Complete Guide To Buying A Used Car

Buying a used car can be a very scary endeavor . The sentiment of buying something someone else has used naturally makes one question the whole process . However, Cars are one of the most turned around commodity in the united states and you can more likely than not find a good deal on one if you know what to look for.

How to buy a used car? What are the most important things to consider? If you want to buy a perfect car that fits your needs perfectly, you have to make informed decisions. If you are not one of those affluent persons, you must not focus on buying an expensive vehicle that you cannot afford. One of the practical and cost-effective choices available is to consider buying a used vehicle.

Most important steps you need to follow to purchase a used car are:

• Allocating a Fixed Budget
• Identifying the Most suitable Pre-owned Car
• Choosing the Option of Certified Used Car
• Discovering an Affordable Used Car Financing Option
• Determining Where to Purchase a Pre-owned Car
• Conducting Research, Performing Test Drive, and Examining a Pre-owned Car
• Entering into a Deal and Handling the Paperwork
• Taking Care of Add-Ons, Insurance, and Warranties

How much should I spend on buying a car ?

One practical approach that smart buyers embrace is to keep the total value of the vehicle(s) under 50% of the annual income.

20/4/10 rule is another common principle that many people follow

20 refer to a minimum of 20% of the total value of your car need to be paid for your down payment. .

4 represent four years. You should not take a loan that lasts longer than 4 years.

10 stand for 10%. Maximum 10% of your gross income should contribute towards all vehicle expenses such as repair costs, loan payments, registration cost, insurance premium and gas expenses, and maintenance cost.

Here is a step by step guide on how to buy a used car to help you save you cash in the best way possible:

1) Create a monthly budget based on your income.

2) Find your credit score using free online services.

3. Conduct Research on APRs for best online auto loans. If you visit the websites of big as well as small banks, you can find the advertised APRs for both new and pre-owned cars and gather a fair idea about what banks are offering. High accuracy can be expected if your credit score is above 730.

4. Make use of an online car payment calculator to find an affordable price range. Details required are car price (make use of the advertised MSRP), down payment, tax, APR and loan tenure.

5. Request quotes from many insurance companies for the car models that you are planning to buy.

6. Submit applications for auto loans at the bank or online and get approvals for an auto loan amount that meets your budget. Applications need to be sent to several banks.

7. Identify your perfect car and model that perfectly fits your budget. Clear awareness about the budget narrows down your choice. Test drive cars, conduct online research and keep on asking friends, neighbors, and relatives.

8. When you KNOW what vehicle, narrow down your choices. Send emails to all dealerships in your area and inform your needs. Let them know that you have a pre-approved financing plan. You have to check whether their responses contain OUT THE DOOR vehicle price.

9. Once you receive written OUT THE DOOR car prices, you can respond back using an email to negotiate the price. Choose the best three bids and inform them that you have better options available. Keep on negotiating to arrive at the lowest price.

10. At this juncture, you get a clear idea about your monthly payment and the insurance cost.

11. When you have all the information available at your disposal, you can visit the dealership that sticks on with the price quoted.

12. You need to ensure that everything goes according to the plan and there are no surprises involved.

13. You have done everything right and bought a new pre-owned car that fits your needs and budget with minimal effort.

Allocating a Fixed Budget for a Pre-Owned Car

Setting a budget for a pre-owned, SUV, truck, or car is a more complex task compared to buying a new one. Various aspects such as the vehicle price including the expenses involved with financing the purchase and the likelihood of expensive future repairs need to be considered.

As the car gets older, the price comes down. The cost of repair gets higher in such a situation. You have to strike the perfect balance between these two aspects.

There are several online sources that offer quality information. Dedicated user websites like Odyclub.com provide a fair idea about the issues that other owners are experiencing with their old vehicles.

The cost of car insurance and the required coverage levels must also be taken into consideration. You can make an informed decision using our used car insurance guide.

Identifying the Most Suitable Used Car

Choosing a pre-owned car is more complex than buying a new one. It adds many things to the mix including identifying a car with low mileage, a vehicle without considerable damage and a history of regular services.

You need to choose a used car that fits your needs and budget. It can be done only if you have clarity about your requirements. Your purpose in buying a car is important. The practicality needs to be considered. It is necessary to analyze whether you need a luxury car, standard car or relatively a new one. The fuel economy must be assessed along with the quality of safety equipment.

Making use of our used car rankings, you can compare cars in an in-depth way using various parameters including the overall scores and individual factors like safety, reliability, and performance.

Narrowing down your search helps you save a lot of time and effort.

