INDIANA, November 29, 2014 – Everybody knows that a brand-new car is a terrible short-term investment. The moment you leave the dealership, you’ve lost 5% or more, plus unrecoverable expenses like taxes, license transfer fees, and dealer specials – prep, delivery, coco mats, asteroid guard, etc.
People buy new cars all the time. Though there is no saving those folks, the rest of us can capitalize on their errors. We can buy their old cars. Some of them, anyway. if you know what to look for.
In general, you should avoid economy cars in the used market. Not only are they cheap to begin with, their owners generally aren’t all that proud of them, and for that reason and straight economics, cheap cars don’t get lavished with maintenance, inspections, garages, waxing and detailing, and so on. There is nothing that will age a car faster than not paying attention to it, and these little eco-busses are frequently flogged on short trips, which increase wear; they have their routine maintenance (e.g., oil changes) delayed or neglected; their frequently-young and often-overworked owners seldom check fluid levels, they don’t get brakes replaced until they’re making too much noise, and don’t wash the car as bird droppings, road gunk, tar, and other detritus accumulate.
The tires wear out completely, precipitating accidents, and accident repairs are made as cheaply as possible. You get the idea: cheap cars are built cheap, and get cheap treatment.
Privately-owned (not leased) luxury cars, on the other hand, are babied, cared for at dealerships, and kept indoors, at least during their first few years of life, when the factors that wear cars out are most-virulent. A new engine, for instance, requires an immediate oil change; a leak in the cooling system is likeliest to happen in the early days of use… or years down the road. Regular checkups by dealers are thorough, and dealer maintenance is mandated by the manufacturers, so corners aren’t cut.
Warranty work is also carried out at dealerships, where the procedures are mandated and adhered to. Warranties expire, and owners naturally seek out shops where “only what’s necessary” may be done. That’s fine, as long as the owner is insistent on keeping the car up to snuff. That’s not to say, only the minimum to keep it running.
So, when a luxury car gets a few years under its belt, the status-conscious owner does the obvious: she gets rid of the car, and gets a new one. The old one goes off the dealer’s lot after it’s spiffed up and checked – buyers of three-year-old luxury cars are still looking for luxury (as economy-car buyers are still looking for economy).
So, a one-owner, three-year-old luxury car still commands primo prices. But when it becomes a two-owner car and is sold on the private, individual market, its price necessarily drops. When an American luxury car gets to a certain age – say, ten to twelve years – it’s lost its prestige status and it becomes just commodity transport. That’s when you pounce.
Why “American” luxury? What about Mercedes, BMW, Jaguar, Acura, Infiniti, Lexus, Porsche, Volvo, Bentley, Rolls-Royce?
Frankly, parts are expensive, model changes are not always uniform in some brands; a part for a “1999 model X” will not necessarily fit all the 1999 model Xs, but may fit the 1996-99 or 1999-2003, and if you have a ’99, you have a 50-50 chance of getting the right part. This happens in Big 3 cars, but not as much; and less in the expensive lines. The Big 3 build their own luxo-barges rather than re-badging Japanese or Korean models, as is frequent practice with econo-boxes.
American luxury cars have a larger number of repair stations, and are often the “practice cars” at American high schools and technical colleges; there is a larger pool of qualified repair stations and people.
Most foreign marques have exclusive dealerships, reducing the availability of repair stations and raising labor rates. Where an American-brand dealership may charge $80 for shop time, the European-brand shop will charge $150. American shops claim the foreign shops are overcharging; the Euro-shops claim the Americans don’t have the training or diagnostic tools necessary to do a good job. Neither criticism is correct; they are just vivid examples of supply and demand at work. And I can’t explain the European penchant for proprietary tools…
Which brings up another thing that is common to all luxury cars: they are electronically “Sophisticated,” they’ll say. Which translates to complicated. And electronics are mysterious. Unlike diagnosing a flat tire, diagnosing an intermittent fault in an electronic gizmo requires a lot of equipment (which regularly goes out of date – another reason to get an older car, with fewer gizmos) and a lot of training, plus some luck: you can’t fix a problem that isn’t there at the moment.
Where this matters in the US v Everyone Else battle is that electronic components for US cars are more-plentiful and less-expensive, pretty much across the board. And they’re more-available from secondary sources like eBay, and mechanics know where they’re hidden in the chassis, so the dealer network isn’t always necessary.
American cars generally have cheaper “wear” components – brakes, standard windshield wipers, standard-sized tires, shocks and struts – and more-plentiful accessories (like steering wheel or seat covers, for two examples) than the often-strangely-sized foreign items.
Repair items are also more readily-available in the aftermarket, giving American luxury-car buyers a better chance of getting the parts at reasonable prices; and the larger production runs and domestic populations help on the “used” component side, as well.
A quick look through Craigslist, AutoTrader, or other sales forums where private owners can go head-to-head with dealers will turn up a huge inventory of affordable American luxury cars, cars with ten or more years and 100,000+ miles, for prices between $3000 and $5000.
If you’re of a mind, you can save a few hundred more dollars by buying from private parties rather than dealers, and going where the supply is: places where luxury cars are plentiful, in proportion to the target market. Florida, for example, is chock full of relatively low-mile Lincolns, Buicks, and Cadillacs, and the heirs that are private-selling these creampuffs often just want them gone, and sometimes after they’ve sat a while in probate.
Examples: In 2005, I bought an 18-year-old, 78,000-mile Sedan DeVille that was so dirty on the outside I didn’t know it had whitewall tires. It hadn’t run in a year, but it looked solid, and it had been sold by a dealer just three months before it was parked for the last time. I got it for $1100, made it run, pumped up the tires and drove it home, where I cleaned it up. Under the dirt, it was flawless and original, and the white leather interior was perfect. It had a power steering fluid leak that cost $500 to fix, and it needed about $400 worth of incidentals, including oil changes, wipers, and brake pads. I drove in luxury for three years, adding 34,000 miles to the odometer and a new set of tires to the “wire” wheels, and sold it for $3500.
In 2009, I bought a 140,000-mile 1999 Caddy Concours d’Elegance for $2000. Over three years, I spent $1000 on it, added 52,000 miles and another set of tires, and sold it for $3000, so 52,000 miles effectively cost me… a set of tires.
Two years ago, I bought a 1997 Buick Riviera for $2300. It had just 102,000 miles on it, and the little old lady who owned it said it had never given her any trouble. She lied. 400 miles later, it developed a serious rod knock. Since the rest of the car was so nice, I decided to rebuild the engine myself, and discovered it had a .030” undersize crankshaft, meaning that engine had had serious work done on it several times!
Still, I built the new engine myself (properly, this time), and I’m now driving a 108,000 mile Riviera with a brand-new engine, getting 27 or more mpg on the highway, and looking good… for under $4500. The “parts” Riviera I bought for $1600 got a lot of attention in the meantime, and I broke even on selling that car, too – after adding about 15,000 miles to it.
You won’t always be lucky, but you don’t have to be. Have someone competent look over the prospect car, perform whatever maintenance it needs as soon as you learn of the need – new belts, fluid flushes, brake and tire inspection, etc. – and keep it maintained, and you’ll be riding in safety and luxury, listening to a premium sound system — for half the cost of a used late-model econo-box. And when you sell it, you’ll likely get what you paid for it, since previous owners got all the price depreciation.
Good luck, and share your experiences in the Comments and on Facebook, etc.