Jump to content

How does a value investor go about buying a automobile?


SmallCap
 Share

What is the best way to go about buying a car?  

142 members have voted

  1. 1. What is the best way to go about buying a car?

    • Buy from auction
    • Buy used from a dealer
    • Buy Used from a private party
    • Hire someone to find one for you
    • Internet searches to find the best deals on a used cars from either dealer or private


Recommended Posts

I obviously left off buying new, if someone can make a good argument for buying new I am interested. I know there is a little overlap in some of these answers.

 

I have never really been the type of person who defines themselves by the car that they drive, I know the type of car that I am looking for but am not really hung up on the make or color. I will take high miles or older car if they offer the best value for the money.

 

Being a value investor type I am always looking to get the best value for any dollars I put into a car, I am looking for $1.00's cars I can get for $0.50. I have realized in the past that I have spent too much time trying to find the great deal that my time investment made it an expensive car.

 

I really wish that I had someone who had a value investing mindset who had a lot more knowledge about cars and their prices then I do and they would just find me a car. but everyone that I have tried this with is more inclined to find the car I say I want regardless of the kind of a deal it is. they just don't seem to get the idea of looking for a deal instead of looking for a preference.

 

Even though I don't expect to ever make a profit on a car I buy, then again why can't I dealers do it all the time, why can't I buy like a good dealer does and then not sell it like they do?

Link to comment
Share on other sites

  • Replies 68
  • Created
  • Last Reply

Top Posters In This Topic

Easy, if you are using a investor mindset, the only rational choice is to buy a Ferrari.

 

You will also get, for free, the added side benefit of procuring some nice friends on this forum.

 

An excellent point, and others should take heed, but I have 3 young kids.

Link to comment
Share on other sites

I have had reasonably good luck with LemonAid by Phil Edmonston.  He gets you away from the worst buys at least. 

 

These days I wont buy a GM, or a Chrysler, on Ford I am kind of agnostic.  Recently I have owned a Mazda Van (trash), Mazda Pickup (okay), Honda Civic (awesome and made in Ontario), Honda Accord (reliable - a bit tortuous to drive), and a Hyundai Sante Fe (awesome). 

 

The Accord came from a dealer I met in my day job.  The Sante Fe we bought at a new car dealer that gets alot of ex-airport rentals.  It was 10 months old with 20000 km and $12000 less than new.  I was worried about it being a rental but this appears to be an asset rather than a detriment.  The rental companies at the airport all do the full maintenance, and take pretty good care of the vehicle. 

 

I didn't vote in your poll.  I have had success buying cars every way you mention, and some dubious acquisitions as well.  The worst are the dealers or salesmen who bring their dogs home and try to sell them privately.  The stories I have. 

 

 

Link to comment
Share on other sites

That's probably a joke but I don't get it. Anyway, the 'no car' option is apparently no option. It is the cheapest though.

 

Your avatar?

 

Hah. It's an otter performing chip tricks. Not a groundhog! I actually paid somebody to design it almost a decade ago when I played poker online :o . Unfortunately this forum doesn't support animated avatars.

 

http://writser.nl/images/otter.gif

Link to comment
Share on other sites

The Sante Fe we bought at a new car dealer that gets alot of ex-airport rentals.  It was 10 months old with 20000 km and $12000 less than new.  I was worried about it being a rental but this appears to be an asset rather than a detriment.  The rental companies at the airport all do the full maintenance, and take pretty good care of the vehicle.

 

We did that with our Kia Soul we bought 2 years ago. Ex-airport rental, 20000 km and about $10k less than new and it was the top model. Sunroof, stereo and all the good stuff.

This time around we went brand new, Kia Sorento since Kia's base model is very well equipped. You get more features on a base model Kia (and Hyundai I assume) than all others. The domestics are the worst, everything is an upgrade. $$$

 

We bought new because they're the only dealer offering 0% financing up to 84 months. All the others wanted anywhere from 2.9%-5.9% and the used cars were on the higher end of that.

 

My wife had been keeping her eye on the dealers for a while so she knows the price wasn't artificially inflated prior to them offering 0%.

