Used Car Pricing Guide: Assessing Risk and Value

Buying used is an exercise in establishing a balance between risk and value. You want to find the lowest price without worrying about purchasing someone else’s headaches. The steps below are designed to help you walk this fine line and find the best deal on a used car:

Why Buy a Used Car?

Buying used means paying less. Not only is the car’s sticker price lower, you also pay less on expenses like taxes and car insurance, while letting the original owner take the depreciation hit.

New Car Depreciation Rate

Depreciation is what many experts cite when they caution against buying new – And for good reason! Within the first three years, new cars typically lose somewhere around 40-60% of their value.

Think about it this way:

In three years, a new $40,000 Vehicle may only be worth somewhere around $20,000. This may be acceptable if you intend to only buy a car once every ten years. But if you are among the majority of American car buyers who purchases a car every two to five years, you are in danger of losing a significant amount of money. For help deciding whether new or used is right for you, check out this calculator from BankRate.com.

Researching the Depreciation Rate

Not all vehicles depreciate at the same rate. For instance high-end, luxury models typically depreciate quicker than economy cars. This is because the more value a car has, the further it has to fall before it reaches its base utility value.

Not every car follows this formula. According to MSN the 2004 BMW 3-Series held its value surprisingly well – only losing about 25% of its value after the initial 36 months.

Advantages of Used Cars Vs. New Cars

While depreciation rate is one compelling argument, it is not the only advantage of buying used:

  • More Car for Your Money: You could buy a three year old fully loaded Honda Pilot for about the same price as a brand new Honda Accord with just a base package.
  • Lower Car Insurance: On average used car owners pay less in car insurance when compared to new car owners.

Researching Your Used Car

While buying used has its advantages, it also comes with some associated risk.

To protect your investment and get the most value out a used car, you’ll need to answer the following questions:

used car research

  • What is the car’s market value? How does it compare to similar vehicles?
  • What is the car’s history? Who owned it? Was it properly maintained?

 

Used Car Market Value

When buying a used car, whether it is from a dealership, off the internet or out of the classifieds, your fist concern is confirming that you are receiving top value.

Kelly Blue Book has long been a respected source. Whether you are buying from a dealer, a private seller, or trading in, Kelly Blue Book offers a starting point for negotiations:

  • Purchasing from Dealer:
    The retail value serves as a starting point for negotiations between dealer and car buyer. This value includes expenses like advertising, sales commission and operating costs. KBB.com also assumes the dealer spent money reconditioning the car, repairing or replacing worn items like brake and tires.
  • Purchasing from Private Owner:
    Private party value is what you could expect to pay for a car if you purchased it from an independent seller. This value is usually lower than the retail price because it assumes the car is being sold “As Is.”
  • Trading a Car In:
    Trade-in Value is what you could expect to receive if you traded the vehicle into the dealership. Because the dealer will incur additional expenses, such as safety inspections, reconditioning, marketing and reselling, this value is lower than what you would receive if you sold it privately.

 

Used Car Vehicle History

Determining value is only half the battle. To guard against purchasing a lemon, research the following:

  • Previous Owners: Research suggests that vehicles with one prior owner have fewer miles and less overall wear and tear.
  • Prior Accidents: Has the car been in a major accident? Even if it has been inspected, you may want to steer clear.
  • Scheduled Maintenance: Ask for maintenance history. You want to ensure that the vehicle has routinely met its scheduled maintenance requirements.

The good news is that the internet makes researching vehicle history easy. Government sponsored sites like Safercar.gov and the Insurance Institute for Highway safety can provide specific details on car safety ratings. While other websites like vehiclehistory.gov, Carfax.com, Autocheck.com and NadaGuides.com offer details on accident history, maintenance and value.

Your Guide to Fuel Efficient Cars

Fuel efficient car guideFinding a fuel efficient car that matches your lifestyle is not as simple as buying the vehicle with the best MPG – If it were, we would all be riding around in the all-electric Nissan Leaf.

