Sunday, September 13, 2009

What car should you buy with $6000?

I don't know whether it's the time of year or some sort of side effect from Cash for Clunkers but it seems that right now you can get a lot more car for $6000 than you could just a couple of months ago.

When it comes to buying a used car, the conventional wisdom for a many years has been to buy a Honda or Toyota because these cars have a reputation for lasting forever. The truth is that these are generally good cars, and yes, they should last a long time but they have two significant factors going against them.

  1. Their reputation is exaggerated. Statistically speaking some other brands are catching up. According to Consumer Reports a Ford Fusion, for example, should be more reliable than a Toyota Camry or a Honda Accord. Speaking from experience, two of my friends – one with a Civic and another with a Camry – had their cars die of catastrophic engine failure – both with less than 100,000 miles on the odometer.

  1. Used Hondas and Toyotas can be overpriced. Since these are the used cars that everyone wants, demand is high which raises the price.

For these reasons, I often try to steer people towards cars that will be reliable but aren't as well known for being reliable. For example, ten years ago the Geo Prizm was a great choice for a high reliability per dollar ratio. A Prizm is just a Toyota Corolla sold under the Geo name so you get all the reliability of the Corolla but don't have to pay the Toyota premium.

More recently the Ford Focus has been a good choice. Ford has been making good cars for a while now but they still don't have the sterling reputation that Honda and Toyota have.

The NADA Guide says the “clean retail” value of a 2003 Focus SE with 70,000 miles is $6000. (I find the NADA Guide to be consistently more accurate than Kelly Blue Book.) A Civic LX from the same year with the same number of miles comes up as a whopping $2500 more.

It's true that the Civic should be more reliable but is enough more reliable to justify a nearly 50% premium? If we're only talking reliability per dollar I would say the answer is no.

Unfortunately things are never as simple as they seem on the surface and there are other factors to consider.

Personal preference could and probably should be a factor in your car choice. Perhaps you really like the sportiness of a Mazda or the styling of the Corolla (not likely). If you want a hatchback, a Civic may not be an option option but a Mazda Protege5, Toyota Matrix, Pontiac Vibe (Toyota Matrix with the Pontiac name), and Ford Focus are all good choices.

If gas mileage is important to you then it should have an impact on your decision. I've had a couple Focus's and I'm on my third Civic now. Comparing the gas mileage of my 1999 Civic EX to my 2005 Focus SE showed a huge discrepancy between the two. On one highway intensive tank in the Civic I averaged 40 MPG. I never managed more than 31 on the Focus. I think Ford is catching up in this department but it seems that as of 2005 they had a long way to go.

Perhaps even more important than the model you choose is the particular car and deal you find. NADA Guide may say that a Civic is $2500 more than a comparable Focus but that doesn't mean that's what you'll find in the real world. Maybe you'll find a particularly desperate Civic owner who needs to get rid of their car fast and will sell it for cheap.

The condition of a car can tell you a lot about how well it's been cared for. Personally I'd rather have a car with 100,000 miles on it in excellent condition than a mediocre car with 70,000 miles on it.

Unfortunately, there are no easy answers to this question so the best advice I can give is to keep an open mind and spend the time it takes to find a car that suites your needs, is statistically reliable, and is in great condition for a good price.