Most people look for cars that they like, decide on one that would make others envious of them, and then try to get the lowest monthly payment possible. They consider this to be wise because they (1) didn’t use much cash up front to purchase the car and (2) they are reducing their cash flow by the least amount possible, which allows them to buy other things on credit (like a home or a boat perhaps). While this may seem wise, my brain is wired entirely different.
I look at a car and I ask myself three questions:
(1) Would I enjoy driving this car?
(2) Do I have the cash to pay for this car?
(3) Can I make money if I sell this car?
If I can answer “yes” to all three questions, then I begin a process that I have come to love: buying a bargain.
Buying a Bargain
Buying and selling cars is in my blood. My Dad was a car dealer for 26 years (in addition to his full-time job) and while I wasn’t always hanging around the dealership, I still somehow learned the market value of many cars out on the road – so much so that my Dad would often ask me my opinion of a car’s value when he got a new one on the lot. It was just fun at the time. I never thought this knowledge could benefit me financially. But now, these skills might just produce enough money for me to achieve my big goal of the year: paying off my mortgage.
Ten years ago, I was learning vehicle prices by browsing car classified magazines. Today, I essentially do the same thing, but instead of flipping pages (which seems utterly archaic these days doesn’t it?), I am flicking my thumb on the face of my smartphone. My absolute favorite way to stay in tune with today’s car prices is by browsing Craigslist for a few minutes each day. By doing this, I will know immediately if something is a deal or not.
The 2008 Chevy Malibu
I have been searching for a good deal on this make of car for a very long time, and I finally scrolled my way into one on Friday night. There it was, a new body style Malibu for only $5,500. I have never, ever seen this type of car for less than $7,000. I immediately called the seller and asked him some questions about it. Basically, it was in good shape inside and out and he was looking to sell it fast. I told him that I wanted to take a look at it and would meet him at his house first thing in the morning.
Sure enough, the car was exactly as he said it was. I test drove it and was 100% satisfied. And then came my favorite part, the negotiations. 🙂 I first asked him if there was any flexibility in his price. He admitted there was, and that he would accept $5,000. One simple question and the price came down $500! Even though I probably would have bought this car if he didn’t budge on the price at all, I sensed that he was still willing to go lower. I didn’t want to offend him, so I mentioned a few of the flaws I saw and asked if he would accept $4,800. Silence ensued for at least 30 seconds. I said nothing and just waited (because if you know anything about negotiations, the first one that speaks loses). He finally spoke and said he wouldn’t go that low, but he would accept $4,900. I nodded, we shook hands, and I am now the proud owner of this 2008 Chevy Malibu!
I plan to clean this car up (there are a few dents to pop out and stains to remove), perhaps enjoy it for a couple of weeks, and then post it on Craigslist for $7,200. I suspect that a few people will show interest and if I get an offer of $6,700 I will let it go and put about $1,500 in my pocket (after taxes and fees). I will then put that money toward my mortgage and get myself that much closer to paying it off! 🙂
Have you ever thought about buying and selling vehicles? Do think this is a good way to make some money?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.