Tuesday, September 20, 2011

Buying a used car in the US

Buying a used car can be a daunting task. In this blog (a rather lengthy one) I write about my experience and the knowledge that I gathered during this process.
Reason
Other alternatives exist - renting when necessary, using public transit or leasing a car. Yet the sheer comfort and the time saved in owning a car overcomes all of these, further the comfort of a car during the winter snow is incomparable. The public transport leaves much to be desired in this country.
Knowing what you want

The very first thing you would plan is the finance. You must have an idea about how much you wish to spend and how much you can afford on top of that.

There are way too many options when it comes to cars - the performance / fuel economy , age of cars, budget, number of doors, makes, number of engine cylinders and finally even color can be a choosing factor. It is always wise to rule out one or the other option and that allows you to focus. For instance when i bought my car, I set a price limit of $1000 to $4000, 4 doors, 4 cylinders (later explained), red color (although I gave it up very soon), models after 2000 (not more than 10 years old) and a mileage bracket of 80k to 130k.

It takes a fair amount of time and research to arrive at these parameters. Later in this article I would explain how I arrived at these and how you can determine yours.

Some geeky car facts that is worth knowing
Many people like cars and it pays off when it comes to buying one. So I take the liberty to get geeky in this part.

  • Car makes
    • Its good to know what makes come from which country. I list some popular car makes seen on the road here in the US.
    • Pontiac [GM], Chevy [GM], Ford, Chrysler, Dodge [Chrysler], Buick [GM], Cadillac [GM], Mercury [Ford], Saturn [GM]  are American cars
    • Toyota, Nissan, Honda, Mazda, Subaru, Mitshibishi are Japanese cars
    • Kia, Hyundai are from South Korea.
    • In general American cars they have a lot of muscle, are less fuel efficient, and wear away after 150k miles.
    • Japanese cars are known for their reliability and features. For lesser cost (first hand) they pack fuel efficiency, safety features, utility features and the parts need replacement only after extended usage. Further they depreciate much gracefully when compared to American counterparts.
  • Mileage
    • In India most other parts of the world mileage is the fuel economy, the number of miles / km per gallon / liter, but here in the US, for some reason it refers to the number of miles the car has run - or the odometer statement.
    • It is wise to buy a car with as low mileage as possible. This increases the reliability of the car, reduces the need for replacement of parts once you buy it and ultimately increases the resale value and the ease of selling it. Generally the heat, struts (suspension system) and tires would need a replacement at around 100k miles and commonly that is the mileage at which owners decide to sell a car away.
    • However, lower mileage cars in good condition are really expensive. For American cars a mileage bracket of 90k to 130k miles is practical assuming you would sell it off after 3 years of use. Indians generally stick to the US national average of about 1000 miles per month. So in 3 years you would have added 36k miles to your car that leaves your car in a salable position.
    • Japanese cars with such low mileages are few and far between. Toyotas and Hondas can be bought at much higher miles on them!
  • Fuel efficiency
    • I care to write about this because I am a fan of fuel efficient cars. With gas prices soaring in everywhere, I bet everyone has to think about this at some point of time.
    • There is a trade off between power and fuel efficiency. 6 cylinder cars have greater capacity engine (like 3.8 lit) and provide (avg) 20/26 miles on city / highway. 4 cylinder cars have lesser capacity engine (like 2.4 lit) and give 26/30 miles on city/highway. These are averages for automatic transmission cars and can vary with models and condition of car. Manual transmission cars generally provide greater mileage but that depends on the rpm you shift the gear.
    • The fuel efficiency could reduce with age, mileage and the condition of the car. The equation is changing quickly with newer models packing good power yet being fuel efficient. Japanese and Korean cars are well known for their fuel efficiency.
  • Safety features
    • For people living in northern states (like me), driving in the snow is unavoidable. It is tricky and needs a whole different skill to master it.
    • Safety features like ABS (Antilock Braking System), Traction Control have become a standard in most cars manufactured after 2000 (this was one of the parameters i set in my personal search). Both help you stay on course while you brake under abnormal conditions
    • Further cars with safety features would be easier to sell in future.
  • VIN number
    • One thing I like about cars in the US is the Vehicle Id number (VIN). This is the chassis number (as we call in India) and all critical facts about the car get tagged to the VIN. Details such like whether car was in an accident, whether it was salvaged or rebuilt get entered. If the car was well maintained by a certified mechanic, even major repairs get entered.
    • You can find the VIN on the windshield's driver side corner from outside or from the registration and title papers
    • Websites like carfax, autocheck, vincheck etc. will search and generate a report for a fee.
    • Other websites like NICB will tell you the critical info (whether the car is a stolen one or whether it was in an accident) for free. In most cases this info would suffice.

