# Buying a used car



## liquidfinance (Jan 28, 2011)

So I'm toying with the idea of getting a car for winter. Been using the bike all summer and we already have a car but the wife thinks a second car would be better. I'm reluctant to spend the money but it would offer much more convenience.

Would you look to finance or sell some investments and buy cash? I'm not talking huge sums here. Probably around $12k I guess it really depends on the interest rate being lower than the expected rate of return. 

Thoughts appreciated.

Thanks


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## chantl01 (Mar 17, 2011)

As you already mentioned, it's really dependent on what loan interest rate you have access to vs your expected rate of return on investments. Generally speaking financing options on used cars are relatively high rates - 6 to 8% is what I've been quoted previously (which the dealers seem to think is a good rate!). If you have access to a Home Equity Line of Credit (HELOC), you might be able to get it down as low as 3.5% and you would have the flexibility to easily pay it off as quickly as possible. My thought on a depreciating asset like a vehicle though is to always pay in cash. That way if something happens to it, you're not still paying off a debt for a nonexistent asset.


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## Spudd (Oct 11, 2011)

You can buy studded tires for bikes, which would allow you to bike year-round if you wish. Depending on the distance you normally travel this may or may not be practical/desirable. 

You can also look into getting a Zipcar or Autoshare membership for the odd time when a car would be handy. Since your profile says you are in Toronto, hopefully there is one of these nearby to your house. (Or Car2Go, which is even handier if you live downtown. I don't, so they don't always spring to mind for me. The advantage of Car2Go is you don't have to return the car to the same place you got it - so you only pay for the actual drive time.)

I agree with chantl01 if you do plan to buy a car - I think interest rates on used cars are not usually good, so I'd just pay cash.


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## james4beach (Nov 15, 2012)

liquid, similar thoughts going through my head (I also mainly use a bicycle). Definitely check out this recent thread which has a pretty good discussion on used cars too
http://canadianmoneyforum.com/showthread.php/16445-Should-I-buy-a-car

Personally I definitely plan on paying cash for a used car, probably spending $5k to $10k

When I lived in Toronto, I looked into Zipcar/Autoshare but didn't find it cost effective. I ended up mainly bicycling and using transit, with occasional car rentals -- which can be quite cheap during winter months (use a credit card that has rental car insurance included on it). I used travelocity.ca for rental cars, book it well in advance to get very cheap rates.

In fact I still find it hard to justify the idea of $10k for a car, when car rentals (even at Enterprise, National, Thrifty etc) can be so affordable, like $20 to $30 per day all-in after taxes. Depends on the city obviously.

If I had a lifestyle that required daily use of a car, that's different.


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## Spudd (Oct 11, 2011)

Zipcar/Autoshare is kind of expensive, but it's still a lot cheaper than owning a car! (Depending on the amount of usage, of course.)

We've used Zipcar 14 times in the past 12 months, and it cost a grand total (including the membership fee) of $338. Before, when we owned a car, we were paying $250/mo in insurance alone.


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## chantl01 (Mar 17, 2011)

There have been many studies on the relative costs of little-used cars (i.e. in an urban environment) vs just using a taxi when needed. In most cases, the taxi is the less expensive option on an annual basis. Yet people have an inherent reluctance to give up on cars and rely on taxis. I think the car-sharing services are filling a nice niche in between and can be a really good option, combined with the occasion weekend rental car. I hope I can convince myself of the economics of it, once it comes time (I still live in the suburbs making owning a car my best option currently). Check out this blog post on the subject:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2010/11/why-wont-she-just-take-a-taxi.html


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## james4beach (Nov 15, 2012)

Spudd said:


> We've used Zipcar 14 times in the past 12 months, and it cost a grand total (including the membership fee) of $338.


See at 338/14 = $24 per usage that's about the same as a rental car. Which is why I wasn't too impressed by Zipcar. As I recall zipcar also has limitations on long distance/highway usage, and there was also an issue of insurance coverage. They include insurance but it's a $750 deductible... pretty ugly... whereas with a rental car, using a credit card with collision/loss insurance, you'll have no deductible.


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## liquidfinance (Jan 28, 2011)

Some interesting points here. 

To clarify the bike is a motorcycle so no option to use it at all during the winter months. Although if I had studded tyres I would probably give it a good go :biggrin:

I live 40 minutes east of Toronto. Zip car not really an option. 
the odd hire car would be but this is really just a convenience thing for my wife as I personally don't think we need a car. 


If I had a car and can maintain the same usage of my motorbike next year then the 2nd car could potentially stand for at least 7 months. 

