You feel smug don’t you? Those tinted windows, that sound system, the
leather seats, that victory at beating the car next to you at the green
light. Don’t lie: you have an unnatural
connection to your car, like it somehow defines or compliments a part of your
lifestyle – never mind that’s exactly what the marketing people want you to
think. Wear LL Bean and drive a Subaru?
Pine for Edward Cullen (Twilight) and have a Volvo in your garage? Trust fund
tushy only comfortable atop German-sourced leather?
America has a problem: people
spend more time thinking about their ride then planning their retirement. How do you stop being a car diva? That’s your problem, but get a grip: a car is
a depreciating asset (i.e. it won’t make you richer) and will one day: A) end up in a junkyard; B) sold
to some weirdo on Craigslist; or C) worse
case, traded-in far below market value for a newer model. The purpose of this post isn’t to shame you
into trading your metal idol for something insanely practical – you’re way too much
of a car diva for that. Instead, this
article is meant to provide a quick how-to guide for someone that needs/wants
transportation, but would like to minimize depreciation expenses. Welcome to
the world of beater shopping.
Car divas have lots of excuses
for eschewing beaters:
D for – definitely need to spend
more money to get something reliable.
I for – I wouldn’t be caught dead
driving that!
V for – Very unfair, I work hard
and want to treat myself to something decent
A for – Am I going to fit in with
the rest of the neighborhood/company/family?
My response to these
excuses: Yes, you can (an AAA
membership can give you peace of mind). Get over yourself. Put your money into
something that will work for – not against – you. And lastly, who cares?!
Again, this article is a
life-hack shortcut to choosing a beater (read: used) car. The information presented
is based on years of personal research, ownership experience, and review websites
such as carcomplaints.com, tradeinqualityindex.com, and Consumer Reports. Note about Consumer Reports: they mostly cater to snobby New England car
divas who prefer new or slightly used vehicles with “soft touch” interior
materials. Additionally, their
reliability statistics have subtle inconsistencies and I believe the
organization and its readers (who provide the reliability data via survey) have
an unfair bias against domestic automakers.
(Dave purchased a 2001 Toyota Sienna van for $1 (pictured). Yes you read correctly: a functioning vehicle, with wheels an engine, transmission, doors, seat belts and 2 air bags. It was acquired from family who would have otherwise donated it. With nearly 240,000 miles, the van has been on the road for almost 2 years after its $1 valuation. The Silver Bullet, as it’s called, can handle 7 passengers, swallow tons of cargo, and take a collision with minimal damage – it was in a low speed accident last winter. Dave’s other vehicle is a 1999 Buick Park Avenue (PA) purchased for $2,700. The PA currently has slightly over 170,000 miles. Dave has performed most repairs and all basic maintenance on the vehicles by reading online forums, visiting junk yards, and watching YouTube videos.)
How do you go about finding a
used car for $5,000 or under?
·
Always pay cash
·
Buy directly from the owner (no middle man).
Find owners who: are trading up for a larger vehicle for growing family, are
moving, have service records, and/or have snow tires (it’s shows they’re
responsible)
·
Yes, you’re going to be the Craigslist weirdo
·
Create a checklist before you test drive and push
every button – horn, radio, trunk release, etc. Come up with a driving route and routine
before testing the vehicle. My favorite
maneuvers simulate desperate scenarios: panic stops – do multiple, slalom, and
peddle to the metal. Does the car make
any strange sounds, pull to the side, emit blue, black or white fumes, or clunk
like it has arthritis?
·
Bring a flashlight, find the hood release and *gasp*
open the engine bay. Funny thing, you
don’t need a mechanics license to do this – get used to it: you’re going to be
doing the majority of your own car maintenance after you buy the beater;
YouTube and free online forums are great for this. For added peace of mind, a pre-purchase
inspection is highly recommended; check out this
past
Practically Frugal Family post.
·
Search the internet for common problems and
maintenance intervals for the model(s) you’re considering: focus on these
areas. Do the records indicate
completion of significant maintenance (e.g. timing belt) and common repairs?
Generally sellers of $5,000 and under cars just want
to make a quick sale. In their eyes, the
car is on its last legs and they’ll likely feel sorry for the buyer – “they
must be desperate if they’re considering driving this.” Use this mentality to your advantage and
barter. Does the car need new tires –
subtract the cost from the purchase price.
Dented fender or body panels; light surface rust? Perfect – you’re likely not going to fix
them, but each one decreases the value further.
Some key characteristics about
your $5,000 or under beater before we begin.
