My father, Chuck, recently bought a used car. He found a cheat code in the current insanity of the second-hand vehicle market to make a deal for nearly ten times less than the average cost of a used car in 2023. While I encourage everyone to read to the end, some may scoff or even “lol” at the notion of buying a car that would not get someone many views on TikTok but may just keep them from going broke. In this interview, learn how by patiently navigating through many options, my dad was able to pay cash for a car he is very happy with. Beauty is in the eye of the beholder! Along with the Q&A’s, I’ll be adding some of my own “Terry’s Takes”. Dad and I are excited to share this true story with you!
Q: What caused you to land in the market of purchasing a used car?
A: I owned a Volvo, on which the cooling system hose suddenly burst, leading to a loss of all the engine coolant. Fortunately, I pay $100 per year to subscribe to AAA, which allows for three tows each year of up to 100 miles per tow, so I was able to get the car taken to the Volvo service center to get the situation diagnosed.
After the team at the Volvo shop had a chance to inspect the car, I was informed of some bad news: The car had a total coolant loss and had blown a head gasket. This led to significant damage to the engine. To get the car back up and running, they quoted me at $6,500, which is almost double what I paid for the car four years ago ($3,600).
Given the highly reasonable total investment and overall satisfactory experience I had in owning my Volvo for 50 months, I elected to move on to another vehicle rather than go through the stress and submit to the solutions of the service center.
Terry’s Take: Chuck has bargain-hunted on several cars in his past. While everyone has been made hyper-aware of the increase prices in new and used vehicles since Covid-19, the truth is that prices were rising well before the pandemic. According to Edmunds, the average transaction price of a used car in 2018 was over $20,000, meaning that my dad paid over five times less than the average at that point. No, my dad wasn’t going to be turning heads on South Beach with a Volvo, but that was never his ambition. Rather, his goal remains to drive a well-maintained, reasonably priced vehicle.
The dirty little secret that few people talk about: Used car prices were consistently rising before the pandemic.
By driving a $3,600 car for 50 months, dad essentially pre-paid 72 dollars per month for his car over the span of his ownership. If he had chosen to buy the average used car on payments in 2018, my conservative calculations show that he would have been paying nearly $400 per month, with interest payments raising the final cost to over $28,000. Hard pass!
When Chuck purchased his used Volvo in 2018, he paid $3,600 in cash rather than that year’s used car price average of $20,100. By avoiding the norms and car loan trap, Chuck saved hundreds on monthly payments, and thousands on interest.
Q: What was the process like of selling or getting rid of your prior vehicle?
A: With the condition of the car, I would have had to make a significant investment simply to make it drivable, which I did not find feasible. After deciding the next steps I’d have to take for a minimal return if I tried to sell, I instead turned the car over to a 501(c)(3) charity to benefit needy children, and that was the end of it!
Terry’s Take: While I would have first explored the option of selling the damaged car to the Volvo dealership, a salvage yard, or another dealership/private buyer, I think it is a totally fine and respectable decision to donate the vehicle to a good cause.
Q: Describe the used car you just purchased.
A: I bought a 1997 Toyota Camry. I know it sounds absurd, but this car is nice looking and from a generation of Toyotas that is extremely durable. All Toyotas are. This one is commonly good for 300-350 K miles and even more! Parts are readily available and reasonably priced. Also, my car was well-maintained and serviced as it should be, and I have 40 service records to back it up. It gets excellent gas mileage and will last a long time. I’m quite satisfied and relieved!
Q: What is the mileage of the car?
A: 170,000 miles
Terry’s Take: Okay, so this is clearly an atypical used car purchase. However, first and foremost, my dad bought a car that he is happy with. I can also assure you that he does not care what others think about it. Aside from the popularity contest, in researching the question How Many Miles Can A Toyota Camry Last?, I learned that 270,000 miles is the expected mileage for this brand/model, with the potential of stretching out as far as 400,000 miles. At the mileage Chuck is driving each year, it would take him well over a decade to even hit the 270K mark.