The problem is that your needs do not always match the car with the best fuel economy. Sure, if you are a single unattached, professional with a moderate commute, then a compact car is an obvious choice. But if you have a growing family, or need a vehicle for both work and personal use, your options may not be as obvious.

Fuel Efficiency that Matches Your Lifestyle

The good news is that technological advancements have worked to answer the needs of the modern driver. For whatever it is your lifestyle requires, there is sure to be a vehicle to match:

Hybrid/Electric Options

If you are concerned about fuel economy and practicality, today’s hybrids offer an array of choices. Whether you are looking for a compact car, full-size sedan, or SUV, some top hybrid/electric options include:

fuel saving tips

  • Ford Escape Hybrid: As the most fuel efficient SUV on the market, the Ford Escape Hybrid is an excellent choice for the driver searching for versatility.
  • Toyota Prius: Offering 48 MPG, the affordably priced Prius is roomy enough to match the needs of the small, on-the-go family.
  • Ford Fusion Hybrid: Other hybrids do offer better fuel economy; but, if you are looking for a family sedan, few compete in terms of room, driving dynamics and comfort.
  • Nissan Leaf: The Leaf runs completely on electricity, traveling as far as 106 miles on a single charge.
  • Chevrolet Volt: By only using electricity for the first 40 miles before switching to gasoline, the Chevrolet Volt is one of the most fuel efficient cars on the market.

 

Diesel Powered Options

Accounting for nearly 50% of all Europe’s car sales, diesel powered cars are no longer the loud smog producers of yesteryear. Instead, these clean quiet engines offer around 30-35% more per gallon over comparable gas powered engines. Even better, the U.S government offers a tax incentive on qualifying diesels engines:

  • Golf TDI: Boasting 42 MPG highway, the Golf offers an easy-load hatchback design and sporty suspension.
  • Jetta Sportwagen TDI: With seating for five and extra cargo space, the Jetta Sportwagen is a more than capable family car.
  • BMW 335d: The 335d is proving that fuel economy does not have to come at the expense of refinement.
  • Audi A3 TDI: Priced just $1,500 higher than the gasoline powered A3, but offering a 10 MPG bump in fuel economy, this is one of the most attractive diesel cars available.
  • BMW X5 Diesel: With an EPA estimated 22 MPG, diesel power has helped make this heavyweight, luxury SUV a more practical choice.

 

Gas Powered Options

If your only concern is fuel economy, there are a number of lightweight compact and subcompact gas powered cars that offer over 40 MPG Highway:

  • Chevy Cruz Eco: A low retail price and 42 MPG highway make the gasoline powered Eco an attractive option.
  • Ford Fiesta SE SFE: A lightweight design contributes to this gasoline powered cars EPA rating of 29 MPG city and 40 MPG highway.
  • Ford Focus SFE: With a roomy interior, the Focus offers the appeal of fuel efficiency and comfort.
  • Hyundai Elantra: The Elantra offers the appeal of both fuel economy and a low starting price.
  • Smart Fortwo: With its unique two passenger design, the tiny Fortwo is sure to turn heads.

Are you wondering how your current car compares against some of the more fuel efficient vehicles on the road? Check out this carfuel economy guide from FuelEconomy.gov.

Practical Fuel Saving Tips

Buying a new car is not always practical. Below are a few tips for improving your current car’s gas mileage:

Search For Your Next Green Car

Our Fuel Economy Search helps you find a car by minimum Air Pollution Score, Greenhouse Gas Score, and Fuel Economy desired.

www.usedcars.com/find-economy-vehicles.aspx

  • Observe Speed limit: On average, gas mileage decreases at speeds over 60 mph.
  • Stop Idling: Not turning your car off when it is parked can waste up to half a gallon of gasoline an hour.
  • Inflate Tires: You can improve your gas mileage by up to 3.3% by properly inflating your tires.
  • Change Air Filter: While a new study from the Oak Ridge National Laboratory suggests that the air filter has little effect on the MPG of newer cars, replacing a clogged air filter on an older cars can help improve fuel economy by up to 6%.
  • Remove Excess Weight: According to FuelEconomy.gov, for every hundred pounds you haul, your fuel economy can decrease by 2%.
  • Know the Area Gas Prices: With this gas price finder you can hunt for the lowest prices in your area.

