How to Buy a New Car for Less Than $20,000
Many are the perils of shopping at the bottom end of market. Choose wisely.
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Here's the reality of the $20,000 new car: People who buy them are usually stretching themselves financially. And they’re not buying a plaything—this new vehicle gets them to work, helps run errands and generally sustains their lives in all the most important ways. Meanwhile those lucky stiffs buying $400,000 cars usually pay cash to add the latest toy to their ever-expanding collection. Lamborghinis are allowed to be unreliable baubles, but that Honda Civic had better start every damn morning. After all, you have to get to work.
With that irony in mind, the first concern when it comes to buying a new or used $20,000 car is maximizing value. The trick is in knowing what values matter to you.
According to KBB.com, in March of 2016 the average price of a new car reached $33,666. So, six months later, let’s call it an even $34K. That means when you’re shopping for a $20,000 car you’re looking in the bargain bin.
If you insist on buying new and staying under $20K, you’ll have to restrict yourself to vehicles like the Hyundai Elantra, Nissan Sentra, Honda Civic and Toyota Corolla. The good news is that most of those are really good cars—even though it’s truly tough to buy one at under $20K once you add up the sales tax and license fees. But there are even smaller vehicles like the Honda Fit, Ford Fiesta and Hyundai Accent that are solid, satisfying machines that come in at lower prices.
Want a truck? The Nissan Frontier—the very cheapest stripper version with a four-cylinder engine and five-speed manual transmission—sneaks in at $18,290 and dealers will usually let them go for a few hundred under that. But simply adding an automatic transmission will knock that up to $21,460. Then you’ll likely want A/C and a radio too, so add another $1,200. Incidentally the cheapest Toyota Tacoma is $24,120.
Things to Look Out For
- Be honest with yourself. How are you going to use the vehicle? If you’re racking up miles rapidly, consider vehicles with excellent fuel mileage and/or long warranties. If you’re going to trade in your vehicle after three or four years, look for the machine that holds its value best. If you’ll be using the vehicle for the occasional Uber gig, consider cars with excellent rear legroom. For instance Toyota lists the Corolla sedan’s rear legroom at 41.4-inches and the larger, more expensive Camry sedan’s at 38.9-inches. Go figure.
- Honda and Toyota have made lemons, but they have earned their reputation for quality. And that shows up in their consistently high resale values. If you’re going to run your new vehicle out for decades until it spontaneously disintegrates around you, the odds favor proven brands. Then again, Kia and Hyundai still offer 10-year, 100,000 mile powertrain warranties and that bring the peace of mind you need.
- Don’t be tempted by extremely long financing. The average car loan today stretches out past five years. Even if a 72- or 84-month loan will knock the payments down to something more comfortable, you may be sick of the car or worn it out before you’ve paid it off. And who knows how your life may change over that long a time? Marriages come and go, jobs change, knees give out, kids want toys at Christmas—you get the picture.
- Think smaller. Subcompact vehicles do 99-percent of what larger vehicles will and do it less expensively. So think Honda Fit instead of Honda Civic. Ford Fiesta in place of a Focus. Toyota Yaris instead of… oh, who am I kidding. No one should be stuck in a Yaris.
- Luxuriate in the boring. If you’re looking for a rollicking good automotive time, spend more money. At under $20,000 the best deals are on commodity products that are produced in massive quantities. A $20,000 Porsche isn’t likely to be a very good Porsche. That said,the one exception is the Mazda Miata. There are no truly terrible Miatas and a used Miata at just under $20,000 is likely going to be good.
- If you’re going used, avoid old luxury cars. A $20,000 Mercedes or BMW sucks in the naïve, chews them up in costly repairs and spits them out mere husks of human beings they once were. A car like a 2005 BMW 7-Series is incredibly complex and ridiculously expensive to repair. Do you want to deal with the downtime it will take to fix the air suspension on a Mercedes S-Class? Buy an old Jaguar and your head will explode. Seriously. It’s science.
- Generally speaking, if you’re going used, buy the simplest, best-built, lowest mileage car you can find at your price. An off-lease, two or three year old, certified used Accord or Camry looks real good at these prices.
- At these price points, leasing can be the right choice for many buyers. Particularly since all the mainstream manufacturers promote lease deals at $199 a month or less. If your lifestyle is stable, your commute is regular and limited to only a few miles, and you don’t mind making two or three years of payments with nothing to show for it at lease end, then it might make sense. Particularly if your accountant says you can write the cost off your taxes.
On the Market Now
- 2012-2014 Honda Accord – These are members of the current Accord generation, but old enough to be coming off two- and three-year leases. Don’t expect anything fancy for under $20K (no leather, no V6), but a transportation nodule that has 36,000 miles on the clock and another 164,000 miles of life left in it. This is the sweet spot of used cars. And if the Accord isn’t appealing, think Nissan Altima, Mazda6, or the inevitable Toyota Camry.
- 2016 or 2017 Toyota Corolla – There’s too much contempt out there for the Corolla. And yeah it is boring. But it’s robust, roomy, available in ten slightly different models (all four door sedans) and cheap to buy. Prices start at $18,765.
