Buying a Used Vehicle

Buying a used car is a real trade-off since you don't know how the car was treated by the previous owner, but you do get the benefit of the drive-off depreciation being taken by the original owner. Drive-off depreciation is when a brand new car is purchased and driven off of the lot. The value lost just from driving the car off the lot can be as high as 20% and makes buying a low mileage used car a tempting proposition. With a few careful steps you can reduce your risk in buying a used car and maximize your savings.

Let's take a look at buying a used car from a private seller first. While you do not typically get the same protection when buying a car from a private seller, you can generally get a better deal and if the car is relatively new and the factory warranty will still provide protection from major car troubles. Most used car dealers offer financing at the point of sale, private sellers can not, so dealing with your own bank or an online source will be needed if you plan to finance your used car purchase. If you are looking to finance a used car purchase, check out DriverLoans.com for competitive rates and top-notch service.

Advantages Of Buying A Used Car From A Private Seller:

•  You can get a good feel for how the seller treated the car. Look for maintenance records and receipts for major repairs. Has the owner changed the oil regularly, what kind of problems has the vehicle had? If you are not sure you can trust the seller, get a vehicle history report online from our credit reports. The report will show any major warranty work, accidents or other major events in the cars life.

• No high pressure sales tactics. Unless the person selling the car is a car salesman at his day job, you are fairly sure to avoid the high pressure sales tactics. A word of warning, some dealerships will advertise their vehicles as a private sale in newspapers and magazines. This is illegal in most states and you should steer clear of these sellers.

• You can get a better deal most of the time. Since the person selling the car would get less if they were to trade in the vehicle at a dealership, they are more likely to take a lower price selling it privately. You are looking to pay between Trade-In price and retail price for a used car from a private seller. If the car is very clean, has full maintenance records, and has low miles, I would be willing to pay closer to retail price for the vehicle.

Disadvantages Of Buying A Used Car From A Private Seller:

• Sellers can be dishonest and hide major flaws with little liability after the sale since most used cars sold privately are AS-IS. You can combat this by getting a Vehicle History Check and/or having a mechanic inspect the car.

• Most sellers will not let you take an extend test drive overnight like dealers do. When test driving the vehicle make sure you drive it at various speeds and on different types of roads. Choose a route that takes you on city streets, country roads and some highway driving so you can get an accurate impression of the ride quality and handling. I always try to find an open uncrowded road to do a brake check where I take my hands off the wheel and apply the brakes. The car should stop without veering to one side or the other. Is the car pulls to one side, there may be brake or suspension issues which need to be addressed.

• No warranty is provided unless there is an existing warranty and it can be transferred. Manufacturers are offering longer warranties on their cars these days, which is good for used car buyers as long as the warranty is transferrable. If you are buying a car without a warranty check out Extended Auto Warranties online. An aftermarket warranty is not always as good as the Manufacturers warranty, but if you go with a reputable company like Extended Auto Warranties you can get close to the factory warranty.

A few tips on finding a used car from a private seller.

• Look to local papers, auto locator publications, thrift papers, local bulletin boards, and friends who might know someone selling.

• Be courteous of the hour when you call. Many people are in bed by 10:00pm. If the ad states a time to call...... follow it. If not, I would not call before 10:00am or after 9:00pm.

• Have pen and paper handy when you call the seller. Write down key facts like mileage, asking price, directions, how long have they owned the car and why they are selling.

• Research the car online before you go to see it. Having the "Blue Book" value in your head can give you a starting point for negotiating. See the left hand column of this page for more information on determining used car prices.

• Have a mechanic look at the vehicle. Most local mechanics will be happy to put the car on a lift and do an inspection for you. Expect to pay for this service, but if you have a good relationship with your mechanic he may do this for free.

• Take a long test drive. Make sure you do some highway driving and also some back road driving to get a feel for the car. Some suspension problems will not show up on the highway but as soon as you hit a bumpy road they will appear.  Back To Top

Buying From a Dealer

As discussed above, buying from a dealer offers you a little more protection in the deal, but most times will cost you more on purchase price. If you do not prefer to get a loan from your own bank or online financial providers, a dealer purchase may be the best option. You can buy the car and get financing all at the same time. Be aware that most dealers get a Kick Back for charging you a higher interest rate, so do your home work with a credit check and rate check of other lending institutions. See our financing section for more information.

