Help us buy our first car!
June 14, 2010 4:51 AM   Subscribe

Please help us buy our first car in the U.S. - Difficulties: We don't like sedans or very small "city cars", and we'll have to sell the car again in 2 years.

I'm moving to Berkeley, CA with my husband in August and we'll need a car there. We're from Germany and have never bought (or even owned) a car, so we're a bit overwhelmed. Additional problem: We'll have to sell the car again in two years when we go back to Europe.

We want a car that is reliable, a bit roomier - no sedan, no tiny cars with just 2 doors -, has an automatic transmission, and isn't too wasteful. We'd prefer a Japanese or German brand (our dream car would be a Honda Fit, but that's maybe a bit expensive).

So, I have a LOT of questions:

- Where to buy? Are or any good for screening used cars in/around Berkeley? Or should we look on Craigslist? Or just go to some second hand car dealer in Berkeley? We're very afraid of being scammed. I know you should have a mechanic check the car before buying, but even then, we're afraid of ending up with a very bad deal because we don't know anything about cars...

- What to spend? Americans have told me you can get a decent, reliable car starting from 5000 or even 3000 USD. Apparently, this is only true for sedans or very tiny cars, which we don't want. There are a few cars with our specifications around 5000$, but they all have huge mileages (above 100k), which doesn't seem like a good idea, right?
So, would spending 6000-8000 $ get you a decent (reliable) car of that type that could still be resold after 2 years? Or do we have to spend even more?

-Used or new? I assume a new car would be easier to resell after 2 years, and we'd also avoid the risk of buying a car that turns out to be rubbish. We have enough cash lying around, so putting something like 10-12k into a car would be OK (as long as we could expect a decent resale value in 2 years). Would you consider buying a new car under our circumstances, or does that sound crazy?

- What about "certified pre-owned"? Would that be a good option for us or is it a ripoff? The prices seem quite high (almost as high as new)...

- What about leasing? I imagine that would take care of the resale problem, but does leasing for 2 years make sense?

Can you give us some input? General tips/recommendations are also very welcome. Keep in mind that we know hardly anything about cars (and nothing about the American market).
posted by The Toad to Shopping (24 answers total) 3 users marked this as a favorite
Best answer: Your best bet is a lease -- googling "honda fit lease san francisco" brought up several car dealers who are leasing them for $149 a month and around $2K as a down payment. That's a total outlay of $6K, and you don't have to worry about reselling it.

Whereas if you buy it, conventional wisdom (and therefore the market, in most cases) is that you lose a third of the purchase price just driving it off the lot, so a $16K Fit will never get you more than $10K back. So you're losing $6K on it anyway, so you might as well lease.

IANACarDealer, but I've bought a few new ones, sold a few used ones, and leased one. The lease was easy, especially at the end when I also had to leave the country. I drove back to the dealer and said, "Thanks for the car, I'm done with it now," and they took it back and didn't charge me a penny.
posted by Etrigan at 5:25 AM on June 14, 2010 [2 favorites]

Best answer: Leasing the car would be by far the easiest option, as long as you can find a dealer that would let you lease for two years. This way, you'd save a lot of time in searching for a car (if you know what car you want, you can have the whole thing over with in a few hours), and you wouldn't have to worry about selling it afterwards.

Buying a new car and then selling in after two years would be by far the most expensive option, since during the first couple of years cars depreciate the most. If you were to go this route, you would still save a lot of time in the process of buying it, but I see no advantage to doing this over leasing the car.

Buying a used car would be the cheapest option but also the most time intensive. It could take you a while to find a decent car for a good price, and then it could take you a while to sell it for a reasonable price. If you want to take this option, then buying from a dealer, again, would be the easier way to go, but buying from a private person (say off Craig's List) would be cheaper. Used cars in California tend to be expensive, but for around $7000 you should be able to get something reasonable. If possible, try not to get anything with more than about 80,000 miles, and have it checked out by a mechanic.
posted by epimorph at 5:26 AM on June 14, 2010

Two questions

1) Have either of you spent any time around American cars? Realize that the standard American "small car" is significantly larger than what you see in Europe.

2) Aside from driving around the area, do you and your husband have specific outdoor passions? Specifically, I'm wondering if you are avid skiers and intend to spend a lot of time in the mountains during the winter - if so, you should seriously consider getting a vehicle with 4 wheel drive, as chain control on non-4wd cars is a standard part of the wintertime drive.

