It should not cost this much

Used car prices are kind of insane.

On occasion I like to window browse on Carvana and CarMax. Just to see if anything weird and interesting pop up. Recently there was a 2016 Toyota Corolla with a manual transmission up for sale. It brought me back to my very first car: a 2006 Toyota Corolla, also in stick shift guise. It’s very rare to see the common commuter sedan with a manual gearbox. Good on the owner(s) of the 2016 Corolla to have put over 70,000 miles on it. We like to see cars driven.

What we don’t like to see is ridiculous pricing. The listed price on CarMax for that 2016 Toyota Corolla is $16,000. Keep in mind the original MSRP of the car 10 years ago was $17,300! Even if you account for inflation - $24,155 in today’s dollars - 16 grand for a decade old poverty spec sedan is laughable. Especially when it’s equipped with a manual gearbox that nobody wants. This isn’t some Porsche sports car with a stick.

Even if you account for the CarMax premium for let’s say $2,000, a 2016 Corolla still isn’t a $14,000 car. It’s not even a $10,000 car. A gut-feeling fair price for a 10 year old compact sedan is around the $7,000 mark. $8,000 perhaps if the mileage is sufficiently low. Is this simply the era we are living in? Just like how there are zero new cars available for under $20,000, the reasonably conditioned used car for under $10,000 - that every personal finance guru says is available - has also disappeared into history.

I used to have a 2016 Mazda MX-5. That same model year of Miata in today’s market looks to be hovering near $20,000 for a low mileage sample, which is insanity. A decade old MX-5 should be less than $10,000, no matter the miles. It’s not a rare car; Mazda has produced plenty, and continues to do so to this very year. Used examples should not be encroaching on the price of a new one.

Because then why wouldn’t you throw in the extra thousand for one with zero miles and zero farts on the seats? You’d get better financing terms buying new, too. The lower interest costs might even make the price delta disappear completely.

In the middle.

Inspect the used car

The method to get really familiar with a new-to-you car is to give it a good hand wash. All the intimate details will appear in front of your eyes as you slide the wash mitt over every single panel. Details you’d otherwise miss on first inspection during the purchasing process.

It’s how I found out the windshield side moldings on my recently-bought 2019 Volkswagen Golf GTI are surprisingly perished. It’s going to cost $100 to buy brand new OEM replacement, which isn’t too bad. The car must have been parked outside constantly with its previous owner. I also found out one of the wheels has a slight bent, though it balances just fine with the new tires I put on, so I’m not going to worry about it. For now.

Minor flaws are what you must tolerate when buying a used car. Even the most stringent of owners cannot avoid some form of deterioration to their cars. What isn’t tolerable is major flaws that are detrimental to mechanical operation. These days it’s far too easy for people to offload cars to CarMax or Carvana that are in need of major maintenance or fixing. Used car buyers have to perform due diligence.

Good news for those of us in California. A new law states buyers of used cars under $50,000 - from a dealership - can now return the vehicles within three days. That’s ample time to schedule a visit to a mechanic to look over the purchase. Any major red flags found is then an easy decision to give the car back. For what remains a person’s second biggest monetary purchase in their lifetime, a purchase inspection is a must do.

I bought the GTI from Carvana, which has its own seven day no questions asked return policy. After picking up the car, it went the very next day to the local Volkswagen dealership for inspection. There were some items needing fix, but none out of the ordinary, or catastrophically expensive. Needless to say, I still have the Golf.

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It was all yellow.

It is done

It took almost seven weeks, but our family’s 2018 Hyundai Tucson - which was a lease - is finally sold off. Made a decent bit of profit too, which is nice. The car market is indeed super crazy right now: the absolute worst time to buy a car, but the best time to have a car to sell. The local CarMax gave us $25,000 for the three-year old Tucson that had an MSRP in the $28,000s. The lease buyout was only $16,500, including tax. Do the math!

It had to be said though our Tucson has relatively low mileage (~18,200) and is practically pristine. Your mileage (pun intended) will vary. Don’t look to get around the same money if your Tucson had significantly more miles.

The $8,500 in profit isn’t without some excruciating waiting and patience. Due to the aforementioned crazy car market, leasing companies have stopped the practice of lease buyouts by a third party. No longer can you take your lease vehicle to CarMax (and the like) and have them cut you a check for the difference in present value and the payoff price. The contract buyout price the leasing companies has is with you; they are not legally obligated to sell to third party for that same price.

And at present time, the lease companies aren’t willing to sell at all. They want to impel the customer to return the car to the brand’s dealership. Because there is an absolute dearth of new car inventory due to the chip shortage.

In order to sell the Tucson and get some money back, we had to do it the roundabout way: buy the car outright from Hyundai, then sell the car to CarMax ourselves. Paying for the car was easy - electronic bank transfer - but then we had to wait over two weeks for Hyundai Finance to mail us the title. With the pink slip in hand, there was another problem: CarMax (and the like) only accepts a clean title: the paper cannot include the leasing company as a registered owner, even though they’ve signed it off to you, and there’s a bill of sale.

Getting a clean title required a trip to the local DMV. After paying $25 to transfer the title to my father’s name only, it was then another prolonged wait for the unencumbered title to arrive in the mail.

That took another three weeks, but thankfully the new pink slip came last Friday. We immediately schedule an appointment at CarMax the very next day. Two hours on the premises later, and finally we unburdened ourselves of Tucson. A whole month after my father have already leased another car! Thank god I had the parking space at work to store the Tucson during this time.

So yeah, if you have a car to sell, now is the best time! I just hope you’re not also looking to buy one as well…

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Today’s office.

Crazy car market

The lease is ending on my dad’s Hyundai Tucson, so we’re in the process of finding a new vehicle to (once again) lease. If you didn’t know, the automotive market is absolutely crazy right now. Due to the semiconductor chip shortage, the inventory of new cars is really low. In turn that pushes used car prices up sky high. This is a great situation if you’re looking to sell, but those looking to buy are in a world of hurt.

Those Labor Day deals you see advertised on TV? Yeah, they don’t actually exist on the ground. Markups are the norm, and you’d be lucky to find a vehicle for MSRP. We contacted the local Hyundai dealership hoping for an easy return and pickup transaction. Sadly, literally every car on their lot have additional makeup on top. The salesperson would not budge from the prices, even though we are turning in an end-of-lease car.

Which ought to be a nice profit maker for the dealership, because of the aforementioned high used car prices. CarMax is offering several thousand dollars above our lease buyout for the Tucson. We were completely willing to let the Hyundai dealer have this profit if they would simply give us a good lease deal on the next one. Shame. Instead, we're planning to sell the Tucson to CarMax, and pocketing the nice difference.

As for the replacement car, thanks to my brother’s contacts at a Toyota dealership, we are able to lease a poverty-spec Toyota Corolla at MSRP. Monthly payments will actually be slightly lower, which is nice. A compact sedan is indeed a step-down from the reasonably nice Tucson SUV, but that’s the best we can do in this crazy market. The goal was to not spend more on the monthly bill, and to that end, job done.

Once my dad retires, we’ll actually buy him the Lexus that will last him for the rest of his life.

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Hollywood sunset.