and making the deal!

First, narrow the field with these three questions:

How am I planning to use this automobile?

a. Daily transportation to and from work
b. Hauling the family to sports events, school, trips
c. Work vehicle with room for tools
d. Adventure vehicle for off road
e. Heavy duty vehicle for towing a boat or toy trailer
f. Sports car with just enough room for two

 

How long do you plan to keep it?

Think about the long term… Is this an impulse buy or can I really keep this vehicle. The best scenario would be to purchase used after depreciation and drive it until the wheels fall off.

 

Am I financing or paying cash?

If you’re taking out a loan, get a quote from your bank or credit union so you can compare those numbers with what the dealer may offer in terms of financing. Remember, longer-term loans may lower your monthly payment, but you’ll end up paying more for your vehicle in the long run. Cash means zero percent financing!

 

A: THE CAR

As a rule, it’s best to set a budget first, seriously, set it and don’t forget it. This will help you decide where the funds will come from and how to pay them back. Decide what you need and want, yes they’re both part of the equation, you’ll be making those payments so you should be happy with your purchase. Remember, affording a car is more than making the monthly payment. You may be able to pay for a BMW and a Toyota Corolla but can you afford to repair the BMW? Search online; Car Gurus, CarMax, local dealers, Carvana, and Facebook Marketplace.
By now you should have a pretty good idea of what’s in your price range, time to start digging…

 

B: RESEARCH

How is the car’s safety and reliability record? Check Consumer Reports and J.D. Power collect maintenance reports from owners and rate your choice as well as other used cars. Safety first and reliability is key!
You can use a guide like Kelly Blue Book to estimate the market value of the car you’re looking at based on age, mileage and options. It’s not perfect, but it should get you in the ballpark.
Now that you’ve found a car…. What’s next?

Once you find a car you like, contact the seller to ask any questions you have and get a Vehicle History Report from CARFAX by referencing the vehicle’s identification number (VIN). This will give you the good, the bad, and the ugly on the car. A reliable dealership should provide a CARFAX report on every car in their inventory. This report is vital, it will provide you with information that cannot always be seen. Below are just some of the details you’ll get from a History Report.

a. Does this car have a clean title? If a car’s been in a serious accident, fire or flood, and was “totaled” by the insurance company (declared a total loss) it still might be drivable. However, the insurance company will issue a “salvage title” to alert future buyers. It’s best to steer clear of cars with a salvage title because it kills the resale value, and the car might still have hidden problems. NOTE, this is not always the case, especially if you plan to keep the car indefinitely and know that the damage was repaired completely.

b. Serious accidents are reported to the insurance company and will probably be on the vehicle history report.
Shady car lots might spin the odometer back to increase its selling price. The vehicle history report can alert you to this scam.

c. It’s nice to think the car you’re interested in was driven to church by a little old lady for its entire life. If you order the report, you’ll know for sure each time it changed hands.

d. Some reports show if required maintenance was done on time and where the work was performed.

A pre-purchase inspection of the car you’ve chosen can be done before making any deals. A pre-purchase inspection is an independent, third-party professional service that evaluates a vehicle’s condition before a purchase offer is made. … Unless the vehicle is unsafe to drive, the evaluator does not provide a purchase recommendation. It will include a detailed road test where components such as steering and brakes can be assessed. A thorough inspection will include checking engine compression and a computer engine analysis. A basic PPI will cost $20.00 from Firestone and the buyer typically pays for the pre-purchase inspection. This is your opportunity to test drive the vehicle to see what YOU think.

 

C: Make the Deal

Let’s make a deal! A good deal is paying less than the listed price, prepare to negotiate with the comparisons from your online research and your Kelly Blue Book numbers. Considering the seller has probably listed their car a little high, you should have some room to bargain. Start by pointing out the things you love about the car then move to your concerns and what the blue book says the car is actually worth. Play nice, be firm and you’ll do just fine.

Before taking ownership of the car, you should add it to your insurance policy. Then, you only need to pay for the car — usually with cash or a cashier’s check. Make sure you get a title and have the seller sign it correctly. When in doubt, check the state’s registry website for more information. Most states allow about 10 days to register the car in your name. If you’re buying from a private party, and there is still a loan on the car, call the lender to find out how to close the deal. If the lender is a bank, offer to meet the seller in a branch office and sign papers there.
If you’re at a dealer, It doesn’t hurt to see if they can get a better interest rate. Just make sure all the other terms of the loan are the same. Review the sales contract carefully before signing. The contract will probably include the agreed-on sales price, sales tax, documentation fee, and registration fee. Take your keys and hit the road!

Have questions? Call or text Mike Love (757) 560-4250. I have answers!
Follow TM Auto Wholesalers on Facebook to see our latest inventory.

 

 

 

Sources:
Reed, Philip “How to buy a used car” NERDWALLET.COM 3/21/2016. Web. Retrieved from

How to Buy a Used Car

Youngs, Jeff “Understanding Pre-purchase inspection (PPI) JDPOWER.COM Shopping Guides 4/19/2019 Retrieved from:
https://www.jdpower.com/cars/shopping-guides/understanding-pre-purchase-inspection-ppi

“Planning to buy a car, take these five steps” ONEMAINFINANCIAL.COM Resorces-everyday living. Web. Retrieved from:
https://www.onemainfinancial.com/resources/everyday-living/planning-to-buy-a-car-take-these-five-steps-first

Berger, Rob “6 Reasons to Pay Cash for a Car (and how to actually do it) Personal finance. DOUGHROLLER.NET 9/26/2018. Web. Retrieved from:
www.doughroller.net/personal-finance/6-reasons-to-pay-cash-for-a-car/