Looking for a reliable used car but you have bad credit and just a few thousand bucks for the down payment? Forget the Buy Here Pay Here lots. The loans are extremely expensive and you will be in a situation where you owe more than the car is worth. Not good. The best option is to use the cash you have for the down payment to buy a reliable cheap car for cash. And instead of paying monthly payments, save that money to pay for eventual car maintenance and repairs.
What if you don’t have any savings? In that case, we recommend that you save the money you would use for the monthly payment until you have a reasonable amount, usually $2,500 to $5,000. You can even buy a car for less than a grand but the lower you go, the more difficult it will be to find a solid car. A typical monthly payment is about $350 so if you save that for 10 months, you will have $3,500 to buy your car in less than a year.
With this money, you will be able to buy a reliable 10 to 15 year-old car with 100K to 150K miles and a few dings and dents. I know this is not the car you were expecting but you will have to be realistic. Would you rather be driving a car that you know is yours or a newer model that could be repossessed at any moment? We can give you the tools and info to help you get a cheap reliable car but only you can answer this question.
Can I really find good used cars in this price range?
Yes, you can. The old belief that cars with more than 100K miles are pieces of crap is not true anymore. Engines from a decade ago are more reliable than those from 2-3 decades ago and that’s why now you can see so many cars with about 200K miles running problem free. If the car has been properly cared for, there is a good chance that it will reach 200K miles or more.
Where do I look for cheap used cars?
There are a few options. The first one is public auctions where you can find repossessed cars and other good deals. There are some problems though: there is a limited selection of cars, auctions are not conveniently located, you usually cannot test drive the car, and you will have to be quick to make a decision which can lead to a bad deal.
The second option is independent used car lots. You can find them everywhere and they have a huge selection of cars, especially if you live in a metro area. The downside is that you will pay more for a car.
Third, you can buy a car for sale by the owner and the best place to look for these deals is on the internet. This is my preferred method. The beautiful thing about the internet is that it is literally full of hundreds of thousands of individuals looking to sell their used vehicle. However the internet market, like all other markets is a buyer beware type of environment. While $5,000 may not be enough money to purchase a late-model used car, for many of us it is still a large sum of money, and it would be a shame to lose it by being scammed. Take a look on our safety tips for buying cars for sale by the owner. Any recommended websites to find good deals? I usually go to Craigslist, AutoTrader, or eBay Motors.
Used car pricing
How should you know that the price that the seller is asking is reasonable? You compare the asking price with estimated prices. There are basically two ways of getting estimated prices on a used car: you can look for similar cars for sale in your area or you can look for estimated prices from companies like Kelley Blue Book and Edmunds.
The most popular way is to check the price on the Kelley Blue Book (KBB) website. But don’t use just one method because sometimes I see a big difference between KBB, Edmunds, and actual prices in my region. To get comparable prices go to AutoTrader, search for similar cars, and average the prices. My suggestion is to check all of them (KBB, Edmunds, and comparables) using the internet. It’s free and quick so, why not?
One more thing: if you’re buying directly from the owner, check the private party price. If it’s from a car lot, use the retail price. And when you look for prices on AutoTrader, don’t mix dealer prices with private seller prices.
How do I know that the car is dependable?
So you decided to buy a Honda or a Toyota because they are very tough cars and you don’t even have to worry about car inspection. Well, these are good reliable cars but only if they have been well maintained. The condition of the car is actually way more important than its brand.
There are 3 important things that you will have to go through to determine if a car is worth your hard-earned money: you need a vehicle history report, a car inspection by a mechanic, and lots of questions about the car. In the end, these three pieces of the puzzle need to come together and form a good picture. If things don’t match or don’t look good, go find another car.
There are free history reports on the internet but they don’t tell you the whole story. I recommend that you pay for them and get full info on the car you’re planning to buy. It costs $30 to $60 dollars and will tell you if there are any accidents, flood damage, salvage title, etc. It will not tell you if the car is good, but will tell you if it’s not.
If you’ve found a car under $5,000 and you like it, I strongly suggest that you take it to a trained mechanic before you purchase to fully inspect the vehicle for any repairs that you may have to go through now or in the near future. Most sellers will be fine with this request. Ask the mechanic to give you a written estimate of the repairs; you’ll use it to bargain with the owner. The most important is to be sure that the car will be able to safely and reliably take you from point A to point B. Don’t worry about small cosmetic repairs unless they affect your safety or the ability to drive the car. The cost of an inspection service is about $100.
Also, ask lots of questions about the condition of the car and all the maintenance/repairs that the car went through. It doesn’t cost you anything and will give you a better idea of how well the car has been maintained.
- Look for a car on the Internet within your price range
- Use the make/model/year to get an estimated price for the car (KBB, Edmunds, AutoTrader). Is the asking price way lower than the estimates? It’s probably a scam so go back to step 1. Is it higher than your estimates? Keep looking. You’ll find something better.
- Call the owner, ask a few questions and get the Vehicle Identification Number (VIN)
- Use the VIN to get the history report on the car. If something seems fishy, go back to step 1
- If he had good answers and everything matches, then it’s time for a test drive
- If the test drive went ok, take the car to your mechanic for an inspection
- Any costly critical issues? Thank the owner for his time and go back to the beginning
- If everything seems fine, make an initial offer which should be the price of the car minus the cost of repairs. Give the seller a copy of the report from the mechanic.
- If he says nope, give him your contact info and tell him to call you in case he is interested in your offer. You never know…
- Did he accept? Congratulations!
Remember while you may not get those late-model cars under 5000 dollars, you can still get a vehicle that is going to be reliable, and that is going to serve its purpose for this amount of money. Good luck with your purchase and let us know how it goes.