While it may seem crazy that Chuck bought a car with 170,000 miles, the truth is that Camrys and countless other common car models can routinely make it past 200,000 miles. He should be able to get several good years out of this purchase.
Q: Okay, now the big question: How much, and how did you pay?
A: $3,500, cash money
Q: You are a rare bird! Many Americans borrow money to buy a new or used car or get fleeced on a lease. You paid cash for a “cheap” car. Why not take out a loan to get something newer with less mileage?
A: As I am retired and on a fixed income, I only purchase sensible vehicles that provide me with the most reliable and cost-effective solution to my daily transportation requirements, rather than being enamored with all the glitz, glamor, and gadgets of the current automobile industry standards. For me, it’s no longer about the “cool”, but the “can do”, that motivates me.
Unfortunately, so many people simply are addicted to credit, coupled with a lack of any strategy for planning and saving. This leads to the inevitable situation of funds not being available for necessity purchases, such as when changing vehicles is a true need, and so the credit trap persists and expands.
Terry’s Take: So, we talked earlier about how if my father had just been normal in 2018, he would have been rewarded with almost $400 per month in car payments. If he wanted to be Instagram-famous in 2023, he could have blended in by making the average used car payment in the second quarter of 2023 by paying OVER FIVE HUNDRED DOLLARS PER MONTH! In other words, what he paid for his car that he owns the title to and will likely drive for the next 5-10 years, he would only have gotten through half a year of loan payments. Why are so many people punishing themselves like this??
While there is no doubt that used car prices have soared since the pandemic, there are still deals to be found, IF your top priority is paying cash to avoid an albatross loan and excessive payments.
Q: In the past, I’ve noted that most Americans can’t even cover a one-thousand-dollar emergency. You had $3,500 readily available to buy a car when you needed to. What’s your secret?
A: I always aim to keep around $5,000 in my regular savings. I also have an annuity that has a larger amount I can get my hands on if the situation ever arises.
Although I am on a fixed income, I often have extra money from my budget at the end of the month. Any leftover money goes right into my savings account. This has been an effective discipline for me. When I decide to make any non-essential purchases, I save for them. If it takes six months to get something I want, so be it!
Q: What would you say to someone who tells you that it is insane you bought a car with so many miles, an older car is unsafe, etc.?
A: This topic is critical to making sound decision when purchasing a used vehicle!
The perception of what truly qualifies as unsafe or high mileage is very misunderstood and varies wildly for every make and model. I invested a lot of time studying the data on various car makes and models. I was quite surprised to discover that regarding cars such as Toyota, Honda, Acura, and Lexus (really just a luxury Toyota), a car can hit 200,000 miles and not even be close to the end of its life. Others such as GM, Ford, Nissan, or Jeep/Chrysler could reach the end of life at around 100,000 miles.
I could have purchased a Jaguar with far less than 200,000 miles, for less than I ended up paying for the Toyota. How is this possible, you may ask? Because the reliability is so poor, and the parts/labor for any routine maintenance or repairs is so exorbitant, that some owners bail rather than keep throwing money in a bottomless pit!
Terry’s Take: What is considered normal or essential in this country is beyond insanity. Consider the iPhone. We are now on the iPhone 15, which starts off at $800. Within the content for a personal finance lesson which I have been commissioned to lead with a group of high school students, I will be discussing reasons why it doesn’t matter if you have the “outdated” version 11 or 12 (The used iPhone 7 I bought on Amazon years ago still works fine for me). IT. IS. A. PHONE!!! I don’t care about the latest upgrades such as the 48-megapixel camera compared to the 24MP version. I don’t need my phone dipped in titanium. Can we think of the children and PLEASE stop the madness??
Extreme car prices are not the only cultural norm that needs to be disrupted. A large crowd gathered recently at the Florida Mall for the opportunity to buy the new iPhone 15 for nearly $1,000. So many megapixels! Must have megapixels!
