Do you want to save money when you buy a car? Don’t go out to a dealer, at least not right away. First do some homework, get the information you need–then head out looking for cars.

You’ve heard it said, “knowledge is power”, and no where is that more true than when it comes to buying a car. Here’s the main point: you’ll be going into a car dealership that not only has the cars you’re interested in, but it’s also a place that’s filled with people who generally have more knowledge about their vehicles than you do. From a financial standpoint, that’s a disaster waiting to happen. The greater the knowledge gap, the more likely it is that you will pay too much for what ever you buy.

How do you get the information on the car you want to buy? In the old days, you probably had to hook up with a “car guy”—one of those people who seems to possess an almost supernatural understanding of all things automotive. But today we have the internet, and that’s really leveled the playing field. There are websites dedicated to providing not only free information about all kinds of cars, but even the best car dealers to buy from!

That last point shouldn’t be taken lightly either. There are different kinds of dealers—independent or franchised—and there are also car supermarkets. Which one you work with will have an impact on the deal you get on the car you buy.

Finding the best deals on new cars

Here’s where you really want to get the most detailed information. You need to get the very best new car deals, if only because prices—and therefore the financial stakes—are higher than they are for used vehicles.

There might be a temptation to think that car prices are fairly standard, that the price at one dealership is roughly the same as it is at all others. Not true! The only way to know just how wide the spread can be from one car to the next, and from one dealer to the next, is through thorough research on new and used car websites.

A good car website will show you what the price of any given make or model will be, as well as the add-on price of various options. When you have such information, you’re in a better to position to negotiate, or even to know if the car you’re interested in is worth buying at all.

You’ll also save time and wear and tear on your current vehicle, since you’ll be “shopping” from the comfort of your own home rather than driving from dealer to dealer. Minimizing contact with aggressive sales people is still another advantage. The more you can research and work the numbers in a non-sales environment, the better the deal you’re likely to get on your next car.

Getting the scoop on used cars

In a real way, researching used cars is even more important than it is if you want to buy a new one. Used cars not only come in hundreds of different makes and models—just as new cars do—but they also come with different ages, condition and mileage. That’s a lot of variables, and all have a strong influence on the true value of used car. Each of those variables will impact the price you should pay for your car.

Used car review sites are the best way to conduct your research. A good site will allow you not only to find the cars you’re looking for, but will also provide valuation tools that help you to consider the value of certain options, as well as the effect of age and mileage on the car you want to buy. If you’ve ever tried to do this using used card guide books, you know how difficult it can be. There can quite literally be dozens of calculations involved in the process of coming up with the value of just one car. And if you want to compare several, it can be a true nightmare.

Used car review sites can do this automatically, saving you time and aggravation, as well as the cost of potential math errors.

Don’t buy a new or used car alone—take advantage of quality websites that can both make the car buying experience much more pleasant—and much less expensive!

This is a featured post for Auto Trader.

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Save Money on Car Repairs by Thinking Outside-the-Box

By Kevin M

If knowledge is power then the lack of it is weakness! Don’t think this message is lost on your friendly neighborhood car dealer! Car salesmen can sniff the knowledge weaklings before they even get into the showroom, and will make them pay more before they walk out.

Not nearly all of us are car experts—in fact most of us are not. But that should never mean that you walk into a car dealership and throw yourself at the mercy of the car salesman in the hopes that he’ll be a straight up guy and give you the best deal possible.

Fortunately, in this day of the internet, any of us can become car experts—or at least better informed consumers—before making the buy. Just knowing the right places to go on the web can raise your car buying knowledge a few notches.

You’ll be spending tens of thousands of dollars on a car—new or used—and just a few hours of research can save you thousands of dollars.

If you’re not a car expert, check out one or more of these before buying your next car.

Popular car websites

If you know absolutely nothing about cars, there are major sites available that can provide a wealth of information. Kelly Blue Book, Edmunds.com and Autotrader.com are three of the most popular. Each enables you to find the value of nearly any car you can imagine, as well as provide reviews and other valuable information that raise your Car I.Q. a few notches.

