A common question for me is, “What are the best value cars and what cars will give me the best bang for my buck?”  It seems like a simple question, but this question is complicated by three factors:

• The car world is so diverse, general rules are difficult to make
• Current buying trends, not trends of car makers, ultimately determine which cars are a huge success or a miserable failure
• The meaning of “value” can be a personal choice and opinion

In an attempt to help you (and me when I buy my next car), I tried to do some analysis to figure out general answers to this question.  Most websites subjectively claim that you should buy a used car when it is one or two year old.  However, based on data, there is only one glaring rule that holds for almost any used car you might consider:

• Buy a car when it is two years young

The following graph best represents what happens after two years.  This graph was generated using an automobile residual value tool such as the online tool from cars.com.  This particular chart is for a mix of American, Asian, and European mid-sized sedans, but the data trends look similar for almost any car type.

You should notice the “knee” at the two year mark circled in red.  This knee is created by a disproportionate amount of depreciation during the two years after a new car is purchased,  followed by three years of relatively steady depreciation.  Therefore, buy a used car when it is two years old.

But wait -  there’s more!  A perk of used cars is that when you buy one from a dealer, you have an opportunity to get a 12,000 mile extension on the warranty.  Many dealers will offer this extension to their certified pre-owned cars (CPO).  I used to believe this was a not-so-savvy way to try to charge more for a used car.  As it turns out, CPO means the car has been inspected, cleaned, and has the warranty extended.

I also wrote a blog recently about buying your child’s first car.  In that post, I made some recommendations for cars that are safe, reliable, and don’t cost a lot because they come from car manufacturers that don’t command a premium.  Those cars are:

• 2006-2007 Hyundai Sonata, 4 cyl. engine (FWD)
• 2006 Kia New Optima 4-DR with Side Air Bags (FWD)
• 2004,2005,2007 Subaru Forester (AWD)
• 2004-2006 Mitsubishi Endeavor (FWD or AWD)
• 2004-2005 Lincoln Town Car (RWD)

But what if you don’t want any of those cars?  Well, go back to what I said earlier.  The final word — and you read it here first — is that you should buy a used car when it is two years old, still has some of the original warranty remaining, possibly has the original warranty extended, and has already suffered the biggest losses in value.

Do you think there are other rules for buying value cars?  Leave a comment and share your thoughts!

Just determining which car you want to buy is hard enough.  Unfortunately, buying the car is even harder. You may remember from my first post, I have purchased seven cars and they came from auctions, dealers, and private parties.  I also love cars (and great deals on cars) so I thought it would interesting to share my most recent and thorough car buying process.

What I Won’t Do. Buying from car dealers and private parties can be excruciatingly painful and time consuming.  I once drove two hours to a dealer only to have the dealer tell me, “Oh sorry, I quoted the truck with the four cylinder engine instead of six cylinders.”  I also had a dealer try to sneak through a $200 increase in price because they thought I wouldn’t check ALL the numbers in the final paperwork.  Private parties are equally problematic because people sell cars so infrequently that they don’t care about anything other than selling the car.  My goal in buying this most recent car was to find a way to get a great deal on a car and avoid all the frustration with negotiations and “misunderstandings.”  Knowing that I wasn’t going to drive from dealer to dealer, web sites like AutoTrader.com proved to be not very helpful, other than for checking out different car choices in general.

Your salvage care before it's "fixed"

eBay. I buy a lot of stuff on eBay; books, kid’s toys, clothes, and much much more.  I have had people ask me if I work for eBay.  When I started looking for my last car, I thought eBay would be the perfect way to get a car at a good deal.  I started by watching, tracking, and recording sales of cars that were interesting to me.  Here’s what I discovered.

• There are a lot of cars on eBay
• Many people try to sell cars with salvage titles
• There are a lot of buyers relative to good cars without salvage titles
• Shipping a car is risky and even eBay’s recommended shippers aren’t reliable

The end result is that good cars don’t sell at a discount because there are too many people bidding on the good cars.  Also realize that if you need to spend $1000 shipping a car, that’s a huge financial advantage for somebody that is local to the car and can drive across town to pick it up.  Strike one.