Before you start shopping for a car, you’ll need to do some homework. Spending time now may save you serious money later. Think about your driving habits, your needs, and your budget. You can learn about car models, options, and prices by reading newspaper ads, both display and classified. There is a wealth of information about used cars on the Internet: Libraries and book stores also have publications that compare car models, options, and costs, and offer information about frequency-of-repair records, safety tests, and mileage. Many of these publications have details on the do’s and don’ts of buying a used car.

Once you’ve narrowed your car choices, research the frequency of repair and maintenance costs on the models in auto-related consumer magazines. The U.S. Department of Transportation’s Auto Safety Hotline (1-800-424-9393) gives information on recalls.

You have two choices: pay in full or finance over time. If you finance, the total cost of the car increases. That’s because you’re also paying for the cost of credit, which includes interest and other loan costs. You’ll also have to consider how much you can put down, your monthly payment, the length of the loan, and the annual percentage rate (APR). Keep in mind that annual percentage rates usually are higher and loan periods generally are shorter on used cars than on new ones. Back To Top

Dealers and lenders offer a variety of loan terms and payment schedules. Shop around, compare offers, and negotiate the best deal you can. Be cautious about advertisements offering financing to first-time buyers or people with bad credit. These offers often require a big down payment and a high APR. If you agree to financing that carries a high APR, you may be taking a big risk. If you decide to sell the car before the loan expires, the amount you receive from the sale may be far less than the amount you need to pay off the loan. If the car is repossessed or declared a total loss because of an accident, you may be obligated to pay a considerable amount to repay the loan even after the proceeds from the sale of the car or the insurance payment have been deducted. If your budget is tight, you may want to consider paying cash for a less expensive car than you first had in mind. The internet has opened up a host of financing options to today's car buyer.

If you decide to finance, make sure you understand the following aspects of the loan agreement before you sign any documents:

• the exact price you’re paying for the vehicle the amount you’re financing

• the finance charge (the dollar amount the credit will cost you)

•  the APR (a measure of the cost of credit, expressed as a yearly rate)

• the number and amount of payments

• the total sales price
  (the sum of the monthly payments plus the down payment)

Dealers are not required by law to give used car buyers a three-day right to cancel. The right to return the car in a few days for a refund exists only if the dealer grants this privilege to buyers. Dealers may describe the right to cancel as a "cooling-off" period, a money-back guarantee, or a "no questions asked" return policy. Before you purchase from a dealer, ask about the dealer’s return policy, get it in writing and read it carefully.

The Federal Trade Commission’s Used Car Rule requires dealers to post a Buyers Guide in every used car they offer for sale. This includes light-duty vans, light-duty trucks, demonstrators, and program cars. Demonstrators are new cars that have not been owned, leased, or used as rentals, but have been driven by dealer staff. Program cars are low-mileage, current-model-year vehicles returned from short-term leases or rentals. Buyers Guides do not have to be posted on motorcycles and most recreational vehicles. Anyone who sells less than six cars a year doesn’t have to post a Buyers Guide.

The Buyers Guide must tell you:

• whether the vehicle is being sold "as is" or with a warranty

• what percentage of the repair costs a dealer will pay under the warranty

• that spoken promises are difficult to enforce

• to get all promises in writing

• to keep the Buyers Guide for reference after the sale

• the major mechanical and electrical systems on the car, including some of the major problems you should look out for.

• to ask to have the car inspected by an independent mechanic before you buy. Back To Top

When you buy a used car from a dealer, get the original Buyers Guide that was posted in the vehicle, or a copy. The Guide must reflect any negotiated changes in warranty coverage. It also becomes part of your sales contract and overrides any contrary provisions. For example, if the Buyers Guide says the car comes with a warranty and the contract says the car is sold "as is," the dealer must give you the warranty described in the Guide. When the dealer offers a vehicle "as is," the box next to the "As Is - No Warranty" disclosure on the Buyers Guide must be checked. If the box is checked but the dealer promises to repair the vehicle or cancel the sale if you’re not satisfied, make sure the promise is written on the Buyers Guide. Otherwise, you may have a hard time getting the dealer to make good on his word. Some states, including Connecticut, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Jersey, New York, Rhode Island, Vermont, West Virginia and the District of Columbia, don’t allow "as is" sales for many used vehicles.

Three states—Louisiana, New Hampshire, and Washington—require different disclosures than those on the Buyers Guide. If the dealer fails to provide proper state disclosures, the sale is not "as is." To find out what disclosures are required for "as is" sales in your state, contact your state Attorney General.

