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On today's podcast, I want to share with you the single best technique for sourcing a quality used car. This episode, of course, fits into our how to buy a car series. In episode one of that series, I talked about how to decide whether you should buy a car or not.

I want to encourage that if possible, without giving too much lifestyle, just skip having a car. Then, of course, acknowledging that most of us are going to choose to have a car for various reasons. We talked in episode two about how to decide what kind of car you should buy, and then episode three, setting a budget for that car, deciding how much you should spend on a car before you go and look.

The natural outcome of the budget for many people is going to be that the decision about buying a used car or a new car is going to be fairly obvious. Remember that we're aiming for somewhere between around 10% of our annual income to as high as 50%. The lower the better for wealth creation purposes, as long as you can get a vehicle that's appropriate for your needs.

That's our target in terms of overall spending, meaning amount of money to spend on a car across our household. Aiming for 10% if you're serious about wealth building, and up as high as 50% if your wealth building goals are more modest and you're trying to perhaps buy a vehicle that's not available at the lower end.

If we think about these numbers, let's say you're earning $100,000, that 10% number is going to be about $10,000. If you're spending $10,000 to $20,000, you're going to be buying most likely a used car. On the other hand, if your annual budget, your income is $1 million a year, then of course you're almost certainly going for a new car to get all the benefits of a new car.

Not really much of a reason to go for a used car at that budget. We spoke about in episode four, this question extensively about deciding if you buy a new car or a used car. Let's acknowledge the fact that especially in the early stages of wealth building, most of us are going to be buying used cars, not new cars.

The problem is how do you find a good one? In the next episode, I'll talk about shopping broadly, buying from a private party, buying from a dealer, etc. I want to create a standalone episode and simply tell you how I do this. The technique is very simple. I want to make sure that I buy a car that I know the history of.

The biggest fear or the biggest genuine problem with buying a used car is you're going to wind up buying a car that you don't know the history of. You can solve that problem in a couple of ways. A new car solves the problem because it has no history. It's coming directly from the factory, therefore you know it's delivered to me.

I'm the one who's changed the oil every 3,000 miles or of course today, 5 or 10. I'm the one who has cared for it. I'm the one who's made sure that any mechanical failures are fixed properly with OEM parts, etc. I know the history of a new car. With a used car, I don't know the history.

I think it's perfectly fine for you to buy a used car for which you don't know the history as long as you're careful about making sure that you buy a car that is known for quality, that has the features that you want, and you get it mechanically inspected before you buy it.

We'll talk about that in the next episode. But there is a simple technique that I have utilized throughout my entire lifetime to buy high-quality used cars for which I know the history. The technique is this. Buy it from someone you know. This technique is rock solid. If your goal is to buy quality used cars, buy cars from people that you know, from people that you trust.

If you do that, you'll buy used cars for which you can be confident of the history and either the car won't have any problems or you'll know about whatever those problems are. This plan is not perfect. For example, I've never intentionally chosen the color of a car myself. It doesn't really matter much to me.

Car comes along, it's painted, no big deal. I've also often given up on some of those features that you might like to have. I've never gone to a dealership myself and ordered a car of a certain trim package so that I could get exactly what I wanted on the new car.

I've given up some of those things that are fun. If you have the choice, take the choice that you want. But what I myself have gotten in exchange is a long history of owning high-quality used cars that I've operated very, very inexpensively. I've done this by buying the cars from people that I know.

Let me expand on this technique because it's not just as simple as, "Hey, so-and-so's selling a car." It does matter. But here are the steps that you want to go through. It is that, but it's a bit more. I want to give you a few more things that you can do.

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Don't lose out on your chance to get a Maverick X3. Visit Del Amo Motorsports in Redondo Beach and get yours. Offer in soon. See dealer for details. The first thing you want to really focus on is the kinds of cars that would be appropriate for your needs. The reason I spent so much time in the early episode talking about deciding what kind of car you should buy is to get you to think about what kind of car will fit your needs and fit your lifestyle.

By thinking ahead and considering what your needs are likely to be in the next few years, you can start to keep your eyes out for a quality car. An obvious simple example is that I've been shopping for a bigger minivan for the last few years. We have a 7 passenger minivan.

There's no urgency, no hurry, but with a 7 passenger minivan, our own family will fill it up and we won't have space for any guests. I always like to have space for guests, so I need to upgrade to a larger vehicle so that we have space for guests. This is not something that's urgent, not pressing.

I can always rent a car, I can always borrow a car. There's always solutions, but I've been systematically shopping for a vehicle for the last several years. Here's the way my shopping works. If I know a friend or I notice somebody that I know, it doesn't have to be a friend, it could be a co-worker, it could be a casual acquaintance, etc.

I simply say to them, "Hey, if you're ever interested in selling your car, let me know." I notice that so-and-so has a nice 12 passenger van or a 15 passenger van or I want a four-wheel drive pickup truck and I notice that someone has one that I like. I simply tell them, "Hey, if you ever have any interest in selling your car or if you ever have any interest in selling your car, let me know." What this accomplishes is it simply puts me on their radar screen where they think about it.