Ideally it must meet all (if not most of the following criteria):
·
Mass produced – meaning many were sold – there
should be enough in junkyards to provide cheap, plentiful parts
·
Use engines/driveline systems in production for
several years – longer time to work out bugs
·
Reasonably reliable (engines, transmissions,
electrical systems not prone to catastrophic failure)
·
Does not require premium fuel and gets decent
mileage based on your driving characteristics.
Fuel economy is better compared in the form of the inverse of mpg (as
gallons per mile). Unless you drive significantly more miles than average, the
difference between 20 mpg and 25 mpg is negligible at current fuel prices, especially
at the $5,000 and less purchase price.
·
Has an acceptable amount of life left (end of
life is likely 250,000 – 300,000 or 18 – 20 years)
·
High depreciation and reasonable alternatives
should not cost significantly less
· Priced at a point where you can self insure for
collision and comprehensive insurance (i.e. you’re only going to carry
liability and if the car is totaled, you’ll get a new one)
· Minimal mechanical complexity - avoid AWD, 4x4
or any other marketing derivative of all four wheel propulsion –it’s complex,
costly to maintain/repair and overrated. Get snow tires if you need good winter
traction.
·
Has a good safety rating, equipment (air bags,
ABS, etc.), and won’t crumble like a tin can. It needs to “take a licking and
keep on ticking.” Translation: if you
get in an accident, you want something that can still operate with minimal
rehabilitation cost because the insurance you buy will not cover collision.
Vehicle that best exemplify the
above requirements:
·
Buick Park Avenue (avoid air suspension)
·
Buick LeSabre
·
Buick LaCrosse (with 3.8 liter V-6)
·
Ford Crown Victoria – avoid police interceptor
version
·
Mercury Grand Marquis
·
Toyota Avalon
·
Toyota Sienna (pre 2004)
Runners-up: consider if you can
get a good price on a low mileage model in better than average condition and
your circumstances warrant it:
·
Buick Century/Regal - price is the only selling
point over above list
·
Chevy Lumina – ditto above
·
Honda Accord (1999 and before)
·
Lincoln Towncar
- only if you can’t find a better deal on a Ford Crown Victoria or
Mercury Grand Marquis – avoid air suspension.
·
Toyota Camry ( avoid models with 2.4 liter
4-cylinder engine)
Below is a highly opinionated
overview of various car companies highlighting models of particular
interest/disinterest. Maserati, Mini,
Porche, and Tesla are not even discussed; if you have to ask why at this point
in the article, then you shouldn’t be driving in the first place.
Acura/Audi/BMW/Cadillac:
Most (if not all) require premium fuel.
If regular fuel requirement didn’t exist, I would recommend Acura TSX –
it’s a Japanese and European spec Honda with a high price markup for people who
buy on brand. Audi & BMW are
notoriously unreliable and expensive to maintain as they age. Avoid.
Cadillac’s have spotty reliability and Buicks are reasonable
alternatives that cost less.
Buick: Yes, people are going to assume you’re an old
person. Find one with the ubiquitous 3.8 liter V-6 which has been in production
for decades. Best models are: Park
Avenue and LeSabre – likely to be good in a crash, mass produced (lots of spare
junkyard parts). Considering their size, they get reasonable gas mileage. Avoid
Park Avenue models with air suspension – it will fail and is costly to fix. LaCrosse is worthy mention too. Consider Century or Regal with 3.8 engine if
you can get a really good deal, but be warned that Century and Regal models are
dreadful to drive and generally have cheap interior parts that fall apart
easily.
Chevy: In the majority of
cases, the Buicks mentioned above are better alternatives. Trucks are generally
reliable (except S-10) and parts plentiful, but they are gas guzzlers. Although
Impala shares 3.8 liter V-6 engine with Buicks mentioned above, it’s not well
built. Lumina with 3.8 engine might be a
good bet if it can be found for $2,000 or less.
The venture vans have bad crash test ratings for a family vehicle and
are not reliable.
Chrysler: Only
vehicle worth considering would be the Chrysler 300 with V-6 engine, but you’re
unlikely to find one $5,000 or under.
Buick Park Avenue and LeSabre are reasonable alternatives and much less
costly. Trucks suck fuel and front wheel drive cars are cheaply constructed and
are typically rated among the worst vehicles: 200, PT Cruiser, etc.
Dodge: Cars are same as
Chrysler: low rent. Trucks guzzle gas
and Jeeps are just dumb.
Ford: the Crown Victoria is built like a tank,
mass produced, engine and drive train have been around forever, and can
probably take an accident better than anything.
