Drive Virtually Free: Smart Used Car Buying Advice

Most of us don’t save for our car maintenance and repairs. Then, when something happens, money becomes tighter for a while or we have to carry a balance on our credit cards.

Putting away money for automotive expenses is one of those things that everyone knows they should do, but always gets put on the back burner. If you can start planning for those expenses, though, you will experience less stress and scrambling when your car needs work.

You can get an idea of how much you need to save for maintenance by looking at the common major maintenance items, their cost and how often they need to be performed. For example, if you know that your oil needs to be changed every 3,000 miles and it costs $30 for an oil change, you need to save $30 every 2-3 months (assuming you drive 15,000 miles per year) or 1 cent per mile you drive. The same goes for tires, brakes, tune-ups, car washes, and anything else you do to take care of your car. These items might seem small when you look at them one at a time, but they start to add up quickly – particularly if you forget that a major service is coming up.

Repairs are another expense, but the problem is that they are a bit harder to plan for, since they tend to happen unexpectedly. So, how can you figure out how much you’ll need for repairs? If you’ve had your car for a while or know someone else who has had the same car and keeps meticulous maintenance records, you can use those to estimate. Even then, you may be underestimating since as cars get older, repair costs increase. You can use the Edmunds True Cost to Own tool to estimate how much the repair will be (only good for 2005+ model years at the time of this writing). Keeping your car in good shape through proper maintenance will reduce the need for unexpected repairs, and probably save you money in the long term.

Once you have figured out how much money you will need for your car repairs and maintenance each month, you can set up an automatic savings plan with your bank (I like ING Direct, personally). The good thing about an automatic savings plan is that once you set it up, you don’t have to get over the mental hurdle of saving again. It is important to make sure that you have enough of a buffer that your other accounts are not overdrawn, but if you get paid on a regular basis, it is easy enough to set up the withdrawals to take place soon after payday. For a more detailed description of how to set up an automated savings system, see this guest post by Ramit Sethi on Tim Ferriss’ blog.

The reason I recommend setting up an automatic savings plan is that many people buy warranties or service contracts that usually cost more than they’re worth (otherwise the people selling them wouldn’t make any money). It’s true that some catastrophic repairs can run into tens of thousands of dollars, but on average, you will come out ahead by simply saving money on your own and keeping a growing fund for expected and unexpected automotive expenses. Skip the warranties and service contracts (unless it was included with your car purchase) and start saving!

Photo: Library of Congress

I’ve always been confused by people who have perfectly practical luxury vehicles but choose to drive an older commuter car during the week. If you ask them about it, they say that they’re “keeping the miles off of it.” Exotic cars that have ridiculously expensive maintenance costs or are utterly impractical for regular use may be exceptions.  Then again, that’s not the point of buying a car like that.

Cars that are made in quantities of more than a few hundred are unlikely to become collector’s items, and therefore probably will continue to depreciate over time.  Mileage will make a difference in the resale value, but even still, that is more a function of time than mileage.

Keeping a second car around so that you can keep the miles off your car will also cost you some money, even if it is a total beater.  You still have to pay for the insurance, gas, tires, brakes, etc.  While these will be cheaper than the “weekend car,” these costs add up and would probably cost just as much as if you racked up a normal amount of mileage on a single car.  The bonus there is that you would be able to actually enjoy the car you bought more, and there would only be one car to maintain instead of two.

After all, presumably you bought the car to drive it, so what’s the point of keeping it in the garage all the time?  To me, it’s kind of like when people cover their nice couches and their remote controls in plastic so that they don’t get messed up.  At the end of the day, you’re sitting on some hard, slippery plastic instead of the nice plush sofa that you paid for.  In 10 years, it will be perfectly preserved, but that’s not really the point of a sofa – you bought it so that you could sit and relax on it.

The same thing goes for your Mercedes/Audi/BMW/Porsche/Corvette – get some use out of it, otherwise you will have paid for something very expensive without getting full use of it.

The flip side of this is that if owners like this didn’t exist, we wouldn’t be able to score great deals on barely used cars.  I used to drive over 25,000 miles per year, and my strategy has always been to buy a car with low miles (about half of what the average is for that make and model) and just pile on the miles for a few years.  By the time I’m done with the car, the mileage will still be considered low.  In some cases, it is roughly average, but I’ve thoroughly enjoyed it without worrying about mileage.

When the time comes to buy the next car, I’ll be looking for the one that’s been garaged and driven only on the sunniest, clearest days on the weekends.  I’ll pay a little bit of a premium on the front end of the purchase, but that’s  a small price to pay for enjoying the great cars I’ve been fortunate enough to own.  It’s also probably a smaller price than keeping a second car around for the sake of practicality.  To each his/her own, but for me, I’ll keep racking up the miles.

While you own your car, you should always keep a close record of maintenance.  While this helps you a great deal to keep regular service items such as oil changes on track, it is arguably even more valuable when it comes time to sell your car.

If a car doesn’t have a full maintenance history backed by receipts, I don’t even bother to look at the car anymore.  It just isn’t worth the hassle, and is too much of a gamble.  Detailed maintenance records tell you a lot about a car and its history.

One thing that becomes readily apparent is how organized the seller is.  Someone who has sporadic records of maintenance probably was also sporadic in their upkeep of the car, which is definitely not something you want to suffer the long-term consequences of as the next owner.  A seller who hands you a neat, organized file full of receipts with a spreadsheet summarizing the items projects the image of someone who took care of their car day in and day out.

Since the vast majority of the fear associated with buying a used car comes from uncertainty about the vehicle’s history, keeping a log of maintenance records is a must if you want to ensure potential buyers that they have nothing to be afraid of.  Basically, you don’t want to give the buyer any easy excuses to not buy your car.

Keeping maintenance records is not difficult, as long as you are systematic about it.  Half of the work is just labeling a folder and making a spreadsheet to keep track of the maintenance.  After that, keep putting every receipt related to the car in the folder and update the spreadsheet with a few items every time.

My suggestion for what to track in the spreadsheet includes:

• Date
• Mileage
• Description of Service
• Shop/dealership name
• Parts Cost
• Labor Cost
• Total Cost (summation of the previous two items)

In all of 30 seconds or less each time work is performed on the car, you can have a nice, organized file which could make a difference of hundreds or thousands of dollars when it comes time to sell the car.  Since many buyers will not have the vehicle history recorded and neatly organized, you will raise the value of your car and differentiate it in the eyes of the buyer, encouraging them to buy from you so that they have peace of mind.   Not only that – they will appreciate what you’ve done for them if they ever need to refer to the car’s history for any reason.

Feel free to use this to keep track of your car’s maintenance: