Why Buying A Used Car Makes You A Financial Genius

Whatever the reason, when you buy a used car, your Money IQ is in the stratosphere.  It's one smart decision you're making.

How's that, you say?

Simple - We all know that cars, vans, trucks and SUVs depreciate quickly.  What's worth $30,000 today is worth $15,000 tomorrow.

You're a genius because you let....

Some other guy eat that $15,000 loss!

Ahhhh.....but the Used Car world is a dangerous place....where you can either Save a Fortune or Lose a Fortune.

Read on to see how a few simple steps can lessen your exposure....and save you a fortune.

Step 1 - Buy Used Cars - A Little Homework Never Hurt Anyone

Yep, you have to some homework.  Okay, "homework" is a lousy word.  Let's call it "Research" then.  It doesn't make a lot of sense to buy a used car....if you buy the wrong one.  If you find a car or truck at a great price, that does not make it a great deal.  By doing solid Research and having several different choices is the way you avoid making a huge money mistake.

I'll make 3 suggestions on where to do your research.

  1. Spend a few minutes reviewing the 1st Commandment - Car Research Jewels; It'll give you a few things to keep in mind as you're preparing to buy a used car, particularly if you're buying from a Dealer....and it'll certainly keep you from making any mistakes.

  2. Since 1996, I've been using Edmunds.com - so should you.  It's probably some of the most accurate information you can use.  Make sure you visit their Used Car, Truck, Van & SUV Reviews, Specs and Pricing.  Everything you need to get an inside look at the vehicles you're considering is right at your fingertips....including what you'll pay at a Dealership for your choices.  Here's a hint - look for  "TMV"

  3. Begin to narrow your choices.  And what better way than to know that than by knowing what that used car or truck will cost you over the next 4 or 5 years.

    Edmunds strikes again with their Edmunds Used Car TCO SM (True Cost of Ownership) Research.  If you have two or more choices your looking at, this is the only way to compare how much money you'll have to sink into that used car over the next five years.

    Think of it this way - If one car is going to cost you $2,611 more to own over the next 4 years than the other you're looking at, don't you think that's information you should have now, not later.  It's a phenomenal tool - make sure you use it.

Step 2 - Buy Used Cars - Loan or Lease Decision

After you've done some solid research, and before you start running all over town, you need to determine how you're going to pay for your new car, truck, van or suv.

Wait a minute - did you say lease listed above?  Yep, you can lease a used car.  I've done it a couple of times.  You can't do it with every vehicle and if the word "Lease" doesn't bother you, explore this option.  Only used cars & trucks with very high resale values are in this game - such as Honda, Toyota, Acura, Lexus, BMW and Mercedes - and they have to be 2 years old or less.

If a 2 year old luxury sedan at $275 a month for 39 months appeals to you - do some homework by checking out our Car Leasing Guide.

If you're certain that you are going to get a loan, don't go shot-gunning your personal information all over the Internet. There's a process for finding the best loans available - here it is.

  1. Credit Unions - Contact your Credit Union - or join one ASAP.   Need To find a Credit Union in your area?  Then try the National Credit Union Administration or the Credit Union National Association.  They both have search options to help locate a Credit Union near you.

  2. Capital One - Used Car Loans, one of the largest online Lenders in the world.  They have any easy application process, very good interest rates and you can get your check the next day.  And that Check is a blank check which you can use within thirty days - that's pretty darn handy to have when you're shopping for a used car - and there's no obligation on your part to even use it.

    And....you can a Capital One Loan at a Dealership and if you're planning on buying from an individual.

  3. Next, make sure you visit E-Loan.com - they've been in business for years, have a quick application process and have provided Loans to millions of car buyers.  And if you're considering a Home Equity Loan to finance a used car, give E-Loan a shot for that as well - they have very attractive rates.

  4. Next, hit your own Bank for the Car Loan.  If you've been doing business with a bank for while,  see what they can arrange.

An lastly, if you're going to buy a used car from a Dealer, apply for your car loan with them the day you plan on purchasing.   Most Dealerships will probably have a manufacturer backed loan or even an attractive offer from a Local bank.

All you need to do now is choose your best option.

