Part One: Identifying Your Target Cars & Arranging Financing
When you go car shopping, the first question you are likely to run into is this: Should you buy a new or a used car?
New cars are a shock to your budget, but they will probably be trouble-free for several years.
Used cars cost less, but how can you be certain you're not buying someone else's problems?
Here at Edmunds, we spend much of our time dispensing advice on new car buying. But there is a huge used car market. In 2006, for example, an estimated 44 million used cars will be sold as compared to an estimated 17 million new cars. While the average sale price of a used car is estimated at about $13,900, the average price of a new car is estimated at roughly $27,800.
It's often said that there is a steep decline in the car's value in just the first year of the car's life from 20 to 30 percent. In other words, that car that was worth $21,800 when it was new can be purchased only a year later for as little as $15,260. That's a savings between $4,360 and $6,540. This is proof that the consumer pays dearly for that new car smell.
You might be thinking that all of this sounds good in theory. But what's happening in the real world? Well, we decided to find out.
A Test Case
Edmunds editors Phil Reed and John DiPietro decided they would be guinea pigs in the used car buying process. Phil actually needed a car to replace the one he just sold. So he decided to get the best car he could for between $11,000 and $13,000.
True, there are new cars that could be purchased in this price range. But by buying used, Phil felt he could get "more" car for less money. By purchasing a used car, he would be able to get a loaded mid-size model instead of a new, stripped "econobox." Besides that, buying a used car that was still under factory warranty could offset much of the uncertainty of buying a used car.
In this three-part series, we're not only going to give you a system for buying used cars, we're also going to tell you how the Edmunds editors faired when putting this system to a real market test.
(You may also want to read Edmunds.com's 10 Steps to Buying a Used car (
http://www.edmunds.com/advice/buying/articles/78387/article.html))
Step 1: Identifying Your Target Cars
John has coined a term he uses to describe good cars that are often overlooked. These are not the "staples" in a given segment and thus can be bought at bargain prices: Dark Horse Cars. While this is a mixed metaphor, it describes a type of car that bargain hunters should be aware of. Dark horse cars are virtually as good as the well-known cars most notably Toyota and Honda but you don't have to pay for the name.
In Phil's case, he would have preferred buying a Honda Accord or a Toyota Camry. But by shopping for a Nissan Altima, a Mazda 626 or a Mitsubishi Galant, he hoped to save about 20 percent, while still getting a well-built and reliable car.