Buying a used car

[Frequitude]

Edit: This can serve as a general megathread for buying a new/used car if people feel the need for it. My specific question to get it kicked off is below. I just wanted to add this edit so that if/when it gets bumped people don't think its some weird bump of an old OP.

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It's a sad day for me. It looks like a pending hefty maintenance bill on my beloved ~20 year old baby means I finally have to let go and move on.

It's the only car I have ever owned, so I'm kind of lost on how to start or what to budget for. There are some good resources on here, so hopefully some folks can help me out.

I have 4 questions.

1. I'm pretty sure I want a Yukon or a Tahoe (not XL). Any opinions on that?
Anyone who has had a car for that long is probably going to have the next one for a long time. I've got a massive dog and plan on starting a family soon, so want a big car and like a Yukon or a Tahoe. I like them, they'll get me through those many stages of life, I like the safety in the size, and my driving habits and patterns mean fuel mileage isn't critical.

2. What's the best way to buy a used car?
Autotrader? Go to a dealer? My first thought is a dealer because I'll have a couple old cars to trade in, I'll need financing, and I'm not concerned about holding my own with a pushy salesperson.

3. I need financing. What's the best way to do so and what kind of rates and downpayment should I assume for budgeting purposes?
Perusing Autotrader, it seems the car of my choosing are in that $30K-$40K range. What are standard terms so I can build an amortization table to calculate monthly payments?

4. Any general advice?

[burn_this_city]

1. Can't go wrong with the full size GMs.
2. Private sale will give you the best deal. Maintenance packages are usually a money loser for the customer.
3. Best rate is probably your LOC.

[CaptainCrunch]

Generally I go to dealerships even for used cars because I like having certification, and someone to blast if the car has problems. I will add on that I won't go to strictly used car dealerships though, I never had any luck.

With my last one I just went with the in store financing and it worked out well in terms of the deal that I was able to get.

Even when I bought my jeep, I went to Pylon who works at a VW dealership and the service that I got was thumbs up professional.

On the last one though with the jeep, I did it as a private sale to Pylon, because he really wanted a jeep to play with. But I tend to go in with the idea of a trade in usually.

[Frequitude]

Old faithful is a 98 Cherokee Sport, so Pylon if you're out there let me know if you want a second project! Heck, I might not even trade it in. I might just say **** it and get my mechanic to put a couple grand in it and make it awesome for beating around in if needed.

[Nufy]

What does it need for maintenance ?

[Frequitude]

Originally Posted by Nufy

What does it need for maintenance ?

Don't have the full quote yet, but ~$300 for a bunch of fluids, $250 for something to do with the rear axle, plus still-to-be-debugged issues involving the power system and the oil pressure sensor. I'll have the ful quote tomorrow AM.

[Frequitude]

I guess I'm also curious around financing/purchasing strategies. It sounds like new cars might actually let you have longer terms and lower rates? Then there's leasing? And then of course the financing used which I started the thread about.

[GreenLantern]

A lot of newer vehicles you can get in at 0% financing for at least the first 2 or 3 years, sometimes it is the full term. I think you will need to scout out the vehicle type you want and then watch for the sales OR search retroactively to see when they have shown up in previous years.

For my last purchase I bought a truck, just kept my eye on Kijiji and knew exactly what I wanted. Took about 3 weeks of daily checking for the right truck to pop up but eventually it did and I just pounced on it that day.

[pylon]

Used: Go to a big name franchised dealer. If a car ends up on those corner lots, or bad credit places... there's usually a reason. High mileage, accident history, or ex-rentals. Big dealers always keep the cherry trades for inventory, and that usually means a super clean carproof report. To many big dealers, used car departments are the driving force as they operate at a loss in their new car departments, and need all the top notch trades they can handle.

New: Well it's pretty much the big dealer for you. Buy the Car Cost Canada report for what you want, but don't tell the dealer. Just be armed with the info, and use it to your advantage. If you walk into a dealer with Carcost in your hand, you're typically not going to have a fun experience. We get it that people want a deal, but asking the dealer to lose money, or make a big fat zero, is a bad way to get started. Just set a price 2-3% over the Carcost report, and stick to your guns. If you are looking at a high demand low production vehicle, Carcost won't help. Especially when there is 10 people behind you, willing to pay fair market. Just because you know what the dealer paid, doesn't mean they have to give you that price.

