How to buy a used car
By Vlad Samarin
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How to choose the 'right' car? What mileage is too high for a used car? What to look for when buying a used car? There are many questions you may have when it comes to buying a used car. I helped many people buying their cars and in this article, I will answer to some of these questions and hopefully, make the used car buying process easier for you.
• What type of used car will fit into my price range?
• What kind of car to look for
• Car value and price
• Choosing the right car
• Cost of insurance
• What mileage is too high for a used car
• How old is not "too old"
• Buying 1-2 year old used car
• Is it worth to buy a car 'as is' or in need of some repairs?
• Who sells used cars
• Buying a used car from a rental car company
• Making a list
• Questions to ask about a private seller used car
• Questions to ask a dealer
• Checking the used car history
• Having the used vehicle inspected
• Negotiating the deal
• Legal aspects and paperwork
• Buying an extended warranty
• Do's and Don'ts when buying a used car
Decide how much you can afford
The first step when buying a car is to set your budget. The car buying process can be overwhelming, especially when your time is limited. You don't want to be distracted by more expensive cars or trucks that you cannot afford. When you enter the dealer's showroom without knowing for sure how much you want to spend, there is a good chance that you will be persuaded into buying something more expensive than you originally had in mind. Often the higher price gets hidden under low monthly payments: "Only $189 a month!" sounds great, but if you read the fine-prints and calculate the total price, it could be much higher than in reality you can afford. When you are offered a "great deal" on that shiny new car you liked, it's hard to resist your emotions. Sometimes buyers just don't have enough time to think their decision through. That's why thousands of people search the internet 'How to get out of a car loan'. Often when people realize that it's a bit too expensive, the deal is already signed. But if you know your budget ahead of time, you will be able to better focus on what you need and won't be easily distracted by more expensive cars.
The overall economy is still shaky. Look a couple of years ahead: If your company is stable and your job is secure is one thing; but when you don't know if you are going to have a stable income next year, buying a car that you can pay off within a few months is a wiser choice than signing a four- or five-year deal on a more expensive vehicle. You want to buy something that you can afford, something that will not put excessive strain on your family budget. If you can buy a car or truck for $12,000 instead of $27,000, I'm sure you can find better ways to use the $15,000 you saved, be it for kids education or something else your family may need. Set yourself a firm limit of how much money you can afford to spend before shopping for a car.
Financial experts recommend that your total debt payments should not exceed 36 percent of your gross income (total income before taxes and other deductions). This means that if you are making $50,000 a year, your total debt payments should not exceed $18,000 a year, or divided by twelve, $1,500 a month. If you are already paying $1,300 a month for all your debts, including mortgage or rent, credit cards, loans and other installments, all you can afford for for a car is $200 a month.
It's also best to avoid long-term loans; a 60- or 72-month term is too long. The basic rule is, if you cannot pay off a car in full within three years without straining your family budget, it is too expensive. Don't forget to consider fuel, repair and maintenance as well as insurance costs. For example, you can buy a used Audi or BMW in good condition for only $15,000, but it will cost you a lot in maintenance, repairs and insurance. Or, for the same price, you can buy a nice used V8 Dodge Ram pick-up truck, but for gas alone it will cost you around $4000 a year.
Before shopping for a car, take some time, review your financial situation and decide your budget. To be better prepared, read this article from the FTC: Understanding Vehicle Financing, it explains many aspects of vehicle financing, including determining how much you can afford.
What kind of car to look for
When buying a used car, look for a model that has a good reputation for reliability and won't lose its value too quickly. Check the gas mileage and safety ratings. Avoid used luxury cars, as they could be very expensive to maintain. Read more what to research here: choosing the right car. Your goal is to find a car that has been very well maintained and has never gone through an accident or other major problems. A one-owner car is even better. It's great if the seller or a dealer can show you the service records to verify that the oil changes were done regularly. The lower the mileage the better, but don't put too much value on the mileage alone; the mechanical condition of the vehicle is more important. Don't turn away if the car has some minor cosmetic damage, like dents or scratches, unless it really matters for you. It's more important for a car to be in a perfect mechanical shape, and if it has some minor blemishes, it won't be unreasonable to ask for lower price. The condition of the interior usually says a lot, so watch for excessive wear of the driver's seat, steering wheel, driver's door, controls and switches. Avoid cars with engine or transmission problems, even if it seems something minor; often, this type of problems could require expensive repairs. Avoid badly rusted cars even if the major corrosion spots have been repaired. Avoid overly-modified cars; if you like modifications, buy a regular car and modify it yourself. Read more: how to check a used car before buying it.
What type of used car will fit into my price range?
Let's look at price ranges:
$10,000-$18,000: this is the price range of a decent 3-4 years old car. This would be a typical car, not a luxury one, sold from a new car dealership; they usually have plenty of one-owner trade-ins. A vehicle sold under a Certified Pre-owned program, possible with some warranty, would be your perfect choice. This type of vehicle could have been serviced at the same or other new-car dealership and later traded in. Often a dealer may have some service records. Sometimes you may find this kind of car from a private owner too. Usually this type of a car can last for another 4-5 years relatively trouble-free if properly maintained. An SUV is usually priced a bit higher than a car.
$5000-$9000: in this price range, you may be able to find a 6-9 years old used car or truck with a relatively high mileage that still might be in a good shape. Of course, it will take more time to find what you need, but I know many people who bought a car within this price range and were happy with it. Typically, independent used car dealers or private owners sell cars and trucks within this price range.
For $1000-$2000, you may be able to find something that can serve as simple transportation to get from point A to point B. More than likely it will be a more than 10-years old or high-mileage car or truck sold by a private owner. Dealers usually don't deal with this type of vehicles. Be prepared to spend more money to keep the vehicle for this price running.
Don't forget that aside from the sticker price you may need to pay taxes, registration and some other fees.
Car value and price
Don't look for a cheapest car. When it comes to used cars, the "best deal" doesn't mean the cheapest one. Your goal is to find not the least expensive car, but a well-maintained one in good condition for a reasonable price. If you are choosing between a cheaper car of questionable quality and a more expensive one of the same model that is in excellent condition and has been well maintained, I'd without a doubt choose the more expensive one. You will simply save on repairs and enjoy driving it. Don't think they sell a used car or truck cheap because they don't know the price or simply they want to clear their inventory. If they sell it cheap, there is probably something wrong with it.
Remember, the proper price for a certain used vehicle is not what listed in a blue or black book - they just give you an average price in your area.
The actual value of any used vehicle depends on its condition, options and other factors. Two cars may only look the same. One might have been maintained poorly, with noisy engine that consumes oil, cheap tires and corrosion underneath. The previous owner of another vehicle might have been religious about maintenance, was using only synthetic oil, has done the rustproof and so on. In this case, you would be right to pay a thousand dollars more for the second car.
To determine what is the right price for a certain model you just need to see what is available.
Just to show you an example, I searched the Autotrader website for a three-years old Honda Accord within my area. The search result gives me more than 200 vehicles with the price ranging from $10,000 to $20,000.
Being realistic, I know that for $10,000 it's unlikely the car will be in good condition. The $20,000 price seems to me too high. But there are quite a few cars in a $13,000-$15,000 price range with a reasonable mileage. This looks more realistic to me.
I also know that I can negotiate the price down using proper strategy. So, in our case with a three-years old Honda Accord, I'd probably will be able to buy one in good condition for about $12,000-$14,000 depending on mileage, options, etc.
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