How to buy a cheap car

As a huge proponent of driving sub-$5000 cars, I often get asked to help people pick inexpensive cars. I have been involved in probably 30 car purchases in the last 8 years, so I have a lot of experience. This reminds me of a quote:

Good judgement comes from experience. Experience? Well, that comes from bad judgement

Here are some pointers that come from my, er, experience:

WHEN TO BUY A CAR

You should start looking for a car when it becomes clear to you that regular repair bills are in your future or it is about to die completely. For example, if last month your water pump busted and this month your fuel pump went out, it’s probably time to start looking. Hopefully you can find a replacement before your current car dies completely. I also use the 200,000 mile mark as a point to move to a different vehicle, but that’s a personal preference.

What is the definition of a car that dies completely? That’s when the cost of repairing the car is more than the car is worth, or more than you are willing to spend on it. I had a 1996 Saturn SC2 with 175,000 miles on it lose it’s transaxle while driving on a major thoroughfare. Parts came off the car at speed. The repair cost was somewhere around $2800. The car was worth maybe $2500, so I sold it to a local mechanic for $300 and bought another vehicle a day or two later. The car also has to be non-functional for this to apply: Just because your $1500 car needs a $2000 retrofit to get the AC working again doesn’t mean your car is dead. The purpose of your car is to get you from A to B and back to A. Everything else is a luxury.

I knew that Saturn was about to have serious problems, but I didn’t start looking at cars until after it died. Things would have been much less stressful for me if I had started looking sooner.

START WITH A BUDGET IN MIND

First of all, you won’t be borrowing money for a cheap car. The number 1 reason is that you’ve given up debt, but the other reason is that banks don’t do used car loans for cars in this price range. The only way to finance one of these cars is with dealer financing which would put you in the 25% APR range. Ouch.

So, how much do you have? No matter how much it is, we can work with it. The best car deal I ever had was one that I bought for $800. I sold it a year later for…$1000. And it was still a mechanically sound car that I would’ve trusted on a cross-country trip. If you are in need of a car RIGHT NOW, whatever you have is whatever you have. Just remember that this car will be temporary, probably 6-12 months.

If you have some time before you’ll need a car then you are in a great position. First, you will be able to spend more because you will have saved up more money. When I bought that $800 Neon, I immediately started saving for a replacement. I picked $4,000 as my goal and started looking at my options.

Don’t forget about sales tax and new tag fees! Government has to get it’s cut, you know!

FIND OUT WHAT YOUR BUDGET WILL GET YOU IN YOUR AREA

Starkville, Mississippi is not Nashville, Tennessee is not Buffalo, New York. Cars will bring different prices in different areas. Start trolling craigslist for cars in your price range. If you have $4000, search for cars for sale by owner in the $2000-$6000 range. You’re not going to buy any of these cars, but you want to get the lay of the land, so to speak. You might discover that for $3000 you can get a 12 year old Honda Civic with 150,000 miles on it, or that for the same price you can get a 7 year old Toyota Echo with 90,000 miles on it. You do this to get an idea of what a good deal is. Ever think you got a steal on a gun you knew little about, and then found out later you got ripped off? Cars are the same way.

PICK A CAR

You have your budget. You know what that will buy you in your area. Now it’s time to pick the kind of car you want! You can say, “I want a compact japanese car with good gas mileage,” or you can say “I want a blue 1998 Honda Civic DX with chrome wheels and a sunroof.” When we bought my wife’s last car, her criteria were 4 door Honda Accord with less than 170K miles on it. The criteria I used for my last car was 1999 Jeep Cherokee 4 door with automatic transmission, NP242 Transfer Case, and a ChryCo 8.25″ rear end with less than 120,000 miles on it.

We both found what we were looking for. She got hers in 3 days. Mine took 4 months. The more specific you get, the harder it is to find what you are looking for in your price range. Be sure to research common problems with the make and model you choose! The last thing you want to do is buy a 2000 Toyota Camry and THEN find out that year has a serious problem with engine failure.

NOW, WE WAIT

Okay, you’ve got a budget. You have the cash set aside. You know the car you want. You know how much they go for in your area. You know what common problems that car has and how to check for them. What do you do now?