Financing: 0% isn't the be-all end all. Make sure you aren't giving up a huge rebate to get 0%. I have seen deals where the adjusted finance cost after giving up the rebate is 15-20% once you factor in what the cost of borrowing would have been if you pocketed the rebate, and took out a 4.9% loan.

Add-ons: I'm not gonna debate the whole suite of products, but I tell anyone I know, take an OEM warranty. Not 3rd party. Genuine manufacturers. It will save you money no-matter what. Outside of the obvious, where something major breaks and it's fixed, the used car market is drastically changing, and one of the biggest features people want now, is warranty coverage. Virtually all OEM warranties are transferable, so not only do you sell faster, you sell for more, and have almost double the audience when you list it. Adding the warranty after the fact usually is usually double the cost, so it makes sense to buy it up front. And most dealers pre-pack warranties on their used inventory, so now, you can compete with them.

Carproof: No matter what you buy, if it's used ask for a carproof report from either the dealer, or run one yourself if it's a private sale. If it is over 60 days old, and from a dealer, ask for a fresh report.

Hopes this info helps.

[Frequitude]

Thanks so much pylon.

The low interest on new cars sounds like there surely must be a catch, so the factoring in rebates to get an effective interest rate is exactly the sort of catch I was looking for. I'm savvy enough with Excel and business school to be able to work it all out so I really appreciate the info.

It sounds like the best plan is to just head over to GSL and Shaw on the weekend to get the research ball rolling.

One more thing, what's the Coles notes on buy and finance vs lease? I'm not someone who cares to have a new car every few years, obviously.

[pylon]

Originally Posted by Frequitude

Thanks so much pylon.

The low interest on new cars sounds like there surely must be a catch, so the factoring in rebates to get an effective interest rate is exactly the sort of catch I was looking for. I'm savvy enough with Excel and business school to be able to work it all out so I really appreciate the info.

It sounds like the best plan is to just head over to GSL and Shaw on the weekend to get the research ball rolling.

One more thing, what's the Coles notes on buy and finance vs lease? I'm not someone who cares to have a new car every few years, obviously.

Then finance. The only big advantage to leasing if you know you're gonna own it long term, is the fact you can walk away if you're in a huge wreck the first 2-4 years. But now, there are a ton of products you can buy from either your insurance company, or the dealer, that will compensate you if you have a huge claim and diminished value. So that benefit is essentially moot now. Plus leasing usually carries higher interest rates anyway.

And one thing. Especially if you're financing. If the perfect car comes along, and it's no more than 5-10% over your budget, just buy it. If you are financing you are talking 1500-3000 spread out over 5-7 years, it makes little or no impact on your monthly budget.

I have seen so many people walk away from the perfect car, only to come back a week later saying "I shopped all around, and your car is still the one I want." "Sorry sir, we sold it 3 days ago."

And then the cycle of insanity starts again. And now your time is costing you money. When I was on the sales floor, and I had that perfect car but it was just out of range after all the haggling, I'd say "Look, I don't have a used car factory I can call to order you up a <40,000 km, silver, 2009 Civic SI with a power sunroof, red interior stitching, and a faux carbon fiber hood."

If you do not exceed your budget by more than 10%, you are doing better than 90% of shoppers.

[Frequitude]

Hahaha, awesome. So what's a good assumption for financing terms on a ~3 year old Yukon/Tahoe just for budgeting purposes before I head in. 5%? Up to 7 years?

[Kjesse]

There is always a cost to taking a loan -- or as its called in this thread, financing.

While a financing package might be best for your own needs, paying cash you will end up ahead 10 times out of 10.

[pylon]

Originally Posted by Delgar

There is always a cost to taking a loan -- or as its called in this thread, financing.

While a financing package might be best for your own needs, paying cash you will end up ahead 10 times out of 10.

Not everyone has 30 g's burning a hole in their pocket.

And contrary to popular conception, dealers want you to finance, and will be more flexible knowing you are. Having cash in hand never gets you a better price. Maybe 20 years ago, but not anymore. Yes you pay interest, but there is nothing stopping you from taking a loan, and paying it off in 6 months. And in a scenario like that, the interest is only a few hundred dollars in many cases, yet you saved another 800-1000 on the car by doing so.

[Frequitude]

Originally Posted by pylon

Not everyone has 30 g's burning a hole in their pocket.

