With several years of used car sales experience under my belt, many would consider me an expert in the used car industry. When you find cars on Craigslist, you are not only saving money each month but are making a financial decision that will free up money that can be invested elsewhere.
There are hundreds of thousands of people out there that make poor financial decisions each and every day. Buying an expensive car is one of these poor decisions. Just take a look at the Cadillac Kelly Blue Book . Now, look at the book value for the previous year model. I would be willing to bet that there will not be a single year where the car value will increases. The reason behind this is simple. As your car ages, components start to age. As components age, they will eventually need to be replaced and replacing parts cost money. In addition, the age of a car also determines its perceived value. Would you pay the same amount of money for a 1997 model as you would a 2007?
Let’s take for example the 1995 Cadillac DeVille. Back in its prime this was one of the nicest American Luxury cars that money could buy. Back in 1995 it sold for around $40,000. Financed at a 6% interest rate for 5 years this car would end up costing you around $54,000 over 5 years. In the year 2000, you car would be paid off and things will begin to break. Fast forward 12 years to the year 2012 and your car now has 200k miles and is worth around $2,500.
$54,000 investment over a total of 17 years and you lose $51,500. In 1995 one ounce of gold was valued at around $370. $54k would 146 ounces of gold. One ounce of gold today is worth around $1,650, making 146 ounces worth $240k.
Now, would you rather own a 17 year old Caddy with 200k miles valued at $2,500 or own over 9 lbs of gold at a value of $240k. Even the least bright bulb on the tree can answer this simple question correctly.
I know, you are probably saying “but how would you know to invest in gold in 1995”. The answer is you would not have known. You could have invested your $54k in virtually anything else and come out much better than if you were to purchase this car.
So why do people make such foolish decisions every day? I mostly blame society and its definition of success. In America success for many is to sport in an expensive car, take expensive vacations each year, and buy larger homes than they can afford. I call this the “Lemming effect” named after the popular video game back in the 1990’s where it is your job to guide these creatures to safety. There are literally hundreds of these creatures that follow behind one another and do exactly as the predecessor does.
This is unfortunately how 99% of people think and function in modern western society and is the main reason people make foolish financial decisions.
Now that you know the reason why finding cars on Craigslist is a superior financial decision, lets talk about how to spot a great deal on Craigslist. One important fact to keep in mind is that not every car this website is a deal. In fact, I have seen several instances where private sellers are asking more than retail for their cars. This is why it is important to have an understanding as far as the actual value of a car. It is easiest to determine a cars value if you have years of experience in the used car industry. If not, it is best to check out what the locals have to say. Perhaps the best indication of actual value is the competition in your local area. If 3 identical cars are listed for $1,500, $2,000 and $4,500, it goes without saying that the two lower price cars will sell before the $4,500 car. The market conditions will be the greatest determining factor when it comes to separating deals from non deals.
Even if you have never purchase a used car before, the process can be rather simple. Once you have found the car that you are interested in and have confirmed that the seller is asking a fair price for it, have the car looked at by a professional in the auto repair industry. Once the car is given the okay it is just a matter of paying the owner and signing over the title.
Make the better decision and buy all of your cars used. It will be one of the best financial decisions that you ever make.