Each site has tools that enable you to determine the value of the car (new or used) you’re interested in, as well as the cost of various options. Try working with several option packages, printing off a page for each to bring along to the dealer. These will be an important reference source to turn to in the middle of the fast talk that’s so common in car buying situations.

Still another site to consider, if you’re looking for a used car, is UsedCars.com. The benefit to this site is that you’re looking at prices of cars that are actually for sale in your local area, which is the true market.

Even if you don’t buy through the site, the information you can get from it will help you to get a feel for the range the car you’re looking for is actually selling in. Just remember that the prices that you see are asking prices, and actual sale prices are something less.

If you learn nothing more than approximate values of the car(s) you’re interested in, you’ll have a huge leg up at negotiating time.

Find a good car blog

Major car sites are excellent places to get raw information that will help in the car buying process, but they can also be intimidating to car buying novices. There are blogs available that are much more intimate where you can not only get information, but also have your personal questions answered through forums.

One of the best blogs on car buying is Car Negotiation Coach. Blog owner Geoff Cudd has been featured on Fox News and is the author of A Crash Course on Car Negotiation, and that’s the kind of expertise you need if the car buying process makes your knees start to wobble.

Much of the car buying process can now take place over the internet, removing the stress and uncertainty of face-to-face negotiations. The site provides a detailed step-by-step guide to negotiating a new car by email, as well as free email templates you can use to send to car dealers to set up your deal before arriving at the dealership.

If you’re trying to gain better insight on how to buy a car, and be better prepared before starting the process, CarNegotiationCoach is a rich source with a comfortable feel.

Old school: Find a “car guy”

Everybody knows somebody who’s a car guy—that person who lives, sleeps, eats and breathes cars. In the normal course of events, the hard core among the group can be at least a bit annoying. But when the time comes that you need to buy a car, he could be just the friend you’re looking for.

I’m not suggesting that you bring your car guy buddy with you to the dealership—thought that wouldn’t be a bad idea either—but you may want to have his cell phone number on speed dial (and him on high alert) when you go car shopping.

Sometimes just having an expert in the wings can give you the confidence you need during moments of confusion, or those intentionally stressful negotiations. When the pressure is heating up at the dealership, never hesitate to take a break from the hostilities by stepping away to consult with your “panel of experts”. It’ll make the salesman nervous, and that’s what we’re going for here.

Leasing can sometimes be the better route

If you’re tired of dealing with car salesmen, you can try and see if car leasing is a good option for you. Many people still believe that leasing is for business only, however, more and more companies are now offering deals tailored to the needs of a personal customer.

With car leasing you never get to own the vehicle – simply consider it a long-term hire agreement. One of the main advantages of this setup is that, compared to auto loans, you enjoy lower monthly repayments and at the end of the term (normally 2 to 4 years) you don’t have to worry about depreciation, re-selling the vehicle or trying to part-exchange it for another car. All you do is take out a new car leasing deal and continue using a brad-new vehicle.

I’ve written many times here at OutOfYourRut.com that car buying is no place for the meek. Often the reason people are meek is a lack of knowledge over what they’re buying and the many technical details that seem beyond comprehension. The best way to deal with this is to learn more about what it is you’re buying. Take in as much of it as you can from the sources above, stiffen your spine and don’t be afraid to walk if you don’t like the deal.

Then be prepared to save thousands…

Do you get nervous or hesitant when you buy a new car? What do you do to help get yourself the best deal?

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Cheap New Cars – Are They Worth the Money?

By Kevin M

Yahoo! Autos had a great piece from CNN Money last week. 10 great cheap cars gives a list of ten cars for well under $20,000.

A few on the list for 2011, with their given price ranges, include:

Ford Fiesta, $13,320 – $17,120
Chevrolet Cruze, $16,275 – $21,975
Honda Fit, $14,900 – $16,410
Kia Soul, $13,300 – $18,495
Honda Civic, $15,605 – $25,490
Nissan Versa, $9,990 – $16,900

Looking at the low end prices on these cars, it’s clear that they begin to compete well with better quality used cars, and for that reason alone they merit further investigation.

We should never buy anything on price alone, but as expensive as new cars—and even used cars—are these days, these prices are…interesting.