In most cases, that's all I'll ever say or I won't make an offer, I won't tell them what I'm willing to pay. I just simply say, "Hey, if you're ever interested in selling your car, please let me know. I'd like to have a car kind of like yours." In some cases, that will actually stimulate someone to go and get another car because they know they could sell their current car easily.

I might be able to buy it soon enough. Most people are going to replace their car over the next, say, few years. By lodging that little seed in somebody's brain, they'll think of me when it comes time to sell their car. In some cases, I've gone beyond this. If there's a car that I have genuinely thought was a good deal, I've gone ahead and offered a price for the car.

I'll do it something like this. I'll say, "Hey, I really like your car. Listen, if you ever want to sell your car, please let me know. I'll be happy to pay you the dealer price for it." Or, "I'll be happy to pay you the dealer price plus 10% for it." Something like that.

What I want to assure the person, if it's a car that I really like or perhaps it's the kind of person that doesn't just want to give me a deal, I want to assure the person that I'm not looking for a big discount. When you're purchasing a used car, because the risk of buying a car that is poorly maintained is so high, I don't think shopping for a discount is generally the first order of business.

If I'm buying, say, a $20,000 car, getting $500 off or $1,000 off is relatively immaterial as compared to the risk of very quickly having a $500 or $1,000 bill at the mechanic. I would rather pay an extra $500 or $1,000 more than what I could get otherwise in order to have a car where I know I'm not going to immediately be dropping thousands of dollars on mechanical service.

As we've discussed previously, all cars are going to need service. But I want to know where that car came from. It's cheaper for me to "overpay" for the car than it is for me to have to go and fix a car that I got cheap because somebody was trying to get rid of a problem.

So if it comes to a price, I'll often, I have said, most cases you don't need to, but I have said to people, "Listen, whatever the dealer offers you, I'll give you that plus 10%." And so this creates a win-win situation. If somebody wants to sell the car and they want to sell the car at top price, they're probably going to go through the hassle of marketing their vehicle.

They're going to shine it up, spiff it up, put it out on every advertising method. They're going to meet at the set at their house. They're going to have buyers come through their house. They're going to meet with people. They're going to try to find people who have enough money, etc.

to close the transaction. They're going to deal with a bunch of tire kickers and eventually they'll sell the car for top price. That's possible. But I think most people who are selling cars in the price range that you and I are likely to buy are probably not interested in dealing with that.

If you're selling cars at the very low end, a $5,000 car, a $3,000 car, etc., there are many people who can just pull out the cash and buy that. If you're selling cars in that high value, mid-range used car space, $25,000, $30,000, $35,000, $15,000, that range right there, your pool of potential buyers is much smaller.

Very few people are going to show up to your house with $30,000 in cash. So then you're often dealing with bank checks. You're dealing with people who might need to get financing. And frequently the people who have that kind of money and who just want to do a cash deal will often be shopping at a dealer rather than private party.

Or they'll be the kind of person that's tempted to upgrade to a new car instead. After all, if you're going to spend $35,000 on a used car, why not just go ahead and spend $50,000 and get exactly what you want? That's the way that many people look at it.

So in this kind of middle-range space, $15,000 to $25,000 just to make up some numbers, the normal way that people dispose of those cars is just trade it into a dealer because it eliminates the hassle of trying to sell it. It eliminates the hassle of them trying to make sure most people aren't comfortable taking $20,000 of cash.

They don't know the risks of taking a bank check or a wire transfer, etc. And so it's just more comfortable for them to go to the dealer. So if I make them an offer and I say, "Listen, I'll pay you the dealer price plus 10%," then I can get a price that's a very fair price and I can solve their problem for them.

They know me, so they'll be happy to take money from me directly. They probably will take a personal check, certainly take a bank check. I can just hand them cash and we can be done with the whole thing. We have an agreed-upon way of setting a fair price. Take it to the dealer, get the quote, I'll pay you 10% more of that.

They'll make 10% more than what they would get trading it into the dealer, which they'll be happy about, and they can sell their car quickly with no hassle. I, on the other hand, win as well. I get a car that I know where it came from, I know the history of it, I know if it has any problems.

I know the person, so the person's going to be honest and disclose them to me. And I get a discount on what I would have to pay for that car at a dealer. And again, this is all built upon the benefit that I get of knowing where that car came from.

If I go buy a car from a dealer or a private party, I'm not going to be sure of the history of that car. Especially at a dealer, I'm not going to know the history of the car very well. And from a private party, while I can know the history of the car, I'm not going to be sure of it.

I've got to look out for scammers and people lying to me. So that's a huge value to me. And yet, I'm still probably, the dealer cost or the dealer offer for a trade-in, plus 10%, is still probably cheaper than I could get the car, certainly at a dealer or in the private market.

And regardless, as I said, the cheapness of it saving $1,000 or $2,000 is not particularly important when we're looking at the total life cycle of the car. To boot, in many cases, you can actually get it cheaper. So frequently when we sell something to a friend, we like to give our friends deals.

We like to give our friends discounts. "Hey, the dealer could give me 20 grand, but I'll tell you what, I'll sell you this car for $18,000." And so you don't always have to overpay for what the dealer would give to you. You can underpay a little bit as well and often get a great deal.