- 2016 or 2017 Honda Civic – After a fallow period when Honda let the Civic wither after a lackluster redesign for 2012, the Civic came back strong with the introduction of the 2016 model. It will be tempting to get all fancy with the 1.5-liter, 174-horsepower turbocharged four-cylinder engine in the EX models, it’s the base Civic LX powered by a 158-horsepower, naturally aspirated, 2.0-liter four that’s the surprise. When paired with the standard six-speed manual transmission it’s a high-quality, easygoing machine. And prices start at only $19,475.
- 2016 or 2017 Ford Fiesta SE Ecoboost – The Fiesta a slick small sedan when equipped with its standard 120-horsepower, 1.6-liter four cylinder engine. It becomes downright brilliant with the 1.0-liter, three-cylinder, turbocharged Ecoboost engine aboard. Rated at 123-horsepower, the Ecoboost’s two big advantages are a relatively thick torque curve and fuel stinginess on the order of an EPA-rated 31 mpg in the city and 43 mpg on the highway. And right now, with Ford putting $1,500 of incentive cash on the hood, the price starts at just $15,690.
- 2007-2011 Toyota Tacoma – Nothing holds its value better than a Toyota Tacoma compact truck. And that means you go in paying a premium for the brand name. So 2007 Tacomas with odometers heading into six digits can still run $15,000 or more. And 2009 or 2010 Tacoma 4x4 Crew Cabs will still carrying $20,000 or more asking prices despite showing big mileage on the odometer. But if you can find the right deal on the right Tacoma, you’ll likely have a truck you can beat hard for ten years and still pull decent money out of when it’s time to sell it.
Not So Good Examples
- 2014 to 2017 Mitsubishi Mirage – My review of the 2015 Mirage in The New York Times generated a ridiculous amount of attention. So if you want to know why I loathe this awful car, here’s the link to that review. This car will never be cheap enough to make up for its lousiness. And it will never have a warranty long enough to make it sensible.
- Any Out Of Warranty German Luxury Car – These beasts depreciate with absolutely astonishing rapidity. A 2008 Mercedes-Benz CL65 AMG that was nearly $200,000 when new can be had for around $50K despite less than 50,000 miles on the clock. And 2008 S550 sedans – which approached $100,000 when new – have now drooped to less than $20,000. The problem is maintenance is just stupidly expensive. Read Edmunds.com’s heinous experience driving a 2005 CL65 AMG for a year in 2014 to understand the horrors that await those who tempt the German car gods. There’s nothing more expensive than a cheap Mercedes.
- Any Toyota Yaris – There’s no such thing as a good Yaris. Yarises aren’t unreliable, but that means you’ll be stuck actually driving yours.
- Any Cheap Range Rover – New Range Rovers can run $250,000. So a 2008 model for under $20,000 will seem like a bargain. Don’t be fooled. Cheap Range Rovers won’t nickel-and-dime their owners, but will instead drain their IRAs and 401Ks in $3,000 chunks. If you fall for one of these admittedly beautiful and (when working) capable machines, you will rue the day you bought. And that’s likely to be less than a week after you buy it.
- 2016 Nissan Versa – At only $12,825 to start, no new car is more affordable than Nissan’s Versa sedan. And no new car is drearier to drive. It’s only virtue being that it’s not a Mitsubishi Mirage.
Shopping at the bottom of the new car market is a perilous adventure. This is where sub-prime loans with high interest rates can double a car’s price over the finance period. Before you go shopping know your credit score and talk to your bank and/or credit union before heading to any dealership. It’s always a good idea to know precisely where you stand credit-wish before running up against a slick F&I guy who will stick you with a terrible loan.
The same goes for used vehicles too. Particularly if you wind up at a Buy Here/Pay Here lot filled with temptingly cheap iron.
Keep it simple. Look for robust cars with few things likely to break. Go for proven brands with good resale values. And embrace the virtuous lifestyle that comes with being smart and frugal. Even if you’re not rich.
No consumer product is analyzed, dissected and researched more than new cars. On this Internet thingie, the go-to places include sites like Edmunds.com (for which I work), KBB.com, and yes, this site, our beloved TheDrive.com. Meanwhile legacy media sites like Caranddriver.com (another site that buys my words) and ConsumerReports.org are jam-packed with information—and increasingly link to dealerships with which they partner. In the 21st century, it’s virtually unthinkable to consider purchasing any new vehicle without at least first researching pricing on several of those sites.
For buyers who don’t want to face negotiating with some sharp-eyed, cutthroat car dealer, there are buying services that include TrueCar.com, Costco, and Edmunds.com. Even skilled negotiators can utilize those resources as jumping off points for getting the best deal.
I’m biased, but I believe the best-written, truly honest and most useful car reviews available come from Car and Driver and TheDrive.com. Meanwhile Edmunds.com is still my favorite pricing source and Consumer Reports still does the best at tracking product quality. Yeah, I know who butters my bread.