Remember, the key to saving money at the pump starts with the right research. By focusing on lifestyle and fuel economy, you’ll get a car that will meet your needs while helping you save.

Is a Certified Pre-Owned Car Right For You?

Want to enjoy that new car feeling without the expensive new car payments? Then a Certified Pre-Owned (CPO) car may be the choice for you. Better than used but not quite new; these manufacturer backed programs are designed to bring a little peace of mind to the used car buying process and ownership.

What Does Certified Pre-Owned (CPO) Mean?

You have undoubtedly heard the term Certified Pre-Owned vehicle and wondered, “Are they really any different than traditional ‘used’ cars?” The answer is a resounding yes.

As opposed to a traditional “used car,” which typically only receives a minor refurbishing from the dealer, a CPO car undergoes a comprehensive inspection. During the process, which is designed by the car manufacturer and conducted by a certified technician, only the best vehicles are selected and certified. Then, in order to add peace of mind, special financing, extended warranties and services are often included.

What to Expect from a Pre-Owned Program

Take note that not all Certified Pre-Owned programs are created equal. For instance, the Lexus CPO program offers a three year/100,000 mile comprehensive warranty, while Nissan CPO cars come with a seven year/100,000 mile powertrain warranty.

Even though one program can differ from the next, there are a number of commonalities. Some key features include:

certified pre-owned car

  • Vehicles less than five years old
  • Mileage limits of less than 100,000
  • No prior accidents or body damage
  • 100+ Point Inspection
  • Extended warranty
  • Low interest financing
  • 24-hour roadside assistance

 

Why Buy a Certified Used Car?

It is important to keep in mind that certified pre-owned cars cost a little more than your average “used car.” Prices are generally somewhere between 2-8% more over the original used car price.

Fortunately, this added expense carries with it a number of benefits. If you are searching for more reasons to invest in a certified pre-owned car, here are four:

Reason #1: Receive Peace of Mind

Buying a used car comes with a certain amount of risk. But when you decide to go with a certified pre-owned vehicle, you get the peace of mind of knowing that your vehicle was inspected by a trained technician and is backed by a warranty.

Reason #2: Get More for Your Money

While certified cars cost more than used cars, they are a less expensive alternative to new cars. So, instead of buying this year’s newest model, which might only come with the base package, you could purchase a slightly used vehicle, complete with all the bells and whistles, but at a discounted price.

Reason #3: Side Step Depreciation

The biggest problem with buying a new car is that it can lose up to 60% of its value within the first three years, which could end up costing you tens of thousands of dollars. When you buy a car that is certified, someone else has already paid that expense.

Reason #4: Benefit from the Warranty

Few used cars, if any, come with a warranty that is comparable to a certified pre-owned car. While the benefits of the warranty will vary depending on the program, you can rest assured knowing that many of your car’s major parts are covered.

Want to conduct a side by side comparison? This CPO comparison tool makes it easy!

What to Look for in a Certified Pre-Owned Program

While manufactured certified pre-owned programs were created to help add peace of mind, they are in no way a guarantee. Just like with every car, whether it is new or used, there is always the chance of future problems. In order to protect your investment and ensure peace of mind, consider the following points:

certified pre-owned program

    • Inspect the warranty: A longer extended warranty does not always equal a greater value. It is important to research maintenance and repair problems associated with that particular make and model. If a particular model has had few maintenance problems, you may be able to justify the shorter warranty.

