August 20, 2012

Shopping for a Good Cheap Car Under $5,000

Occasionally I see people saying they can't find a good cheap car.   They insist that the cheap cars are not safe, or that they are unreliable or that they simply aren't to be found.  Now there are varying levels of 'cheap'.   If you're talking about $500 for a car then I agree thats quite hard to find anything reliable for under $1000 nowadays.   But if you look under $5,000 level I do think that still qualifies as pretty cheap and at that level it should not be too hard to find a good, safe and reliable car.

Today I'll run through an example of how I might search for a good, safe, reliable car under $5,000.
This is just one way to go about it.   But the point is to show some basic steps and methods of research that you could use to find a decent sub $5,000 car.

Total Cost of Ownership (TCO) for cheap used cars

I've said more than once that you should consider the total cost of ownership (TCO) of a car and not just the purchase price.   For new cars its easier to find the TCO.   However for older cars you may not find the data.   Without knowing the TCO you can either chose to just use sales prices and adjust it for your known costs or try and figure a TCO figure on your own.   Today I'm going to set the idea of TCO aside and assume you the cars have similar enough maintenance and operation costs.  Also some people really do have to worry about the out of pocket costs more than possible maintenance costs 3-5 years from now.   I plan to discuss how to figure TCO on your own in the future but thats another topic.

This is NOT meant as a total guide to car shopping.  Just an example of steps you might use to find a reasonably priced, fairly reliable car.  

Some basic points on hunting for cheap cars.

1. You don't need a new car for it to be safe.   Car safety changes gradually over years and theres no giant leaps from year to year in general.   Most 10 year old cars are just about as safe as a new car.   You should however check the safety testing for the cars and make sure they have good crash test results and verify they have airbags and the standard safety features.  
2. Reliability is important.  You do certainly want to look at the manufacturer reliability history. We want a cheap car but we don't want it to break down.  If we don't care about reliability then finding a cheap car is simple.
3. Higher but not too high mileage is a good sweet spot.   You don't want a car with too many miles as any car will eventually start to break down.  But you are looking for a cheaper car so low mileage isn't a realistic choice.   I'd shoot for a car with 75,000 to 150,000 miles.   Of course the fewer the better.
4. An older, low mileage car could be a great bargain.   Most people don't want 10 year old cars so their value is lower.   But there are older cars with low mileage.  If you can find a car with 50,000 to 75,000 miles that is older then could give you many miles of reliable driving for a good price.
5. Don't limit yourself to 1-2 brands.   Many people simply stick to their favorite car brand or buy Hondas since they're reliable.  If you're' looking for a good car that is cheap and reliable then limiting yourself to only a couple brands or models will keep you from finding some good cars.
6. Do a LOT of research.    I'm doing a quick and simple search today with what I consider basic research.  If I were spending up to $5,000 on a car I'd do a lot more research.   I'd want to check out JD Power, Consumer Reports, search on Craigslist and scour the web for all the information I can find.

Find Lists of 'good' cars

Of course this isn't a new topic and there are some lists out there for good cheap cars.   I searched Google and found a few.  These kinds of lists can give you a good starting point to find some good cheaper cars.   No sense in doing all the work from scratch if someone else has already done it.   However, I wouldn't simply rely totally on such a list and I'd put in some time to check out the cars in question myself. 

A couple lists I found for under $5000 cars are :
Top 5 Best Used Cars under $5000 from 2009 from Yahoo and  AOL Autos has an article Our Picks For The Best $5,000 Used Cars

Other lists are a little pricey but hey give some good ideas :
CNN Money had a list of Best Cars under $8000 but thats a little rich for our blood.
ConsumerReports has a list of cars Best in used car fuel economy but that focuses on fuel economy specifically and they only drop down to 'under $10000' level so those aren't especially cheap.

From the lists I come up with a short list of models and the minimum model years to look for :
Honda Civic >1994
Subaru Impreza > 2000
Hyundai Accent > 2003
Honda Accord > 1995
Toyota Camry >2002
Subaru Outback > 2000
VW GTI > 1999

This list is based on recommendations from a couple websites.    But if I were doing this for real I might want to check out the history of these brands a little more and make my own judgement.   I wouldn't just trust one source.   In the list when I say >1994 for the Civic for example, I mean models that are 1994 or newer.  So if a 1994 model is OK then I assume a 1995, 1996.. would also be good.   

Given this short list I go to and do a search for the make & model, year range and price maximum of $5000.
That only gives me two hits :
2002 Honda Civic with about 95k miles for $4900
2005 Hyundai Accent with ~90k miles for $5000

Cast a Wider Net for all cheap Low Mileage cars

Next I expand my search to other makes but limit it to only cars with under 100,000 miles on them.   I figure that most brands are pretty good now under 100,000 miles and should have some considerable life in them.   I also don't want to miss some bargains because I made my search too limited.  

If I search for cars under $5,000 with less than 100,000 miles, any year and any make I get 85 hits.

I picked out a few cars that might work :
1999 Chrysler Sebring with 60k miles for $5k
2004 Ford Focus with 90k miles $5k
2001 Saturn LW300 42k miles for $4k
1996 Dodge Intrepid 80k miles just $3000

I didn't look through the whole list and there may be some other good ones out there. 

Check Into Individual Car Reliability

I go to and look up the reliability reports for each of these cars :

 2002 Honda Civic = significant transmission problem, 4/5 overall
2005 Hyundai Accent = one moderate problem, 4/5 overall
 1999 Chrysler Sebring  = significant engine problems, 4/5 overall score
2004 Ford Focus = minimal problems, 5/5 overall
2001 Saturn L series wagon = several moderate problems 4/5
1996 Dodge Intrepid = couple significant problems, 4/5

Turns out that Ford has the best reliability record according to the data from Edmunds.   If I pick that Ford and put it on my short list then that gives me 3 good candidates to look at : 

2002 Honda Civic with about 95k miles for $4900
2005 Hyundai Accent with ~90k miles for $5000
2004 Ford Focus with 90k miles for $5000

I'm now a little wary of the significant transmission problems reported on that Civic.   I would probably want to research that issue a little more and see how common it is really if I want to keep the Civic on my short list.  

Going back to Edmunds. I can also check what they think these cars should be worth.
2002 Honda Civic = dealer retail $5100
2004 Ford Focus = dealer retail $4300
2005 Hyundai Accent = dealer retail $4500

The prices the sellers are asking are not too far off from what Edmunds thinks the cars should be worth at a dealer.  

What you might do next is call the sellers for each of these three and get some more information on the cars.   You might ask what kind of maintenance its had, why are they selling, what kind of driving its had, is there a CarFax report available, or similar questions.  This might help you cross a car off the list or add detail that make the cars more or less appealing.   For example if the dealer selling the Civic says it was "bought at auction" and they have no history and they dodge the question when you ask about CarFax then thats not so good.   But on the other hand if the dealer says the car has its full maintenance record from one owner and its been serviced at the dealer and they'd be happy to show you the CarFax then thats better.

Once you call the sellers and check them out you might then arrange to go see each of the cars in turn.   You could visually inspect them and take a test drive.  The condition of the cars is best to judge in person.   Photos on websites don't do a great job of showing rally what kind of shape a car is in.  I wouldn't go to see cars in person until I've got a short list of just a few, otherwise you're driving around town all week long looking at cars.  Its most efficient to only look at your top few choices.
Taking a test drive of the cars will also help you get a feel of how you like driving it and how it feels for you.   Just because a car has a good reliability record and is good 'on paper' doesn't mean you'll enjoy driving it. 

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