What’s the difference between the new car and the used car world?
For the most part, the first place our minds will wander to is the price difference. Pretty much everyone knows that, in terms of the used car world, pre-owned certified goes a long way in reducing the cost of car ownership.
You keep your warranty, have the chance to extend one, have a reliable car that’s backed by the dealer, and generally have all the goodies that come with a new car.
There is a subset of that used car category, though. In that one, it gets even cheaper. It’s the world of private sales, where you might find anything from a salvaged automobile to a missing title to rolled back odometers.
Saving money in this place isn’t as scary as it looks, but precautions are necessary as you get serious with private sales.
Does the paint look original? Do the panels align?
People laugh at me when I say this. In Los Angeles, it’s not uncommon to have accidents or damage go unreported. A way to tell when this has happened is to look at quarter panels or pieces of the car that look out of alignment. Anything from a gap that’s too large to a piece that doesn’t look to fit correctly are good giveaways that there is significant damage to the vehicle.
I’ve had cars where the owner had a clean title, but the car’s condition was indistinguishable from a salvaged one. If they had to replace a panel, they usually won’t find the exact color, and, even when they do, the paint job is generally not done by a professional. Glossing over the car quickly will tell you what you should be looking for.
Take your OBD-II scanner.
It’s a standard looking scanner with teeth that hooks to a unit underneath the steering wheel. It looks like this:
These are important for a few reasons:
- Sometimes the owner turns off the electronic component that runs a check engine light. The scanner will either malfunction or it will search for the code if the owner wiped it.
- It will give you a general overview of what might be immediately wrong with the car that’s been omitted.
Carfax/AutoCheck/Car background checking.
People will get lazy or make a mistake. The best way to catch those mistakes is through irregularities in the car’s background check. If you see an odometer reading in 2016 for 20,000 miles, then the car’s servicing disappears and the car reappears in 2020 with 22,000 miles, then you know something is strange.
It doesn’t always mean that the car has been tampered with, but it justifies you to ask and inquire about the details. Any service records that prove a car has been garaged are great. If the dealer the car was purchased from has a manifest about the original tires on the car, then check the private party’s tires to see if they match. Tires change, for most sedans, every 30,000 to 50,000 miles depending on driving style. If the tires are changed, and those changed tires look worn, then you know with certainty something is not right with the odometer reading.
Understanding residual value and maintenance costs.
It’s normal to see the appeal of a Mercedes Benz S-Class after a few years.
We see that the residual curve begins to flatten after a few years, and we might compare it to something like a Toyota Prius.
That’s not the whole story. An S-Class, even after a few years, will sell for around $70,000. It’s true that in two years it won’t lose more than 30% of that original value, but, if we think of it in absolute value, we would see that the loss taken would equal a brand new Toyota Prius.
When we think about a 10% loss on a Toyota Prius, we are speaking about hundreds of dollars. When we talk about an S-Class, we are speaking in five-figure values.
That isn’t the end of the story. When we speak about maintenance and repairs, we have an entirely new line-item to add to car ownership.
After the first few years, the manufacturer’s 3-year warranty ends. This is in line with the issues that begin with a vehicle such as a high-end Mercedes.
The five-year cost of ownership for a 2017 Mercedes S-Class is projected to be $39,900 for gas, insurance, repairs, and maintenance. This is according to U.S. News. By comparison, the 2017 Toyota Prius costs $18,300 for the same period for the same items. That difference in maintenance is the price of another entry-level sedan.
The context of the values is always important.
The first year of any generation of a vehicle.
For example, the 2004 Prius is infamous for head gasket issues, 2005–2009 are fine. The 2010 Prius is infamous for problems with the coolant pump. The 2011–2015 are fine. The 2016 Prius had issues with the axle on one side (usually driver side). All other models are fine.
Original automobile ownership/title checking.
If you run into a car with a single owner for its entire life, it’s usually a great sign.
However, you should always check that the registration of the vehicle aligns with the person’s driver's license/identification. Make sure those addresses line up, otherwise, you may end up driving away with a stolen car.
One car owners are fabulous for a few reasons:
- Usually have all the vehicle documentation/service records.
- They have taken great care of their car if it has lasted as long as it has.
- They know everything about the car. The more personal details about the car, the better.
- They want to replace it with something better even though it’s probably a great car.
- One owner means that if something was wrong with the car and the person sold it to you with that omission, you know exactly who it was. With multiple owners, that blame becomes a lot more confusing.
I’ll drop the price if you smog the car.
In California, the seller of the vehicle needs to have the car smogged before they want to sell it to you.
Many private sellers will ask that you smog it, and they’ll drop the price by a few hundred dollars. This is a dead giveaway that the car won’t pass smog, and the owner knows that it won’t. You need the smog certificate to execute a title change on the vehicle. If you pay for the car and you go to smog the car, and it fails, then you’re stuck with the car legally registered to the person who sold it to you. Except, you probably already paid that person.