A few general notes to get the ball rolling:

* Lease terms are usually for 2-3 years, so that's a fit. The problem is that leasing rarely makes sense from a financial perspective.

* Depreciation on a new car is significant, though there's always the possibility of getting a great deal on last-year's model that never left the lot.

* There's a significant resale market for used cars. A car in good shape and good running order will always find a buyer.

* You've got some time - use CraigsList to get a sense of the market for used cars in private sales, and what the kind of cars you're interested in will go for.

Lastly, with the large Mefite population in the Bay Area, I'll bet you'll get more than a few specific tips to help you out. Don't panic! :)
posted by swngnmonk at 5:33 AM on June 14, 2010

Oh, and don't forget insurance costs - I don't know what insurance is like in Germany, but insurance in the US can be a significant outlay - especially with a new car.

If you lease (or buy with a loan), you will be obligated to pick up collision (insures damage that you caused to the car) and comprehensive (theft, random damage like a tree falling on it) insurance, in addition to the standard liability coverage.

Most insurance companies will provide quotes on-line, which will help you figure out which cars are cheaper/more expensive to insure.
posted by swngnmonk at 5:37 AM on June 14, 2010

Best answer: It's not clear what sort of car you'd prefer. Ruling out sedans eliminates a huge chunk of the market. What does "sedan" mean to you? Also, disliking 'small city cars' but loving the Honda Fit seems contradictory.

You can sell any car in 2 years. For the sake of utility while you're here, you want something dependable. For the sake of economy, you want something that won't depreciate a whole lot. These factors are in tension, because newer cars are more dependable but depreciate faster. You'll need to strike a balance. How reliable do you need it to be? Will you be so busy that an occasional trip to the mechanic will ruin your careers? Will you be driving out into the wilderness?

Ideally, I would shop for a car that's maybe 2-3 years old, with around 30K miles on the odometer. At this age the car is nearing the end of its original factory bumper-to-bumper warranty, but still has a fair bit of drive train warranty remaining. Also, its dramatic initial depreciation is already over with.

If you have the time, you can save a lot of money by reading up on the process of negotiating for a car. Ignore the sticker price; the asking price (on used cars, especially) is almost always dramatically higher than the price they will actually sell it for if you negotiate well.

Do your own research. Do not depend on what the car salesmen tell you if you can possibly avoid it. They lie a lot.

"Certified" used cars are not generally worth it. They're simply selling you a slightly extended warranty at an inflated price. That doesn't mean you have to look only at cars that aren't advertised as 'certified,' though. You can either negotiate to buy the certification for a lower price, or to buy the car without the certification.
posted by jon1270 at 5:41 AM on June 14, 2010

Best answer: All decent advice, though don't forget the cost of insurance on a new vehicle. It'll be a large expense.

I think "Sedan" means something different to you. Here, a sedan is any 4-door car. A Honda Civic is a sedan (or hatchback) by our standards.

Craigslist is probably your best bet for used cars. Find a good independent mechanic (Car Talk has good advice on finding one) and have them do a pre-purchase inspection.

$8K buys you a lot here. German? For $6K-$8K there are a lot of cars that will fit the bill. A used V6 Volkswagen Passat from the '01-'05 generation is in that range and gets fuel economy only slightly worse than Golfs and Jettas of that generation. A BMW 323i circa ~2000 is also a remarkably solid vehicle. You can get a Golf or Jetta from maybe '03-'05. Diesels command a huge price premium here, so they're probably out of the question.

Japanese, in that price range, you should be able to get just about anything made in the early to mid '00's. You name it. Subarus, Hondas and Toyotas are probably the safest purchases. You almost can't go wrong with them. A Civic is probably a better bet than a Fit in terms of price. The Fit commands a bit of a premium here.

80K-100K miles is no big deal. Yes, things are starting to go wrong at that point, but by buying something older, you'll still come out ahead in the end. Engines and transmissions are almost always good to 175K or more if the car has been well maintained. As long as it's in good condition when you buy it, your repair costs will be less than the money you'd be spending on higher insurance rates and depreciation over two years. That's why people buy used cars.

If you're going to be driving a lot of miles (over 10,000 per year) get something with maybe 80K miles on it. If you're going to drive more like 5,000 miles per year, mileage is unimportant if it's in good condition. Something with 125K would be totally fine.