 

    • Don’t be fooled by the 100+ point inspection: Just about every program claims to offer a 100+ point inspection. However, many of these points would be inspected if you simply got your tires rotated or asked for an oil change. When examining the inspection points, look for things that could end up costing you if they were not identified. You want to ensure that areas like transmission, brakes, fuel system, suspension and steering have been carefully examined.

 

  • Feeling overwhelmed? UsedCars.com wants to help you find the pre-owned car that is right for you. We have compiled a list of some of the more popular certified pre-owned programs, complete with details on inspection points, warranties and key differentiators. Visit our CPO Vehicle page to start your search.

Quick Guide to Selling Your Car

Thinking about selling your car? Keep in mind that getting the best price is not as simple as placing an ad in your local newspaper and waiting for the phone to ring. Familiarizing yourself with concepts like retail price, wholesale price, and market demand will eliminate frustrations while improving your return on investment:

Evaluating Your Vehicle before You Sell

evaluating your vehicle before you sell

Before you start the process of selling your car, you’ll need to carefully evaluate it. Is it a popular car and in good condition? Then selling it and getting a great price may be easier than you suspect. But if it is an older car, or has its share of defects, offering it as a dealer trade-in may ultimately be your best option.

How to Determine Your Asking Price

Take the time to research the market value of your car. Sites like Kelley Blue Book and NadaGuides.com offer tools that will help you establish a starting point for price negotiations. Kelly Blue Book also offers information on the trade-in value which can help you establish whether you want to sell your car privately or trade it in.

While Kelly Blue Book is a great starting point, you should also be prepared to do a little independent research. Check used car pricing on internet sites like Craigslist. Search for vehicles that are the same year, make and model with similar miles to your vehicle. You may even want to visit a local dealership. Once you have an idea of the price range, you’ll need to consider a couple more factors:

  • Mileage – Average mileage is 15,000 per year.
  • Condition
  • Optional features – Leather, Navigation, Sunroof will increase the vehicle’s value.
  • Improvements – Some aftermarket items such as stereos and premium wheels may increase vehicle value, but be aware you may not recoup your full investment on those additions.

 

Remember, it is always smart to price your vehicle a few hundred dollars higher than you expect to receive. But use caution. If you set the price too high, you could end up alienating potential buyers.

Trading-In vs. Selling Privately

Invariably, you will be faced with the decision of whether you want to sell your car privately or trade it in to the dealer. While both have advantages, there are a few points you should consider:

Selling Your Car Privately

If you decide to sell your car privately, you will more than likely receive a better price. However, keep in mind that this higher price is sometimes offset by incurring selling expenses and risks such as:

  • Placing Classified Ads
  • Cleaning and Detailing
  • Conducting Minor Repairs
  • Supplying Documentation, like a Vehicle History Report
  • Potential for Buyer Fraud

 

Trading Your Car In

While you may not receive top dollar if you decide to opt for a trade-in, there are a number of advantages:

  • Guaranteed Sell: Selling a car privately can take months. But you can take your car to the dealer and get rid of it in as little as one afternoon.
  • Hassle Free: You do not have to deal with the added cost and hassle of cleaning your car and listing it in a classified section.
  • As Is: Besides taking your car to the car wash, emptying the trash and running the vacuum, you can pretty much give your car to the dealer “As Is”.
  • Tax Credit: Many states allow you to deduct the value of your vehicle from the retail price of your new car, which in turn lowers the sales tax on the purchase.

Other things to consider include the type of vehicle. If the car is vintage or a “collector’s car,” then selling privately is often the best route. A site like eBay Motors [http://www.motors.ebay.com] is good resource for selling vintage or collectible automobiles. If your car is new or in high demand, the difference between selling and trading-in could be minimal.

