Money Saving Secrets - How I saved $27K on an almost new Lexus
Published in the Serious Buyer, Serious Seller Eletter, November 16, 2010, Written by Viraf Baliwalla
This article is a follow up to my previous article entitled "How to make car buying part of your financial plan". In my last article, I released some trade secrets, normally reserved exclusively for my closest clients, on how to maximize savings when purchasing a used vehicle. This time, I'll tell you how I applied that advice to my own latest personal vehicle purchase (for my wife) and ended up saving myself $27K on an almost new luxury vehicle. Apply these lessons to your own situation and you'll keep more of your hard-earned money in your pocket. As I always say, "it isn't what you make but what you keep that counts".
Recently, my wife was involved in a total loss because someone ran a red light and t-boned her. She was ok but now she needed a new car. Luckily she knew someone in the business who could help her out (ie: me). So, she put me to work.
Lesson #1: That weekend, we went looking around for the type of vehicle that she was interested in. Knowing her tastes, I pre-narrowed down the options so we didn't have to waste a lot of time. Of the three vehicle types we considered, I quickly decided that she was a Lexus girl. (Men, here's a secret that will forever win you brownie points and save you lots of time and headaches. Whether it is on a car or a house, and I've experienced this repeatedly on both, the principle is the same. Watch her eyes when she first sees it. If she "gets the look", then that's the one. What is "the look"? Her eyes will open wider than normal and she will take a quiet breath. Just watch the next time you're in that situation and let me know if my theory worked.)
Lesson #2: She was already pressing me for a new car but there was no way I would let her do that, I'm just far too pragmatic. Let someone else take that initial hit for depreciation, especially on a higher priced vehicle. The higher the price of the new vehicle, the bigger the initial hit in the first year. Besides, the novelty of being a new car is gone just as fast as the new car smell. It then just becomes another car, albeit one that is worth a lot less than it was two weeks ago.
Lesson #3: We started looking for a 2009 Lexus ES350. I started searching the dealer auctions in US and Canada and determined that pricing was much better down south. With the exchange rate being as good as it was, I was bent on buying it from the US. A lot of people shy away from a US vehicle because they fear the unknown like not being able to see the vehicle before buying it or that it will have a lower resale value or that the warranty may not be honoured in Canada. Honestly, there's no reason to be concerned.
Lesson #4: First of all, most people don't know enough about cars mechanically or structurally to make a difference if they see it or not, and this includes me. I always have used vehicles inspected thoroughly by an independent professional mechanic before I buy them. If there are some minor issues, then I'll just pay to have them fixed so long as the upfront price is right.
Lesson #5: Secondly, since 2007 Canadians have been buying US vehicles in droves. Our society has accepted it and there are a lot of US vehicles floating around up here. In 4 or 5 years when you are ready to sell, there will be even more acceptance. Even if the resale value is a little less, you have saved that much more money when you bought it so you have actually come out ahead. For example, let's say you save $8,000 when you buy it. Because of depreciation, the savings gap narrows as time goes on. In 4 or 5 years, the difference may be $2,000, if any. You're ahead by $6,000.
Lesson #6: Thirdly, if a manufacturer doesn't honour the warranty, then throw a third party warranty on it. If you're saving $8,000 on the vehicle and it costs $2000-3000 for a comprehensive third party warranty, you're ahead by $5,000-6,000. That's still big savings.
Lesson #7: Put the fear factors aside because they will cause you to make an emotional buying decision as opposed to a logical, financial one.
Lesson #8: Because I buy all my used cars wholesale, I checked the auction prices in Canada as well as in the US and confirmed that prices were much better south of the border to the tune of several thousand dollars. You don't get a clear picture of actual values by looking at various consumer classifieds sites because dealers post these vehicles at whatever the market will bear. Looking at the guide books is even worse. The only true value indicators are actual selling prices at auction. True, most people don't have access to that. So find yourself a dealer you can trust and see if they will give you access to this information and do the searches for you. That's what we do for all our customers.
Lesson #9: Now I was finally ready to start the search. I always search both sides of the border just in case a great deal does come up here. And surely, it did. There was a 2009 vehicle I found in Calgary with only 8,600 km on it that matched exactly what I was looking for. I noticed that it had been purchased at the same auction two weeks before for $31,000 and was now showing again. This same vehicle was selling for $57,600 tax in only a year ago. I looked at the disclosure notes and noticed that it had a $7600 accident claim registered on it. For this type of vehicle, that isn't much. I assumed that when it sold recently, the accident was probably not disclosed and when the buyer found out, he returned it according to the arbitration and disclosure rules of wholesale auction. I confirmed with the auction and that is exactly what happened. So it was back on the auction block and I felt it would sell for a significant amount less, probably in the neighbourhood of $5000, which would then put it on par with a US vehicle. So I decided to bid on this one.
Lesson #10: I ran the vehicle history reports myself to ensure there was nothing else wrong with it and had someone go look at the vehicle for me. The accident damage had been properly repaired by the insurance company however, there were some new scratches that needed some bodywork. Other than that, it was reported to be in good condition. On the day of the auction, the bidding started out low but ran up fast. In the end, I was competing neck and neck with another interested buyer. Eventually, I prevailed at $25,250, $5750 less than what it sold for two weeks ago simply because it had an accident registered against it. I had a further mechanical and structural inspection done and it got the green light. So we had it transported to Toronto for about $900. The body work and cleanup cost me only $350. Including taxes, I paid under $31,000 for a luxury vehicle that was selling a only year ago for $57,600.
Many people would be very apprehensive about buying a car sight unseen like this. But for those of us who have done it before many times, we know what to look for and what to avoid so it isn't as daunting. Besides, for those who hire us, they are counting on our recommendations and paying for our expertise and execution.
As you can see from the video, the car is absolutely gorgeous with all the bells and whistles. My wife is very happy. And as every married man knows, when your wife is happy, you're not in the doghouse.
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