Published in: Personal Loans | July 23, 2019
Shopping for a Used Car? Why It Can Pay Off to Spend More
By: Lyle Daly
Don’t end up regretting your next car purchase.
If you’re in the market for a used car, then you’ve probably run into some advice that the personal finance crowd throws around regardless of how much you can afford to spend on a car. Buy a beater. Find a used car for about $1,000 to $4,000. You’ll save so much money.
On the surface, this seems like sound advice. Plenty of car shoppers are on tight budgets, and even those who aren’t may still want to limit how much they spend. But going the cheap route on a used car can end up costing you far more later, and you could be happier if you spend more to get a better car.
Why "buy a beater" isn’t always the best advice
The problem with the recommendation to buy a cheap, reliable used car is that it leaves out the most important part -- where you can find these cars in the first place.
While there are cheap used cars that run well, there are many more with potentially serious problems, such as transmission issues, heavy rust, a worn-out suspension, or body damage. If nothing else, most will have quite a bit of mileage already, and as mileage increases, so do maintenance costs.
You’ll be looking for a hidden gem, which usually means sorting through a lot of junk first. There’s no guarantee you’ll find a car that meets your standards, and even if you do, it could take quite a bit of time to find it.
You’ll also need to take any cars you’re seriously considering to a mechanic to get them checked out, and an inspection like that typically costs about $100 to $200. Those inspection costs can add up quickly.
What’s a good price range for a reliable used car?
If you want to find a reliable used car without feeling like you’re searching for a needle in a haystack, then $5,000 to $8,000 is a good price range.
At that range, you should have a solid selection of cars without any major issues. Here are a few things to look for that will help you figure out which cars are worth seeing in person:
- 12 years old or less
- Fewer than 150,000 miles
- All the warning lights and gauges are working
- The "Check Engine" light isn’t on
Unless you’re knowledgeable enough about cars to inspect a used car on your own, you should also take any car you’re seriously considering to a mechanic for a thorough inspection.
Another good option, if you can afford to spend more, is a certified pre-owned (CPO) car. These cars go through a multipoint inspection, include a vehicle history report, and often have a warranty. CPO cars are often available in the $8,000 to $12,000 range, and while they’re more expensive, you can shop with more confidence knowing you’ll be getting a reliable car.
How to get financing to boost your budget
While it’s great if you can pay for a used car in full up front, that doesn’t mean it’s the only option you should consider. If you don’t have much money saved and you need a car immediately, then you may be better off financing a more reliable car instead of buying a cheap car that barely runs.
Here are a few different ways you could finance your used car purchase:
- Apply for an auto loan through a bank or credit union. These financial institutions often have the lowest interest rates, but they might charge more for a used car loan than they would if you were buying a new car.
- Apply for a personal loan through a private lender. The best personal loan providers offer flexible terms and low interest rates.
- Use a credit card with a 0% intro APR. Many 0% APR cards have intro periods lasting 12 months or more. The only catch here is that you need to be sure you can pay off the entire balance within the intro period, because if not, you’ll end up paying much more interest once the intro period expires.
No matter which option you choose, you should still put down as much money as you can up front. This will keep your debt to a minimum and allow you to pay off your car more quickly.
Finding your next ride
There are certainly some diamonds in the rough out there on the used car marketplace, and if you luck out, you might find that elusive car that’s both cheap and reliable.
Just remain open to spending more, even if you need to secure financing for it. You’ll be able to find a car you like without spending weeks or more on a protracted search, it will likely have more advanced safety features, and you could save on maintenance costs in the years to come.
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