Used cars are all the rage these days. Not only are people looking for greater value from their car-buying dollars, there just are not enough new cars to go around. Things will not change until manufacturers start ramping up production again. Expect the market to stay in overdrive. In the meantime, what is your strategy for buying a good used car?
There are multiple options for shopping and buying. Five of them are described below. There are others, but these five account for most of the used cars that are bought and sold in the U.S. Each one has its pros and cons. According to the folks at California’s Car Fast Cash, it is all about finding a great deal on something reliable.
1. Car Rental Companies
Believe it or not, statistics cited by Rochester, New York TV station WROC suggest that the best deals come from car rental companies. They apparently sell used cars at an average of 1.6% below market value. That amounts to an average savings of $303. None of the other options cited by the WROC report come in under market value.
The question is, what determines market value? It might be Kelley Blue Book. It might be some other resource. At the rate used car prices are rising, it is hard to imagine that any of the resources used to determine market value are up to date by the minute.
The thing about rental cars is that they tend to take a lot of punishment. Granted, rental companies do their best to maintain their cars in good working order. They obviously cannot send customers out in dangerous heaps of scrap metal. But still, customers can put a lot of excess wear and tear on engines that buyers would not know about for at least a couple of years.
2. Local Dealerships
Your local car dealer is another good source of quality used cars. On average, dealers sell for about 0.2% above market value. That works out to about $31 per car. That is not bad, given that car dealers spend money to buy while still looking to turn a profit.
Of course, there are two types of dealers to consider. First is the new car dealer. The majority of its used cars are actually trade-ins. The other kind of dealer is the used car dealer. This is a dealer who buys used cars from new car dealers at wholesale prices. The dealer turns around and sell these cars on their own lot.
You are likely to get a better warranty on a used car from a new car dealer. However, used car dealers have been known to offer warranties from time to time. One of the benefits of buying from a used car dealer is in-house financing. It is the go-to option if your credit isn’t stalwart enough to survive new car dealer scrutiny.
3. Online Dealers
The last few years have seen the emergence of the online car dealer. One of the more well-known companies in this sector is the car dealer that invented the automotive vending machine. If you know what company that is, good for you. Otherwise, go look it up online. You will find it pretty quickly.
Online dealers suddenly became popular when the COVID crisis hit. With people afraid to go out of their houses due togovernment lockdowns and their own health concerns, buying from an online dealer was the easiest and safest way to go. The experience has been so good, that some online buyers have no intention of ever going back to a local dealer.
You can get a quality used car from an online dealer if you know how to shop. Unfortunately, you are going to pay out the nose. WROC says that online dealers charge an average of 2.4% above market value. That works out to $444. Simply put, you will pay more going through an online dealer simply because demand is so high.
4. Car Auctions
It used to be that car auctions were the best place to find used cars at rock-bottom prices. They still aren’t a bad option. Auctions are populated by bank repossessions, new dealer trade-ins, municipal fleet vehicles, and cars seized by law enforcement.
The thing about car auctions is that you are competing against used car dealers. These are the same dealers that buy trade-ins from new dealers. They have money to spend. At any given car auction, you will find that the majority of buyers are local used car dealers looking to fill their lots.
The good side to all that is that the used car dealers can only spend so much before they start cutting into their margins. So if you can get them to their limit, throw in an extra hundred dollars and the car is yours.
5. Direct from the Owner
Last but not least is buying a used car direct from its owner. For some consumers, this is the only way to go. You search for used cars online or in classifieds. If you see something you like, you contact the owner and set up a meet and greet. Perhaps the two of you can work out an amicable deal.
This used to be the way most used cars were bought and sold. There was a day when so many people sold their used cars on their own that weekly magazines were published just so people could keep up. These days, plenty of owners still try to sell their used cars by themselves. But companies like Car Fast Cash make it so easy to sell to a wholesaler that doing things yourself is often not worth the trouble.
There are plenty of options when it comes to buying a used car. Which option would you choose? Every option has its pros and cons, and you have your own risk aversion to deal with. One way or the other, used cars are out there to be had. You just have to look around until you find one you want.