For more information, see our Auto Loans Guide

Step 3 - Buy Used Cars - Close The Insurance Black Hole

Most folks never even consider Car Insurance costs when they're going to buy a used car.  Yet, there can be a huge difference in premium costs.  Make sure you call your Agent or Insurance Carrier to find out what the premiums will be on the car, van, truck or suv you're considering - especially if the Driver is under the age of 25.

If you want to learn how to cut your car insurance costs by almost 55%, no matter who your Insurance Company is, what State you live in, your age or, what your driving record looks like, check out 12 1/2 Strategies to legally slashing your Car Insurance Costs when you buy used cars - it'll really open your eyes.

Step 4 - Buy Used Cars - Cover Your Arse

One of the biggest risks - and worries - with buying a used car or truck is....

Do I have to worry about it breaking-down and have horrific repair bills to cover.

If that's you, eliminate that risk. If you're looking at buying a used car from a Dealer, look into Certified Pre-Owned (CPO), cars, vans, trucks and SUVs.

These are almost always newer-used cars and trucks that have anywhere from 20,000 to 75,000 miles.  Before they're put-up for sale, they undergo a Manufacturer mandated multi-point inspection.  Any service or repairs are done before the vehicle can be offered for sale.

Once they're put-up for sale, a no-cost extended warranty on major parts such as the engine and transmission is usually in place and they can be a great choice.  The only negative - A certified car or truck is always going to be more expensive.

Whether you're buying from a Dealer or an Individual, an alternative you have to protect yourself is an extended warranty offered by an Insurance Company.

A company that I highly recommend you take a look at is Warranty Direct - they've been in business forever, cover over-heating (a major plus) and pay for any needed repairs before you leave a repair facility.  If you're worried about expensive repairs when you buy a used car, give Warranty Direct Used Car Protection a look.

For more information, see our Used Car Warranty Guide

Step 5 - Buy Used Cars - Accessorize Yourself

A lot of people look at purchasing accessories when they buy a used car or truck.  They want to dress-it-up a bit or add a must-have or two.

That's great!  I've done it every time I've purchased a used car.  If you plan on doing the same, do not purchase your accessories from a Dealership.  You'll be over-paying by almost 60%.  In fact, you can get the exact same accessories that a Dealer sells - elsewhere....for a heck of lot less.

Most folks don't realize that Car Makers don't make the accessories their Dealers sell.  They outsource almost all of it.  So, the floor mats that sell for a $147 at the Dealer will sell for $96 elsewhere - And they're the exact same floor mats.

If you want to add accessories to the used car you're going to buy, only shop at the largest online distributors - Auto Anything, JC Whitney & Drive Werksicon - and save yourself up to 60%.

Step 6 - Buy Used Cars - Price It

You've done all this work.  Now it's time to get the price on the used car or truck you're going to buy.  Step 1 has already given you a rough idea on what the price should be.  Now you get to find out how to get a better price and where.

There's two things you need to do first.  One, you need to print our free Car Pricing Organizer.  It's a great way to keep all your contact info and pricing data organized.  Or, you could always just jot your notes on a scratch-piece of paper....and have a disorganized mess.  It's up to you - here's a link to our Free Pricing Organizer.

And two, get yourself an anonymous e-mail account.  E-mail addresses are bought and sold each day in the U.S. and unless you enjoy getting slammed by junk mail, I'd recommend getting a free account to use for any e-mails you might send - get one from Yahoo - it's easy and free.

If you want to buy from a Dealer - (Buying from an Individual- go here)

If you want to buy from an Individual -

Step 7 - Buy Used Cars - Choose Wisely Grasshopper

Hopefully, you've narrowed down your list to one or two cars.  The first thing you need to do is check the vehicles history before you waste your time driving all over town.  You want to know upfront if the car or truck you're interested in.....has had any problems

Get the VIN (vehicle identification number) from the seller.  If it's a Dealer, the VIN will be on any of the Websites you visited.

If you're going to buy from an individual, just ask them for the VIN.  Once you have that info, you can check the vehicle history.  And the only company to offer that is Carfax.  You've probably heard or have seen their commercials so the name should sound familiar.  Here's my recommendation - don't ever buy a used car without first getting a Carfax report.

Carfax will note any prior accidents, odometer fraud, a manufacturers buy-back (because it was a lemon) and even flood damage (very important with all the Hurricanes in the U.S.)

Use the VIN to make sure CarFax has a complete history.  The check is free and let's you know what is on the report.  If the vehicle records show, go ahead and get a report.

