How to buy a good used car, or a project car, and how to tell the difference
Most of us don't have a spare million sitting in the bank available any time we want to buy a brand-new vehicle. The rest of us get to choose from the old, used cars that someone else got tired of.We want to avoid buying a car that we later find out has a bunch of problems we didn't know about. A good inspection should be able to uncover most of these problems. You could take it to a mechanic, but expect to pay for the inspection. This can get expensive if your mechanic finds problems that makes you decide against several cars you paid him to inspect.
My Vehicle Inspection Checklist (click here to download pdf)
Or if you're looking to save money by buying a project car, then this worksheet can help you evaluate what it would take to fix it.
You can do the inspection yourself, but it helps if you have a close friend or family member help you. You just have to know what to look for. I often forget to check things because I get distracted or excited about a car, so it's a good idea to bring along a checklist, flashlight, pen, paper towels, and an OBD-II scanner that you can connect to your cell phone.
Usually, used cars from a dealer already have had an inspection done. It's the cars from private sellers that really need a good look-over. I looked at buying a truck a while ago and saw a great price, $3300. I went that night and took a look with my flashlight. I found several problems that the owner said he didn't know were wrong. I saw a broken leaf spring and noticed that the front differential had a leaking seal, just by getting down and looking. The engine had a persistent misfire. He said it was like that since he got the truck a few years ago. The transmission's synchronizers were worn out. You couldn't downshift without the gears grinding really bad, unless you did a double-clutch throttle bump. The check engine light was non-functional or disabled (that's why it wasn't flashing during the misfire). And the OBD-II port's wires were cut, so I couldn't get any information with a code scanner. I offered the guy a stupidly high $2000 for a project truck that I didn't really want. He never took me up on the offer though. But if I had a good inspection form, I could have figured out a better estimate of the truck's value, which may have been only scrap value.
Brakes and tires are consumables. Cars go through them and if they're in need of replacement it's usually not that big a deal. The big deals are the engine and transmission. If you have a $2000 car and the engine quits, then you just sell the car as scrap and buy another $2000 car. But you want to get a decent $2000 car, not a basket case.
Here's a hypothetical situation. Say a car worth $10,000 was in an accident. It caused $8,000 worth of damage, so the insurance adjuster totaled it. Let's say a shop buys the car for $300. With a branded title, they can't get much more than $7000 for it after it's repaired. So they have an upper limit of about $6000 to spend on repair parts and labor. They put it up for sale for $8000, expecting to get an offer for $7000. But there's no way they can perform the full and proper $8000 repair and still make a profit. They had to cut at least 25% of the repair cost out of the actual repairs. The repair parts probably won't be certified to fit, and some damage may not be repaired or not repaired correctly.
But if you know the history of why the vehicle was totaled, you may be able to find a good deal, such as a theft recovery vehicle that wasn't wrecked.
One mistake I made was on a 1994 Dodge Caravan 3.8L AWD. The van was vandalized and looked like it just needed tires and a couple windows. But it sat for a long time. So I bought it for $100 and put tires and glass on it. Then I did brakes, fuel pump, a driveline bearing and seal, etc. Getting the thing back to good running condition cost me $1900, and that was me doing all the labor except for the tires and glass. We drove that van for no more than 25,000 miles before the transmission quit at just over 100,000 miles.
Do Your Homework
Research the car you're interested in first. Check out reliability reviews. Determine the value. Use my checklist to evaluate your own car before you go check out that new ride. That way you'll be better able to quickly determine the value of the car and what price is fair.Negotiating the Deal
There's much more to the price of a car than the value. When you buy from a private party instead of a dealer, you're likely dealing with someone who has some emotional baggage tied up in the car. Maybe they liked it. Maybe they hated it and it cost them money. Maybe they are unwilling to face the reality of the value.
Cars that are priced at their actual value really do sell quickly. You will probably run into someone asking more than it's worth and firm on the price. One example is this 1962 Thunderbird with no engine and no transmission. I've been seeing this car on the classifieds for maybe a decade now.
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| Still up for sale. Has it been a decade? Still not worth $4500. |
So you'll want to know up front if they're willing to negotiate on price. If they're asking more than it's worth, one of the first questions you want to ask is if they're willing to negotiate on price. You may want to follow that up with asking them how they determined the asking price.
Most private sellers don't understand that selling faster for less is often more profitable than waiting for the higher price. Consider a small dealership that sells ten used cars a week for an average $500 profit each, making $5000 a week. Maybe they could make $1000 profit on each car, but are only able to sell two a week at the higher prices. That dealership probably wouldn't want to have a space occupied by a car that isn't bringing in any revenue. They would be willing to lose money on a car to get the space to be available for more cars. If they had only 20 spaces, and had an inventory of 10 cars that weren't selling, they would lower the price on those, even if it meant a short term loss.
So before you travel to look at the car, ask if they're willing to negotiate. My brother asked me to help him take a look at a Toyota Prius. I brought along the checklist and found some things wrong with the car that weren't readily apparent. The front end and back end had minor unrepaired damage. He was asking $8000 for a $6000 car and was unwilling to negotiate. When I said that I found some things wrong with the car, he immediately got defensive and said he didn't want to get beat up on price. He brought up unrelated situations such as the boat he had in his back yard as the reason he couldn't come down in price. It was a learning experience.
I'm not saying that over-priced cars don't sell. They sometimes do. But you don't want to be the one over-paying. The guy with the Prius actually called my brother back and bragged that he sold it for $8000.
