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How To Buy a Used Car -- Part 2

You may miss out on the new-car smell, but buying a used or pre-owned vehicle often offers the benefits of affordability, flexibility and overall attractiveness.  Purchasing a used vehicle, however, does require a bit more attention to detail and planning. A few things to keep in mind:

  • Online car shopping tools are your friend.
  • Negotiate for a lower price when you can.
  • Always get the vehicle history report.

Last week we discussed how to set a budget, figuring out what type of car you want, how to research vehicles, how to start the hunt for a car and checking the vehicle history report. This week we will discuss what come next and closing the deal.

Step 6: Take the car for a test drive.

Whether you’re buying from a car dealer or a private party, seeing the car in person before you buy is incredibly helpful. Look at the exterior and check for marks and dents. Inspect the interior for stains, tears and smells. Climb inside and get a feel for the ergonomics and driving position. With the seller’s permission, take the vehicle for a test drive so you can evaluate how it runs. Make sure the ride is smooth and quiet and that you feel comfortable behind the wheel.

Additionally, consider getting a pre-purchase inspection from a third-party mechanic. Even if the car seems to be in excellent condition, a mechanic can examine the engine bay and underside of the motor vehicle and spot potential issues. Some sellers might say they’ve already done a pre-purchase inspection, but their interest is in selling the car, not necessarily in making sure you’re happy months down the road.

Pre-purchase inspections are more common when buying from a private seller. An inspection is crucial for these purchases because you may have no recourse if the vehicle turns out to be a lemon. Be sure to approach the topic politely and choose a reputable inspector that you trust.

Step 7: Figure out your plan for financing.

When deciding how to finance your vehicle, ask yourself a few questions:

  • How’s my credit?
  • Do I have a trade-in or enough cash for a down payment?
  • How long do I want to make payments for?
  • Do I want to get preapproved or go with dealer financing?

Used cars are cheaper than new cars, but they still cost thousands of dollars. You still might need an auto loan, either from the dealership or a private lender. If you're purchasing a used vehicle through a private seller, you'll likely need to find your own financing.  It’s smart to get preapproved by a bank, credit union or other lender before you go car shopping. Getting preapproved lets you shop around for better rates — dealer financing often doesn’t give you much wiggle room. Preapproval also helps you negotiate rates and terms, and dealer financing isn’t even an option if you’re buying from a private party.

If you decide to get a loan through your dealership, financing is often just part of haggling over the vehicle’s price. Each car dealership should have a dedicated finance department with a straightforward credit application. Finance applications can vary, but expect to provide some personal information, such as proof of income, proof of residence and your Social Security number.

Step 8: Negotiate the price.

If you did your research early on, you should have an idea of what the vehicle is worth and what you’re willing to pay. Compare the seller’s price with the average market price to ensure you're getting a good deal.  Focus on the total price of the car when negotiating.

If you’re preapproved for a loan, this is easier, since you have a firm limit that the seller has to accommodate if they want to make the sale. Try to open negotiations with an offer that’s low enough to give you some wiggle room but not so low as to insult the seller. Also, avoid going over your budget, no matter how much you want the car.

If you’re at a dealership, focus your negotiations on the price of the car, not your monthly payment. While establishing your monthly payment helps you understand what you can afford, dealers may just alter your financing to get the right monthly payment. This might seem fine at the time, but it can lead to spending far more money in the long run.

Keep in mind that you should also leave roughly 10% of the loan amount in your budget to cover taxes and fees. Trading in your current vehicle should help free up some money. Keep in mind you may still need cash in the bank for repairs that come up.

Step 9: Close the deal.

Closing the deal at a dealership is relatively simple since you have a salesperson to guide you through the process. Just read all the fine print before signing to ensure you're getting what you’re paying for and only paying for what you want. If you’re buying from a private party, make sure you get the title, a bill of sale and whatever other paperwork your state may require. You’ll also have to discuss your method of payment with the seller. This will depend on your financing status and your seller’s preferences — just be careful to avoid scams.

Finally, make sure you’re square with your state’s motor vehicle department and you have at least the minimum amount of car insurance required by law. Nearly all states require some level of car insurance, which helps protect you financially in case you cause injury or property damage while driving.

Protecting your investment

As the second-largest purchase most people will make in their life, buying a vehicle is a big deal. One of the first decisions you'll need to make is whether to buy a new or used vehicle.

One of the biggest disadvantages of buying used is that the warranty may be expired. That’s when it makes sense to consider protecting your investment with an extended automotive warranty. Similar to an original manufacturer's warranty, an extended car warranty offers financial protection if your vehicle suffers a covered failure. Some car owners like having a plan so they won't be saddled with thousands of dollars of repair bills. If you use it for one big repair or several smaller ones, a good extended auto warranty will likely pay for itself, especially for higher-mileage vehicles.

WKFCU has Mechanical Repair Coverage available to purchase for your convenience.

Bottom line

Purchasing a used car doesn't have to be difficult. Understanding the process, asking the right questions and doing your research should help you get the right vehicle at a price you can afford. From there, it’s a matter of maintaining your car to get the most out of it and keep its value high.

(Partially reprinted from consumeraffairs.com)

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