In this episode of Getting Money Right we’re talking about how to buy a used car. Buying a used car is usually more economical while still providing you with the performance and reliability you need. Follow the steps we outline to find, evaluate, and choose a great used vehicle that you’ll enjoy for years to come.
Find the right car
There is no “best” car that is suitable for everyone.
The cheapest car is not always the best buy; neither is the most expensive.
You must consider the amount of maintenance a car requires, maintenance costs, mileage, resale value of the car, and the intended use of the automobile.
Most of this information is listed in consumer used car guides, which you can easily find on the internet.
The average family, during their lifetime, will put more money into automobiles—almost 50 percent more—than they will put into their homes. Your best hope of finding a good used car at the right price and knowing the quality of it is to buy it from a private individual.
Before you buy a car, you need to have it mechanically checked.
A good resource for reports of service histories, safety recalls, fuel economy, key advantages and disadvantages and current price ranges for all makes and models of vehicles is Consumer Reports Complete Guide to Used Cars.
Each issue contains all models for the previous ten years.
Most libraries keep copies of the most current issue.
Determine the type of car and features.
Avoid making impulsive decisions and purchasing cars that don't match your lifestyle.
Make a list of your routine driving needs and select a car that best matches those needs.
Needless to say two-seater cars aren't ideal for big families.
Read car reviews and Forums.
It's advisable to read reviews for the specific type of used car you intend to purchase.
Several websites such as Kelley Blue Book and Edmunds and Autobytel.com provide information on car features, specifications, even cost of ownership.
Define your budget.
Consider the total cost of the car.
If you will finance the purchase determine the monthly payment that you can afford and look at used car listings bearing this price in mind.
Consider the overall cost. Don’t just take in account the monthly payment, but consider the total cost of the vehicle.
Factor in additional costs.
Apart from the basic car cost, you should also budget for taxes and registration costs.
Cross-reference various online used car listings.
To get a quality car for a good price, putting in the extra time to comparison shop is a must.
Buyers should also research Kelley Blue Book (kbb.com) and Edmunds.com to determine the actual worth of used cars.
Determine vehicle history.
Ask if the owner has maintenance records.
Look for hidden clues that will help you assess the true condition of the vehicle.
Look under the hood - if the engine is dirty and looks like it’s been neglected so has the maintenance.
Fluid leaks - Be prepared to look under the car (flashlight). If you see oil stained parts move on.
Interior condition - stained, torn, or abused upholstery are trouble signs you should not ignore. There are too many cars out there to settle on something that’s not been maintained and cared for.
Consider running a vehicle history check (Carfax) to find out if the car has been in accidents, but don’t let it be your only source of information, because not everything will show up on the report.
A vehicle history report provides information on maintenance and on the number of times the car was previously sold, but since the information is not regulated a lot of information will be missing, especially for cars not maintained by car dealerships.
Once you find the ideal car, it's important to research insurance rates offered by major insurance companies.
Some cars with a higher probability of theft or damage require higher premium payments, so bear these factors in mind before selecting a used vehicle.
Watch out for scams.
Craigslist is a great source for finding cars but you have to be aware of scams.
Remember: if it’s too good to be true, it generally is!
A good deal is only good when it’s good for both parties.
Steps to buying
Call the owner
Get as much information over the phone before you drive out to look at the car.
Ask for additional pictures to get a better feel for the condition.
Ask the right questions to either confirm or remove the car from your list.
How long have you owned it and why are you selling?
How many ORIGINAL miles on the car?
Has it ever been in an accident?
Is the title a salvage title? There are different types of titles such as flood, totaled, junk, salvage, reconstructed, and rebuilt.
Take it for a test-drive.
After you have found a vehicle that you would consider purchasing, take it for a test drive for at least 15 minutes (not just around the block).
Check all the accessories and features. Use an Inspection Checklist to ensure a thorough visual and operational check is done. This is your opportunity detect obvious problems and eliminate a car from consideration.
Negotiate your best deal.
Your negotiated price is based on the assumption that the vehicle is in good working order and has never been in an accident or flood. Any known problems should be in the negotiated price.
Always make any offer contingent on a professional pre-purchase inspection.
Get a professional unbiased inspection.
Never buy a car without getting a pre-purchase inspection done. The only way to know if the vehicle is in good condition is to have it properly inspected.
There are many types of pre-purchase inspections. However, only an inspection from an experienced ASE Master Certified Technician can give you a comprehensive inspection. Once you have quality pre-purchase inspection information, you can renegotiate your deal based on that information.
Cash or Financing
We strongly believed the best way to buy an automobile is not to finance it but to save the money and pay cash for it. However, if you are going to finance an automobile, there are some basic guidelines.
It is generally better to sell your old car yourself rather than trading it in on a higher-priced newer one.
This may take a little longer, but you will get more for it to put toward the newer vehicle.
Never use equity in your home (ELOC) to purchase a car or a cash out refinancing. Don’t create a 10‑ to 15‑year note for an automobile, because the car will be worn out long before the note is paid.
If you have to borrow for a car this time, we encourage you to start preparing yourself to buy your next car with cash.
Car replacement fund!
Requires less per month than a car payment.
Use saved amount + the cash from selling old car to purchase your next car.
Extended car warranty
If you're considering buying an extended warranty, get the answer to the following questions first:
Does the warranty cover a period of time or number of miles that is not covered under any implied warranties?
If an extended warranty covers five years or 50,000 miles, the average driver will have that warranty for only about three years, since the average person drives more than 10,000 miles per year. However, if the extended warranty covers five years or 100,000 miles, the owner would get approximately five years of extended coverage.
Does the extended warranty cover parts and labor or just parts?
Does the price of the extended warranty seem reasonable in relation to the price of the parts covered?
When the extended warranty covers only parts, labor is usually so expensive that the owner will not get the full benefit of buying an extended warranty unless each part covered under the extended warranty is more expensive than the cost of the warranty itself.