There are many benefits to buying a used car, such as the lower initial purchase price and insurance costs. However, the lower initial purchase price should not be taken at face value.
The true benefit of the lower purchase price will depend on the method used to pay for the vehicle; pay it in full or finance over time. If paid in full, the buyer will receive the full benefit of the lower purchase price, but when financing, the total cost of the car increases.
What’s the difference? With a loan, the buyer must pay the credit costs, which include interest and other loan costs.
Before deciding to purchase a vehicle, buyers should consider how much of a down payment they can make, what the monthly payment would be, the length of the period of financing and the annual percentage rate.
In addition to the financing piece of purchasing a used car, there are some precautionary steps buyers should take because the vehicle may be out of warranty and may be susceptible to maintenance issues.
Shop for a newer used car: Most late-model used cars come with at least a three year/36,000-mile basic warranty coverage and usually also have power train coverage on the engine and transmission. So, when buying a car that is less than three years old, buyers will most likely be covered under the warranty for at least a short period of time and the car is still in its prime. If the dealer offers an additional warranty on the car, take time to read what it covers. Oftentimes, consumers hear the word warranty and think everything is covered — at least the major parts. However, this is not always the case with new or used cars. Buyers should clarify what the warranty specifically covers with the dealer.
Consider buying certified, preowned vehicles: CPOs are usually used vehicles that have less than 50,000 miles and have been given multipoint inspections. The vehicle is typically serviced to the satisfaction of the actual automaker (Ford, Chevrolet, GMC, etc.) before it is put on the lot. Also, these vehicles usually come with extended warranties on the engine and transmission.
Beware of reputation: Ensure that the type of car you are interested in purchasing does not have a bad reputation for being a problem car. Problem cars have an unusual record of recalls and/or consumer complaints, and you can find information about such cars at:
National Highway Traffic Safety Administration (www.nhtsa.dot.gov)
JD Power & Associates (http://autos.jdpower.com/index.htm)
Consumer Reports (www.consumerreports.org/main/home.jsp)
Screen the car: Have the specific car being considered for purchase examined by a third party mechanic before buying. A car may have a great overall reputation for its quality and reliability, but it is essential to make sure that the specific car to be bought has been maintained properly.
Ask the seller for a record of services performed on the vehicle. This is evidence of how many times the vehicle has been repaired and will alert the buyer to potential ongoing problems with the car.
Pull up a CARFAX vehicle history report by obtaining the vehicle identification number from the dashboard of the car. The search will reveal the history of the car such as whether the car has been in an accident, odometer accuracy and other important information. The $25 cost of the report is minimal considering it could potentially save the buyer thousands of dollars.
The bottom line on purchasing a used car is that the buyer must do his homework before making a decision. Taking an honest look at the budget, method of payment and the condition of the vehicle will pay off in the long run.