Craigslist . Surprisingly, Craigslist is very similar to eBay except you usually find cars within a couple hundred miles instead of a few thousand miles.  A lot of items are mis-listed and mis-categorized so you either need to be good at using advanced (and poorly documented) search commands or have a lot of free time.  Third party Craigslist search businesses still yield very poor search results.

There is an abundance of high mileage and salvaged cars on Craigslist, probably because dealers typically won’t buy these cars for more than about half of Blue Book - if at all.  Dealers like cars that are low mileage, accident free, and in excellent condition.  If you find a good car, there will be a lot of other interested buyers so you’re not going to find sellers that are flexible in price.

Finally, while eBay has some policies to protect buyers, Craigslist has none.  In 2001, I almost bought a used Porsche from a guy in Texas until I actually found a mechanic at a Porsche dealer that knew the owner (and the car wasn’t in Texas!).  Strike two.

Local Newspaper Listings. Once upon a time, using newspaper classifieds was the best way to sell your car.  With free online classified listings such as Craigslist, newspapers are now advertising for dealers.  What you’ll mostly find are newer high priced (relative to Blue Book) cars.  Maybe the people that put ads in the newspapers believe that if you are actually using the newspaper to find a car, you might just be naive enough to buy one at an inflated price.  Strike three.

Here Comes Carsala. Without any luck from eBay, Craigslist, or Newspapers, I decided to try Carsala.   I liked the idea of not having to negotiate with dealers and getting about 25% off of Blue Book (wow!). Here’s what I did:

• Filled out Carsala’s form with details about the car I want to buy and when I could pick it up
• Waited for Carsala to call me with a quote in writing
• Went to the dealer, test drove the car, and then bought it!

I really don’t want this to seem like an advertisement, but it’s almost comic how easy it was.  The trickiest part was actually filling out the form.  You have to think about what you do and don’t want in a car.  For example, I really didn’t want aftermarket wheels or window tinting.  And don’t forget the seemingly obvious stuff such as a car with four doors, not two (Carsala actually pointed this out to me).  My wife and I decided on the car together, so it was interesting to document our car choice.  I thought my wife was determined to get a car without many options when in reality she decided she wanted every option possible.

If you can’t tell by this point, the clear winner for me was Carsala.  I’m about to buy a second car with Carsala but this time it’s for my mother-in-law.  In case you’re wondering what car I ended up buying, you can watch a video of me and the car here.  Please feel free to share your own car buying stories!

Before you go looking for boxes to fill in so that you can see your gas savings - STOP - it’s an easy to use, but very advanced in what it can calculate, Excel spreadsheet and you will find it at the end of this post.

Most gas savings calculators only let you enter in an average fuel efficiency (MPG), and the number of miles you drive.  These two numbers are supposed to come up with your “gas savings” compared to a different car.  The gas calculator I created takes much more into consideration:

• Highway miles driven
• City miles driven
• Gas type (regular, mid-grade, premium)
• Expected time to own next car

If you drive more freeway miles than city miles or if your car takes premium gas and you’re comparing it to a car that uses regular gas, this gas savings calculator will really help you understand your “true” savings.  Better yet, you can take it with you!  You don’t need to be online to use the calculator since it is an Excel spreadsheet.

I created the spreadsheet out of my own interest in calculating my expected gas savings.  My old car was a 2000 Volkswagen Passat and I was looking to buy a newer Honda Civic because of the huge improvement in gas mileage (and reliability).  Using the gas calculator, I estimated that I would be saving $769 a year in gas, or $3,847 over the five years I expected to own the Honda.   Knowing that I was going to get that kind of gas savings made purchasing the Honda a really easy decision.

As I mentioned, I created this calculator out of my own interests, but if you think I can improve it in some way (or if you find a bug), please make a comment and let me know.  I’m also interested in what kinds of cars people are selling and buying in an effort to save on gas.  So, make a comment and share your gas savings experience.  Thanks!

Here’s the calculator: Carsala’s Gas Savings Calculator

California is well known as a leader in automobile policy, particularly when it relates to the environment.  This means that no matter where you live, it’s always good to stay up-to-date on what California is trying because there is a good chance it’s eventually coming to you.