Do a search on craigslist for the car you want, then add the RSS feed for that search to your feed reader. This will notify you every time someone posts a car that meets your criteria. Protip: Always put a minimum price in, even if it’s $100. Otherwise you’ll get cars with no price listed, and those are usually dealer cars way out of your price range.

Now, when I decided on my Jeep, I knew I could get it for $4000, because I had seen one that met my criteria at that price. At the time, I didn’t have $4000 so I didn’t buy it. I had to *gasp* wait!

AFTER IDENTIFYING A POTENTIAL CANDIDATE

When you find one you want, contact the seller. Things you should verify are:

  • They have possession of the title (ie, there isn’t a lien on the car)
  • They have possession of the car (yes, that actually happens)
  • The car does not have a salvage title
  • The mileage stated in the ad is what is actually on the odometer
  • The car actually runs, and there are no “check engine” lights on
  • The VIN (for later)

Now here is where you identify the scam artists. If you are in Kentucky, and they posted the ad in Kentucky, but then they tell you the car is in Utah when you ask about it, this is a scam. Just forget about that car and move on. Most of the “wow, that’s a really good price” ads are scams like this. If they tell you they’ll hold the car for you if you wire them some amount, this is a scam. If they tell you they’ll only show you the car if you meet them in a dark alley, come alone, and bring cash, well this is a robbery 😀

Once you decide that this car has good potential, arrange a time for a test drive.

CHECKING THE CAR

Ideally, you would bring a mechanically inclined friend with you who has done this before. Remember, good judgement comes from experience, and you don’t have a whole lot of that. On my quest for a Cherokee, I actually bought one that had been in a rollover because I didn’t know what to look for. The original transfer case (NP242) had been replaced with an inferior one (NP231), something I didn’t even think to check. The next day the seller allowed me to return the Cherokee for a 90% refund. I suggested he keep the 10% as sort of an inconvenience fee for him. It was all very cordial, and I learned valuable lessons from that ordeal.

So, what should you look for? Well you should make sure the tires aren’t bald because that’s an indication of how well the owner might have kept up the maintenance. Check the oil change sticker against the current mileage.

Don’t be afraid of body damage. My wife’s accord has a ding on one of the doors, but it doesn’t affect operation in any way and it doesn’t make the car unsafe. It’s just kinda ugly. In this price range, that’s what you’re looking for.

Pop the hood with the engine running and look around. Look at hoses and belts and make sure they aren’t cracked or leaking. Or disconnected entirely. Look at the engine wiring and make sure it looks either 1)factory original or 2) professionally installed. I once bought a full size Ford Bronco without popping the hood. When I got it home I discovered that the alternator was connected to the battery via four strands of 16 gauge speaker wire electrical-taped together and crimped to the connector. Damned thing should’ve burst into flames at some point.

While you’re in there, is the firewall (the metal in between the engine compartment and the passenger compartment) the same color as the rest of the car? If not, then the car may not be it’s original color. This could be because the car had significant body damage, or it could be because the previous owner just always wanted a canary yellow Kia Sportage.

Also look for white residue that looks like it’s splashed across the engine. That would be dried coolant, and indicates the car had a major cooling system malfunction. The engine probably overheated and there could be some unseen damage.

With the engine running, listen for knocks, ticks, dings, or any other metal-on-metal clanging noises. If you rev the engine, does it smoke inside the engine compartment? These are not good signs.

In my area, any vehicle made after 1974 must undergo emissions testing. If the car was manufactured after 1996, the entire emissions test consists of them plugging in to the OBDII port and pulling engine codes, as well as testing your gas cap to make sure it can hold a vacuum. The gas cap thing is easy to fix but hard to check. The OBDII thing is easy: Is the check engine light on? No? YOU PASS.

THE TEST DRIVE

If the car passed your visual inspection, and neither it nor the seller gave you the creeps, it’s time to test drive! Here are some of the things that I do when I test drive a car:

Check the automatic transmission by bringing the car to the verge of a gear change, and then feathering the gas. The lower the gear the better, since those are used more. If there is a problem with the transmission, then you will get stuttering, clanging, shuddering, or other kinds of mischief. If you get any sort of weirdness here, the car is not for you. Ignore the seller’s statements that “it’s always done that” or other dismissals. That transmission is going to die, and not terrible long from now.

