FIRE Pillar 3: Buy Used Cars
When you buy a new car, you are paying a premium for the peace of mind that should anything go wrong. If it does, you can take it straight back to the dealer. Whilst purchasing a second-hand car may seem intimidating at first (especially if you’re not a car expert). We hope to show you how to save money while buying a second-hand motor, safely and without worry.
Why buy second-hand cars?
The key reason why you should buy a second-hand car is cost. It really is as simple as that. If you are serious about adopting the FIRE Movement philosophy, choosing a used car, rather than a new model, can save you a serious amount of money.
Some may argue that there will be more ongoing maintenance costs with an older model. But this will depend on how old the car is and how many miles it has done. As all new cars depreciate as soon as they drive off the forecourt, you’re potentially making a large saving right at the start.
Many nearly new cars are also still under warranty, which could be as much as 7 years old with certain manufacturers.
If you really want a newer vehicle, cars which are around one year old are much cheaper than a brand new option. According to MoneySavingExpert, when an average new car priced at £28,500 reaches one year old with 10,000 miles on its clock, the price goes down to £21,000. This is a 27% saving in 12 months.
How to buy used cars
Before heading online to buy used cars, it is important to understand the difference between buying a second-hand vehicle from a dealer and purchasing one from a private seller.
If something goes wrong with your car after you have handed over your money, different consumer laws kick in, depending where you bought it.
Buying a second-hand car from a dealer
Purchasing a car from a dealer is often more expensive than a private sale. However, if you buy a second-hand motor from a dealership, they will often give you a warranty. As dealers will normally replace any broken parts and clean up the vehicle, it should look almost as a good as new. In this way the process is more akin to buying a new vehicle.
When you buy from a car dealership, you have rights under the Consumer Rights Act. Your car must last for a reasonable amount of time, be “as described”, “satisfactory quality” or “fit for purpose”.
If there is a fault with your vehicle, you should be entitled to a replacement, repair or a refund. If you take it back within 6 months of buying it, then the dealer has to prove that the fault wasn’t there when you bought it.
Remember to haggle. Check how much a similar car is being sold for at other dealers. Knowledge is power and a little research could result in even bigger savings.
Buying a used vehicle from an individual
Buying a car from an individual could work out much cheaper than going to a dealer. However, you won’t have the same rights, as the car is ‘sold as seen’. Basically, ’buyer beware’.
However, if you are confident about your cars, you could pocket more money for your FIRE goals.
Do your research before you hand over any money. And take the time to test drive your car before buying.
Buy a used car that is economical to run
FIRE followers save cash wherever they can. Make sure you know a car’s running costs beforehand. How big is the engine? How much will the insurance cost? What is the expected mpg for the type of journeys you do?
A cheap used car which guzzles fuel may not save you as much money as you think in the long run.
The best time to purchase your car
Car dealers often work to targets to get their bonuses. Use their quarterly sales goals to your advantage and look for a car towards the end of a month or quarter.
Summary: why buy used cars
Picking up a preowned car, rather than a brand new set of wheels, can help you to hang on to more of your hard-earned money. Whether you buy from a dealership or a private individual, there are some serious savings to be squirreled away, enabling you to get one step closer to your FIRE dream.