Other Cost Considerations
The price is an important consideration when you buy a new or used vehicle, but it's not the only money-related issue that should be pondered. Another important aspect is the overall cost of the vehicle while you own it. Get a glimpse of what a specific vehicle might cost you over the long haul by looking through our Research channel. Annual operating costs, such as insurance and maintenance, should also be considered.
As mentioned earlier, residual, or resale, value is the single, most significant factor related to overall costs. If two new cars sell for $25,000 but one is worth $14,000 after four years and the other $10,000, then the latter costs $4,000 more overall. While you secured a great deal on purchase by taking advantage of a fat rebate from the manufacturer, you may pay in the long run because the vehicle's resale value could have taken a hit from those heavy incentives. Best sellers don't always hold their value either. Manufacturer incentives may bolster their sales. Plus, those best sellers may flood the market when they're sold as used vehicles, which could depress values.
Just Like New
The safest bet for used-car buyers is the "nearly new" or "barely used" vehicle categories. Oftentimes, these are the vehicles that dealerships use for demonstrations, test drives or short-term transportation during special events, such as golf tournaments. These so-called "demo" cars may have a few hundred or several thousand miles on their odometers, but they're still considered new because they've never been owned or titled by an individual. These gently used, well-cared-for vehicles could save you hundreds or thousands of dollars compared to a brand-new one, and they represent a safer risk than a used vehicle. Though they've racked up some miles, they remain covered under the factory warranty. But if a vehicle has more than 10,000 miles on it, it's no longer considered a demo but rather a used vehicle and should be priced accordingly.
If you want to get rid of your old vehicle when you buy a new one, you may want to trade it in at the dealership where you're planning to buy. But negotiate a deal on the new vehicle first. That will allow you to shop the new-car price cleanly from dealer to dealer.
Once you've negotiated the new-vehicle price, find out what different dealers will pay you for your current car or truck. Treat the price for your current vehicle and that of the new car as separate transactions. You are likely to get more money if you sell your current vehicle on your own. But take into consideration the dollars versus your time and hassle.
Typically, the best price you'll get on a new car is when a manufacturer or dealer wants to clear out the current inventory to make room for new models. The end of a model year is a good time to save money. Buying the previous year's model when the new model year has started generally around Oct. 1 is even better. Dealers pay interest for vehicles on their lots, so they want to rid themselves of that expense.
In addition, manufacturers offer rebates, low-interest loans, price cuts and other incentives to consumers at the end of the model year. Automakers also pay extra cash to dealers who can pass savings on to customers to get rid of the old models. While the waiting game may be a good strategy to get the best price, your selection will be limited. You may be stuck with a model that doesn't have the features you want and has a color that other people rejected. And keep in mind that if you sell the vehicle in three years, it will be valued as a 4-year-old vehicle, which results in lower resale and trade-in values.
Vehicle History Reports
The purchase of a used car should definitely include an investigation into the history of the vehicle. Getting this information isn't easy, but Carfax a service based in Fairfax, Va. can provide a limited vehicle history. Carfax can find out how many previously registered owners it's had, the odometer readings each time the car was sold and whether the car had ever been part of a daily-rental fleet or used as a leased vehicle.
You'll need to provide Carfax with the 17-character vehicle identification number before it can conduct the search. Carfax can't tell you who previously owned the car, but for a fee you'll receive a state title number, with which you can contact the state's vehicle department for further information. Many automakers' certified pre-owned programs automatically require a Carfax search before a vehicle can be considered.