The Certified Used Car Option

Manufacturer-certified pre-owned cars also known as CPO cars combine the cost-competence of used cars with the security aspect involved with a manufacturer-backed warranty. These vehicles get the certified status after comprehensive inspection and some refurbishment. There are many benefits of buying certified used cars including manufacturer warranty extensions, trip interruption coverage, roadside assistance and financing deals with low-interest rates.

You need to check the authenticity of a certified used car carefully. It is always advisable to purchase a car that has been tested to manufacturer standards. You should look for the stamp of approval and warranty to buy a car that qualifies for all benefits including the warranty coverage offered by the automaker. An authentic CPO car of a particular brand can be found only on the franchised dealer lots of same company.

The negative aspect is that CPO cars are costlier than non-factory certified used vehicles.

Discovering an Affordable Used Car Financing Option

If you cannot pay outright, you need to look for a pre-owned car loan. Several people undermine the importance of discovering a used car financing deal. You need to find a beneficial financing deal even before you start looking for a car.

Lenders charge high-interest rates for pre-approved vehicles due to increased risk factors. Old cars are more vulnerable to expensive repairs. It is more difficult to value a used car compared to a new one. However, you can expect a better interest rate pretty close to a new-car financing interest rate if you select a certified pre-owned car with low mileage.

Here are some steps that you can follow to get the best used car financing deal:

Good Preparation leads you to better decisions

You have to be well-prepared with a pre-approved deal prior to start searching for cars or talking to dealers. First of all, check your credit score and assess the credit reports. Make committed efforts to improve the score by controlling the outstanding debt and making timely payments.

Lenders primarily assess your credit score before deciding to grant a loan and fixing the interest rate. If you have a low score, you need to pay a higher interest rate. The best course of action is to opt for a shorter loan term and increase the down payment as much as you can preferably %20 as mentioned earlier . If you have an excellent score, you qualify for the best interest rates and longest loan tenure and also take advantage of the manufacturer-subsidized loan offers on used cars.

Learn about the Sources Available that Grant a Used Car Loan

Several sources offer used-car financing nowadays. You must look for offers from many before determining which one meets your unique needs. Some lenders offer special programs for first-time buyers, buyers with bad credit and existing customers. These special offers help you save money and eliminate some complexities as well.

Established National Banks

Largest banks in the USA offer a wide range of auto lending options both offline and online. Although these institutions put forward strict lending policies, you may find some special loan deals with a few. The interest rates of banks always stay higher compared to other online lenders. Moreover, if you have a bad credit score, you chances of getting a loan become slimmer.

Community Banks

Community banks have smaller geographic footprints and branches compared to national banks. These institutions offer auto lending solutions with a personal touch. Your special lending requirements can be met even if you have a bad or damaged credit.

Credit Unions

Owned by their own members, credit unions return their profits to members with reduced loan interest rates and savings interest rates. These sources can be used to get auto loans with lower interest rates. Applying an auto loan, you need to be a member of a credit union. Visit MyCreditUnion.gov to locate a credit union you can join.

Online Lending Institutions

Online banks or lending institutions are a relatively a new entrant in this field. If you want to get an auto loan immediately, you can choose this option. Setting up a pre-approved loan becomes faster with online institutions. Submitting loan applications and disbursing loan amounts are done online.

Auto Financing Companies

Financing companies lend money, but they don’t accept deposits. In fact, these institutions raise funds from other financial institutions and use them to lend money to borrowers including people with bad credits. Several vehicle manufacturing companies have their own finance companies. They offer CPO car financing and special new car deals for their customers. You can make use of these financial services to buy cars from their franchised dealerships.

Car Dealers

Car dealers work as agents of other lenders including financing companies, credit unions and banks. Marking up the interest rate on a loan, dealers make a profit.

You can choose a convenient option from the sources mentioned above based on your unique needs, circumstances, and budget. It is always advisable to have an alternative financing option when you approach a dealer to gain the maximum advantage of all offers and incentives available.

How to Apply for Pre-owned Car Financing ?

You can apply for pre-owned car financing on paper or online. You have to submit all relevant details accurately and honestly to avoid the possibility of rejecting the application. Lenders analyze your personal information and credit report data to find your repayment capability.

Like you approach different dealerships to identify the best offer, you have to apply at multiple lenders to find the right financing deal. To prevent repeated credit checks making a negative impact on your credit score, you must submit auto loan applications to different lenders within a short time. The credit bureaus will consider multiple credit check requests as one inquiry if done within a short time.

Applying for an auto loan before selecting a vehicle makes the approval conditional with a cap on the amount. At this juncture, you can compare auto loans depending on the interest rate, loan tenure, and down payment. When you have multiple approvals at your disposal, you can find the best choice easily once you get to know the used car price you are purchasing.