James it's interesting you should mention the hire car idea. I used to live near a rental shop in the UK and I did cost this out but for the times I needed a car it was only marginally more expensive to own my own vehicle. 

I went to look at a car tonight and it looked to me it had been in an accident so I walked away.


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## james4beach (Nov 15, 2012)

liquidfinance said:


> I went to look at a car tonight and it looked to me it had been in an accident so I walked away.


Be careful about this, because even cars that look good might have been in major accidents or even rebuilt!

Before buying any used car, always get the VIN number (serial #) and investigate the details. Not sure how best to do this in Ontario but in Manitoba I think you could call MPI (the public insurance co) and directly ask its history. If someone doesn't want to let you run the VIN, that's very suspicious


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## wendi1 (Oct 2, 2013)

We just bought a second car (convenience, as you say). We have always bought used (3-6 years old), and have always paid cash. We sell 'em for scrap when we are done.

Edmunston's Lemonaide is an excellent resource for used cars - I strongly recommend it.


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## Spudd (Oct 11, 2011)

james4beach said:


> See at 338/14 = $24 per usage that's about the same as a rental car. Which is why I wasn't too impressed by Zipcar. As I recall zipcar also has limitations on long distance/highway usage, and there was also an issue of insurance coverage. They include insurance but it's a $750 deductible... pretty ugly... whereas with a rental car, using a credit card with collision/loss insurance, you'll have no deductible.


I do agree the price is kinda high compared to a rental, but it's much more convenient. To get a zipcar we bike <5 min from our house to the car, enter the car, and away we go. To rent a car, we have to bike more like 15 min to the nearest rental place, stand in line, fill out paperwork. We rent cars when we need them for longer, but if we just need to take the cat to the vet or something, then we use the zipcars. The combination works out a lot less than owning a car.


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## Four Pillars (Apr 5, 2009)

james4beach said:


> See at 338/14 = $24 per usage that's about the same as a rental car.


You can rent a car for $24? It's been a while since I've rented anything, but prices must have gone way down in the last few years.


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## the-royal-mail (Dec 11, 2009)

Some car rental agencies will pick you up and drop you off at your front door if renting from them. They don't usually advertise it. Ask.


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## HaroldCrump (Jun 10, 2009)

Four Pillars said:


> You can rent a car for $24? It's been a while since I've rented anything, but prices must have gone way down in the last few years.


I think it is _possible_ to rent compact cars for that price, not including anything else (i.e. CDW, gas pre-payment, etc.)
But this is not a rate I would bet on getting every time.
$30 - $35 might be more reasonable.


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## Spudd (Oct 11, 2011)

Yeah, usually the cheapest is around $29/day plus tax, but sometimes there are deals for less (and sometimes you have to pay more). It depends a lot on weekend vs weekday (weekend is cheaper) and time of year (Christmas is expensive, for example). In the winter, Discount often has deals for like <$20/day on the weekend, but only at the last minute. Most rental places in my neighbourhood aren't open on Sundays so if you want to rent a car for just Saturday you cannot - you have to pay for Sunday as well since they won't be there to process returns on the Sunday.


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## marina628 (Dec 14, 2010)

We are also in GTA area going to trade our V6 for a smaller SUV .Definitely invest in winter tires and then even a small -midsize car will be ok in our crazy winters.My nephew bought a 2003 Honda 2 years ago for $3500 and he has nothing but great things to say about it.Since you only want a winter car I don't think I would spend much more than $5000 on it.


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## liquidfinance (Jan 28, 2011)

marina628 said:


> We are also in GTA area going to trade our V6 for a smaller SUV .Definitely invest in winter tires and then even a small -midsize car will be ok in our crazy winters.My nephew bought a 2003 Honda 2 years ago for $3500 and he has nothing but great things to say about it.Since you only want a winter car I don't think I would spend much more than $5000 on it.


That makes sense but I just can't stomach the cost to insure something like a Civic. I'm not saying they aren't good cars because I know they are reliable etc but when insurance is cheaper for a Merc / BMW I just can't justify the cost. For sure these may be marginally more expensive to run but shelling out this amount of money I need to enjoy turning the key.

Believe me If I could get a cheap runner $2k and insure for less than $1k I wouldn't think twice to look at anything else especially as I can do a lot of work myself.


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## liquidfinance (Jan 28, 2011)

I'm starting to think my expectations may be too high. 

Every car I have looked at seem like its been run into the ground and traded in as its about to cost money with dashboards lit up like Christmas trees. This is in a price range of $5 to $15000. Some cars at the Lowe end seem to represent mucvh better value such as a 2002 Audi A4.