But what are we getting at these prices? Are they actually decent cars that will last a few years, or are they throw-aways—the ultimate manifestations of “planned obsolescence”—destined for the scrap yard after five years? Do they come with important options—like engines—or are they your basic “Flintstones Car”???

Watch those options!

As you can see from the list above, there’s a pretty wide range on the final buy price of one of these cars. The Honda Civic shows an upper end of over $25,000, and that’s where you’re beginning to bump heads with the lower end of some higher quality new cars.

My guess is that those upper ranges are based on certain packages; you could probably take the price about as high as you’d like to go if you pack the car with enough options. And that’s the moral of the story here; cheap cars will only be cheap if we buy them largely stripped down. Options are the enemy when price is the overriding consideration.

How much creature comfort are we willing to do without in order to keep our car expense to a minimum? Which is an excellent bridge into an alternative strategy…

What about a better quality used car?

Up to this point, we’ve been focusing on low priced new cars, but what if we decide that all that cheapness isn’t exactly what we’re after? What if we want cheap, but with a little bit more creature comfort—or at least a little bit more legroom?

All of the cars on the list are small vehicles—manufacturer claims of roominess notwithstanding. I’ve seen most of these cars on the road and find it hard to believe that I can load my family of four into one, as well as some light luggage, and still have the car reach as much as 40 miles per hour.

A higher end used car might represent the price/quality alternative.

According to Kelly Blue Book, you can get a nicely loaded 2008 Toyota Camry LE Sedan 4D with 50,000 miles on it for around $16,265—price-wise, that compares favorably with the list of cheap new cars above. Yet it’s a larger car with a full suite of options and a longer track record than most of the cars on the list.

So should you buy a better quality used car instead of a cheap new one? There are advantages to going either way. True with the used car you get a better quality car, but there are substantial advantages to going new. You’ll be the original owner, the car will have maximum warranty coverage and you’ll be able to get the best financing deals available.

Which way you go may depend less on number crunching and more on good, old-fashioned personal preference.

Resale value—should it be the deciding factor?

One factor I think of as being almost a litmus test when choosing between cars, and that’s resale value. That’s the amount of value we have stored in the car at the end of a reasonable period of use, and it’s one of the factors that will determine what kind of car we will graduate to when the time comes to replace what we have.

On that score, let’s consider three cars here as to what they’ll be worth after five years of ownership. All numbers are based on “suggested retail”; please keep in mind that this is an attempt to predict future values, which is nothing better than an educated guess at the very best (hey, we’re just having fun crunching numbers here!).

The above mentioned used 2008 Toyota Camry LE Sedan 4D. It’s already three years old, but what will it be worth after we add five years of driving say, another 50,000 miles (100,000 total) by 2016 when the car is eight years old? Well, we can’t predict future values, but we can look at past performance as a guide.

According to Kelly Blue Book, a 2003 Toyota Camry LE Sedan with 100,000 miles would be worth about $9,455 today. If you bought it for $16,265, the five year depreciation on it would be less than $7000, or less than $1400 per year. And you’d have a nice trade in or down payment for your next car.

Honda Civic. Using the stripped down 2006 DX Coupe 2D (manual transmission and no air conditioning!), now five years old and with 50,000 miles on it, Kelly Blue Book says it’s worth $10,755 today. Assuming it was purchased for $15,605 (the bottom of the range on the list above), the depreciation on it would be less than $5,000, or less than $1,000 per year.

If you can handle the manual transmission, the missing air conditioning and doing without a few other niceties like a sound system, the numbers on this look good. Low depreciation, and a fat down payment going forward—what more could a budget want?

Nissan Versa. Taking the rock bottom price of $9,990, this looks to be a no-brainer as far as numbers are concerned. We’re going to cheat a bit here, because the Versa only goes back to 2007. So taking the 07 S Hatchback 4D with 50,000 miles on it, we get a 2011 value of $9,780. On the depreciation side, the car costs us nothing(!) and we have a nice down payment going forward.

Like the Honda Civic, we’re still stuck with manual transmission, but we might not notice while we’re enjoying the air conditioning and sound system that it came with. Purely based on numbers, this may be the way to go. The only drawback on this car might be the image issues we have driving a bottom-of-the-line car—after all, we are what we drive, and none of us like to think of ourselves as a “budget version”.