You need to go beyond choosing a suitable monthly payment option that suits your budget. It is wise to look at the total vehicle cost including financing. It can be done by multiplying the number of months in the loan term by the monthly payment. Then, you have to add the down payment and the trade-in value if there is one.

The total payment can be found by entering the car price, interest rate, and loan tenure in a car loan calculator.

The Significance of a Down Payment

Making a down payment offers several benefits even if you get an offer to buy a used car without any down payment. Basically, it lowers the borrowing amount, which in turn reduces the monthly payments and loan tenure. The loan-to-value (LTV) is also reduced to make you eligible for better loan rates. You can also get rid of negative equity-related issues when your vehicle is stolen or damaged.

Short Loans Make Better Choices Compared to Long Loans

Keep your auto loan tenure within five years. Longer loans come with higher interest rates and involve high risks. You can prevent situations like making car payments when the car is out of warranty or needs expensive repairs or maintenance.

Determining Where to Purchase a Pre-owned Car

You can find many sources that sell used cars. The advantages and disadvantages of each one vary according to the price and service. It is necessary to gather clear information on all places where used cars are being sold. Check the reputation of a company with a local customer protection agency like Better Business Bureau before accepting a deal.

Franchised New Car Dealers

When you depend on a franchised new-car dealer to buy a pre-owned car, you cannot expect the best price due to many aspects including administrative fees, commissions of the salespeople and overhead expenses of the dealer. However, franchised new-car dealers offer a seamless experience using their expertise to deal with complex paperwork and familiarity with multiple lenders. Moreover, these sources are the only option available where you can find factory –certified used cars from their own brands.

Pre-owned Car Superstores

Offering a large inventory, pre-owned car superstores provide a sophisticated sales process using their access to multiple lenders. You can expect to receive branded add-ons like extended warranties. However, you cannot expect the best price with them.

Independent Used Car Dealers

Sourcing used cars from wholesale auto auctions, independent pre-owned car dealers offer a better price than superstores and franchised dealers due to reduced overhead expenses. However, they don’t have any service departments of their own.

Buy Here Pay Here Dealers

Buy here pay here dealerships are a good option for people with bad credit. The financing can be availed directly from the dealer and payments need to be made at their location. These dealers often charge a very high interest rate from consumers. Late payments invite large penalties. If you have no other option available, you can choose to buy here pay here dealers.

Private-Party Sellers

Purchasing a pre-owned car from a business or individual that is not a professional seller can be termed as a private-party sale. You can expect the best price from this deal because overhead expenses involved with a dealership are not applicable.

You need to perform all the paperwork when you buy private-party sellers. Consumer protection laws are not applicable to this transaction. It is advisable to seek the help of a disciplined and experienced negotiator to bring the price down. You have to be wary of curbstoners while dealing with these types of sellers. Extensive research is what you need to make informed decisions.

Conducting Research, Performing Test Drive, and Examining a Pre-owned Car

Now, it is time to start searching for specific cars. To take the right decision, you should find ways to learn about a vehicle’s history. It is necessary to take a test drive and perform a thorough inspection to ensure the mechanical soundness of a car.

Never undermine the importance of Getting a Car History Report

You should get a vehicle history report from credible agencies like AutoCheck or Carfax before making a buying decision. Some dealers will offer free reports. If you order individually, you need to pay around $25 per report. AutoCheck and Carfax provide discounts for multiple reports. In order to run the report, you should request the vehicle identification number (VIN) from the seller.

What details can you find in a vehicle report?

It tells you about major reported accidents using data from police agencies, insurance companies, and DMVs. You can find information on the damage caused by fire or flood in a reliable report. The reports generated by Carfax or AutoCheck also cover whether the car is stolen and recovered, title deed issues, history of ownership, odometer readings, service history, sales information, registration and inspection details and recalls. You need to analyze all these aspects carefully before making a buying decision.

What is not included in a Vehicle History Report ?

You should not consider vehicle history reports as perfect documents. They may not contain very recent information. Some shops fail to report the damage repaired at their center. These unreported actions won’t find a place in a vehicle history report. The state privacy laws do not allow the name of the car owner to be included in the history report. This report does not make the practicality of an in-depth pre-purchase inspection irrelevant.

Your first Impressions can provide a fair idea

First impressions are not always bad. They give you a fair idea to proceed or not. Check whether the car sends down a puff of smoke plume from the back or makes unpleasant noises. You need to look for broken glass, worn our ties and other similar things that can be seen with your naked eyes. If you get a wrong first impression, you must look for another option.

Check the paint and find out whether it stays fresh. The color and gloss need to match. If you find some difference in certain panels, it can be a sign of rectified collision damage. The condition of the lights must be checked. Look under the car to see some hanging parts and leaks.