Do several checks for engine power. If you’re driving a 4 cylinder station wagon, don’t expect the same responsiveness as a v8 pickup. What you want to know is if the engine stutters when you floor it. Basically, if you have to pull into traffic is this car going to get you killed? I check the 0-60 and the 45-70 performance since those are my two likely scenarios.

Check the brakes, preferably before you leave the neighborhood/parking lot. Check them again on the road to see how well they perform. I test drove a truck once where the brakes were adequate for in-town speeds, but when I tested “panic braking” at 60mph on a deserted highway, the brakes completely failed. When my friend and I returned with the truck, the seller said something like “Oh yeah, it does that.” /facepalm.

Also while checking the brakes you can check the shocks. If the car nosedives easily, it will need new shocks. Take this into consideration.

VEHICLE HISTORY REPORTS

The last thing to do, and this is optional, is run a CarFax report. Here is the thing you need to know about CarFax and similar services: They will only give you reasons to NOT buy a car. You shouldn’t use this report to assuage any fears you might have, or as a substitute for actually looking at the car.

That Cherokee I bought with the missing parts and rollover damage? Completely clean CarFax report. If the accident isn’t reported, or CarFax doesn’t have access to the proper databases, then things like that won’t show up.

Also, it used to be that you could pay $25 and get all the reports you wanted for 30 days. Now I think the only plans are dealer contracts and $20 one-time use reports.

What should you look for on these reports? Well, obviously you should see if there are any accidents, but another thing that should raise questions is the number of owners. Verify with the current owner about the history, because a caveat here is that CarFax will report each new address the car was registered to as a new owner. My wife had an SUV that CarFax said had 5 owners in 8 years, when in reality she had registered the car in 5 apartments in 8 years.

Also check old odometer readings. I almost bought a used Corvette (pre-Dave), but passed on it when CarFax indicated the car had a lot more miles on it that the current reading. As it turned out, the Corvette engine had been replaced with a regular Chevy V8 truck motor and the odometer was reset. When I pointed it out to the seller, his reaction was, “So what?” No Corvette for me!

So these reports have value, but only in limited circumstances.

BUYING THE CAR

Okay, so you’ve decided that this is the car for you. Now what? Do I just write a check and take the keys? How does this work?

Well, the short answer is call your county clerk and ask him. I’ve gotten by with a simple bill of sale and signed title after giving the seller cash. Once I sold a car to a gentleman in another county, and that county required a notarized affidavit of sale. When you go to get a new title and register the car, you’ll also have to pay the sales tax at that time so be prepared! If you buy from a dealer, they’ll usually collect the sales tax when you buy the car. Sometimes they will facilitate new tags as well.

Method of payment is between you and the seller. I’ve paid with personal checks. I’ve paid with cash. I’ve paid with postal money orders (at the seller’s request). When I sell a car, I generally prefer cash since you can counterfeit a check pretty easily. The last time we sold a car, the buyer was uncomfortable carrying around the couple thousand dollars that we agreed on, so I met them at their bank and we did the transaction in the lobby. They went to a teller, withdrew the cash, and handed it to me. I handed them the signed title and a bill of sale, and then drove to my bank and deposited the cash. Obviously, once you get to the more-than-$10,000 range this becomes impractical.

Well, there you go! That’s about all I can think of for now. Plus this is already really, really long!

7 comments to How to buy a cheap car

  • Carfax can also screw up. We bought our 97 F350 and the carfax was clean. A couple years later we bought the 2003 explorer and while we had the carfax account we ran the truck for fun. It gave an alert on the mileage saying the odometer was incorrect an that the mileage should be 125k not the 121k it was.

    Come to find out the DOL fat fingered the mileage when doing the title transfer on the previous owner.

    Great article other than you missed looking for government surplus vehicles. Old police cruisers are to be avoided, but most other fleet vehicles have fantastic maintenance histories.

  • >mileage should be 125k not the 121k it was.

    3k is an oil change interval. I wouldn’t worry too much about that.