Getting It Ready to Sell

If you do decide to sell your car privately, be prepared to spend some time cleaning your car, investing in repairs, and gathering paperwork:

getting ready to sell

  • Cleaning: At the very least you will want to clean your car thoroughly: washing the exterior, removing any clutter, vacuuming and cleaning the interior.
  • Detailing: You will want to wax the exterior, and have the carpets and upholstery cleaned. Depending on the asking price, you may want to invest in a professional cleaning service, which can cost anywhere from $50 to $250.
  • Minor Repairs: Change the oil, replace burnt fuses and bulbs, change the wiper blades and inflate the tires.
  • Major Repairs: Use your judgment when it comes to fixing things like bad brakes, faulty transmission, or worn tires. While fixing these items may make the car more appealing, it can cause you to raise the asking price and drive potential buyers away.
  • Paperwork: Title, Loan Documents, Repair Receipts, etc.

Other Things to Consider

Detailed records and documentation can build a relationship and establish trust with potential buyers. Consider offering the following:

  • Vehicle History Report: These can be found through sites like CarFax and Autocheck.
  • Maintenance Records: Offer itemized copies of all maintenance and service receipts.
  • Third Party Inspection: An independent mechanic will inspect the vehicle for around $100.

In the end, the trick to selling your car quickly and for a good price requires researching its value and prepping it for sale. With a little time, research and prep work, you can get the best deal.

Used Car Review: The BMW 7-Series

In terms of luxury and drivability, not many cars can compete with the BMW 7-Series. Offering the luxury and design that car buyers have come to expect from BMW, the sedan sets itself apart with its dynamic drivability. All it takes is one test-drive, and you will soon discover that this is not your average luxury car

Right from the start, the 7-Series has impressed critics and car buyers with its ability to create a memorable driving experience. While the vehicle’s high starting price tag may limit its appeal on the new car market, a long-record of reliability make this a great choice for the used car buyer.

Advantages of the BMW 7-Series 

As BMW’s flagship sedan, the 7-Series is in a class by itself, delivering the rare combination of drivability, engineering, style, comfort and flair. This car was not just built for the car driver looking for a status symbol. Instead, with its advanced driving mechanics, it was engineered for the sports car driver in all of us.

 

  • Leader in excellence: BMW has long been considered one of the leading luxury car manufacturers – and with this flagship sedan, you know you are getting the best of the best.
  • Performance: While the 7-series has a luxury car look and feel, it really excels in terms of driving performance.
  • Luxury and comfort: Don’t let all the talk about driving performance fool you. At its heart, the 7-series offers its passengers comfort, luxury and refinement.

 

BMW 7-Series Redesign

In the luxury car market, there is a lot of competition. This is what makes the 7-Series’s elevated status so impressive. Since first being introduced to the car buying world all the way back in 1978, this luxury sedan has set the standard for which all other cars try to live up to:

2009 – Now in its fifth generation, the 7-Series has been redesigned to capture some of its more traditional roots. Adding to the sedan’s high-end appeal is an array of high-tech gadgets, including night-vision camera, side view cameras and the iDrive interface system.

2002 – In 2002, traditional design styles were abandoned in favor of a more aggressive approach. The larger 7-Series also offered an updated interior

1995 – When the 7-Series was redesigned in 1995, car buyers quickly took note of its sleek styling and refined interior. Many critics consider this generation of luxury sedans to be the best that BMW has ever offered.

1988 – By adding the option of including a longer wheel base, the second generation 7 Series was able to offer a roomier, more comfortable interior.

1978 – When the 7-Series was built in 1978, it became the largest sedan every manufactured by BMW.

What the Critics Say about BMW 7-Series 

Since first coming of the assembly line way back in 1978, the 7-Series has fared well in the eyes of the critics, representing the BMW name with class leading performance and styling:

The following reviews are for the 2011 model year.

  • Consumer Reports

Test score: 74/100

  • JD Power and Associates

Predicted reliability score: 4/5

Similar Used Cars

Other luxury cars that may interest you include: