Buying and Financing a Used Car

Before anyone starts shopping for a used car they need to do some homework.  A little research can lead to saving serious money or avoiding big headaches.  Used car purchases may even involve more research than a new car, regarding both the purchase and the car loan or car finance. 

Before buying a used car or any car for that matter, consider your driving habits and the needs for the car.  Consider what the car will be used for and who will be driving the car to determine the necessary features needed.  Then use this information to research various models, options, costs, repair records, safety tests, and expected mileage.  This information should be used to narrow down the search and gauge the cars available with your available budget.

Comparing models, prices and needs means that you have to make sure to develop a budget.  A budget helps avoid over spending by creating an acceptable price range that shouldn’t be violated.  Evaluate your financial situation and determine how much you can afford to pay for the total car price as well as monthly payments.  Within the budget it’s helpful to factor in vehicle related costs outside of a new car loan payment, such as insurance, maintenance and gas costs.  These costs can be especially true for purchasing used cars that may require more maintenance. 

To help build an accurate price range for the potential car purchase, you can check newspaper ads, the Internet and used car guides to find values on specific models before you go car shopping.  Now you can investigate the market for cars that are available from dealers or private seller that meet your driving needs and are within your budget.

Whether you buy a used car from a dealer or an individual it is important to examine the car thoroughly.  It is advised to use an inspection checklist.  It is equally important to test drive the car.  For the best testing circumstances it is useful to test drive under a variety of road conditions such as on hills, highways, and in stop-and-go-traffic.  If the seller has any records available, ask for the car’s maintenance record from the private owner, dealer, or repair shop.  If you have any reservations, hire a mechanic to inspect the car.

When buying a used car, one of the biggest decisions is whether to buy from a dealer or private seller.  For used car purchases that are made from a car dealership, the Federal Trade Commission’s Used Car Rule requires dealers to post a Buyers Guide in every used car they offer for sale.  The Federal Trade Commission’s Buyers Guide provides information that includes:

Whether the car is being sold “as is” or with a warranty.
What percentage of the repair costs a dealer will pay under the warranty.
The fact that spoken promises are difficult to enforce.
The major mechanical and electrical systems on the car, including some of the major problems you should look out for.

The Buyers Guide also informs the potential buyer to:

Get all promises in writing.
Keep the Buyers Guide for reference after the sale.
Ask to have the car inspected by an independent mechanic before the purchase.

Buying a car from a private individual is different from buying from a car dealership.  Sales and purchases of used cars between private parties generally are not covered by the Used Car Rule, or by “implied warranties” of state law.  A private sale is generally sold “as is” in which case you’ll have to pay for anything that goes wrong after the sale.

With either type of purchase, private seller or car dealership don’t ignore negotiating the price.  It is important not to be emotional over the purchase, if you are not happy with the price or need more time just take your time or walk away.  The market for used cars is very large and there is ample opportunity to find another car if you are not happy with the price.  Take your time negotiating the car’s price, as well as the financing or car loan rate you are offered at a dealership. 

After refining the car search it will come time to decide how to purchase the new car.  You can pay cash for the car or obtain a car loan and finance the purchase.  Check your budget since car loan financing increases the total cost of the car because you’re also paying for the cost of credit, including interest and other loan costs.  You also must consider how much money you can put as a down payment, the monthly car loan payment, the loan term, and the Annual Percentage Rate (APR).  Car loan rates are usually higher on used car loans and the loan terms are often shorter. 

While shopping and comparing used car loans become familiar with the common terms that are involved in the course of purchasing or financing a vehicle, such as down payment, fixed rate loans and variable rate financing, dealer financing and more. 

In a competitive market it’s important to check car prices and options as well as car loan rates and other financing terms options equally.  Banks and lenders offer a variety of car loan terms.  Shop around to negotiate and obtain the best possible auto loan contract.  Compare annual percentage rates and auto financing options from several loan sources.  Be cautious off any lender that requires a big down payment and a high APR for the car loan.  To get a lower car loan rate, you want to consider a less expensive car that allows you to make a larger down payment.  If money is very tight, you may consider paying cash for an even less costly car.

When you are ready to make the purchase, read the contract carefully before signing it.  If you have any questions or concerns, ask questions first before making the purchase.

Tags: auto financing, auto loan, car finance, Car loan, car loan payment, car loan rate, car loan terms, dealer financing, used car loans

This entry was posted on Friday, May 15th, 2009 at 12:13 pm and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.