The interior part of the vehicle should be examined carefully. Flood damage or mold infestation leaves a bad smell. You have to check the overall cleanliness as well.

Test Drive is an Essential Thing

You have to test drive a used car under all circumstances. Just taking a spin a simple hop does not serve the purpose. A proper test drive helps you evaluate the vehicle’s condition but also assists you in determining whether the car fulfills your exact needs.

Assess the Comfort Level before You Start Driving

Assess your comfort level inside the car by sitting on the driving seat. Find out you have the best access to the pedals and control everything comfortably. The view from the driver’s seat plays an important in deciding the comfort level.

When you move on, every system needs to be examined, including the air conditioning, interior lighting, audio system, power door locks, and emergency flashers and exterior lighting. If you find some issues that can be repaired, you can negotiate a price reduction.

Test Drive is a good opportunity to learn about the vehicle

A test drive is a wonderful opportunity to gather realistic information about a vehicle. As you start moving, you have to switch off the stereo and keep the HVAC fan setting at the lowest levels to detect every possible sound. Unusual transmission and engine sound indicate a possible water leak. Analyze the braking system carefully. You can take an auto expert with you while driving to clarify your doubts. It is necessary to drive the car on the kinds of roads you normally drive on. The test drive allows you to check the visibility and maneuverability of a vehicle. Finally, you must feel comfortable while driving.

Get the Car Inspected by an Independent Mechanic

Even if you feel satisfied after a test drive, you should not take a final decision. Get the car checked by an independent, experienced mechanic to make sure that there are no underlying mechanical problems. A qualified mechanic has the expertise to detect all underlying issues with clinical precision.

Preparing a Deal and Performing the Paperwork

If you receive positive confirmation from the mechanical inspection, you can start negotiating a purchase price for the vehicle and focus on getting the paperwork done.

Deciding on a Fair Price

Price negotiation needs some skills. One of the biggest lessons this complete guide to buying a used car provides is that you should never allow emotions to take over while performing a business transaction like buying a pre-owned car. Negotiation needs to be done on the basis of facts only.

You need to do your research. It is advisable to look at what others are paying for cars that are pretty similar to the ones you are planning to buy. You can rely on our used car reviews to get market price information for used cars over the last decade.

You need to ask the seller to reveal the price directly. This approach forces him/her to come up with the maximum price they are looking for. Dealers always look for a fair profit. Private parties are interested in getting a reasonable market price. Your prime focus should be on the total vehicle cost and the financing instead of getting unnecessarily worried about the monthly payment.

When it is time to place a counteroffer, you need to focus on saying an amount that sits at the low end of what others are paying. Your price can be backed up with information about the condition of the vehicle and how much cash needed for repairs. If the seller does not agree with your price, you can ask him/her to get the repair work done as a part of the deal. When you negotiate, you have to be firm but courteous and polite. If you are prepared with a pre-approved financing deal, you can make an informed decision with clarity and speed.

You should be prepared to spend some time to arrive at an agreeable price. Never crumble under pressure or fall victim to guilt about how long the seller has been putting to enter into an acceptable deal. If you are forced to make a hasty decision, just walk away.

Signing the Deal

You need to do the paperwork and sign the deal before taking your newly purchased pre-owned car home. If you are dealing with private sales, the seller or buyer should prepare a bill of sale that includes any special terms and conditions that are included as a part of the transaction.

The registration paperwork required for a private-party vehicle sale varies from state to state. One common rule is that the title of the vehicle should be transferred to your name.

Buying cars from dealerships eliminates the headache of spending time on paperwork. They will take up the responsibility and charge a documentation fee as a part of their service. They will ask you to sign on a heap of papers. You need to read each document before putting our signature.

Taking Care of Add-Ons, Insurance, and Warranties

Your are almost there. However, you need to focus on a few more things before start making decisions

Add-ons

Dealers offer a broad range of add-on products ranging from third-party protection schemes to insurance and extended warranties. You need to search for better offers outside the dealership office before buying any of these products.

There are also many sources like auto clubs, credit unions, auto lenders, banks and car insurance companies to buy an extended warranty, group insurance, and third-party products. Look for good schemes with better prices.

The financing wing of the dealership will pressurize you to buy all add-ons immediately as a part of your car loan. They will underplay the importance of financial implications. You can do your own math. Don’t jump into any hasty conclusions. Take your own time.

Finding a Suitable Car Insurance

Buying car insurance is essential to safeguard your vehicle and your finances during critical situations like accidents and thefts.

This guide offers clear information on auto insurance coverage including how it works, how much coverage you need and how to discover discounts on coverage.

Owning a Pre-Owned Car

Once you buy a new pre-owned car with the help of this complete guide to buying a used car, you need to focus on maintaining it properly to safeguard its value.