Cliffs notes: cheapest to buy used, about 7 years old, in tip-top condition as verified by a good mechanic. Toyotas, Hondas and Subarus are going to be cheaper to maintain than Volkswagens and BMWs. Don't even consider Audis of that early 2000's era.
posted by pjaust at 5:49 AM on June 14, 2010

Best answer: A little more information about buying used cars... Craig's List is probably the most popular way of buying directly from the previous owner. Before you agree to buy a car from someone, check the Kelley Blue Book or Edmunds to get a rough idea about what the car is worth. Also, get the car's VIN and run it through Carfax to make sure it hasn't been in any serious accidents (using Carfax will cost you a little, but it's worth it), and again, take the car to a mechanic first. Another way to verify that the car hasn't been in any major accidents is to check that all the panels have the same VIN (you can see it on the doors when you open them, for instance). It is also desirable to buy from someone who has all the maintenance records for that car. That way you can verify for yourself that it has been taken care of properly.
posted by epimorph at 5:50 AM on June 14, 2010 [1 favorite]

Best answer: Craigslist, or any used-car listings in a local paper, with a vet-check and a carfax lookup.

I've done a few year-and-a-half or two years stints in the US, and every time I buy a 8-10 yr old Honda Accord for around 4-6 thousand from a private party, and resell it at end of my stay, usually for around a 1500 less than I paid. Honda Accords are legendary for keeping their value-- they have excellent gas milage for their size and and are very well-built-- and are very easy to resell, though you have to be quick to buy a good used one. And a very old used car will save you a fortune in insurance.
posted by Erasmouse at 6:13 AM on June 14, 2010

Over two years a new car will lose at least 20% of its original sales price. This varies. That does not count the California sales tax which is maybe 9% in Berkeley. Therefore, purchasing a new car is a very bad approach to your problem. Leasing a new car is about as costly as the depreciation would be; that's how the leasing company figures out the cost of the lease. However, I believe the lease spares you the sales tax.

The low-cost solution if you are simply looking for transportation is to buy a used car. I buy used cars because I rack up high commuting mileages on them, and keep my eye on the market. Numerous small station wagons or 4-door sedans are available for on the order of $5k with around 100k miles on them and that is what I buy. This market is full of opportunities.
posted by jet_silver at 6:20 AM on June 14, 2010

Response by poster: Thanks, your answers are very helpful! Keep them coming!

It's not clear what sort of car you'd prefer. Ruling out sedans eliminates a huge chunk of the market. What does "sedan" mean to you? Also, disliking 'small city cars' but loving the Honda Fit seems contradictory.

OK, some trans-atlantic clarifications: when I said we don't want a "sedan", I meant we don't want a "conventional" sedan (as opposed to a hatchback or wagon-type car). We want a car that has a big luggage compartment that is connected to the rest of the car, as opposed a small, separate trunk that sticks out in the back. SUVs or crossovers would also qualify, of course. The main idea being we want a lot of space for luggage, because we're going to travel, and we also really don't like the look of conventional sedans.

When I said we don't want a small city car, I meant we don't want a car with just two doors and/or not much room for luggage (such as a BMW Mini, Smart, etc.).
In Europe, the Honda Fit would not really qualify as "small" because it's quite roomy, has 4 doors and lots of room for luggage. But I guess in American terms, we'd be OK with a "small" car as such - it should just have 4 doors and lots of space for luggage.
posted by The Toad at 6:29 AM on June 14, 2010

The problem is that leasing rarely makes sense from a financial perspective.

I wouldn't say rarely. If you are the kind of person that wants a new car every few years then leasing most certainly makes a lot more sense financially than buying new and then selling used each time. Now, whether or not you are that kind of person is another matter, and frankly the kind of people answering in this thread that know how to get a good deal on a solid used car tend to NOT be that type, so there's kind of a selection bias there.

But back to the question, never having owned a car does mean a bit of a learning curve. I guess the real issue here is how risk-adverse to maintenance are you? On one extreme, there are people who gladly go for the $3k car knowing full well that certain things are going to need replacement while they own it, but also knowing that even with the cost of maintenance they will still come out paying less than if they had paid more initially. These types of people consider certain models (e.g. Civics) to have not even been broken in yet until they have 150k miles at least, with the expectation that they will easily last to 250k or more. On the other end of the spectrum are people who have absolutely no desire to even think about maintenance or breakdowns whatsoever, and thus leasing a new car is the perfect option. In the middle are people who pay maybe 8-12k for a used car with the expectation that there will be some regular maintenance required (timing belts and gaskets and such) but nothing major on the horizon.