Of course, what car we buy won’t come down strictly to the numbers—we’re going to own a car for several years and we have to feel good about driving it. Numbers don’t take into account such factors as comfort, look, “feel”, power, our own unique personalities or our intended use for the vehicle. But in today’s time of constrained financial options, numbers aren’t a bad place to start either.

Have you ever bought a cheap new car, say well under $20,000 at today’s prices? How did it work out for you? Would it be better to buy a better quality used car instead? What would you recommend to others who are looking to buy a car?

Related Posts:

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Why Fuel Economy Still Matters

By Kevin M

Comedian Jeff Dunham says people who buy new cars for their kids have it all wrong. 16 or 17 year old kids, he emphasizes, don’t need a new car–they need a bumper car. And he was talking about his own daughter!

I agree!

The closest thing to a legitimate sounding opinion I’ve heard for buying a brand new car for a kid is for safety, that new cars incorporate the latest and best safety features and it’s worth paying the extra money for better survivability in the event of a crash.

Maybe. But maybe not. I’m not convinced that the newness of a car has as much to do with safety as the make of a car. Think Volvo here—historically one of the safest cars available irrespective of age. I’m also equally certain that when human beings are feeling the itch to spend money, nearly any decent sounding justification can and will be used to support the decision, reason and logic be damned.

What are some compelling reasons for not buying a brand new car for your kid?

Cost. OK, I admit that I didn’t even have to think about this one—but we should never overlook the obvious. Unless you’re searching for ways to spend money, this is absolutely one of the very best ways to waste a whole bunch. Cars, after all, cost a lot of money, and not all of it in the purchase price.

A new car will require greater outlays for insurance, ad valorem taxes (if you have them in your state), as well as maintenance and repairs. After all, you can’t put less expensive used parts in a new car, nor can you use a friend or backyard mechanic to maintain or repair it.

A good quality used car will save you money on all of these recurring expenses, in addition to the price of the car.

Humility. Most of us consider humility to be a valuable personal characteristic in a person, especially in our own children. But how is that quality imparted in a kid who’s about to get a brand new car?

A brand new car is virtually a counter teaching on humility; if it’s a trait we’re trying to instill on our kids, this is close to the worst way to make it happen. It would be difficult indeed for a teenager to not get a big head when showing up to his high school parking lot with a brand new car.

Future rewards and merit. A new car is one of life’s financial rewards. They’re something we buy for ourselves as a way of compensating ourselves for hard work, accomplishment and thrift. What has your high school child accomplished that warrants such a bonus? By giving them a new car, you’re separating rewards from merit.

Maybe this is old fashioned, but I think kids shouldn’t have a new car until they’re in a position to contribute to it financially.

Personal responsibility. This might be an expansion of future rewards and merit, but by giving a kid something for nothing, no lesson of personal responsibility is being conveyed by the parents. It’s one of the best examples of something-for-nothing—a message no teenager needs to learn.

In my experience (I have teenagers myself), I think most people tend to overrate their kids’ levels of maturity and responsibility. A car is one of the best—and last—opportunities you will have to teach them this lesson before they head out into the world.

Damage control. Now let’s get back to that bumper car thing! Jeff Dunham may have made this suggestion in jest (watch his Jeff Dunham’s Very Special Christmas DVD, it’s a real hoot!) but it’s really a serious point.

Kids WILL get into fender benders—many without rational or cohesive explanation—it’s part of the whole learning to drive experience. Do you remember what it was like when you first learned to drive? It’s part of the whole teenage thing! Would you rather that happen in a $30,000 new car, or a $3000 “beater”? And which do you think will cost less to fix???

Let kids cut their teeth on a beater, then let them have the joy of trading up as they gain more experience, responsibility and financial capabilities. Not only will you save a ton of money, but you’ll also be giving your teenager a chance to learn the satisfaction of personal accomplishment as he moves through life.

Can you think of other reasons why buying a new car for a kid isn’t a good idea? Or am I all wet on this subject?

(For more thoughts on this topic, check out Teenage driving: Should you buy a car for your kid? over at Car Negotiation Coach; it’s well worth a read!)