If you're considering multiple vehicles, select the unlimited used car history reports - it's cheaper than buying a single report for each.  And if you're only looking at only one car, make sure you only select the single used car history report so you can save a few bucks.

If an accident shows, or anything else that's negative, WALK AWAY - do not purchase the used car.  If you do, when it's your turn to sell it, you won't be able to get rid of it.

Now it's time to pay a visit.  I recommend setting an appointment in the daytime.  Why?  Because you can't see squat at night.  Right before you leave the house, make a few copies of your drivers license and black-out any reference to your Social Security if it's listed on the license.

Whenever you test-drive a car at a Dealer, they need a copy.  And when you're going to test-drive an individuals car or truck, give them a copy as well - it'll reassure them that you're not just going to drive away with their car and never return.

Before your test-drive, take a walk around the car or truck.  Check the condition of the paint and the tread on the tires.  Stick a penny into the tread (Lincoln's head down) - if all of his head shows, you'll need to purchase new tires.  If his head is partially obscured, you're in good shape.  Use that info to get a better price if you decide to buy.

And here's two more tips that'll help you decide if this vehicle is one you should buy....before you even test-drive it.  One, stick your finger in the tailpipe (make sure it's not hot) and rub it around.  If your finger is dirty, that's normal.  It it's black and oily, that's an indication of the engine burning oil and a strong indication of trouble ahead.

And two, rub your fingers along every seam of the car or truck.  Wherever metal-meets-metal, like the where the trunk meets the fender, the hood meets the fender and where door meets door.  The seams should be as smooth as a babies behind.

If any of the seams feel rough, it's an indication that the car or truck has been painted - meaning it's been wrecked.  What you're feeling is "overspray" from when the area was painted.  Point it out and ask the Dealer or individual if they know anything about it.  At this point, you need to decide if it's time to walk away or not.

Step 8 - Buy Used Cars - Get Some Seat Time

If everything goes smoothly to this point, it's time to test-drive the car or truck.  Your best bet would be to test drive the car or truck when the engine is cold.  You're very likely to hear squealing bearings and pulleys when the engine is cold.

Next, turn off the radio before you begin your test-drive.  You want to hear everything and feel everything.  You can listen to the radio later - when you're finished.

During the test-drive, don't rush through it.  It's okay to take your time.  Make sure you drive it like your going to drive it - meaning if you drive mostly on the highway, take it on the highway.

When you're on the test drive, observe the following:

Step 9 - Buy Used Cars - Get Ready To Hand Over Your Cash

So, you're leaning toward a particular car.  Good for you.  Now it's time to ask to see the car or trucks  service records.  If the Dealer or Owner has these available, it's usually means the car was taken care of and it's your proof that there were not any unusual and expensive repairs.

If the Dealer has no records, don't be to upset - that's normal.  Most toss anything they find in the trash to make it more presentable.  If a private owner has no records, I'd be a little suspicious.  This doesn't mean his car is lousy one, but I'd wonder why he wouldn't have them.  Is he hiding something?

If there are no records, ask if your mechanic can look at it.  Some dealers will allow you do that, some won't.  And some individuals will act the same way.

If you have a mechanic you trust, and you're allowed to have it checked, it could be the best $50 you spend.

If you've identified problems, and still want the vehicle, offer an amount with all potential costs subtracted from the asking price.  Once you agree on a price, here's what to do next.

If you're buying from a dealer, all the contracts, a bill-of-sale, registration and title issues will be handled by them.  They do it hundreds of times a month and can be trusted to handle it completely.

If you're buying from an individual, here's how to handle that situation:

Step 10 - Buy Used Cars - Your Follow-Up

So, you bought a used car.  Now what.  Well, the first thing you need to do is call your insurance agent or Carrier and have the car or truck added to your policy.  Don't put it off - do it the same day if possible.  You'd be shocked at the number of people who put it off....and then forget about it.

And if you have any issues with the title or registration, or have a question about whether you need to have a vehicle emissions inspection, check this listing for your States DMV.

I hope you have an enjoyable experience....and use this information to save yourself a significant amount of money and....avoid any trouble the next time you buy a used car.

Tom O'Leary is an Automotive Portfolio Analyst, Author and has been called a modern-day "Robin Hood" for his efforts in helping the Automotive Consumer.

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