Part of the issue here is that car ownership involves a development of this sense of what needs replacement when. If you've never owned a car then you won't necessarily have that sense and it may make judging your options a little harder. If you think that you fall more on the risk adverse side of things then definitely consider leasing a new car, as it fits your situation in a lot of ways.

(Also, yeah, forget this notion that a sedan means small.)
posted by Rhomboid at 6:31 AM on June 14, 2010

If'n it was me, I'd head to a place like Carmax, tell 'em your story, and test drive a bunch of different cars.

Check out the Chevy Malibu Maxx. A family member has the SS version, and it is a really nice car. Lots of room, but also not very big. The SS version drives really nice. The newest generation of Honda CRV is also a fine automobile.

(Especially out West, 100k miles is no big deal. IF the car seems well taken care of.)

(The nice thing about leasing is that when the lease is over, you don't have to worry about finding a buyer or getting a good price.)
posted by gjc at 6:51 AM on June 14, 2010

We want a car that has a big luggage compartment that is connected to the rest of the car, as opposed a small, separate trunk that sticks out in the back.

Okay, so you want either a hatchback, a wagon or a small SUV. Maybe that's obvious, but I thought it might help to clarify the terminology that's commonly used here.
posted by jon1270 at 6:52 AM on June 14, 2010

Best answer: The main idea being we want a lot of space for luggage, because we're going to travel, and we also really don't like the look of conventional sedans.

If you don't like the sedan look then that's a perfectly valid reason. But if it's a matter of space for luggage, I'd wait until you look at some various models in a showroom before completely ruling it out. The Honda Fit here is classed as subcompact and is considered tiny. Americans expect their cars big and that includes huge trunks.
posted by Rhomboid at 6:54 AM on June 14, 2010

Best answer: I drive a 2000 Subaru Forester, which has a nice big hatch in the back and handled the Berkeley hills with no problem. My own experience and that of friends is that these things are pretty robust -- mine has 100K+ on it and I would feel pretty comfortable buying a used one with a similar track record.
posted by escabeche at 6:54 AM on June 14, 2010

Since you will be in Berkeley, have you considered Car Sharing co-op like ZipCar? We live in San Francisco and have used that instead of owning a car for the past 2 years with no problems.
posted by bottlebrushtree at 7:06 AM on June 14, 2010

Just to stick this out there:

Are you going to need the car every day? Berkeley is well-served by public transit and is mostly very walkable.

If you realize you don't, then depending on where you live, you may realize that having a car is a bigger hassle than you think (parking). You can always rent a vehicle for long weekends/traveling across the country (I've done it). Also as bottlebrushtree says (though I'm pretty sure you'd need a CA drivers license), there are a couple car share opportunities in the area. ZipCar and CityCarshare.

Bottom line, if you aren't going to use the car every (or most) days, considering depreciation, repair, and insurance costs, renting/borrowing a car as needed may make a lot more sense for your circumstances.
posted by ilikecookies at 7:19 AM on June 14, 2010

Here's a thread from last month on various hatchbacks. Maybe some of the info will help. Personally, I drive a 5 year old Toyota Matrix hatchback (90k+ miles and still ticking!)and it is surprisingly roomy in the trunk area. Car camping in it isn't too bad either.

I'll also second CarMax. No pressure car sales ftw.

Oh, also, my Matrix has never gone all Herbie and accelerated for no reason.
posted by mrsshotglass at 7:26 AM on June 14, 2010

Best answer: We currently have a Honda Fit and *love* it. We were looking specifically for a hatchback to make life a little easier when doing out-door type stuff.

That said, we spend the previous 7 years with a 1998 Nissan Altima (a 4-door sedan), that we were able to fit just about everything that we can fit in our Fit, including bookshelves, loads of stuff from IKEA, camping equipment, skiing equipment, etc. In most US sedans, the seats fold down to connect the trunk to the back seat, so things you would say "we'll never get in there" somehow manage to fit after a bit of jiggling around.

While a hatchback/wagon does give a better, squarer space, you might be amazed a how much you can fit into a 4-door sedan once the seats are down.
posted by chiefthe at 8:52 AM on June 14, 2010 [1 favorite]

Just another perspective: please, don't buy on credit!
Credit is ubiquitous in American car buying (and much else), and car dealers want to convince you that you can afford that bigger car. But some of my friends have ruined their years in the US, thinking that 1) their income is bigger than it really is ("salary" quotes do not represent real, take-home pay, given taxes and other deductions, like health insurance ... plus, figuring out income tax is the responsibility of the payer here, and they did not deduct or save enough); and 2) they can safely borrow a lot. They were thrilled to 'own' latest great new car. They were horrified when a tiny switch in circumstances left them utterly screwed.

