Auctions: In short, your best values are not going to be found at auctions, at least not the auctions usually open to those with “connections.” Yes, you may find a great deal on a vehicle, but you’re probably not going to find a great vehicle. The more accessible the auction, the more picked-over (repeatedly rejected) the selection. The first rounds of auctions are open only to franchised dealers who have access to the brands they sell. Cars not sold there move to the second round, where franchised dealers can buy vehicles of any brand. After that, third round auctions are open to any car dealer, franchised or independent. But by then, as you can imagine, the cream of the crop have already been taken. The ones that remain, if chosen in the last round, end up on your typical side-of-the-road used car lots, and are – in almost all cases – not good values, regardless of price.
Book Values: There are only two “book values” that matter: NADA’s “Price Guides” (used by banks), and the “Black Book” (used by – and only available to – dealers). So, there’s no point in getting too excited – or too depressed – by “book values” provided by any of the countless sources who provide them, either online or in print: they will not be considered or recognized by anyone you’ll be doing business with.
“Buy Here, Pay Here” Dealers: Rarely good for the buyer, though some – either due to credit problems or other issues – have no choice. More often than not, the cash down payment required covers most, if not all, of what the dealer has invested in the car, sometimes more. The monthly payments the buyer makes are, for the most part, pure profit for the dealer. If the buyer defaults, the dealer probably isn’t going to lose any money, but may very well repossess the car just the same (and try again with another buyer). Even if the payments are made (and made on time), they probably won't reflect on (or improve) the buyer's credit rating.
“Certified” Pre-Owned: Can be more gimmick than good value. Almost every manufacturer supports a “certified” used car program, but not all of them actually hold any significant value for the buyer. Yes, some added levels of inspection and/or conditioning may be included. And, yes, an extended warranty is usually included as well. But the extra cost often exceeds the benefits, particularly on cars and trucks with traditionally high reliability ratings and resale value. In almost all cases, the extra expense does not translate into a similar increase in equity (or resale value); so you’re paying more for some extra “peace-of-mind” that you may or may not need. My advice: think twice before spending hundreds (if not thousands) more for a used car or truck carrying a “certified” sticker. It could be an unnecessary – wasted – extra expense.
Extended Warranties: These are rarely necessary, usually more to the advantage of the seller – who’s making more profit than providing useful coverage – than to the buyer. It’s usually not prudent to purchase an extended warranty on a new car, since most manufacturers allow extended warranties to be purchased at any time within the original warranty period. If you’re buying a used vehicle, you’d be better off buying one with a proven reliability record, leaving you with less to worry about, regardless of warranty coverage. However, if you’re buying something that you expect trouble from, an extended warranty may be a good move. Just be sure to do the research, making sure it covers what you need covered (and that you're not paying for more than you're getting).
“Hidden” Ownership Costs: The costs of owning a car go far deeper than purchase price alone. Financing costs, insurance, fuel, taxes, maintenance and repairs should be considered too. The biggest hidden cost is depreciation, a loss that rarely makes itself known until you’re ready to trade, when far too many owners find themselves in the troubling position of being “upside down” (owing more on their vehicle than it’s worth). And, in some cases, any negative equity could be rolled into your next vehicle, sometimes without your even knowing.
Joint Ownership: Two tiny words – “and” & “or” – make a big difference. Using the word “and” between the names of joint owners requires that both parties be directly involved in the buying, registering and/or selling of the vehicle; both signatures are always required. Using the word “or” between the names allows either party to handle aspects of buying, registering and/or selling; only one signature of the two is required. The word “and” tends to be society’s default setting (as it's typically used to describe most couples), and it does offer a certain level of protection for each party. But it can also cause “headaches” and limit flexibility both in the normal course of dividing tasks (amongst a couple) and in the event of unforeseen events. The word “or” – an option often overlooked – allows greater flexibility during normal course of life, but can be particularly helpful if one party becomes incapacitated or dies. My advice: consider your worst case scenario, and choose between security (using “and”) and flexibility (using “or”). As a general rule, a couple sharing ownership might be better off using “or” between the names, whereas a vehicle shared between parent and child, for example, might be better off using “and” between the two names.
Magazine Ratings: Should be “taken with a grain of salt.” Magazines – and the reviews they often provide – are great reference materials, but they rarely offer the “last word” when it comes to any car, crossover, SUV or truck. Most of these reviews take place in a “vacuum.” A car buff spends some time behind the wheel of a new model, then – in the form of a “road test” (or group of models in a “comparison” test) – gives a largely subjective opinion based on a relatively limited amount of time with a vehicle. Actual purchase price and operating costs are usually not explored. Reliability and resale value are rarely addressed. And, while there can be value in some of the “long-term” tests – where the magazine’s staff actually “lives” with the vehicle for an extended period – even those don’t always cover all the bases. My advice: use these ratings as one of many resources, then use your own good judgment (after considering all the factors important to you) before making your selection.
Recalls: Stay on top of recalls with today's technology. Yes, there are old-tech systems in place to notify owners of defective products by mail, but they're not fool-proof: people move, ownerships change. Now, you can get instant, precise and up-to-date information by first checking for recalls yourself (going to the government's Recall Notices site), and then signing up for email alerts for any number of vehicles and vehicle-related products (by going to the government's Defects & Recalls Alerts site). For more information on these sites, go to my Regulatory Links page. Or, if all of this sounds like too much work, you can simply sign up for my newsletter, which includes recall alerts in each issue.Standard Warranties: Most vehicles come with reasonable warranties. Some come with “extraordinary” ones. Be careful not to let such an “extraordinary” warranty lull you into a false sense of security, however. It’s always best to buy a model – or a brand – with a long-standing reputation for reliability. It makes far better sense for the warranty to serve as peace-of-mind on a good (reliable) car, than to rely on a warranty as a “safety net” on a questionable (potentially unreliable) car. Even if failed components are covered by a warranty, dealing with those repairs still takes time, and often causes personal inconvenience. Even if there’s no dollar cost to you, the time and aggravation will cost you on a personal level.
Tax Breaks & Incentives: There are some tax credits available for certain vehicle types. Larger (usually heavier) trucks (including some SUVs) have long enjoyed some of these breaks, and high-efficiency models – like electric cars, diesels and hybrids, even flexible fuel vehicles – are offered breaks too. These incentives vary, change frequently, and relate directly to your broader tax-payer status. So, check with your accountant or tax preparer to find out whether or not any of the available tax breaks can work to your advantage before you take any action.