Q: How many miles do you drive in one year?
A: My mileage driven yearly varies. I would estimate around 7,500 miles, which would be a busy year.
Terry’s Take: Remember that 270,000 miles is the expected mileage for this brand/model, with the potential of stretching out as far as 400,000 miles. At the mileage Chuck is driving each year, it would take him well over a decade to even hit the 270K mark.
Q: What are some sources that you used to search for cars?
A: I did an expansive search, which included:
-Craig’s List
-Regular dealerships that sell used vehicles; the big dealers wanted an exorbitant amount of money for cars! I was flabbergasted at the cost and more so the condition of 90% of what I looked at. Most of these cars had too many unknowns, such as several previous owners and a lack of service or accident history.
-Several small used car dealers; a lot of the cars at the small dealers were absolute junk!
Terry’s Take: It is very important to keep in mind that the buyer always has the end power. Not often is there a good reason to say yes to the first option, or the first offer. Many people fail to get second opinions even from doctors when Door #1 doesn’t provide a clear entry, while the few and proud know that the first car they see for sale won’t be the last.
Q: What are some examples of insane prices you saw relative to the vehicle for sale?
A: Too many to keep track of! Toyotas, Hondas, and other common brands were consistently priced at two, even three times more than listed Kelley Blue Book prices! And there was no justification for this other than too many buyers have not put in the time to learn the games that sellers, especially dealerships, play.
This isn’t to say that a fair price can’t be found at any dealer, however I believe it exposes the obvious lack of buyers’ knowledge, or failure to put in extra time or energy to dig into the details of how the used car market ticks in 2023.
Terry’s Take: Again, you have the right to say no.
Why pay for a moderately priced used car in cash? Because it is no fun to be bogged down with tens of thousands of dollars in high-interest debt!
Q: How long did it take for you to find the vehicle that met your needs and budget?
A: In all, the process took about two months. I did a lot of digging. If a person is willing to be patient, do the research, has cash available, and can make a quick yet informed decision, you can still win in the used car market. I will say with a caveat: It is a hot market and desirable cars don’t last long!
Q: You needed a car for two months. I assume you had to drive in the meantime. What did you do to get around while you were searching?
A: I have a friend who lives close to me. He was kind enough to take me around to several locations during my search. He also has multiple cars so for some of the time he loaned me one to drive. As I am retired, I was fortunate to not be on a strict schedule. There were times I made other adjustments, such as having grocery orders delivered to my home, rather than picking up at the store which I usually prefer. I wasn’t going to allow the stress of not having consistent transportation trap me into rushing such a large purchase.
Terry’s Take: Usually when we are in desperation mode, or box ourselves into thinking we have no options, we make impulsive (poor) choices. By being patient and accepting an olive branch, dad was able to extend his car search until he found the right one.
Q: Did you purchase the car from a dealership or a private sale?
A: Sort of a hybrid. I found a gentleman who has a little shop and specializes in repair, restoration, and resale of older Toyotas only. He has access to private auctions where dealerships move cars that they don’t want to put up for sale because they would rather use their lot space on something else. He’s been doing this for over 20 years with great success and many happy customers like me.
Terry’s Take: I defy anyone to tell me that a dealership is the only option from which to buy a car.
Q: What other recommendations would you make for someone on a limited budget who needs a used car?
A: It is important to check on the accident record of any vehicle of interest. Under no circumstances should someone buy a car with a salvage or other title indicating that major body damage has been repaired. This is very common. Clean titles only!
Terry’s Take: Like the commercial says: Show me the CARFAX!
It is my sincere hope that this interview has provided insight upon a creative strategy by which acquiring a car can be approached in this hot market. We learned from a man who has avoided credit and made vehicle purchases which could be described as unpopular and extreme, or brilliant and financially-savvy, depending on point of view. As a growing number of Americans who don’t have the money to justify outrageous loans are past due on their car notes at the highest rate in three decades, the truth is that affordable options still exist in 2023.
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