Buying a Used Car

It has been a warm day in Santa Fe, New Mexico, where strangers are kind and beauty is overflowing.

Here are some assorted thoughts on buying a used car, if one must.

1. Buying an old car is a journey of discovery that is expensive in terms of time, money, and emotional energy. It is ill-advised unless one cherishes the journey. It is true that, in normal times, the value of a new car drops by a double-digit percentage as soon as one drives off the lot. But so does the value of an old car. The drop is especially large if one buys the used car from a dealer. When buying a new car, one pays a premium for indulging one’s idiosyncratic tastes, for not smelling another human’s sweat, cigarette smoke, or dog pee, and for not second-guessing previous owners’ driving history and diligence at servicing the car. Get a used car if you must, but otherwise buy new.
2. Premium features do not resell well. The price of a used car mostly depends on the model year and the odometer reading. Leather seats and a moonroof command a much smaller premium on the resale market than on the new-car lot. As a result, those who buy a car with a luxury trim buy it because they are rich or because they really love cars, not because they believe they are making a sound investment decision. As a result, they will service the car as a rich person would, regularly and well, and they will drive the car as a car lover would, with care. A used car with a luxury trim is worth a look. It may be underpriced.
3. One gets what one pays for, so I see no obvious arbitrage opportunity in committing to buying from a private seller rather than from a used-car dealer. A used-car dealer has a greater reputational incentive than a private seller to not sell you a lemon. You can leave a bad review for a car dealer. You cannot leave a bad review for a private seller.
4. Ask the seller what is, or can potentially go, wrong with the car. You will be surprised how much the dealer or the private buyer could tell you. Their response will help you judge their character. If the seller acknowledges the problem only after you have identified it first, it is a red flag. You want the seller who knows the car that he is selling, and you want to trust him. Trust your intuition about trusting.
5. Should one commit to a make and a model? Perhaps, for a day. Once you see multiple cars of the same make and a model, you will start seeing patterns. Maybe the metal is soft and the coats of paint thin on certain makes. Maybe the cars are prone to corrosion more than you had thought. Maybe the driving position is not as comfortable as you had hoped for. Maybe a fleet car is run down to an extent you did not imagine were possible; in this case, even if you buy the same model in a better condition, it may deteriorate as fast and as badly as that fleet car did. If so, there is no shame in extending your search (remember, you are in it for the journey) and researching another make and another model.
6. You may consider committing to a dealer as an alternative to committing to a make or a model. Different dealers have different business models and cater to different clientele. I trust the seller when I listen to him and hear a mechanic speak. If you trust a particular dealer, see what other cars he has, even if the car you came to see did not live up to your expectations. If you trust the dealer, you may trust him enough to purchase a slightly more expensive car than you had planned. If you do not trust the dealer, move on. You can rarely explain to anyone, including a dealer, that he is wrong, and even if you could, that would not make him like you more or offer you a better price. Just move on to a dealer who is not wrong.
7. Some dealers will ask about your budget. The question is stupid, for the answer depends on the car. If I am offered a 50,000-dollar car for 15,000 dollars, I shall borrow and buy only to resell immediately. How much you are prepared to pay depends on what you get. Your budget may creep as you search and learn about the market. You are not looking to spend a specified amount of money. You are looking for a car you will like and trust from a seller you trust (and maybe even like). Having said this, I see no obvious reason to be strategic with the seller when answering the question about the budget. No one will force you to pay more than you want to pay. You can say, “For a car like this, I would not pay more than X.” But if you say, “I would buy this car for X,” then be prepared to buy it if the seller meets your price.
8. Some (most?) dealers do not fix their cars completely before putting them on sale. An important part of the negotiation process is to tell the dealer what needs to be fixed (e.g., a crack in the windshield) for you to be willing to buy the car. When test driving, you may notice something that the dealer had not noticed and, therefore, has not fixed. The dealer may not know which defects are important to you and which ones you are prepared to overlook. The dealer’s workshop may be too busy fixing the cars that have already found a buyer or require immediate attention, and may have no time to attend to the car that took your fancy with no prior notice to the dealer. Having said this, if the car has an obvious problem, and the dealer has put it on sale with that problem (e.g., a foul smell), perhaps the problem cannot be easily fixed. Furthermore, if you notice problems that need to be fixed, there are likely to be others that need fixing but you have not noticed.
9. Most cars look good in silver. White looks great on an Audi or a Tesla but not so great on a Subaru. Green looks terrible on most cars but great on a Jeep Wrangler. It is unwise to commit to a colour of a car before committing to a make and a model. You may be surprised by a colour you end up liking.
10. Provided you are lucky and do not end up with a lemon, you will get much more than you will end up paying. A modern car is a marvel of human ingenuity, and any finite price for it is just too cheap. There are so many mechanical parts in it that took so many decades and so many people to perfect, to source, to assemble, and deliver. There is so much love for humanity in it. One does not build something great for the love of money alone. One builds something great for the love of people. There is nothing shameful, of course, in being guided by prices in gauging what it is that people want.

Enjoy the journey.

Thank you kindly.