Bottom Line/Personal: What is the best used car you can buy for $20,000 or less?
I’m Steven Kaye, Editorial Director at Bottom Line Publications, and today my guest is auto analyst Karl Brauer, Kelley Blue Book Senior Director. Karl’s going to help us sort through the hundreds of choices that you have at the $20,000 and less price point for used cars and show us where he thinks the sweet spots are.
Karl, thank you for coming out today.
Karl Brauer: Yeah, let’s talk used cars. A lot of value out there.
Bottom Line: There is, and for $20,000, you actually can get a very nice car. And besides, every car is a used car soon as you drive it off the lot.
Brauer: Right.
Bottom Line: So, when you think about putting money into a used car, you can get a fancier car that’s older, you can get a less fancy car that’s newer; what do you think the sweet spot is at any given price range?
Brauer: For used cars, I love the idea that you buy a used car that still has a warranty in place.
Bottom Line: A warranty.
Brauer: The most important feature most people find when they buy a new car is they want to have that new car peace of mind, that they’ve got coverage. No matter what happens, they’ll be okay. Someone will pay to help them get it fixed. It won’t be all up to them. Whereas most used car purchases, you kind of feel like you’re rolling the dice a little bit. You hope nothing goes wrong, because if it does, you’ve got to spend all this money to fix it.
So I tried to pick cars that were new enough to still be under the factory warranty, but old enough to be meeting our price points and still have a lot of nice modern features. I wanted the newest car I could get with the best warranty coverage to meet our price points.
Bottom Line: Okay, so given the length of warranties – most are about 3 years, 36,000 miles; there are some that are 4 years, 50,000 miles; and then there are a few in the industry where they go out even further than that, maybe on the drivetrain or on other components. So you can get a car for $20,000 that is pretty new, still has some warranty coverage left, and probably looks great, probably drives just about like a new car?
Brauer: Yes.
Bottom Line: All right, there are probably dozens of those out there to choose from. We asked you to come up with a few choices that you think represent the best values. Where do you go? What’s your choice #1?
Brauer: I think Hyundai always has this advantage in the used car market.
Bottom Line: Okay, this is the Hyundai Sonata sedan, and for $20,000 or less in 2015, what year car are we looking at?
Brauer: Like a ’13, believe it or not.
Bottom Line: A 2013.
Brauer: You can get a 2013 Sonata that has not that many miles on it. You’re probably talking somewhere around 40,000 miles or less. It’s going to have more than half of its warranty left, and 7 years left on the warranty. And this is a pretty car. This car really sold well and really put Hyundai on the map in the family sedan category because of how well the styling was received by the buying public.
Bottom Line: At this age, you’ve got not only drivetrain warranty left, but you’ve got full bumper-to-bumper warranty left in most cases.
Brauer: Yeah, if you get a ’13, it’s a 1- or 2-year-old car. You’re going to have full coverage on the vehicle for a couple years. So to get something like that – again, you could’ve gone for a premium car, as you mentioned. You can get a BMW or something for under $20,000 as a used vehicle, but you’re going to have to go older, higher mileage, and probably out of warranty coverage.
Bottom Line: Another choice for $20,000 or under that I thought was very interesting that you came up with was a Toyota Sienna, which is a minivan. A good minivan. But why zero in on that in the under $20,000 category?
Brauer: Toyotas have great durability, so you can get basically a full-featured minivan that’ll carry plenty of people – or cargo, if you need to fold the seats flat – for less than $20,000. If you’re looking for utility and long-term durability, I don’t know how you could do much better than a Toyota Sienna, especially, say, a 2011. You can go back only 3 years and get a 2011 Sienna without that many miles – again, less than 40,000 miles. That means the engine’s got a long life ahead of it, and it’s got warranty coverage on it. That means you’ve got a lot of modern features. They’re going to have Bluetooth and a lot of the other convenience features that people want, power sliding doors, all that. But you’re going to have a very functional vehicle.
Because Toyotas hold their value so well, really, the depreciation curve is flattened out by the time you go back 3 or 4 years. So you could probably buy this car for under $20,000, drive it for a couple years, and depending on how many miles and how good a condition you keep it in, resell it without much of a loss for what you could sell.
Bottom Line: Very interesting. A lot of people buy minivans, obviously, for family use, and they beat the crud out of them, basically. So having one that’s a few years old to start with really in some ways is a no-brainer.
Brauer: I think you can get one that still hasn’t been too beat up, and a lot of people get through minivans fairly quickly. They get through that toddler or infant stage, and then they’re kind of done; they don’t want the minivan anymore.
So if you bought one that was already in still okay shape and had gone down below $20,000 and someone else took the big hit on the depreciation curve, drove it for a few years and hopefully didn’t have too many Cheerios jammed in all the crevices, you could potentially sell it for not that much lower than you paid for it. It’s like basically a real cheap rental that you got for 3, 4, 5 years.
Bottom Line: So that when you get out of it, you get back a lot of what you put into it.
Brauer: Right.
Bottom Line: All right, that’s terrific. And then the third vehicle you wanted to focus on as a used car for $20,000 or less is a small SUV. Honda CRV.
Brauer: CRV. Yeah, and the CRV, this is another vehicle that they sell a lot of, so you’re going to have a lot of choices, and it’s another vehicle that has a long life. These Honda products, particularly the CRV, it’s got lots of durability and life built into that drivetrain, and really the whole car holds up extremely well. So you can get a 2011 CRV that has less than 40,000 miles, plenty of life left in that car. There should be some warranty potentially left, too.
And you’ve got this very functional, roomy interior. Even though it’s a small SUV, it’s surprising how much space and comfort Honda packs into their CRVs.
Bottom Line: And a new CRV – this used CRV from 2011 would be under $20,000; a new one would cost how much more?
Brauer: Probably – I mean, if you got a base model one, you might be able to get right around $20,000 out the door or low twenties, but you could get a fully loaded EX for under $20,000. Again, someone else is going to take that hit on the depreciation.
The nice thing about Hondas and the Toyotas is they don’t take that much of a hit, but you can still let someone else take those several thousand dollars that they’ll lose after 2 or 3 years, and then that curve flattens out again, and you go buy it 2 or 3 years old and you keep it for 2, 3, 4 years, sell it for probably not much less than you started with.
Bottom Line: It’s interesting. You’re not getting a car for half the price it originally sold for when you buy a high quality car like this used, because the value doesn’t plummet like it does with some vehicles. But what happens then is that after you’ve driven it for a few years and you sell it, you’re getting back a lot of what you paid for it.
Brauer: Yeah.
Bottom Line: You might end up spending a little more at first, but you end up with a net cost at the end that’s actually lower, and it’s a better vehicle.
Brauer: Right, because of the vehicle you picked. It’s funny when you think about it; you’re kind of doing the antithesis of what too many people do. They buy a new car every 2 to 3 years, they take the biggest hit in the depreciation, and then they do it again.
You’re doing the opposite. You’re buying a 2- to 3-year-old car, and if you did that every 2 or 3 years, you could potentially have very small hits to the depreciation and still get to switch vehicles every 2 to 3 years. And have very nice vehicles.
Bottom Line: You still have the fun of having a “new” vehicle.
Brauer: Yeah, a “new to you” vehicle every 2 to 3 years.
Bottom Line: Okay, perfect. Thanks very much, Karl.