And contrary to popular conception, dealers want you to finance, and will be more flexible knowing you are. Having cash in hand never gets you a better price. Maybe 20 years ago, but not anymore. Yes you pay interest, but there is nothing stopping you from taking a loan, and paying it off in 6 months. And in a scenario like that, the interest is only a few hundred dollars in many cases, yet you saved another 800-1000 on the car by doing so.

Is that the case for all auto loans? Can I just pay off the balance whenever I want? My compensation is pretty lumpy, so I'd be in a position to put a good chunk down early next year (the plan was originally to buy a car then...though I have been saying that for 5 years!). If so does that lower your payment or just shorten the term?

[Kjesse]

Originally Posted by pylon

Not everyone has 30 g's burning a hole in their pocket.

And contrary to popular conception, dealers want you to finance, and will be more flexible knowing you are. Having cash in hand never gets you a better price. Maybe 20 years ago, but not anymore. Yes you pay interest, but there is nothing stopping you from taking a loan, and paying it off in 6 months. And in a scenario like that, the interest is only a few hundred dollars in many cases, yet you saved another 800-1000 on the car by doing so.

Financing leads to people buying cars they really can't afford. If they discipline themselves, buy cheaper, reliable, and of course used, they will have more money for other things -- cars included -- down the road.

Dealers want you to finance because they get a fee for every loan granted.

Pylon, if there's some magic reason other than making money off a loan, please explain why a dealer will sell for less if you finance through them.

[oilyfan]

Originally Posted by Delgar

Financing leads to people buying cars they really can't afford. If they discipline themselves, buy cheaper, reliable, and of course used, they will have more money for other things -- cars included -- down the road.

Dealers want you to finance because they get a fee for every loan granted.

Pylon, if there's some magic reason other than making money off a loan, please explain why a dealer will sell for less if you finance through them.

Sounds like you are giving personal finance advice in a thread about buying a used car. I would call that a derail.

[karl262]

Originally Posted by Delgar

Financing leads to people buying cars they really can't afford. If they discipline themselves, buy cheaper, reliable, and of course used, they will have more money for other things -- cars included -- down the road.

Dealers want you to finance because they get a fee for every loan granted.

Pylon, if there's some magic reason other than making money off a loan, please explain why a dealer will sell for less if you finance through them.

Actually most of the loans and leases granted at dealerships pay nothing at all. Anytime a vehicle is sold on a manufacturer finance/lease (the low rate ones), which is most new cars and some used cars, there is no money made at the dealer level.

Dealerships like you to use their bank sourced finance plans because they make money, but that doesn't mean you will get screwed over. Most likely you will be offered a pretty competitive rate for finance. By the finance department picking up some money on a contract the sales manager might be willing to drop the extra $500 or include winter mats or whatever.

[pylon]

Originally Posted by Delgar

Financing leads to people buying cars they really can't afford. If they discipline themselves, buy cheaper, reliable, and of course used, they will have more money for other things -- cars included -- down the road.

Dealers want you to finance because they get a fee for every loan granted.

Pylon, if there's some magic reason other than making money off a loan, please explain why a dealer will sell for less if you finance through them.

There is no magic reason. You hit the nail on the head. Dealers get a loan reserve. Also, the odds of a client adding more add-ons to the vehicle, go up exponentially.

Also, in your perfect world of everyone paying cash for cars? The nicest thing on the road, would be a Hyundai Elantra. Without a financing model, even some mid 7 figure people wouldn't have the cash on hand to buy anything else. And the used car market would be impossible to find anything in. You'd have a demand for used cars that is 10x more than today. Your business model works in a country where your choice is a red, green, black or white Lada.

[pylon]

Originally Posted by karl262

Actually most of the loans and leases granted at dealerships pay nothing at all. Anytime a vehicle is sold on a manufacturer finance/lease (the low rate ones), which is most new cars and some used cars, there is no money made at the dealer level.

Dealerships like you to use their bank sourced finance plans because they make money, but that doesn't mean you will get screwed over. Most likely you will be offered a pretty competitive rate for finance. By the finance department picking up some money on a contract the sales manager might be willing to drop the extra $500 or include winter mats or whatever.

Captive finance arms like GMAC, VW credit, Toyota finance etc.... Yeah, they typically pay nothing on promo rates. At most it's $100. When hey are sourced to regular banks, that's when money is made. But there are a ton of scenarios we run into, where its advantageous to cash out the rebate, source it to a bank, the client gets a lower payment and end time balance and we make a little extra money. It can be a win, win, win scenario.