By Kevin M

America is often described as a “throw away society”. We buy things—usually brand new—use them for a while, get rid of them in some form or fashion, then move on to the next thing.

This creates an enormous pile of stuff sitting somewhere—much of it of pretty good quality—and presents a real financial opportunity to anyone willing to invest some extra time and effort in buying what they need.

Why buy anything used? For one thing, new isn’t always better; sometimes we can get better quality merchandise second hand that we could never afford brand new. Sometimes, the item in question is one we don’t use that much, or won’t use for very long—why pay a premium for it?

But more important by far: any money we can avoid spending is money that can go either into debt reduction or directly into savings.

What are some items that are better bought used than new?

1. Furniture

It can cost thousands of dollars to buy decent quality new furniture for just one room, and tens of thousands for an entire house. But you can often buy used furniture for ten to twenty percent of what it costs brand new which is also a way to get better quality furniture that you can’t afford to buy brand new.

Check out estate sales, garage sales, second hand furniture stores, your local newspaper or your company or neighborhood newsletter to see what’s available.

2. Cars

There may be tangible advantages to buying a brand new car, but the financial factors heavily favor used cars. For one thing, used car prices are much more negotiable, especially if you’re buying direct from the seller. Depreciation is another factor. The average new car will lose up to 20% of it’s value in the first year and 10% in each of the next four years which makes buying new a guaranteed money loser!

You only have a certain amount of money to put down on a car, new or used, but if you buy new, you will most likely make up the price difference by taking on more debt. Buy a used car and keep the loan to a minimum. Better yet, buy a used car you can pay cash for and skip the loan altogether. Driving it may not be such a rush, but your non-car life will be so much better for not having the debt that you might not care.

3. Car parts

If your car is at least five years old, you can save a small fortune buying used replacement parts rather than relying on new parts from a repair or body shop. You can find replacement parts on the web, and the availability is greater than most of us imagine. I recently paid $25 for a replacement taillight box on our van that would have cost at least $200 brand new.

4. Toys

My kids are out of the toy stage, but one thing we learned as they were growing up is that a toy, no matter how important it seemed at the time, was just a passing phase. And that phase can last as little as a few hours!

Here’s a little secret: kids can turn just about anything into a toy. The brand-new-in-the-box-from-the-store thing is but a momentary rush. They may play with it for a few days or a few weeks, but rest assured they will get bored with it and throw it on the heap with the other old toys. Buy used toys that way their phases won’t cost so much and put the money you would have spent on new toys into something more permanent, like their college fund.

5. Clothing

The problem with clothes is that they aren’t permanent. Sooner or later they’ll either fall apart, go out of style or no longer fit. This is especially true with children’s clothes. So why spend so much money buying them brand new?

Thrift stores have clothing available for impossibly low prices, generally $3-$5 per article. Much of it is gently used, name brand clothing discarded by fashion addicts who got rid of it simply so they could make room in their closets for the new spring (or fall) lines. It takes patience and digging through the racks, but the savings are substantial.

6. Tools

If like most people you’re a weekend handyman why pay a premium price to buy a brand new tool you probably don’t use more than once or twice a year? I bought a good quality manual hedge clipper at an estate sale for $5 and have been using it 3-4 times a year to trim my hedges—for 15 years! I have many other tools that I’ve gotten at less than retail, but that one stands out in my mind.

A good quality tool can last for many years, whether you pay $5 used or $50 new. Unless you use tools in your occupation, there’s no need to have hundreds or thousands of dollars worth sitting your garage or basement.

7. Books

My son got tired of the meals we prepare around here and borrowed a cookbook from the school library in the hopes of stoking our creative energy. His choice was an outstanding one, and we decided we needed to have the book. Brand new it was $30, but we got it on Amazon for $8, including shipping. We use the book all the time, but the fact is most books are read then either shelved or discarded. So why buy them brand new?

Check Amazon.com before buying any book brand new. Chances are they have several used copies for a fraction of the price. If you’re a book hound, get familiar with the used book stores in your area and frequent them regularly.