Highly recommended given low maintenance, repair and operating costs. Two
caveats: 1) avoid any Crown Victoria used for police duties (interceptor) – it
likely had the crap beat out of it; and 2) snow tires are a must if you live in
a cold climate. Other car, SUV and van
models, though mass produced, don’t make sense due to reliability issues. Ford trucks are generally reliable, but like
GMC and Chevy trucks, they do not get good gas mileage.
GMC: With the exception of
the Sonoma, GMC trucks and their carbon copy Chevy twins last a long time. However, they have uncomfortable and cheap
interiors and generally do not get good gas mileage. Additionally, there’s little
sense in dealing with an uncomfortable truck with a cheap interior unless you own
a contracting business.
Honda: I think Hondas are generally overrated and command unjustifiably high
used prices. 1999 – 2005 Accords are
among some of the most problematic vehicles (see carcomplaints.com). Transmission issues abound in Accord and
Odyssey models. A pre-1999 Accord is probably best way to go, but may be near
end of life. CR-V feels cheap to drive
and commands too high of a price; reasonable alternatives exist for much less. Civic and Fit have questionable crash
resilience when compared to the average SUV driven on America roads. Element is
an appealing concept, but the 600 lb load capacity is a serious
shortcoming. Ridgeline and Pilot have
mechanical complexity of 4WD and are too overpriced. The Passport is a rebadged Isuzu product and
although Isuzu did not receive any mention in this article, I’m here to tell
you it’s not pretty: questionable reliability and manufacturer has left US.
Hyundai: Hyundai used to
produce trash, but has improved its models considerably in the recent past.
This presents a catch-22: older models are unreliable and newer models suffer
from high depreciation (good for us) given past reputation. At the time of this
writing, there aren’t enough in junkyards to warrant making our beater list. Additionally, they are difficult to work on –
replacing headlight bulb requires removal of the entire headlight
assembly.
Infiniti/Jaguar: Low
production volumes, premium fuel, avoid.
Jeep: Almost all are 4x4 – transmission issues, avoid.
Kia: Somewhat related to Hyundai models, most are unremarkable.
Land Rover: Laughable. Expensive, not economical, and not reliable.
Lexus: Reliable, but too many characteristics violate our rules:
premium fuel requirement, Toyotas offer reasonable alternative for much less,
not mass produced.
Lincoln: TownCar is the same
as Ford Crown Victoria and only Lincoln worth considering. Look for one without
the air suspension – it’s prone to leaks.
Mazda: I think most Mazda
cars have a cheap factory finish/construction and develop significant rust and
suspension issues over time. Millennia
and 626 models in our $5,000 or less price range are plagued by problems.
Protégé models may be the only exception to the bad Mazda lot. Depreciation on these vehicles is likely to
be high (better prices). However, I
consider the Protégé to be too small to provide adequate crashworthiness. Overall,
our mass produced requirement casts a cloud over the whole Mazda line as there
are not large numbers of these vehicles on the road.
Mercedes-Benz: Don’t make me laugh.
Any Benz model you can find for $5,000 or under is going to either be a
complete piece of trash or over 20 years old.
These vehicles violate most of our requirements.
Mercury: All models are Ford
posers. Only one worth consideration is
Grand Marquis.
Mitsubishi: Automaker is
likely to be the next manufacturer that leaves the US market. Very low production volume on models
translates into sky high replacement parts cost. Reliability for Outlander models is enticing
and pre-2007 models can be found for less than $5,000, but beware replacement
parts cost.
Nissan: Trucks guzzle gas,
the Quest in our price range is unreliable and has low production volume. Buying other Nissan models is like spinning
the clunker roulette wheel. Although the company may be associated with
reliability due to its Japanese heritage, it is aligned with French company Renault,
which has questionable reliability; vehicles share many components. Maxima models 1999 and earlier are reliable,
but are likely too close to end of life.
Altima is a mixed bag not worth the risk when better alternatives exist.
Pontiac: Although many
models can be found in our price range and are mass produced, crash test ratings
on most models are not good and interiors are embarrassingly cheap. Buicks offer better alternative in most, if
not all cases including: Grand Am and Bonneville. A notable exception to the Pontiac line is
the Vibe. Underneath the body cladding
is a Toyota engine and drive train which is subject to higher depreciation on
the basis of its Pontiac nameplate. If
considering Vibe or Toyota Matrix, go for a Vibe model and avoid the following:
1) the 2.4 liter 4 cylinder engine in model years 2009 – 2010 easy to do
because it’s likely out of our price range; 2) AWD – these models are less
reliable and have a frequent maintenance cycle. The Vibe did not ultimately make our list due
to relatively small size and scarcity of junkyard parts availability.
Saab: Weird, not mass
produced, high cost of replacement parts, manufacturer has left US market-
enough said!