I know problems have to be fixed for safety but I'm untrusting of dealers. Also having owned an odb diagnostic reader in the past I know you can simply reset errors an some faults will stay away for awhile. Certainly long enough for a car to pass a safety.


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## james4beach (Nov 15, 2012)

I've been helping someone shop for cars all weekend and wanted to share some advice I got from some of my engineer friends.

They said that if you're trying to get a car that's in great shape, practically new, then simply go to a reputable (new car) dealership and ask what they have for used cars, 2 to 3 old, previously on a corporate lease. Apparently you can find cars with as little as 20,000 to 30,000 km, still covered under original warranties, and obviously past the point of rapid depreciation.


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## james4beach (Nov 15, 2012)

Also there appear to be some pretty affordable NEW cars out there. Or I'm getting fooled by dealers... any advice really appreciated here!!!

We were looking at a new 2013 Mazda 3 because Mazda currently has a manufacturer cash back program (means Mazda pays $4000 incentive totally independent of whatever the dealership does)... at the major dealership we went to this ended up with a net cash-price of 17,100 before tax, just based on MSRP, before negotiating. This is not a bad car. I've driven hundreds of km in them when I rent cars.

As I understand it the dealerships have a strong desire to get rid of current year, 2013 models. Or am I being duped? Is 17k (net of rebate) a good price? As I understand it the "manufacturer cash rebates" are specific incentive programs, and these rebates come from head office... not the dealership. In other words you can still negotiate with the dealership as the $4000 isn't their money.

Now here's my thinking. Since you can get a good quality, brand new 2013 car for 17k, doesn't this mean you should be able to find a similar car that's just a couple years old (still under warranty!) for around 12k ? Assuming typical depreciation.


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## rivet (Nov 30, 2012)

$17000 before tax seems quite normal for a small car, I remember the 2013 toyota corrolla is only $18*** after tax and everything if you pay cash. I believe it is not hard to find a decent 3 to 5 years used compact car for $12000 or brand new one for $20k. 



james4beach said:


> Also there appear to be some pretty affordable NEW cars out there. Or I'm getting fooled by dealers... any advice really appreciated here!!!
> 
> We were looking at a new 2013 Mazda 3 because Mazda currently has a manufacturer cash back program (means Mazda pays $4000 incentive totally independent of whatever the dealership does)... at the major dealership we went to this ended up with a net cash-price of 17,100 before tax, just based on MSRP, before negotiating. This is not a bad car. I've driven hundreds of km in them when I rent cars.
> 
> ...


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## wendi1 (Oct 2, 2013)

It doesn't necessarily follow that a used car will be depreciated reasonably - the marketplace rules, and sometimes is not very logical. I recall looking for a used Mazda 3 one year, and finding that new prices were very similar to 3-5 year old used prices. 

The secret is to find the cars that are both very reliable and at a good price, which is where the Edmunston book comes in. We ended up with a Ford Escort (which is now 15 years old) instead of the Mazda 3.

I also suggest you try smaller dealers. These are often repair shops that deal used cars on the side. They can be found online. Of course, have any used car checked over by a mechanic you trust before you buy. And never deal with someone who doesn't have a verifiable address.


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## james4beach (Nov 15, 2012)

Wow this is great thanks for the replies. That's an interesting point that the depreciation isn't necessarily the "average" rate...


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## liquidfinance (Jan 28, 2011)

Finally found one. 

Not cheap to run but but very nice. 

2006 BMW X5 :biggrin:

Although the insurance was very reasonable compared to anything else I looked at.


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## james4beach (Nov 15, 2012)

So you bought it? Congrats!


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## Four Pillars (Apr 5, 2009)

liquidfinance said:


> Finally found one.
> 
> Not cheap to run but but very nice.
> 
> ...


Nice - how much?


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## liquidfinance (Jan 28, 2011)

Four Pillars said:


> Nice - how much?



$10400. 

Car has done 170k which is 106k Miles. Owned plenty of cars with that before and never had too many issues so touch wood! I'm not afraid to get my hands dirty once in a while either. 

I anticipate doing 5k a year in it so for me it should have a good life (5years) I just thank the people who are willing to shell out $70K + for these vehicles when they are new :biggrin:


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## nathan79 (Feb 21, 2011)

That's a great price... I assume that's the 3.0i?

And the mileage is no problem. I don't think I've ever owned a car with less than 150K on the clock, lol. Almost any car will make it to 400K with proper maintenance.


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## liquidfinance (Jan 28, 2011)

Yeah 3.0i Straight 6 Exec trim.


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