8. Secondary appliances

In order to stretch the food budget, many people have or want to have secondary appliances, like a freezer or a second refrigerator. But if you already have a refrigerator, why pay the retail price for a second unit that’s hidden in the basement and used mostly for extra storage? Somewhere in your community, someone is looking to sell an appliance, and you can probably get a few years use out of it for just a fraction of the price brand new.

9. DVDs

We don’t buy too many DVDs in our home these days because we began to notice a pattern that when ever we purchased a must-have DVD, we’d watch it two or three times, then store it in the cabinet with the 100 other DVDs we don’t watch any more. That’s a lot of money sitting in a cabinet gathering dust! Cheaper, used DVDs are the only sane way to buy a movie that you’ll probably only watch a few times in your life.

10. Video games

This is really an extension of the discussion above on toys—but for older kids. Like toys, video games are just phases that pass, so the less you spend on them, the better.

We’ve gotten some decent discounts buying used videos through EB Gamestop, finding that the quality is generally comparable to brand new ones. The one or two that did degrade to the point of impairment turned out to be a non-problem because the kids just moved on to another “hot” game. Like DVDs, video games just aren’t worth a heavy investment.

 
A disadvantage of buying used goods is that you may not get exactly the items you want, but that will be a small price to pay for the extra thousands of dollars that you won’t spend or borrow, that can be used to improve other areas of your life—like your finances!

Can you think of any other items that are better bought used than new?

By Kevin M

Perhaps more than any other expense I have to pay, I most dislike (OK, despise!) paying for car repairs. It’s not that I expect our cars to run maintenance and repair free, year after year, but I can’t stomach the idea that every time we bring one of the cars to the shop we get hit with charges of $500-$1000.

We just had a recent experience with this, and I stepped out of character and went the full price repair route to handle it. Maybe I need to do that from time to time just to remind myself why it is I’m always looking for a better way.

Now, be forewarned, I’m not a “car guy”. My interest in car repairs is strictly from a financial standpoint; cars are one of the biggest expenses the vast majority of us have, and I’m always looking for- and experimenting with- ways to save money here. But back to the story…

The dreaded Service Engine Soon warning light

The “Service engine soon” light was on in my car, conjuring up visions of some dreaded evil overtaking my engine; this one could be well over $1000, I dared to think. But while I did consider going the alternate repair route, instead I went for speed and brought the car into the shop for repair.

$791.80. That’s what I paid my haste, and as you’ll note, it fits nicely in the middle of that expected $500 to $1000 range mentioned at the outset. That means it merely comes under the category of a run-of-the-mill repair. Nothing special, right?

The knock sensor needed to be replaced and the EGR ports had to be cleaned. And there are still at least two dozen similar widgets on the car that could go anytime.

But as disgusting as this episode was, let’s take a look as the alternatives, how they could have fit into my situation, and some other things you might want to consider if you plan to keep your car around for more than five years but don’t want to get hosed on the repair costs.

FREE diagnostics!

One of the problems with car repairs that really spook us non-car types is that we usually don’t know specifically what’s wrong with a car that stalls, dies or flashes warning lights. Not only does this make do-it-yourself repairs seem daunting, but it also leaves us vulnerable to exaggerated work orders at repair shops.

But knowledge is power, and even if you don’t do the repairs yourself, you’re giving yourself a tremendous leg up if you can go into a repair shop knowing what the problems are in advance. And there is a way you can do this—before spending any money!

Before bringing the car to a repair shop—while I was still thinking of going “alt repair”—we brought the car in for a diagnostic check to find out what the problem was. Autozone offers these for free! They hook your car computer up to a mini-computer that tells you where the problem is. Now the system they use at Autozone isn’t as sophisticated as the ones at the fancy repair shops, but I can tell you this: the Autozone diagnostic revealed the same EGR and knock sensor issues that the mega computer at the repair shop did.

The difference? The repair shop diagnostic was $100, the Autozone scan was free.

Finding out what’s wrong with your car is half the problem if you want to repair it yourself, and you can do that at Autozone. They do this as an inducement for you to buy their parts of course, which leads me into the next topic…

Buy car parts direct and save—a ton!

The same Autozone that does the free diagnostics on your car, can also save you a bundle on car parts. Again an example from my recent repair experience…

After getting the diagnostic at Autozone, we priced the parts needed. A new EGR valve would be $124, a new knock sensor would be $99.