Link to comment
Share on other sites

Do your research on the car you want, know the price and offer it. Give the salesman 15 minutes to say yes or no. Also, warn that any attempts to talk besides the yes or no will result in you leaving immediately. This formula can take some time to actually make the purchase, but I have found that it usually works after about a year or several attempts!

Link to comment
Share on other sites

My wife and I just recently bought a Lexus ES 300H brand new with 1.9% financing for 5 years.  We typically don't buy a car brand new because of the depreciation factor.  But because the interest rates are so low, we just couldn't resist.  We used to own a Lexus RX 300, which we put 220k + miles on it, before we traded it in for this new Lexus ES 300h.  We know we are paying somewhat of a premium for owning a Lexus but once you've driven a nice car, it's really hard to scale back.  If you want to get the most bang for your buck, I would go with a Toyota Camry or a Honda Accord. They are just well made cars that last for a long time. 

Link to comment
Share on other sites

Look into (at least what use to be called) the Fax Attack.  Have a stock letter that you send out to all the dealers in your area that says "I want to buy a Prius and the current offer I have is $XX,XXX.  Can you beat it?"  Then take the lowest price you get from your responses and send the fax/email out again.  Repeat until you have only one dealer respond.  Get a formal offer letter from them in writing so when you go to their lot they don't reneg on the offer.

 

The only other bit of advices are: Dealers have monthly quotas.  They'll often take a loss on a car if it makes their quotas.  So do the Fax Attacks near the end of the month.

 

Also, bring your own financing (unless they've got a great offer *from the manufacturer* that you know you'll get.  Dealers can get money from you via their financing offers if they dom't get money from you in the up front sale.

Link to comment
Share on other sites

A car is an expense as many other expenses you have to make with your money. If you save first and spend later (paying yourself first), then it's not such a complicated decision. What can you buy with the money you have? New is usually more expensive upfront but less on maintenance. Depreciation is high on the first 2 years and low after that, but if you plan to have your car for 5 or more years then it doesn't make a big difference.

 

If interest rates are low or if you are able to earn a better return than interest cost with your invested money, then you shouldn't pay cash even if you have the money, etc, etc, etc; but I don't think that all expenses have to be rationalized in such a complete and complicated way. If you pay yourself first and are a disciplined investor, then I think you can enjoy life and buy new if that's what makes you happy.

Link to comment
Share on other sites

Easy. You look for motivated sellers. Go to the typical craigslist like websites (I don't know which are the US relevant ones) and put in alerts for car offers based on following keywords: "death", "died", "passed away", ... .

 

These ads are typically made by people who suddenly have an extra car on their hands due to the parent/grandparent passing away unexpectedly. The good thing about this method is that you are buying a car from "older" and thus more careful people when it comes to car treatment. I once bought a car via this method from an older guy, who refused to drive when it was raining and cleaned it every sunday.

Link to comment
Share on other sites

Things have changed.

 

Bought a new car two years ago. Previously always bought one or two year old with low mileage.

But now it there seems that there is no longer enough difference between new and old.

The same vehicle, two years old, was only about 15-20% cheaper (if that).

But the new one is - brand new - has no miles on it and comes with a 3 year bumper to bumper warranty and 5 year power train.

That's just not enough difference.

Link to comment
Share on other sites

Guess it all depends on how much time you want to devote to this.  Have a good friend who owns some dealerships, talked to him recently about buying a car.  On a new car there's usually a few grand of 'play' between the invoice and sticker price.  You might be able to go back and forth and get a new car for a few hundred dollars below invoice, on a new car that'd be considered success.

 

Used cars are different.  You can go the private seller route and look for the motivated seller if you are patient.  My friend just purchased a used car this way.  The boyfriend took out a loan in his name to buy his girlfriend a car, they broke up.  He wanted to dump it, but had financing and it needed to be purchased with cash.  My buddy had cash, took it to a mechanic and all that and got a great deal.  He looked for almost a year waiting for this type of situation.  So you can be patient and wait, might be six months to a year.

 

We recently purchased a used car from a dealer.  In Pennsylvania there are some high volume dealers who turn over a lot of cars and don't negotiate.  Their business model is based on volume with a smaller margin verses working the customer over.  We went to this place and paid the sticker price.  What's interesting about it is the price wasn't even set by the dealer.  They use a third party service that looks at all comparable used cars and sets the price to be competitive.  The price we got was excellent, so we were happy.  Somewhat.  My wife didn't like not negotiating.  I asked her if the price was $2k higher and they came down to what we paid if she would have felt better, even though it was the same end price.  And sure enough she would have preferred the higher price that was dropped.  Everyone likes feeling like they got a good deal, whether it's true or not. 