This is a technique that I have used again and again. Not all of the vehicles that I have personally purchased have been purchased using this method. I have gone out and purchased various vehicles from a dealer, from private parties, etc. But usually when I have been forced to do that, it's because I've been looking for something specific that I couldn't access in my network.

I was looking for, in one case, I bought a 15-passenger van. I bought an RV from somebody. I bought a couple of big diesel pickup trucks, but I was looking for trucks that were older that somebody didn't want to sell, etc. So I had to go and source those from different people.

One case, I went and bought an SUV from a dealer. So it's not that this always works, but the best vehicles I have purchased have always come this way. And it's something that you can repeat again and again and again. It's extremely low risk and it works. It allows you to get a high-quality used car where you know the history of it, you know where it came from at a very fair price, and that is the key of what you are looking for.

So what are the last few factors that you need to be prepared for to make this technique work? The most important one is you need to have money. And you need to be ahead of the game. So many people go shopping for a car when you need a car.

Generally speaking, a good rule of personal finance is don't shop when you need something or you're going to pay whatever price is demanded by the person selling it to you. Always shop when it's convenient for you to shop and you can get the best deal. So a couple of silly examples.

If you go to Costco, you can buy a flat of 30 half-liter water bottles for $3. So $3 divided by 30, if my math is right, you're paying about 10 cents a water bottle. That's a great deal, right? 10 cents a water bottle is your cheapest deal you're going to get on a bottle of water.

But if you don't bring water with you and you're at the airport boarding area for your plane and you're dying of thirst, you're going to go and you're going to pay $6 for the same 10-cent bottle of water. So this is the difference between buying something when it's convenient for you versus buying something when you really need it.

If you want to buy a lawnmower, one of the best times to do that is in the fall and winter when everything is discounted after the summer season. If you want to buy a winter coat, one of the best times to do that is in the spring and summer when everything is being cleared out.

And it's the same whether you're buying new from a store or whether you're buying from a yard sale, etc. Buying things at off-peak prices is usually your best way to get the lowest possible cost. But in order for that to work, you have to be thinking ahead about your future needs and you have to have the money that you can comfortably use to pick up a lawnmower in the wintertime knowing it's going to sit there for some months before you ever fire it up.

So the same thing applies with cars. You need to be thinking ahead about what you need and then you need to buy it before you need it. If your current car breaks down, let's assume that you have a catastrophic breakdown or you have an accident and your vehicle is totaled, then you're immediately forced into what I'm going to call the retail price world.

You have to go out and whatever car prices are at this very moment, you have to go and pay those. So this is what happened to many people over the last two years. We've had a very unusual used car marketplace caused by supply chain disruptions, especially chip shortages, etc.

And so anybody who needed to go out and buy a car over the last couple of years has paid a very, very high price. But if you could just afford comfortably to keep your vehicle going, then you can reach back and you can buy the car when you're at a normal market.

And I think we're close. If we're not there already, we're back to a pretty normal market in many vehicles. Not all, but in the vehicle market has changed dramatically in the last six months. So you don't want to be forced to shop. So that means a couple of things.

Number one, you need to be prepared to replace your current vehicle before it ends its life cycle. Now, remember, we're usually talking about years where this is perfectly reasonable. Vehicles have such a long life cycle compared to other consumer items that we use that you can drive it for an extra year and generally you're not going to have any trouble with that.

But you need to be thinking ahead. Hey, the car that I have in my driveway is nearing the end of its useful life cycle or nearing the end of its reliable life cycle. So I need to be looking for a replacement. And looking for a replacement using this technique might take a couple of years to appear.

The other thing that you need is you need to always have money available to do the deal when it's offered to you. So if I've used this technique and I get a call from someone saying, "Hey, you mentioned to me that you might like to buy my car. Would you like to buy my car?" Usually I have a couple of days to decide to buy it or not.

Now, if I choose not to, it's no big deal. No harm, no foul. I haven't harmed anybody by expressing interest in buying a car that they're selling. But if I'm going to act on it, I need to be prepared to act quickly. So I need to have stockpiles of money set aside, ready to go quickly.

I don't need to go, and I also generally going to avoid financing, of course. We don't want to finance a depreciating asset. That's dumb. But I just need to have money available. I need to have liquid money where I can say, "Absolutely, I want to buy that car. Let's work out a price and let's make it happen quickly." I believe that's everything that's important for me to share with you.

This simple technique is, in my experience, one of the most reliable ways for you to consistently purchase high-quality used automobiles at fair prices and basically minimize the hassle of maintaining a fleet of vehicles. I've identified the areas in which it won't work, specialty cars, specific things that you want in a car, but it is an effective way of having transportation.

I'm not a car guy anymore. It's a transportation. If it goes down the road and it does what I need it to do, I don't care what color it is. Your mileage may vary. You might be in a different situation, but that is the technique. I hope you'll use it, and I hope you'll teach it to others because the net impact of this can be thousands and thousands of dollars of savings over the course of a lifetime, which can really make a big impact of helping you get on the road to wealth.

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