Don't think so much about what you will get back when you sell your car -- who knows what will happen to the value, even of a new car? -- but look at the car as a basic, monthly, travel expense. How much can you afford?

=> First, don't decide right away when you get here. Ask your administrative personnel/colleagues/friends what's important to know about costs and fiscal practices here. While you do this, if you need to, you can rent a car for a week or month (a temporary rental, by the way, is different from a 'car lease'). Don't let anyone push you into a fast decision.

=>Second, once you are here, compare the alternatives given your specific living situation (the location of your housing, work, shops, etc.). Compare monthly costs of car, against the same for public transportation (combined, perhaps, with an occasional car rental for special trips). For a car, costs will include insurance, gas, and a reserve for basic maintenance, based on the type of car you choose -- someone here can help you estimate this. To be fair, the cost of the "car" option should include what you paid for the car -- not forgetting the TAXES and fees which increase the list price -- pro-rated by month. Note that when you buy your car for cash, your monthly costs will be lower because you don't pay interest. (You can also lease instead of buy, but you'll see that built into the cost of the lease is the car's cost and more, so it's not a free ride. Check it out, though...)

=>Then, consider your funds and pick your best option. It isn't necessarily public transportation, by the way -- a car can be cheaper depending on your needs. But base it on what you need and can pay.

Let me say, a good used car is definitely a possibility. The Car Talk guys -- Tom and Ray Magliozzi, you'll find their weekly show on your local NPR radio -- had a great riff a few years back on how much more value you could get out of a used car, pointing out that people overestimate the maintenance costs of an older car, so they sell their cars far earlier than they need to, putting a lot of relatively 'young' used cars on the market, which are very reliable.
posted by Bet Glenn at 9:51 AM on June 14, 2010

Best answer: The Honda Fit is the smallest car Honda sells in the US. You may not realize it, but you're looking for a small car.

In American parlance, you're looking for a "small, five-door hatchback" or "small station wagon". You probably want to buy one that's 5-8 years old (and you should have plenty to choose from in your price range). 80-100k miles is not all that much for a car that's been reasonably well maintained (look for receipts -- especially one for timing belt replacement, around 60-70k miles) . If you take care of it, and put another 25k miles on it over the next two years, it'll probably be worth about 10% less than what you paid for it when you sell it.

Common examples of 5 door hatchbacks from the early 2000s include: Toyota Matrix, Mazda 3, VW Golf, Subaru Impreza, Ford Focus ZX5, Chevy Aveo, Scion xB, as well as the (newer) Honda Fit and Toyota Yaris.

Pay $50-$75 to have a mechanic look over any car you're interested in -- and assume that they're all going to need at least a little bit of work. A $5000 car that needs $750 of work is cheaper than a $6000 car that needs nothing.

[Also, a freshly-arrived European national with no prior credit history in the US is not going to be able to get a lease in 2010. It may have been possible once, but not anymore.]
posted by toxic at 10:11 AM on June 14, 2010

Best answer: Seconding Toxic. 5 door hatchback wagon, Subaru Impreza or Mazda 3 would be my pick. Craigslist is very active in Berkeley and the entire Bay Area, I would look there. Once you find something that looks good, go test drive. If you like it, have it checked out by a mechanic. $3-5k should get you what you want, 100k miles is not unreasonable. My last two cars have had over 200,000 miles on them and were still going strong when I sold them.
posted by sophist at 10:30 AM on June 14, 2010

I often lease, yes it's not always financially smart, but for this scenario, the 2 year honda lease would be great. brand new, so on the very rare chance you have a problem it's under warranty. it will have all modern safety stuff you should have. it won't be a flood or salvage title car, and at the end of the lease you don't have to work on selling it.
posted by thilmony at 12:15 PM on June 14, 2010

Response by poster: Thanks so much, lots of really helpful answers guys! I think we're going to check out the leasing route for a Honda Fit. But I assume it's not going to work anyway because (never having lived in the U.S.) we don't have a credit history.
So we're going to look for a used car. I really like the Subaru Forester some of you suggested. ALso, thanks for pointing out that sedans might be OK room-wise. I still don't like their look (in Europe, only grandpas drive that kind of car!) but we might change our mind if we get a good deal...
posted by The Toad at 1:15 AM on June 18, 2010

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