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Buying used can make smart money sense--if
you follow these five easy tips:
1. Always have a mechanic check out a used car before
you buy it. Use an independent service shop or diagnostic
center. Most charge about $125 for a complete check.
2. Budget any needed repairs as part of your purchase
price. So, if a seller wants $7,000 but the vehicle
needs $1,000 in repairs, budget $8,000 for your vehicle.
Or, better yet, negotiate the selling price down to
include the cost of repairs.
3. Forget about a used vehicle's "asking price."
Smart used-vehicle buyers never negotiate down from
asking price, they negotiate up from "loan value."
Loan value is what most lending institutions will actually
lend on a particular vehicle. Your credit union can
tell you this figure. For instance, if the seller is
asking $7,000, but the loan value is $5,000, you want
to negotiate up slowly from $5,000.
4. Talk warranty after you've settled on the price.
And never accept a 50/50 warranty--the dealer pays half
of warranty-covered expenses. On any vehicle, fight
for at least a 30-day, 100% drive train warranty. If
you're also thinking about buying an extended service
agreement, remember that the price of a service agreement
usually is negotiable, too.
5. Always shop used-car financing rates. Most states
allow dealers to charge much higher rates for financing
used cars than for financing new cars. For instance,
a new car might be financed at 8% while a two-year-old
used car might be financed for 15% or higher. How do
you find the cheapest rate? Ask the seller to give you
a completely filled out copy of the finance contract,
and compare it with your credit union's rate. A tip:
APGFCU finances used cars at or near
new-car finance rates.
Editor's note: Remar Sutton's car-buying
tips have been featured on "Good Morning America,"
"Today," "20/20," "Nightline,"
and in magazines such as People, Newsweek, and Credit
Union Magazine. He's president of the national Consumer
Task Force for automotive Issues. He writes this column
exclusively for credit union members. |
