The first step to buying a used car is choosing a vehicle, or at least narrowing your options. Ask yourself: How many passengers do you regularly carry? What sort of trunk or cargo space do you need? What is the minimum gas mileage a car has that will stay within your budget? What would your auto insurance be? Are there certain vehicles you feel more reliable or offer a better warranty? Once you’ve decided on the possible makes and models, it’s time to find the one.
Photo by KB35 via Flickr
Make sure the car you’re looking at, is the one you researched. Many models have an assortment of engines and options and it’s easy to get confused.
Lower mile vehicles generally mean less wear and tear on the vehicle. Anything above 15,000 miles/year is considered a high mileage vehicle.
A car that’s been passed around the whole neighborhood, or an owner that’s selling after owning only a few months could be a sign of a lemon. This is also a good opportunity to find out the history of a vehicle, for instance, if it’s been in the same family. My current car was bought and traded into the same dealership for an upgraded model; it gave me confidence in my purchase that the previous owners liked it enough to buy a new one.
This is generally only a concern for private party vehicles. If the vehicle is financed, the title is held by a financial institution. The money must be paid to the bank or credit union for you to take true ownership of the vehicle. In this situation, I suggest making a deposit with the person, and purchasing the vehicle the next business day at the financial institution so the title can be released to you immediately.
A vehicle that has suffered damage that was too expensive compared to the vehicle’s value may be salvaged. This can happen through theft, car accident, and other reasons. Some salvaged vehicles are fixed to near perfect fashion and are perfectly safe to buy, but unless you have some knowledge of mechanics and bodywork I wouldn’t make this your first choice. In some states like Nevada, it’s even illegal for a private party to sell a salvaged vehicle.
Accidents do happen. Sometimes they happen more than once. A car accident can range from a small fix to a complete t-bone. The small fix is generally repaired and the owner sent on their way, while the larger incident may result in the aforementioned salvage title.
A rule of thumb is replacement is better than repair. During repair, a bondo fill can be used. This is where a (hopefully) excellent body worker fills in a crush or dent that can’t be pulled out. The vehicle is sanded, painted and sent out the door. Unfortunately, if you don’t have a great body shop, the bondo can warp and looks like putty. It is also a cheap fix and may be indicative of the state of other repairs.
Service records prove that general maintenance has been done and may alert you to any future recommendations from the mechanic.
There are perfectly rational explanations to sell a car. Someone might need more passenger or cargo space, or need the cash. You may have to weed out some people who are just tired of a vehicle with never ending repairs.
While the large franchise dealerships generally have reputable mechanics on site, you should be able to request a mechanic look at a vehicle any other time, whether small dealership or private party. If you like the car, tell the salesman: “At the end of our test drive, if I like the vehicle, I’d like to take it to my mechanic for an inspection. You are, of course, welcome to come with me.” A salesman working on commission is very unlikely to deny your request.
You can buy a car from a dealer or from a private party. Buying a car from a dealer simply means you are buying from someone whose business is selling cars; a dealer can be a major operation with an automotive franchise, or a single individual who sells cars from his driveway. Buying from a private party means you are purchasing the vehicle from an owner.
If you are interested only in a brand new car, a large franchise dealership is where you’ll head. Since they order direct from the manufacturer, in some cases, you can even custom order the options you want. However, the depreciation when it rolls off the lot can be a hefty bill to foot. A dealer can always sell a used car for more than you can. Why? When you buy a used car from a large dealer, the assumption is made that the vehicle needs little or no “reconditioning.” All of the major systems are in good mechanical order, the interior has been detailed or replaced as necessary, and you shouldn’t have to take it to a mechanic any time soon. Some dealers go a step further with “Certified Pre-Owned” vehicles which must pass a specific set of inspections.
So where do the small dealerships get their cars from? Almost every town has a street lined with small scale dealerships, or that one guy who’s always selling cars. These are not connected to a manufacturer, and generally do not have a (legitimate) body shop or mechanic on site. When cars are traded into dealerships, the dealer will weigh what they paid for the vehicle against what they can sell it for and how much time and money it will take to recondition. Sometimes the decision to ship out a vehicle can be as simple as, “We’re a Ford dealership, and don’t have a really good chance at selling a Chevy Malibu with our current lineup.”
These cars are sent to dealer or wholesale auctions. They are sold at a great price to other dealers who then sell them on their lots. The quality of the cars available on these smaller lots vary greatly based on the quality of the lot that is selling them. They are still bound by all of the laws that a franchise dealership is, but if after looking at the vehicle you wouldn’t buy it from a man on the street, don’t buy it from anyone else.
You can also buy a vehicle through a private party sale. That means an individual who owns a car is selling it for any number of reasons. Individually owned vehicles sell for much less than a similar one at a dealership due to the reconditioning that a dealer vehicle undergoes (theoretically). The real benefit of buying a vehicle from an owner is a chance to know the vehicle’s history. The service records and accident history can tell you a lot about what you are getting into. Even walking up to the owner’s house: if they’re lawn is littered with trash, how do you gauge the upkeep of your potential new ride?
No matter what you do: NEGOTIATE. I have never walked into a dealership that won’t “haggle” and I refuse to accept a price labeled “firm.” A sale in front of a person is generally better than the one that might come in. That philosophy gives you extraordinary power. When I bought my first truck from a dealership I was offered an incredible deal by a friend of the family. The Dodge Dakota that I wanted happened to have sat on the Chevrolet lot longer than they hoped so they gave it to me for wholesale and threw in a warranty for half price. When we sat down to sign the final papers I asked if they would throw in the taxes, title, and registration, too. They said “No” but it would’ve been far worse to me if they would’ve said “Yes” and I never bothered to ask.
Wherever you decide to purchase a car from, you need to be able to pay for it.
It should go without saying, but you are always better to pay with cash in hand. If the vehicle you’re looking at is too expensive to buy with cash, take the time to assess if there is a vehicle that you can pay for with cash that will meet your needs. If not, your next step is financing.
I purchased my Dakota with dealer financing. Because it was a used truck, it didn’t qualify for the financing that comes direct from the manufacturer. This is the deal you will often see at 0% for 60 months, but you must have great credit, and it usually only applies to new vehicles. Instead, the dealership had a relationship with a credit union association, and arranged for a loan through my credit union. You don’t have to go through the dealership to obtain outside financing, though. On my most recent vehicle purchase, I called my credit union and pre-qualified for an auto loan. This allowed me to figure out what my budget was before I got my heart set on a vehicle with monthly payments that would put me in the hospital.
If there is any way you can avoid monthly payments, please do so. I have never taken on an auto loan that hasn’t gone underwater for a portion of the vehicle’s life span. If you’re heart is set on a vehicle that requires payments, take three months and pull the payment out of your monthly budget. Make sure it doesn’t tighten your belt too much. Check to see if it causes you to put more on credit cards. If it’s not bad, then go ahead with the comfort of knowing you already have three months of “emergency” payments set aside.
When you go to buy a vehicle, remember that your buying power is directly related to the information you possess.