Double Your Money to Get a Much Better Used Car

2011 Toyota Camry LE

Are you in the market for a used car? Think you want to spend $7,500 on some good basic transportation? Don’t. What you really want to do is buy a $15,000 used car. It’s fast becoming the automotive sweet point for buying a used vehicle.

Why’s that? You’re going to be in for an overall better buying and ownership experience. Some may say less is more, but in this case, more is more when it comes to buying a used car.

For our example, let’s look at two Toyota Camrys. The first is a 2005 Toyota Camry in the LE trim with a V6 engine. It has a CarGurus value of $7,297. The next is a 2011 Toyota Camry LE trim with a V6. It has a CarGurus value of $13,740.

But note the age of the 2011 Camry. Suddenly, for just a hair over $15,000, you should be able to buy a certified pre-owned (CPO) version. Toyota will certify a model if it is 6 years old or newer and has less than 85,000 miles. A 2011 Toyota Camry with under 85,000 miles should be available in a CPO version for a relatively small amount more money.

Buying a CPO used car would most likely get you better warranty coverage, and there are often special financing rates for certified pre-owned vehicles you can’t get with regular used cars. Will it save you a lot of money? Frankly, no, but it’s definitely better to pay 4.9 percent than 5.9 percent, for example (in some cases the deals are better). Plus, you’ll have to pay much higher interest rates on older used cars.

Advantage of Future Value
2005CAMRY_LE-prvWhat’s the first advantage of buying the 2011 model? In five years you’ll have a 10-year old car worth approximately half what it cost you new, or about $7,000. The same is true of the 2005 model, which will be 16 years old and worth about $3,000, give or take.

Which will be in better shape to sell? That’s something people rarely consider when buying a car, new or used. What’s it going to be worth when it comes time to sell? In 5 years’ time, do you want $7,500 to put down on your next car or $3,000?

Consider the Buying Experience
Most franchise dealers won’t sell you an 11-year-old car, because the profits aren’t there. (A franchise dealer would be a new-car dealer for a specific brand, like Toyota. An independent dealer is a used-car dealer not affiliated with a specific brand.) Independent dealers who sell 11-year-old cars are largely good, but they can’t offer you what a franchise dealer can in terms of additional benefits.

When you buy from a franchise dealer, you get all the amenities of a new-car dealership at a used-car price. You get things like a full service department, reliable warranty coverage, and better vehicles. Plus, new-car dealers typically have more extensive contacts for financing.

Also, franchise dealers are given first choice when it comes to used cars up for auction from their brands at closed auctions. They’re going to find used cars that can be turned into certified pre-owned vehicles because of the higher return.

Want a tip? You might want to buy a car that’s aged out of the certified pre-owned classification if a franchised dealer is selling it. Odds are it will still be a car in good shape without the additional cost of certification.

When You Shouldn’t Buy the More Expensive Car
Okay, there will come a time when you can’t afford a $15,000 used car. If you’ll need to finance a used car for longer than 60 months to make your payments affordable, find a cheaper option. A 5-year-plus loan would be risky with a new car, but the odds are worse with a used car. Paying the car off over more than 5 years could leave you upside down on your loan if something goes wrong or your car’s warranty expires.

-Keith Griffin

Find Certified Pre-Owned Cars and Used Cars in your area at CarGurus.

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3 Comments

  1. Buying a certified used car is having benefit, but after buying does it going to wrecked and buyer need to pay for wrecked car.

  2. It is really interesting advice to tell readers they should spend twice as much as planned on their next used car. That being said, I actually think you made a very convincing argument to back it up. I really don’t like the idea of owning a car from the 90’s that can’t even play music from my phone. I would much rather have a car that is a few years old but still has all the modern technology I need. I will have to consider increasing my budget!

  3. I do agree that it is better to get a newer model car whenever possible. However, I do think that you should always stay in your budget. I think the 60 month window is a good indication of when you should or shouldn’t finance a used car. I might even try and cut that time limit in half. If you are buying a used car, try to make sure you can have it paid off in a few years, certainly no more than five. If you can’t, go cheaper and get a better car when you have more money.

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