 

Used car pricing is interesting.  This is all from my friend again.  In the sub-$10k market you can negotiate like crazy.  Dealers will pick up a car for $4k and sell it for $9k sticker.  So you can come in and get a few grand off.  Above $10k and especially in the $15-30k range for used cars there isn't as much room.  There aren't as many buyers, and the supply isn't as strong.  So same as a new car, you can maybe save a few grand from a dealer.  But with the internet prices are a lot more competitive.

 

Just hunt around online, AutoTrader, Craigslist etc.  We drove 1.5 hours to get our car, was at a rural lot.  Sometimes rural lots can have great deals, other times it's in the city.

 

At the end of the day I'd find a 'good' price and not worry about extracting every last cent from the dealer.  That is unless you absolutely love to negotiate and work these guys down.  So say you save $250 or $500 by stretching things out a few weeks.  Is it worth it?  Is it worth the stress, obsessing about the deal?  If you're on this board I'm sure there are much better things you can do that earn a few hundred dollars.

 

Like most things in life my mantra is to find a good deal, but not the best.  The marginal return going from good to best isn't worth the time. 

 

Oh and auctions...I'm not sure I'd go there unless you are mechanically inclined.  Most dealers dump cars at auction that they don't want to sell on their lot, condition, mechanical etc.  There are other dealers who specialize in buying these, putting some money into them and flipping them.  Can be a great business, but you need very cheap labor.  If you can drop a tranny on your own then by all means go for it. 

 

 

Link to comment
Share on other sites

The best value (if you intend on driving the car 10+ years until it dies) is to buy something with a salvage title at 40-50% off of blue book. Search on craigslist for rebuilt titles, there are a dozen people around me that buy wrecked cars and do the body work to fix them up. A lot of times, the damage is not extensive for a car to be totaled (needs a new bumper, trunk, head/tail lights, hail damage).

 

The guy I met only buys Lexus and Acuras that are around 4-7 years old without frame/mechanical damage and repairs them. He had great looking '09 Lexus RX350 for 11.5k. I believe the KBB was about 20k for the vehicle.

 

 

Link to comment
Share on other sites

We had a Honda Pilot and I was getting rid of my old Saab and so needed a second vehicle that we didn't plan to put many miles on, on an annual basis.  We found a 2+ year old Honda CRV that was being sold by an individual outside the city. It looked like new and was loaded with all the options. However the CRV had a record of hail damage and a minor front end accident - both repaired nicely - and quite high highway km on it since it was an "acreage car".  So, we got it for a quite a good price. 

 

Going forward, driving fewer than average or typical km, we expect it will become an 'average mileage' vehicle for its age - the relative price should thus adjust upward over time.  The hail damage is a permanent mark against it but we saved more on the up front purchase price due to that damage than we likely will loose on the eventual sale price (plus we have a car with an extra coat of paint over most of it).

 

The crv is an ok vehicle, great interior room, amazing head room, good and reliable, nice to drive in town but like our previous Hondas: incredibly boring to drive. (I miss my even more reliable - and very fun to drive Saab.) So we've decided we won't be getting any more Hondas.  We're not getting any younger and buying vehicles that are good value for the dollar has a downside impact on quality of life if you do anything more than city commuting.

Link to comment
Share on other sites

^ Yeah our intent has been to buy at about 4 yrs and sell at 8 years.  Thus paying about half price of new at 4 years and selling at 8 before major repairs undo the savings advantage. 

 

I've had a couple cars I've kept a long time but when I thought about it, one- I've taken the maximum or highest depreciation hit by buying new and realized that while buying new gets you the latest safety technology compared to buying a 3 -4 yr old vehicle, then keeping the vehicle for 10 - 12 years to justify the new purchase is in the end worse than being just 4 - 8 years behind on safety and driving technology. Basically the leapfrogging works but the lagging could be a killer (like a value trap).

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share




×
×
  • Create New...