Don't get emotionally involved. You don't have to have that car. There are more cars added to the classifieds every day. Always be willing to walk away.
My inspection checklist has gone through several revisions as I improve it. There is an order to the efficiency. You want to start with the most important things first, and not spend too much time on a car that you will decide against.
- Take it for a test drive
- Inspect the interior
- Look under the hood
- Look over the exterior
- Look underneath the car
Here are some pointers to help you know what to look for while you're going through the vehicle inspection. Write down everything that you find wrong with the car that needs to be fixed.
Engine and Under the Hood
If the engine oil is black, then it's probably overdue. Check for head gasket failure by removing the oil cap and looking for any gray slime. Any gray slime means coolant is getting into the oil. Coolant corrodes engine bearings, so if you see any gray slime, consider the engine in need of replacement. Check the radiator for any gray slime, meaning oil getting into the coolant. (Don't open the radiator if the engine is hot or the radiator hose is pressurized.)
Are there signs of oil leaks, like large black spots on the driveway? Most oil leaks aren't too hard to fix. Rear main oil leaks are more difficult because you have to take out either the engine or transmission to get to them. There's a weep hole between the engine and transmission. If it looks like oil is coming from there, the engine's rear main seal or the torque converter seal may be leaking.
Check the air filter. A very dirty filter means the owner hasn't had time (or money) to properly maintain the car. If the air box has been replaced with a so-called "cold air intake", ask for the original parts. The factory air box may actually perform better.
Brake fluid should not look muddy, ever.
If the automatic transmission fluid is pink and opaque, coolant may be getting into the transmission because of a crack in the transmission cooler in the radiator. The fluid should be reddish. If it's brown, it's overdue for a change. If it is black or smells burnt, then the clutch packs are slipping and it needs a new (or remanufactured) transmission.
Brake fluid should not look muddy, ever.
If the automatic transmission fluid is pink and opaque, coolant may be getting into the transmission because of a crack in the transmission cooler in the radiator. The fluid should be reddish. If it's brown, it's overdue for a change. If it is black or smells burnt, then the clutch packs are slipping and it needs a new (or remanufactured) transmission.
[Update April 2021] There may be times when you can't tell when a transmission or engine has problems. I have a 2007 Ford Freestyle that has a transmission that won't go when below 40F. The fluid pressure is too low until it gets warmed up.
My son bought a car that lasted about six weeks until the engine bearings failed. For his next car, the transmission failed the day after he bought it. You can't always tell when something major is about to fail.
Branded Titles and Why to Avoid Them
The major reason to check over the exterior is to look for evidence of unrepaired damage. When a car is in an accident, or flood, fire, or weather damaged, and the insurance adjuster determines that it is more expensive to repair than replace the car, then the car is sold for scrap. These cars get branded titles, also called a salvage title. But some shops may repair such vehicles for much less than the insurance adjuster's estimate. To do this, they might take shortcuts. You pretty much have to take shortcuts to come out with a profit after the branded title discount. A branded title due to a minor accident or theft recovery could be a good deal still. I'd avoid a salvage title due to an accident that caused the airbags to deploy.Here's a hypothetical situation. Say a car worth $10,000 was in an accident. It caused $8,000 worth of damage, so the insurance adjuster totaled it. Let's say a shop buys the car for $300. With a branded title, they can't get much more than $7000 for it after it's repaired. So they have an upper limit of about $6000 to spend on repair parts and labor. They put it up for sale for $8000, expecting to get an offer for $7000. But there's no way they can perform the full and proper $8000 repair and still make a profit. They had to cut at least 25% of the repair cost out of the actual repairs. The repair parts probably won't be certified to fit, and some damage may not be repaired or not repaired correctly.
But if you know the history of why the vehicle was totaled, you may be able to find a good deal, such as a theft recovery vehicle that wasn't wrecked.
Interior
A strong air freshener smell may mean that there is an odor that they're trying to cover up. I've seen this with a smoker owned car.
Remember that blue book ratings don't include cars in the poor condition category. These special project cars may require careful evaluation due to the high risk of becoming a money pit. If it doesn't start, it's in poor condition, no matter what the owner claims is wrong. They may say it just needs a fuel pump, but there may be other problems you can't find without it running.
You may want to practice on your own car before going to look at a used car. I updated the inspection worksheet several times since I printed this one. Here are the results of my inspection.
Value
You'll want to compare the vehicle condition to the blue book value. The only way to ensure you have an accurate estimate of the condition is with an inspection. After you come up with an evaluation, that's pretty close to your upper limit for an offer. Don't let a high asking price trick you into thinking the car is better than it actually is. Often, owners don't even know what's wrong with their car. If you can show them exactly what is wrong and what the value should be, you have a higher chance of them accepting your reasonable offer.Remember that blue book ratings don't include cars in the poor condition category. These special project cars may require careful evaluation due to the high risk of becoming a money pit. If it doesn't start, it's in poor condition, no matter what the owner claims is wrong. They may say it just needs a fuel pump, but there may be other problems you can't find without it running.
My Inspection
It took me about an hour to research the car, and about two hours to inspect it. (I was really thorough.) I found 15 things I didn't already know about, even though we've owned the car for a couple months.You may want to practice on your own car before going to look at a used car. I updated the inspection worksheet several times since I printed this one. Here are the results of my inspection.