Saturn: S and Ion models
are relatively reliable, but I’d rather take my chance of a collision in a
Buick. L, Relay, and Vue models are
notoriously unreliable. The Aura and Astra models are enticing for a moment,
but are transplants from General Motors’ European division and as a result are
low volume, high replacement cost used cars.
Scion: I love the concept of
reliable, inexpensive, and utilitarian (hatchback and wagon-style) vehicles
this youth-oriented branch of Toyota promotes.
Scions can be obtained in our price range and have fuel efficient drive
systems that have been around for years, but there are a couple of flies in the
ointment: the questionable durability of the 2.4 liter 4-cylinder engine found
in the Tc and 2008 + model years of the Xb, and the crashworthiness of the
remaining models: xA, xD, and 2004 – 2006 xB.
I owned two xBs for a couple years; they were driven exclusively on city
streets in a small town. Both were sold
when commutes changed to heavier driving in a larger city (with crazier
drivers). I consider the gutless performance from the dinky 100-horsepower, 1.5
liter 4-cylinder engine, small size (the xB actually bounced off the crash test
barrier in an IIHS safety test) and lack of side airbags to be a major safety
issue. The 2004 – 2006 Scion xB is worth
considering if and only if you don’t do much high speed driving in a low
population area. The xA isn’t worth
considering when the more cavernous xB can be had for the same price.
Smart: No, they’re dumb.
Subaru: Society seems to
love Subarus, but I don’t. Here’s
why: Subaru has used the same 2.5 liter 4-cylinder engine in most of its models
for nearly 20 years, but it has always been prone to head gasket failure –
search the internet. Additionally, I don’t think they age gracefully – rust,
expensive and frequent replacement of parts (brakes, wheel bearings, etc.) were
my experience owning a Subaru Legacy until end of life at 18 years old and with
220,000 miles. It was a rust bucket when
I sold it, the steering linkage was leaking, exhaust system was gone due to
rust, and the wheel bearings were bad and could not be replaced due to
corrosion. Granted the transmission and
engine still worked well, but the engine required numerous oil leak fixes. The cost of maintenance was not worth the AWD
hype. You have better options.
Suzuki: Actually fulfilled
my prediction about Mitsubishi by existing the US market in the past couple
years. Models are low volume, and
replacement parts are very expensive.
Avoid the whole lot.
Toyota: Most used car buyers
worship at the Toyota alter. However, liking
all models across a brand is similar to liking all of the tracks on a band’s CD
– and I like my songs and vehicles on a case-by-case basis. The Toyota line offers some pros and cons
with respect to our requirements.
Positives first: most models are mass produced and have engines and
drive train systems in production for several years. Negatives: they are popular used cars and
therefore demand higher prices. Toyotas
$5,000 or less are either going to be older or have more miles than our
alternatives. That being said, I would
avoid any model with the ubiquitous 2.4 liter 4-cylinder engine. In my opinion, this power plant, appearing in
many models after 2002, was cheaply engineered to increase profitability. Stories of blown head gaskets, stripped head
bolts, and excessive oil consumption for this engine abound on the internet. I
briefly owned a Highlander with this engine and it was a POS. Although the 3.0
liter V-6 engine also has a bad reputation (for oil sludge), I’d say the root
cause are dumb owners who don’t change their oil frequently rather than bad
design. The 3.0 V-6 has a deserved
reputation for being a long lasting and reliable design if properly maintained
(avoid bone-head owners or ones without documented proof of oil changes). Large, crashworthy models with this engine
and under $5,000 include: Avalon, and Sienna (pre-2004). Ubiquitous
Camry models with the 3.0 V-6 or 2.2L 4-cyclinder are worth a look as well.
Volkswagen: I like the driving dynamics of most VW models, but they
are hopelessly unreliable, and difficult to work on. Avoid the whole line.
Volvo: Avoid: not mass produced, complicated
designs (electrical issues), and replacement parts are sky high.
There you have it. Used car knowledge distilled
down to a $5,000 or under price point.
Beater cars, they’re not for everybody. If you’re a car diva, challenge
yourself: is your ride really worth the
total cost?
This post is written by guest blogger and friend, David Cook. Here is a little more about him:
I am a 30-something financial pragmatist: down to earth and enjoy telling it like it is. While many of my MBA cohorts gravitated toward corporate pursuits, my path has lead to a position in local government working as an IT Business Analyst and Project Manager. A moderate, non-corporate work schedule has afforded time in my personal life to focus on applying relatively basic financial concepts, including: paying down all non-mortgage debt, shopping for expired food, and gaining competence as an independent dividend growth stock investor. I currently manage a 20-stock portfolio and hope to write about the experience.
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