Second Hand Cars - Good Deals or Not?

Buying a second hand car is the solution to many people's need for a cheap car. Even though prices are low, are second hand cars always a smart buy?

Let's take a look at some important considerations.

It's all about risk

Why is it that a brand new car that costs $28,000 dollars only costs $14,000 three years later, and only $7000 three years after that? If the car is a good reliable brand such as Honda, a six year old used vehicle could give you the same long reliable service as a brand new car — or not.

When you buy a new car right out of a dealer's showroom, there is a very small risk that you'll have problems with the car within the first years of its life. Sure, it's possible to get a lemon, but its rare. And any problems you encounter are almost sure to be covered by the manufacturer's new-car warranty. In other words, there is very little risk in buying a new car. Peace of mind and promise of reliability and dependability are part of the price you pay for a new car.

As cars get older, with more mileage and more wear and tear, the higher the chance of failures. Engines and other mechanical components wear with use. Electrical parts fail sooner or later. If a car has not been maintained properly or has been driven hard, risk of problems goes up. Some cars are more poorly built than others, which causes faster wear — and greater chance of future breakdowns.

In general, the older a car, the more likely it has of experiencing problems. Now, we know that some second hand cars that have 100K miles or more are in great condition and will give their owners at least another 100K miles of problem-free service. But other similar cars of the same year, make, and model are junkers at 75K miles. So when we buy an older second hand car with high mileage, we take a chance – a risk, a bet – that we won't have problems. It's a gamble.

If it weren't for this risk, second hand cars would cost nearly as much as new cars, deducting for the value of styling changes, new features, natural new-car-to-used-car instant depreciation, and of course, new-car smell.

So when we buy a six year old car for $7,000 (that originally cost $28,000), we acknowledge that we are willing to accept some risks in exchange for a huge price discount. However, most second hand car buyers don't look at it this way. We want both — low price and low risk of problems. Sometimes it works out that way and sometimes it doesn't. As with all forms of gambling, there are winners and there are losers.

We've seen how accepting risks when buying second hand cars gives us a lower price but what does it cost in the long term? Maybe little or nothing, if we're lucky. However, odds are that we might experience surprise breakdowns at inconvenient times, loss of the use of our car for periods of time during repairs, and expensive repairs costs at times we can least afford it.

How to reduce risks when buying second hand cars

When you buy a second hand car, you get very little information that tells you how much risk you are taking and whether the price is fair. Sure, the car looks good and the seller tells you that it runs great, but you really don't know.

There are essentially four things you can do to reduce the chance that you'll buy a second hand car with existing problems and future problems:

1. Do your own inspection
If you to do your own inspection, here's an online ebook: Inspect Before You Buy. written by a certified auto mechanic that has valuable guidelines and tips.

Some of the things to look for:

Uneven tire wear patterns

Worn or frayed belts

Low or dirty fluids

Leaks - spots under car

Rust damage

Flood damage (soiled carpets, rust in door frames, musty smell)

Accident damage (signs of being repainted)

Non-working equipment (radio, A/C, lights, heater, instruments, power windows)

Missing equipment (spare tire, jack, lug wench)

Paint damage

Chipped windshield

Recent emissions inspection sticker

Some of the most serious problems, such as those with engines and transmissions, are difficult to spot in a self-inspection. These require an auto mechanic to find.

2. Test-drive the car
Test drive the car in as many ways as you can. Drive city streets and low speeds, and highways at high speed. Smooth streets and bumpy roads. Curves and straights. Drive uphill and down. Sudden starts and quick stops. Does it shake, rattle, or squeak? Do all the dash instruments work? Are there any abnormal smells or noises? Does the transmission shift smoothly and quietly? Does it overheat?

3. Get a mechanic's inspection
This is the single most important thing you can do to avoid problems with a used car. Having a qualified mechanic do a point-by-point inspection can alert you to existing hidden problems and tell you if the car is likely to have future problems. You can find a mechanic in your telephone yellow pages or go to a local repair shop. It might cost you $75-$100 but if it helps avoid a large mistake, it is a good investment.

4. Get a vehicle history report
Vehicle history reports are available online from companies such as AutoCheck® . A report cost $15 and tells you if your car has been wrecked, salvaged, flooded, and if the odometer is correct. Smart car buyers always get these reports.

Used Cars Online

You can find used cars online from a number of sources, including eBay, Autotrader, Craigslist, UsedCars.com, and Drivetime.com . However, if you buy from Craigslist or Autotrader, beware of a common seller's scam that is hard to detect until it is too late to do anything about it. Furthermore, buying a car long-distance is more risky than buying locally. Also see our article, Best Used Car Web Sites, for more details.

Summary

Remember, when you buy a second hand car, the sale is considered "as-is" which means you acknowledge that you know the car's condition and that you have no right to return the car later and ask for your money back. Even if the seller lied about or misrepresented the car's condition, you have no recourse. Your only protection is to inspect and test drive the car before you buy.