For comparison sake, the repair shop charged $268 for the knock sensor replacement. Clearly, not only are they charging us for labor, but they’re adding a mark-up—a very healthy one at that—to the parts they’re installing in the car. Had the repair shop purchased the part at Autozone, they’d have made a $169 profit, or 169%, just on the part itself. My guess it that they get it for less since they’re a national chain and can buy in bulk, but I digress.

If the EGR valve needed to be replaced (it didn’t), they would have charged “over $300” for the part alone. That’s about two and a half times the actual price of the part!

Do you see now why even routine repairs to your car can run upwards of $1000???

Moral of the story: either make the repairs yourself, saving on labor and the massive parts mark-up, or find a mechanic who will let you buy your own parts! Either way you’ll save hundreds of dollars on a typical repair job just by doing this.

(Note: I don’t intend for this post to be an advertisement for Autozone; that’s just the parts dealer we chose to use. You could get similar savings on parts at Pep Boys or any number of suppliers.)

Do you want to save even more on parts?

A few months back I did a post on a website/network called Car-Part.com, a national network of salvage parts dealers all over the U.S. and Canada.

If your car is more than a few years old, it can be more cost effective to replace worn out parts with used ones rather than new. The savings can be enormous. This is especially true if you need body parts for the car.

You can go on the site, enter the part you’re looking for, and it will bring up dealers in your area that you can either visit or order by mail—there are literally thousands of dealers in the network. Not only will this be cheaper than relying on a repair shop or body shop for parts, but it will give you more control over the specifics. We’ve saved hundreds of dollars using this network, and I can strongly recommend it to anyone.

Find a backyard mechanic

This is my favorite of the alternate car repair topics! If you’re a car guy, this doesn’t apply to you, but if you’re like me, this is the crucial link.

We all know people who know a lot more about cars than we do, and that can be a real advantage at repair time. At a minimum, having someone who can point you in the right direction is significant in itself. But having a link to someone who can also do the repairs is downright liberating! You’re free from the repair shop robber barons.

Carlos is a close friend of mine, who happens to know a lot about cars. When he doesn’t know something, he knows someone who does. For me, he’s the guy who ties all of this together. He’s a big part of the reason we’ve been able to keep two (paid for!) older vehicles.

Do you know anyone like this? Perhaps a repair shop employee whose looking to make some money working on the side and will charge a lot less than the hourly labor rate at the shop? And just as important, one who will let you supply the parts?

A discount mechanic, in combination with direct buying of new or used parts, can easily chop a repair bill from a $1000 to only $300 or $400.

Would that make keeping your car a few years longer, or buying a used car instead of a new one, worth it to you?

Here’s some bonus material…

Talk of car repairs always conjures up thoughts of used cars, after all you can hardly talk about one without taking on the other. But as luck would have it, this week Kiplinger’s published their list of the “10 Best Picks In Used Cars”. Six of the vehicles are priced in the mid-teens, the other four run up to the mid-20s. The list includes:

2007 Mazda 3s Touring Sedan

2007 Honda Accord EX-L V6 Sedan

2008 Chevy Malibu LT

2007 BMW 328i Sedan

2007 Hyundai Azera Limited

2006 Lexus LS430

2006 Ford Escape Hybrid

2008 Subaru Forester Sports 2.5 XT

2008 Honda Pilot Ex

2006 Honda Odyssey Touring

So there are the used cars du jour, and now you have a way to keep them running longer for less money!

What are some money saving secrets you use or know of, to save on car repairs? Have you used any of the suggestions above? What was your experience?

By Kevin M

Question: is a car an asset or a liability?

That was a theory question in a sophomore level accounting course I took in college way back when. After some debate among the class, the professor confirmed what we all knew, that the technically correct classification is “asset”, but felt compelled to add, “Of course, in the real world, we all know that automobiles aren’t assets at all, they’re liabilities that cost money and continually drop in value from the moment you drive them off the dealer lot.”

Most of us know this to be true intellectually, but does that reality guide our decisions at buying time?

