Buying a Used or Second Hand Car
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Buying a used car is an important decision, for both financial and safety reasons, and you’ll want to make sure you’ve made the right one. At times, finding and buying the right car can be challenging and frustrating and this article is intended as a guide to assist you in the decision making process around how to buy a used car successfully.
Whether you’re looking for your first car, or second or third, the same three fundamental questions apply so let’s start with the “big picture” and then get down to more detail.
Firstly, what are you looking for?
The importance of following the old but very wise adage, ‘Buy the car you need not the one you want’ will become more obvious the further we look into this topic, of how to buy exactly the type of second hand car you need.
Secondly, what do you mostly need the vehicle for?
Is it for commuting to work, transporting children to and from school or towing the boat, etc? The answer to this question will be a major factor in the type of vehicle you eventually buy.
Thirdly, what is your budget?
It’s best to have this sorted before you start searching, and you’ll need to figure out your total spend limit as well.
With your answers to the above questions firmly in mind, we can now look at the used car buying process in more depth.
Now you have decided on the primary use for your car, we can look at the ideal make of vehicle for your needs. As a general rule, the newer the vehicle (assuming lower kms), the more reliable it will be. Generally, European used vehicles have higher maintenance and mechanical repair costs than Japanese or Korean makes, and when considering resale further down the track, the more mainstream and reliable car makes usually retain higher resale values.
Fuel costs will not go down and when calculating general running costs, your primary fuel usage will be a major factor, particularly if much of your driving will involve short trips around built-up areas. Usually, smaller engines use less fuel, so smaller vehicles are cheaper to run and cheaper to maintain, and that includes tyre replacement and servicing costs as well.
Vehicle manufacturers provide the estimated fuel usage of every vehicle but remember this is just indicative and usually optimistic, based on an average that is calculated between highway and city driving.
Diesel is cheaper than petrol but that alone is not the reason you would consider purchasing a diesel vehicle. You need to take into account the additional costs involved, which include road user charges, higher servicing costs and higher maintenance costs for engine repair.
Whether you purchase a diesel or petrol-fuelled vehicle will also depend on the kms you intend to drive. All this is neatly taken into account on the ‘Diesel v Petrol Charges Calculator’ which is available through Transport New Zealand, www.transport.govt.nz. This calculator allows you to enter your predicted annual kms and vehicle fuel usage, etc, to determine potential savings. For a used small to medium sedan, petrol is the better option.
Vehicle safety should always be a major priority, particularly when transporting children,. The safety ratings for all vehicles are easily found on the Internet under ‘Used Car Safety Ratings’ and the data you find here will more than likely have an impact on your final choice of vehicle make and model.
Some vehicles cost more to insure than others, particularly high performance models. You can easily check out the likely insurance costs for particular vehicles by contacting a reputable company such as Cove Insurance. Before proudly driving away in the car that you’ve purchased, you must have organised vehicle insurance. If you haven’t taken out full insurance, Third Party Insurance is the minimum cover you can obtain. This covers costs for the other vehicle only, should you be involved in an accident that happens to be your fault. Third Party Fire and Theft insurance is the next level up, which also covers you in the event of your car being stolen.
Around 80% of vehicles purchased in New Zealand have been financed through loans. Before finalising finance for your car purchase, work out the total financial cost of the period of the loan, to make sure you are not over-committing yourself. If you are using a vehicle finance insurance company, shop around for the best deal, which may be at an interest rate of between 7 and 8%. Perhaps a family member could help out by lending the money or adding to their mortgage and you repay them over an agreed period. This could significantly reduce the cost of funding your vehicle purchase at vehicle finance rates.
A simple rule to keep in mind when buying a used car: if you don’t have experience in buying one, don’t do it alone. There are plenty of potential pit falls out there for inexperienced buyers and plenty of tricksters waiting for an opportunity, so ask someone who has some knowledge in this area to guide you through.
Buying a car privately (and that includes Trade Me) may seem the cheaper option but it does carry the risk that you’ll have no comeback should you have problems with the vehicle in the future. A vehicle inspection report is a must and these are easily found on the Internet. The AA is a good place to start, www.aa.co.nz/cars/buying-a-car.
This is really important: you need to check the vehicle’s history to ensure there is no money owing on it from previous owners. This can be done for around $12 on the Internet. Simply Google, Check Car History or go to www.carjam.co.nz
Car dealers are specialist vehicle re-sellers so you do have some comeback in the event of a problem with a car you’ve purchased through a licensed dealer. Look for reputable dealers who have been around for some time. Some dealers specialise in certain types of vehicles more than others so track down one that’s going to be the most beneficial for you.
Many thousands of vehicles are bought and sold annually through dealers, but to get a good price you need to negotiate with them. See below, ‘What is a good price to pay for a used car?’
Many vehicles are purchased and sold at auctions, with dealers purchasing much of their stock this way and Turners Car Auctions are a major player in the field. If you do buy your used car through an auction, you’re paying about the same price that a dealer would and that’s real incentive to try and achieve a good auction deal.
The downside: you can only test drive the vehicle a very short distance and you’ll be bidding against other interested and auction-savvy parties. This can be daunting so you’ll need someone with you who is familiar and confident with the bidding process. You can request a mechanical inspection report prior to the auction and this is strongly advised.
If for some reason you haven’t requested a vehicle inspection report and you are left to check out the vehicle yourself, try to take someone along with you who has car mechanics and car buying experience. Here are some useful pointers:
Okay, now for the big question, How much should I pay? No one wants to feel that they’ve paid more for their vehicle than they needed to once the deal is done. The way to avoid this is to carry out your own research.
Let’s say you’re keen on buying a 3 year-old Toyota Corolla, for example. Go on Trade Me and check out the asking prices for the same make and model, keeping in mind that the lower the kms, the higher the price. Next, look at dealers’ pricing for this vehicle on the Internet. You could also try calling into a Toyota dealer and having a chat with someone in the know. Once you’ve gathered all this information, you should then have a verified price band in mind.
Finally, assuming you’ve followed most of the advice above, and you are standing with the seller, be it a dealer or a private seller you’ll need to negotiate to discover how far below the asking price the seller is prepared to go. You should never expect to pay the asking price for any vehicle. This is where it’s essential to have an experienced person on your side.
Still not sure? Let’s say you’ve decided to buy a particular car and you’re at the stage of confirming the deal with the seller but you’re feeling unsure about a particular issue or generally confused. This is a sure sign you shouldn’t go ahead with the purchase. But don’t get discouraged. There’s no need to rush and potentially make a bad decision because at the end of the day, it’s buyer beware and there’ll be plenty of other opportunities just around the corner.
The content presented on this page is provided for informational purposes only. Cove Limited makes no representations or warranties as to the accuracy, completeness or timeliness of the information. Each person should consult a qualified advisor for advice specific to their circumstances. Cove Limited assumes no liability for actions taken in reliance upon the information contained herein.