According to The Millionaire Next Door (which, for those not in the know, is the inspiration for this blog and an excellent resource on the saving/spending habits that will make you rich), the best way to go about buying a used car is to buy from a private party seller. In a previous post, I discussed some of the myths of buying from a dealership, and some of the reasons you still might want to buy from one. If you're here, I'm assuming you're shopping for a used car from a private party.
1. Get Ready.
The first thing you should do is set up a free email account with yahoo, google, or another mail provider. If you already have a secondary email for spam this will work, but a fresh email account is a good tool if you don't want to wade through a long list of requests from deposed Nigerian princes.
2. Get Set.
The next thing you're going to want to do is go to your local online classifieds. Craigslist is probably the most well known, but it's also the most spammy. Here in Utah (also works for Idaho and Wyoming) I use KSL. There are similar websites for other areas around the country.
Once there, you can usually narrow your search for the specific model you're looking for, and usually for a price range. Make sure the results are sortest in order from newest to oldest.
3. Get Smart.
People who have just posted their cars are less likely to be willing to negotiate with you than, say, someone who's had their ad up for months. So right away, I'd go to the last page of cars and start working my way forward. Now, there are two main reasons why these older ads haven't sold: either the car is lousy or the ad is. Your goal is to find lousy ads for good cars. In other words, you want to find sellers who have done a bad job of recommending their car, even though it's good quality. Here's how you do it:
Look for ads that have low-quality or no pictures. It doesn't matter how nice the car is, if the pics are bad or not there, the ad isn't going to be getting a lot of hits. The great thing for you is that the longer this ad is up, the less hits it's going to get. People see that a car has been for sale for a month without a picture and they automatically assume there's something wrong with it. They pass by without bothering to ask the owner for pictures. The seller, meanwhile, feels like nobody is interested in his/her car and so is more likely to do whatever it takes to hold onto a potential buyer.
Look for ads that DO NOT say "O.B.O." This seems counter-intuitive, because you're going to be pitching a lower price. But people who put "O.B.O." (or best offer) in their ads receive more traffic and more offers. More nibbles at the ad means the owner perceives more fish in the sea and is more likely to be a hard negotiator.
Look for ads with brief, undetailed descriptions. For instance, the car I bought had an ad that said, "Great family car, no problems! Plenty of room for car seats!" That was it. No pictures posted. The only piece of information I got from that ad that I hadn't already gleaned from Consumer Guide Auto was that this particular car had given its owner "no problems."
When I pressed for details, this is what I found out: the seller had advertised it as a 2005, but it was actually a 2006 and she hadn't bothered to correct the typo because she didn't know how. They were the first owners. It was a clean title vehicle. They had records of all the regular maintenance that had been performed. There were four brand-new tires and a full-sized spare. Most of the miles that had been put on the car had come in the last year when the husband used it to commute 140 miles a day (highway miles), and the rest were from California ("California car" is a big selling point out here because it means less damage from weather.) Oh, and there was absolutely no damage to the car, inside or out. And apparently the car was silver; the owner hadn't even mentioned the color!
Look for ads that have been reposted many times. This isn't a necessity, but if you notice that every week the owner is lowering their asking price and then reposting the same lousy ad, it's another indicator that they're desperate to sell.
Look for ads with a low number of hits. The fewer people that have even bothered to click on the ad, the less likely the owner has heard from anyone.
4. Get in Contact
I am not a very tough negotiator in person. I couldn't even talk my way out of a speeding ticket! But thanks to the cold, calculating nature of emails and text messages, I can be as hard-nosed as I want.
To begin, since we've targeted lousy ads, you need to get some information. Here are the things you absolutely need to know before you can continue:
1. Is it a clean title? If the title is branded, rebuilt, restored, or salvaged, that means that the car was declared totaled and then repaired. If you buy a car like this, it's likely that it will need more repairs in the future and you'll sell it for much less when it comes time to upgrade. Buy at your own risk. For me, I'll only consider a clean title.
2. Does it have any damage, inside or out?
3. Does it have any options not included in the base price for that trim level?
4. Has the owner performed regular maintenance on the vehicle, and do they have any record of that?
5. Has the car been detailed?
6. What is the exact mileage?
7. Has the owner noticed any problems with the car?
8. Can they get you pictures via email or text?
9. Do they have a copy of the Carfax they can show you?
Next, enter aggressive negotiations. Car hasn't been detailed? The owner doesn't have a receipt for every oil change? Point that out. In your next text message/email, point out the weaknesses in their car as you can see them. Make sure they know how disappointing you find that rock chip in the windshield. You're using a technique that's common in big ticket items like cars and homes: inflating the value of tiny items because in comparison to the overall purchase these items seem tiny. If you walked into Wal-Mart and saw that they were going to charge $300 for four rubber mats, you'd flip. But somehow at the dealer that inflated price for mats seems reasonable. By pointing out the flaws in the car, you can significantly chip away at the owner's asking price.
In your next text/email, ask this question: "What is the absolute lowest price you'd take for your car?"
Whatever they answer, don't get back to them right away. You need to stockpile a list of "absolute lowest price" quotes for leverage coming up. If there are enough ads for similar cars, I'd try to get at least three or four.
Next, starting with your least-favorite car, try to get the owner to go even lower. Tell them you've got several cars with similar attributes that you're trying to choose between (if there's one with a lower asking price, make sure you mention that) and ask if there's any way s/he'd consider dropping another $800 off that price. It's EXTREMELY likely that they'll tell you no, but still drop it by a bit. The next most likely scenario is that they'll tell you they really can't do any better than the price you agreed on. Very rarely, they might agree to go down by that much. If that's the case, let them know you're waiting to hear back on a couple of other offers but (if you're at least somewhat interested) set up a soft appointment for you to come by and look at the car.
Make your way up the list this way, being sure to mention if you have a lower offer in the works to every subsequent owner. It's up to you how hard-ball you want to be here, but don't be a jerk about it. Tell them if there's a reason you're really digging their car over the others so they feel like you're seriously interested and not just arbitrarily milking them.
By the time you get to your first-choice car, you should have several offers to sell for lower than their absolute lowest price. I'd lay your cards on the table here. Tell them you're entertaining several offers but that you do like their car best. Tell them why. But then tell them you really need to put price before anything else at this point and see if there is any way they can lower their price a second time.
If you have the time, (I didn't) The Millionaire Next Door suggest setting a firm price that you won't go above. If the seller says they can't make that happen, ask if they'd be willing to reconsider the price if the car still hasn't sold after another couple of weeks, or a month, or however long. This is more for people who are casually shopping than desperately trying to find a deal before their rental car runs out, but it's a good idea if you can handle it. I actually had an owner on the line who was asking 6300 and wouldn't budge, but after a couple of weeks he emailed me to let me know that if I was still interested he'd now consider my offer of $5000. That's quite the price drop, and all it would have cost me was a couple of weeks and a text.
Now that you have your revised list of prices, print out copies of the information on each car so you have them in hand for comparison. I'd also print out Consumer Guide's list of common trouble spots you can watch out for while test-driving and the KBB information for that make and model of car (if, for some reason, you're still looking at cars that are priced at or above their KBB value.)
With these papers in hand, you're ready to roll. Your negotiations are done (unless you're REALLY into it and want to haggle on-site, in which case, you probably don't need to be reading this guide on negotiating!)
Time to test-drive!
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