Cars represent a structural expense, that is, an expense that’s mostly a consequence of an underlying cost structure created at the time of purchase. Once we’ve made the initial purchase, we’re largely stuck with the expense level over a period of years. It’s in our best interest then to make the most intelligent decision at the time of purchase.

With that thought fresh in our minds, I believe used cars are the better choice for most people in most cases.

The new car trap

Buy or lease a new car every 3-5 years and you’re guaranteed of one thing: you will never get out of debt. You will always…

• pay the new car premium,
• have monthly payments to make, and
• dedicate a disproportionate amount of your income for auto expense, since debt service, insurance and ad valorem taxes are higher on newer vehicles.

Cars always decline in value and you can never come out on top in this game because the deck is fully stacked against you from the start. According to Buying Advice, the average new car will lose up to 20% of it’s value in the first year and 10% of it’s value in each of the next four years. That’s a 60% decline in value within the first five years of ownership.

In 10 Ways to Buy a Car Without Getting Ripped Off we discussed another dilemma often afflicting frequent car flippers: being “upside down”—or—owing more on the car than the car is worth.

Many owners of late model cars are in this situation because of extremely low or non-existent down payments, immediate and continuous depreciation of vehicle value, and dare we say it, cutting a bad deal on a car in the first place. Still another cause is the possibility that an owner may have bought a new car while still being upside down on the previous one. The hole only gets deeper when the process is repeated!

Used car advantages

Let’s face it, buying a new car is a rush! The newness, the cutting edge design and technology, the idea of being the original owner, the new car smell; alluring, all of it!

However, if we’re going to talk dollars and cents, buying used comes out as the solid better deal.

1. Since there’s no manufacturer to pay, used car prices are more negotiable, and there are great websites that can help you find a huge inventory of used cars where ever you live.
2. If you’re not particularly savvy when it comes to cars, the ramifications of making a bad deal on a $10,000 purchase price are likely to be far less severe than on a $25,000 car
3. The possibility exists to purchase direct from a current owner which can produce an even better price than working with a dealership
4. Since much of the depreciation on new cars occurs in the first two to three years, used car prices are closer to book value (Car Price has a good tool to estimate depreciation)
5. Since used cars can be bought closer to book value, and depreciate more slowly than new cars, it will be easier sell and cover the attached loan, should that become necessary
6. The relative size of a down payment from a $3000 trade in will be proportionately higher on a used car at, say $10,000, than on a new car at $25,000 or $30,000
7. On average, depreciation slows after a car hits five years old
8. It can be more cost effective to buy a better quality used car than a cheap new car
9. Loan balances will be smaller due to the lower purchase price
10. A lower purchase price holds the possibility of paying off the loan early, or for buying the vehicle for cash, eliminating the need to carry debt
11. Do you really want your 16 year old cutting her teeth in a new car???
12. The lower overall cost structure of a used vehicle will afford more options at a future time when income may be in doubt

And here’s one we don’t often think about: even if you buy a car brand new, after a year or so, it’s not new anymore!

The bottom line

The average new car today costs roughly what it cost to buy an average house in the 1970s. One of the problems with the price structure is that there’s little room for people of modest/middle class means to buy a new car, or at least to do so without taking on an outsized debt. A $20,000 debt on a mid-priced car is hardly unusual, and that’s a debt on a depreciating asset!

Assuming a five year term and a rate of 10%, the monthly payment on a loan that size is about $425 per month. Some families have two of them, or $850 per month—that’s not a car payment, that’s a small house payment.

Just because the bank says you can “afford” to carry such debt, doesn’t mean it’s in your best interest to do so. $850 per month is over $10,000 going out the door each year to cover debt service, and that doesn’t even include the costs of fueling, insuring, maintaining and repairing the cars. Can you really afford that?

Given that there’s very little selection available for new cars for under $20,000, the better option for many people will be to buy a used car. A two to three year old car can have many of the benefits of a new car, but can be had for 30-40% less. On a $25,000 car purchased brand new, that’s a savings of $7500 to $10,000.

How might it impact your future financial position to have that much more money in your bank account than in your car?

Can you think of any other reasons a used car would be a better choice than buying new? Do you hold the opposite opinion, that new is the way to go?