15 Moves You Must Remember Before Buying a Used Car
If you’re in the market for a new set of wheels, you can save big money buying used, because, after all, the original owner or lessee already paid the bulk of the depreciation.
If you don’t know how to buy a used car, however, you can leave money in the dealer’s cash register that should be in your bank account or, even worse, drive home with a lemon. Do your research, think before you sign and follow these tips for buying a used car.
Determine Your Budget
Step No. 1, when buying a used car, is the same as the starting point for buying a new car — or buying anything, for that matter: Find out what you can afford.
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That includes the cost of the car itself, title, taxes, fees, insurance and the principal and interest that constitute your monthly payments if you’re financing. Auto sites such as Edmunds offer budget calculators and other tools to walk you through the process.
Factor In Long-Term Costs
When setting your budget, it’s important to understand the long-term cost of ownership. The cost of insuring a car can vary considerably from one type of car, model or even color to the next. Fuel economy can make a difference of hundreds of dollars a year and thousands over a few years. Then there’s the likelihood of unscheduled repairs and their average annual cost.
Sites such as RepairPal offer tools and calculators to help you gauge these costs for all major brands and most models.
Check Your Credit Score
If you’re planning on financing, the process for buying a used car continues the same way it does for buying one that’s brand spanking new, and that’s checking your credit score. Your score — and the financial history it represents — is what lenders use to assess the risk associated with lending you money.
Free credit reports from the three major bureaus still don’t come with scores, but you usually can get your score from your bank or credit card company. If not, a free scoring service will give you a good idea of what your lender will see when judging your creditworthiness.
Get Preapproved
When you’re ready to buy a used car, it’s always a good idea to get preapproved for financing before you walk into the dealership. That allows you to negotiate from a position of strength.
Preapproval lets you compare any offers from the dealer’s financing division against that of your financial institution, so you can walk away knowing you got the best deal, no matter which option you choose. As with some of these other steps, this principle applies when you finance a used or new car.
Get a Vehicle History Report
It’s hard to imagine that anything about a used car is more important than just how used it is. Carfax and AutoCheck are among the most popular vehicle history report services, but there are many others. Which one you choose is up to you, but you absolutely have to get a car history report, which details things such as major accidents, number of owners and service history.
Remember That Carfax Might Not Show the Whole Picture
Vehicle history reports are a necessary and good start before you sign on the dotted line, but don’t use a clean report as an excuse not to perform further due diligence.
The best report on a car’s vehicle identification number (VIN) won’t be able to tell you about things such as unreported accidents or self-paid repairs that weren’t handled through an insurance company. A vehicle history report also can make it appear that a car had more owners than it actually did by reporting sales between multiple dealer groups.
Run the Car’s VIN Through the National Insurance Crime Bureau
When you find a few used cars you like, plug their VIN numbers into the National Insurance Crime Bureau (NICB) yourself, which allows five free searches every 24 hours per IP address. This service will tell you things such as whether the car was reported stolen or if it’s been totaled or salvaged.
Line Up a Third-Party Inspection
It’s true that some used-car dealers just want to make a buck, even if it means knowingly selling a lemon. Most, however, are well-intentioned and do their best to make sure they’re selling a vehicle that’s in good condition. Even in those cases, however, dealer inspections can and sometimes do miss things.
Hire a mechanic who specializes in used-car inspections so you have an extra set of eyes, ears and tools checking for hidden flaws. This holds true even for certified pre-owned vehicles.
Research Resale Value
When determining what to look for when buying a used car, remember that average resale value is a key metric. Vehicles with low resale values might seem like a great deal to used-car buyers, but cheap used cars often start having problems right around the time they reach their full depreciation and the warranty runs out.
On the other end of the spectrum are the extra reliable vehicles. The fact that so many owners keep the reliable vehicles for long periods of time keeps resale values high — so high, in fact, that used ones rarely are a bargain until they’re nearing the end of their runs.
Consider a Credit Union
Credit unions often offer lower interest rates, fewer fees and better customer service than big or even local banks. Credit unions are member-owned not-for-profits that reinvest their earnings to give their members great rates, and that often translates into a better loan than you could gain when working with a dealer.
Don’t Fall in Love
Cars are like houses in that buying one can be an emotional process. And just as with houses, it’s always better to proceed analytically and resist the urge to fall in love with a used car you’re thinking of buying. Pursuing a vehicle that stokes your passions can cloud your judgment and make you more willing to ignore problems or exceed your budget.
Take the Test Drive Seriously
A test drive in a new car can be an enthralling experience that gives you a moment to picture yourself in your brand new ride — and that new car smell!
When buying used, however, a test drive is a crucial part of your due diligence. Use all your senses. Smell for gasoline or burning oil and listen for knocks in the engine, squealing around turns and whistling from the windows or sunroof. Make sure to go up and down hills and over bumps. Keep an eye on the instrument panel, brake hard several times and always test all the buttons, dials, controls and features.
Shop Discontinued Models
There’s a common misconception that discontinued models are hard to service and require parts that are no longer available on the market. The truth, however, is that automakers usually can service discontinued models for decades.Even when the car is brand new, you can enjoy real savings by buying a model that the manufacturer no longer makes. Those savings are magnified even more when you buy one that’s been previously owned.
Focus On Comparable Car Costs
Dealer invoice cost is a common benchmark for negotiating the price of a new car, but there’s no such thing as a dealer invoice price for used cars. Since dealers can get cars from a variety of sources, such as auctions and trade-ins, the only number you should use as a starting point for negotiations is the price that people in your area are paying for comparable cars. Sites like Edmunds and Kelley Blue Book can help with that.
Don’t Rule Out Private Sellers
It’s a common misconception that dealers offer higher-quality used cars for lower prices than you could find for sale on Craigslist or other peer-to-peer sites. The truth, however, is that there is no data to back up this assumption.
In fact, dealers have to make a profit on each used car they sell, while private sellers are often just trying to sell an older car quickly and could be more willing to negotiate. Also, some states don’t levy sales tax on private vehicle transactions.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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