So now that we\’ve gone through the process of looking at the best vehicles when it comes to warranties for free servicing, reliability, and working at removing emotion from the negotiation process, it\’s time to look at how to buy your car right.
So many Americans do not buy their cars right. They buy their vehicles without building margin into that purchase. So what they end up doing is purchasing a vehicle, financing 100% of it, and then slowly paying it down, only to realize the depreciation curve is steeper than the pay-down of that debt. What ends up happening for many Americans is they take that negative equity every two to four years, put it on the next vehicle, and they perpetuate that cycle going forward.
People often buy overly expensive vehicles and extend terms longer and longer. Unfortunately, what ends up happening is them having a vehicle that has depreciated faster than they have paid down the loan. Because of this, people assume that vehicles are bad investments. They assume that they\’re going to lose their shirts when it comes to trading in their vehicle and make this assumption without researching to figure out the best path forward to know how to buy their car correctly.
I can confidently tell you that this doesn\’t need to be the case. People do not need to lose their shirts when purchasing their vehicles. They do not need to take negative equity from one car to the next. Many have just ended up in this place accepting this when it should be this way.
Today, I want to go through three components to improve your vehicle purchase process and prevent this behavior. In this blog, we will cover the first component and look at the other two in detail in part two of this blog.
- Vehicle History
The first component to look at is the vehicle\’s history. I believe the vehicle\’s history is the first thing to look at because you\’re going to want to filter out the chaff, per se. You\’ll want to filter out those vehicles that don\’t rise to the top and are not the best investment.
Example
For today\’s example, I want to utilize the website CarGurus.com. The vehicle of choice that I want to use is the Toyota Tacoma. The Toyota Tacoma is just a mid-sized truck, and it\’s the truck of choice. For today\’s example, the actual year doesn\’t matter, but the radius does.
So we\’re going to expand the radius to be nationwide to look at all types of different backgrounds in history.
Scrolling down to the bottom, you\’ll find the section that has to do with the vehicle history. The vehicle history is an area that shows you all of the aspects that can be selected and filtered out for your search. Different platforms will have different versions of this, but it\’s important to know what each of these means.
a.) Accidents
The first one that I would filter out has to do with accidents. Of course, this can be a tricky one because certain accidents are not a big deal. It could have been a slight fender bender in a parking lot or something minor that required a repair and a police report and insurance claim to be filed.
However, If you\’re trying to buy a vehicle correctly, you want to have a vehicle that doesn\’t have any hesitations when it comes to reselling that vehicle. Also, you want to have that peace of mind that the vehicle is in its original factory state, that nothing\’s been tampered with, that everything has been repaired to spec, so you don\’t have to worry about it.
Therefore, you\’re going to want to filter out any of those with accidents.
b.) Frame Damage
Beyond that, the next component, and I would say even the most important, comes down to frame damage.
Frame damage means it was in a severe accident where the frame was compromised. Unfortunately, you don\’t know what shops actually repair the frame properly and which ones didn\’t.
If you want to buy a vehicle right and be in the best position to get top dollar when you go to resell it, you\’re going to want to filter out any vehicle that has any frame damage. So often, this will show up as a salvage vehicle or as a rebuilt vehicle.
c.) Theft History
The next one comes down to theft history. Theft history looks at if the vehicle has been stolen and recovered or if any parts had been. Again, this will show up on the history search. Therefore you\’ll want to factor that in and filter those out accordingly.
d.) Fleet Vehicles
The next one that I prefer to filter out is fleet vehicles. Now, fleet vehicles could be just corporate vehicles, but they\’re more than likely rental vehicles, and we all know how the treatment rental vehicles receive. Therefore, I usually go ahead and filter those out. Usually, these vehicles take a bit of a hit on the value, even though there\’s no way to know. So I would filter that out to make sure that you have a vehicle that was owned and maintained well by an individual.
e.) Lemon History
The next component comes down to lemon history. A vehicle with a lemon history is a vehicle that the manufacturer may have repurchased because of the number of repairs it went through to meet its initial owner\’s requirements.
f.) Salvage History
The last component has to do with the salvage history. This is the big one.
You want to make sure the vehicle does not have a salvage history or has not been rebuilt because that typically reduces the value by about 50%.
Of course, the market\’s crazy today, and therefore these vehicles are getting a higher percentage of book value.
So filtering each of those components out will hide the vehicles that do not rise to the top and do not meet the minimum requirements for a vehicle that you would be proud of and put your name on when you resell it.
I Almost Got Burned
So history is one of those aspects where I almost got burned pretty badly when I was buying a Lexus. It was a hard-top convertible Lexus that was beautiful. It was one of those cars you would consider beautiful from far, but it was not so much once you looked at it closely. That is because it was involved in a significant accident. I actually purchased the vehicle, then went to get a pre-purchase inspection, which ended up being a post-purchase inspection.
When I was going through that process, the Lexus dealer told me that when they put it up on the rack and looked at the frame and everything else, it looked like it had been hit by like a train.
That\’s literally the words they used.
Obviously, that was a scary event because it was not a cheap car. So, I wrestled with the news and decided that I needed to go ahead and sell it to a dealership. At least they could put it through an auction.
Therefore, I took the car in and traded the vehicle in for a 4Runner. Fortunately, I had some positive equity in the Lexus and put that towards the 4Runner, which I bought at retail.
Unfortunately, that Lexus purchase was something from which I could not recuperate. When I went to sell the 4Runner later, it was a loss since I had bought it at retail.
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