Buying a new car is complicated.  You have to consider price, financing, safety, fuel efficiency, reliability, type, size, color, history, options, and insurance costs.  Starting January 1^st, 2009, all new cars in California will have an Environmental Performance (EP) label.  Add that to your list.

The new label scores a vehicle’s Global Warming and Smog emissions from 1-10 with the HIGHEST score being the cleanest vehicle.  A score of 5 is the average for all new cars in that cars class.  The Smog Average is more like a median for all new cars available, not new cars sold.  The Global Warming Average is more like a mathematical average.  If you’re really interested in how the averages are calculated, go here.

This is great, right?  Well, yes and no.  For people that are buying a car because it is better for the environment than other cars, this is wonderful.  Unfortunately, that’s not most people and there’s some history here to back up this point.  When Toyota released the Prius, they marketed it based on environmental friendliness because they thought that’s what would sell the car.  When gas prices started increasing and Toyota saw their Prius sales increase, they realized that people were buying Prius’ because they wanted to save money on gas and the environmental component was secondary.

Don’t get me wrong, the EP label is a welcome addition to the wealth of information we already have available about cars.  However, if we really want people to buy more fuel efficient and environmentally friendly cars, put a label on the car showing them how much money they will save in gas - that’s what people want.

Here’s a suggestion for car buyers.  Use some logic and intuition to determine what car is right for you.  I haven’t seen the data, but I’m guessing that fuel efficiency correlates really well with Environmental Performance.  If you use only use safety, reliability, fuel efficiency to choose the car and then buy a used car so you don’t get stuck with the new car premium, you’ll probably get a car that’s great for you.

Barak Obama and John McCain finally agree on one thing - having the right tire pressure is good for America.  But what does that really mean to us personally and to America?  What about that offshore drilling idea? How much money will we individually save if inflate our tires and, ultimately, will correct tire pressure save America and our oil woes?

In case you’re out with friends or at work and want to sound really smart, remember a few of the following points and you can claim this blog as your source.

• If we drill offshore, the oil would meet about 1% of our demand, 20 years from today
• The actual gas (not barrels of sweet crude) we would be producing by drilling offshore would be 1.4 billion gallons of gas per year
• Keeping tires inflated properly can improve gas mileage 3.3%
• The actual savings of gas for American due to proper tire inflation would be 1.2 to 2.8 billion gallons of gas per year

According to these references, proper tire inflation appears to be as good or better than drilling offshore in terms of gas savings compared to new gas generation.  The bad news is that neither proper tire inflation nor drilling offshore will save America and solve our oil problems.  We simply need cars that are more fuel efficient or use different fuel sources.

Since tire pressure and offshore drilling can’t save America, maybe it can save you a few dollars instead. If you own an automobile that gets 20 mpg, drive 15,000 miles per year, and get a 3.3% improvement in fuel efficiency then you would personally save $100 per year in gas if you inflate your tires properly.  If you factor in tire life, it’s about $150 per year total.  If you keep your car for five years, then this is $650 savings in your pocket today!  Who knew?

The problem with tire pressure is that properly inflating your tires can be really hard.  Gas stations no longer have tire pumps and those mechanical tire pressure gauges read something different every time you use them.  Make your life easy and buy a digital tire pressure gauge and a 12 volt air compressor / tire pump that you can plug into your car.  For about $35 you can buy them from an online store like Amazon and avoid taxes and shipping.  For you finance people, this would be a monstrous 1,860% return on your investment (ROI).

While you’re waiting for your tire pressure gauge and air compressor to arrive, here are some fun facts that will make you sound even more intelligent with your peers.

• Underinflated tires are responsible for 660 fatalities and 33,000 injuries each year
• Correct tire pressure is located on a placard either on a car’s door jamb, inside the glove box, on the fuel filler door, or in the car’s manual - NOT on the tire
• A tire that is underinflated by 20% will reduce the tire life by 30%
• About 20 gallons of gas can be created from a 42 gallon barrel of sweet crude

Don’t forget to share some of your own fuel savings tips with other readers of this post.  Thanks!