    Here in Maryland, getting the car through the ownership title inspection check is a significant hurdle for owners. I’d pay a significant markup to skip that step |(i.e the seller had already done this step and hands you a valid certificate). [You can get 15 day tags, but only once. You need tags so the mechanic can road test the car and get the inspection cert, but you can’t get tags until you have the inspection cert.]

    I’ve once bought a vehicular with a bad VIN. Check the title against the plate on the car. (although with only one letter off, a rubbing was acceptable to the MVA)

    Another good tranny check is a drop of ATF from the dipstick on a white paper napkin. It shouldn’t smell burnt or be black but it should not be brand new fluid either. If there’s a bunch of silver then you know a clutch or band has disintegrated.

    I’ll go off on a tangent here and tell you that you should never do a tranny flush as a maintenance item, especially after driving the car for years on the same fluid. There are more than likely a bunch of deposits in the passageways and putting in all new pink fluid will haul all of that sludge into suspension all at once and maybe damage something. I’d recommend pulling a quart out at a time every week for a few weeks until the stuff seems to be close to the proper color. Then drain the pan only (1.5 quarts or so out of 7-12 quarts) every oil change interval. (I had to weld a drain bung into my Government Motors truck. Not everyone has the skilz to do that. Toyotas have a drain plug installed from the factory,) The two quarts or so every 3k is cheap, and a new or rebuilt transmission is quite expensive ($3-4k for the work on my Camry).

  • One note on the “check engine” light – sometimes people will just take the bulb out if the light won’t go off, rather than fixing (or letting you know about) the actual problem. There’s not much the average person can do about this, unless they happen to have a code reader and the right plug for that car, but it’s something to be aware of. If it’s on, that’s certainly a warning sign, but don’t count on it being on if something is wrong, either.

    On Baron’s comment about surplus vehicles: Avoid used EMS vehicles, too, for the most part. We don’t do the high-mileage constant stop-and-go driving like the police do, but we do run them to death. Even worse is the way we run them: extremely hard from a cold start (hard acceleration, high speed, hard braking), and generally without a proper cool-down. Diesel engines in EMS vehicles don’t usually get a chance to get up to the designed run temperature, so they run dirty and accumulate gunk that would normally burn off (a problem our town’s mechanics complain about frequently).

    There are some exceptions. A lot of departments will give the chief and maybe other high-rank officers a permanently assigned vehicle, so they have the lights & sirens available when they’re off duty (because at that level, you’re never really 100% off duty). Those tend to get used more like a normal personal vehicle, and are run hard for a much smaller percentage of their life.

  • For GM vehicles, before you test drive, while the engine is cool, pull the radiator cap. Orange sludge? Don’t buy it. It’s Dexcool sludge and it means there are seals and such degrading. It will blow the engine. The more sludge you see, the closer it is to blowing.

    Also, if it smells like pancakes after your test drive, there is a leak in the cooling system. This may be simple like replacing hoses, or it could be a very bad thing like a water pump.

    A friend gave us an 82 Civic once that we actually turned a profit on while still driving it. And it was still quite driveable after the semi rear ended me in it. It was never pretty. But the insurance settlement was a nice thing.

    My dad didn’t have any sons and insisted I know my way around a vehicle. And I married a mechanic, so that’s nice too. Heck I installed a transmission on my 92 BMW that I purchased off the repo lot of the credit union. Did the replacement in the church garage because they had a life. It will save you a TON of money if you can handle repairs yourself.

  • Heather

    What are your thoughts on having a dealer inspect the car if you and all of your friends are mechanically moronic?

    • wizardpc

      I’m split on it. On the one hand, a dealer mechanic should know exactly what to look for. On the other hand, I’ve had some pretty bad experiences with dealer mechanics telling me things like an aftermarket alarm system was causing a transmission problem.

      They will likely try to tell you the car needs services that it really doesn’t, but that’s not exclusive to dealers. The only mechanics I’ve ever had that didn’t do that were the ones that owned their own shop and relied heavily on word of mouth.

      Probably the best thing to do would be to take it to one of these small shops and ask the mechanic, “Would you let your mother buy this car?”

  • […] was getting to the point where I needed to start looking at my next vehicle. If you’ve read “How to buy a cheap car”, you know my process is to start with a budget and then figure out what you get. After that I got […]

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