State laws hold dealers responsible if cars they sell don’t meet reasonable quality standards. These obligations are called implied warranties—unspoken, unwritten promises from the seller to the buyer. However, dealers in most states can use the words "as is" or "with all faults" in a written notice to buyers to eliminate implied warranties. There is no specified time period for implied warranties.

Warranty of Merchantability

The most common type of implied warranty is the warranty of merchantability: The seller promises that the product offered for sale will do what it’s supposed to. That a car will run is an example of a warranty of merchantability. This promise applies to the basic functions of a car. It does not cover everything that could go wrong.

Breakdowns and other problems after the sale don’t prove the seller breached the warranty of merchantability. A breach occurs only if the buyer can prove that a defect existed at the time of sale. A problem that occurs after the sale may be the result of a defect that existed at the time of sale or not. As a result, a dealer’s liability is judged case-by-case. Back To Top

Warranty of Fitness for a Particular Purpose

A warranty of fitness for a particular purpose applies when you buy a vehicle based on the dealer’s advice that it is suitable for a particular use. For example, a dealer who suggests you buy a specific vehicle for hauling a trailer in effect is promising that the vehicle will be suitable for that purpose.

If you have a written warranty that doesn’t cover your problems, you still may have coverage through implied warranties. That’s because when a dealer sells a vehicle with a written warranty or service contract, implied warranties are included automatically. The dealer can’t delete this protection. Any limit on an implied warranty’s time must be included on the written warranty.

In states that don’t allow "as is" sales, an "Implied Warranties Only" disclosure is printed on the Buyers Guide in place of the "As Is" disclosure. The box beside this disclosure will be checked if the dealer decides to sell the car with no written warranty.

In states that do allow "as is" sales, the "Implied Warranties Only" disclosure should appear on the Buyers Guide if the dealer decides to sell a vehicle with implied warranties and no written warranty. A copy of the Buyers Guide with the "Implied Warranties Only" disclosure is available here.

Dealers who offer a written warranty must complete the warranty section of the Buyers Guide. Because terms and conditions vary, it may be useful to compare and negotiate coverage.

Dealers may offer a full or limited warranty on all or some of a vehicle’s systems or components. Most used car warranties are limited and their coverage varies. A full warranty includes the following terms and conditions.

• Anyone who owns the vehicle during the warranty period is entitled to warranty service.

• Warranty service will be provided free of charge, including such costs as removing and reinstalling a covered system.

• You have the choice of a replacement or a full refund if, after a reasonable number of tries, the dealer cannot repair the vehicle or a covered system.

• You only have to tell the dealer that warranty service is needed in order to get it, unless the dealer can prove that it is reasonable to require you to do more.

• Implied warranties have no time limits.  Back To Top

Pre-Purchase Independent Inspection

It’s best to have any used car inspected by an independent mechanic before you buy it. For about $100 or less, you’ll get a general indication of the mechanical condition of the vehicle. An inspection is a good idea even if the car has been "certified" and inspected by the dealer and is being sold with a warranty or service contract. A mechanical inspection is different from a safety inspection. Safety inspections usually focus on conditions that make a car unsafe to drive. They are not designed to determine the overall reliability or mechanical condition of a vehicle.

To find a pre-purchase inspection facility, check your Yellow Pages under "Automotive Diagnostic Service" or ask friends, relatives and co-workers for referrals. Look for facilities that display certifications like an Automotive Service Excellence (ASE) seal. Certification indicates that some or all of the technicians meet basic standards of knowledge and competence in specific technical areas. Make sure the certifications are current, but remember that certification alone is no guarantee of good or honest work. Also ask to see current licenses if state or local law requires such facilities to be licensed or registered. Check with your state Attorney General’s office or local consumer protection agency to find out whether there’s a record of complaints about particular facilities.

There are no standard operating procedures for pre-purchase inspections. Ask what the inspection includes, how long it takes, and the price. Get this information in writing.

If the dealer won’t let you take the car off the lot, perhaps because of insurance restrictions, you may be able to find a mobile inspection service that will go to the dealer. If that’s not an option, ask the dealer to have the car inspected at a facility you designate. You will have to pay the inspection fee.

Once the vehicle has been inspected, ask the mechanic for a written report with a cost estimate for all necessary repairs. Be sure the report includes the vehicle’s make, model and VIN. Make sure you understand every item. If you decide to make a purchase offer to the dealer after considering the inspection’s results, you can use the estimated repair costs to negotiate the price of the vehicle.   Back To Top