Used, Not Abused: Finding and Buying a Used Car

Finding and Buying a Used Car

We all know the stereotype--used car salesmen are more interested in their Hawaiian shirts, plaid sport coats, and the size of your pocketbook than in actually selling a decent vehicle. While some of it may ring true, your used car buying experience doesn't have to end in a bad joke.

More than 70% of all vehicles sold are pre-owned, which means there are lots of used cars out there with happy drivers. The key to joining them is a process that, when broken down, is very simple.

The search & discovery

Begin your used car buying experience with one question: How much can I afford? You never want to spend more than 20% of your monthly take-home income on a car payment. However, there can be a big difference between what's affordable on paper and what you feel comfortable spending. Look at your current budget and do a little math to figure out what you want to spend - don't forget to factor in the interest rate.

There are several options when shopping for a used vehicle, including, but not limited to:

Family & friends

Buying a car from parents can be a good way to go. It'll help ease you into the process, and you might even get a great deal. If your parents don't have anything to sell, ask around the family. A cousin might be looking to trade in for something new, or an elderly aunt may be selling a car she can't drive anymore.

Private seller/Online

The Internet has an endless vehicles to browse through. Check out  autotrader.comedmunds.com, and  craigslist.org. Make sure the website and the seller are trustworthy - if something goes wrong with the car, you can't take it back.

Dealership

Most dealerships provide a warranty, and they will take care of the title work and registration (which you pay for in the processing fee). Get ready to negotiate though, unless you go to a haggle-free dealership, such as CarMax.

Repossessed

Many financial institutions sell repossessed cars. These can be great deals because the cars are sometimes priced based on the amount owed on them, rather than what they're worth.

The more research you do on different types of cars and sellers, the more likely you are to get a good deal. Check out  nada.com and  kellybluebook.com for car comparison and value information.

The mechanics

Lay your emotions aside and really check out the car you're interested in purchasing. Yes, it's pretty to look at, but if your test drive includes clanks and other loud noises, don't ignore them. Unless you're a mechanic, you should find one to inspect the car.

Take these factors into consideration when checking out cars:

Certified pre-owned

Some dealerships offer certified pre-owned cars, which means they've gone through a more rigorous inspection, and offer an extended service warranty. They also cost more, so don't get too caught up in the glamour of certification-- if you're thinking of getting a 2006 Toyota, certification may be less important than if you're getting a 1989 Ford.

Mileage

"Too many" miles is relative. Many cars can run past 200,000 miles. Judge the worthiness of the car on the mechanic's evaluation, and search consumerreports.org for cars that will go the distance.

History

Has the car been in an accident? If you want to know for sure, consider purchasing a complete vehicle report at carfax.com, which lists any previous incidents involving the vehicle. Keep in mind that "under-the-table" fixes don't get recorded, so it's important to have the car thoroughly inspected.

The purchase

You've found it - the used car of your dreams! Now it's time to haggle with the salesperson and get a great deal. You'll want to start with a low, but still reasonable, offer. Based on your budget and the general price range of the car, you should already know what you're willing to pay. Look at the price breakdown when sitting down with a seller. Many dealers package fees into different categories, but they should be able to disclose every item to you. Wherever you get the car from, there are more expenses to consider. Some fees and expenses may add to the bottom line regardless of where you buy the car. Mandatory fees include registration and title. Possible fees include processing fee, sales taz, VIN # etching, warranty, and trade-in sales tax.

The loan

Ideally it's best to save up and pay cash for your new ride. It will be much cheaper in the long run, because you won't have to spend extra on interest. However, if buying with cash isn't a possibility, you'll need to get some extra help in the form of a loan. Used car loan rates are generally higher than new cars, and the loan term is usually shorter. On the upside, you'll probably be borrowing less because used cars are generally much cheaper than new ones.

Check with your financial institution and compare its financing options with those at the dealership. Work on improving your credit score to grab a lower interest rate (get a free credit report at annualcreditreport.com), as well as save for a generous down payment.

The after-purchase party

As you drive away in your new ride, don't forget that paying for your car doesn't end with car payments. Keep in mind that car insurance premiums will be affected by the kind of car you buy, and that regular maintenance is necessary to keep it running well and road-worthy.

The Bottom Line

The average used car costs $8,186. Although that's less than buying a new car, it's still a considerable chunk of change, which makes doing your homework totally worth it. Cars are more than fancy stereos and a shiny color. The more you know now, the more money you'll save when driving off into the sunset.

This article, Used, Not Abused: Finding and buying a used car, published on May 1, 2009 in brass|MAGAZINE Summer 2009 issue is reprinted with the express consent of brass|MEDIA Inc. This brass|MEDIA Inc. content is provided with the understanding that the publisher, copyright holder and organizations distributing the magazine are not rendering investment, financial or other professional advice. Investment and other financial decisions depend on each reader's individual facts and circumstances. You should not make decisions based on information contained in licensed brass content without the advice of a qualified professional.