  • Auto websites
    • There are plenty of auto sites that write reviews about cars and tabulate their features and reliability stats just like those for electronic gadgets.
    • My favorite is autos.msn.com and edmunds.com. You can search a car with its year-make-model and find everything you needed to know about that model.
  • Estimator pricing
    • Websites like kbb.com [kelly blue book] and edmunds.com allow you to fill up the specs and get an estimate of the car's worth. As you would know buying from a private party is cheaper than getting the same car from a dealer. It is a misconception that all cars from dealers have a warranty, some dealers sell the cars as-is.
    • Generally the kbb shows a higher estimate than edmunds.com and people suggest calculating an average of the two and use that as the starting point when you bargain.

Searching for used cars
This is by far the lengthiest and painful phase unless you already have a known and trust worthy seller. Some of the places where I looked for is Swap sheets in local bank or credit union websites, newspapers, dealer websites and finally in Craigslist (in my and neighboring cities).
Most of these sites would allow you to shortlist based on cost, make, mileage etc and would sort them by date. Depending on the city you are in and depending on the economy (the time you read this article) cars might be selling quickly or slowly. There is no way to know without making calls and visits.
I made a spread sheet with columns like car name (year make model), cost, condition, location, URL, comment, estimator pricing, reliability, contact, final notes. It greatly helped me stay organized. Once I find a car interesting, I would visit the auto website to see the picture, find the specs, reliability, fuel economy and finally get an estimate of their worth. Only if I find all suitable and if the owner is asking a fair price I would call him/her and take it forward. You can deal with about 5 different parties at the same time and be not overwhelmed.
Visiting a car and test driving
Judging a car from test driving it is an art that you gain with experience. Yet those who love cars and would naturally love to do that. I would research about every single car that I decide to visit before hand. I would carry a small note with each page dedicated for that car. I would fill up questions to quiz the seller. Questions would be actual mileage, condition, oil change habit, any known malfunctions, any repairs recently made, any repairs due, condition of tires, whether heat and ac is working, amount of rust, title status - clean / salvaged / rebuilt, the asking price and any car specific notes.
Depending on the seller they might or might not allow you to drive on highways etc. While test driving I would roll down the windows and listen to the engine sound, any noise while transitioning from one gear to another and whether all lighting and electronics work.
It is wise to bring one of your friends along. He/she can spot the facts that you missed and also he/she can engage the seller in conversation while you examine the car in detail.
Once you like it, get the VIN (vehicle Id number) number of the car and check for details. Finally if everything works out, get permission to take the car to a mechanic to find if any major faults exist and the cost of repairs.
Buying your car
Once you get the diagnostics from the mechanic, try to bargain the price. Use your knowledge from estimator pricing, talk on the cost of repairs needed and settle for a fair price. Next decide on mode of payment (check, money order, direct deposit or cash). After you make payment, get the title from the owner. For cars registered after 2005 (not made after 2005, registered by the owner) the backside of the title has odometer and damage disclosure statements. You and the owner has to fill and sign them up. For older registrations, download those forms from your state's DMV website.
Most sellers would ask you to sign in a 'Bill of sale' form that they would type themselves. It would generally say that you are buying this car from so and so for this cost and that the car is as-is, meaning there is no warranty. Once you sign it have a copy for yourselves.
The owner would remove the license plate (number plate) and hand over the car. Get all the keys for the car at that time. Although it is illegal to drive without license plate, you are allowed for short distances if you have the title in hand. Take the title (and other papers if older than 2005) asap to the DMV office and register the car in your name. You would have to pay for registration fee (which can be calculated from your state's DMV website)
Next find the bare minimum insurance requirements for your state. Get quotes for free from insurance websites and decide on the best one for you. You might settle for the minimum or add packages like road side assistance depending on your need.
And thats it, you are all set. Keep a the registration paper and insurance card (one copy of it) in your glove compartment of the car. Store the title safely elsewhere. Drive your car safely and happily. After a while I would write about caring for your car.
Post a Comment