Thanks to increased demand coming out of the economic downturn, prices on many late-model used cars have risen, increasing the importance for consumers to get the best value for their money, with no surprises.
A study released by Cars.com in April 2011 said the average price of a used car increased about 10% year-on-year in 2010. But dealers argue that used cars still offer great value, as new cars can lose 15% to 30% of their value just in the first year of driving. Automotive Digest says the rise in used car prices has remained steady over the last three years, rising 30% since 2008.
Know what you want. These days, you can do most of your pre-test-drive research without having to set foot in a used car dealership.
- Set a budget and stick with it. Take into account the cost of insurance and mileage, as well as the term of the car’s warranty, if any. All of this will determine the running costs and potential repair costs after your initial purchase.
- Make price and model comparisons. The Kelley Blue Book and AutoTrader.com allow you to compare used and new car models, browse consumer reviews, and search those models by price, mileage and engine size. There are many questions you should ask yourself before settling on a model. Are planning to have a child within the next 12 months? What are your mile-per-gallon, safety features and storage capacity requirements? Will you need to towing capacity for a trailer or mobile home?
- Establish a fair price range. Some sellers will be more flexible than others, but once you know your preferred model online resources like NadaGuides.com will give you an indication of the true value of the vehicle’s worth. If you’re not paying cash up front, get a range of loan offers.
Visit dealerships and shopping websites prepared. Be prepared to haggle and inspect every inch of the car’s frame and interior.
- Negotiate your price. An analysis by online automotive website CarGurus.com said just over 50% of cars listed for more than 30 days have at least one price drop. Everything is up for grabs to leverage a price reduction, including the odometer reading and the smallest cosmetic defect in the interior. According to Carsala, an online car negotiating service, up to 25% can be knocked off the opening price of used cars.
- Look out for tell-tale signs. Small things can reveal big problems. Does a door have trouble closing? That could also mean it’s been in an accident. Also, check for different colored paintwork, which could suggest the car has needed major repairs.
- When you finally choose the car, investigate its history. Any flaw like undisclosed flood damage or a rolled-back odometer could help you knock money off the asking price. Carfax.com charges $34.99 for one history report using the Vehicle Identification Number (VIN). This is especially useful if you’re buying a car online.
Get the right extended warranty. Assuming the original warranty has expired, an extended warranty is essentially a promise made by a manufacturer to fix certain defects or problems that may occur over a set period of time. Choosing the correct one is one of the most important decisions you will make before closing on a sale. It’s also possible to get a private warranty from the dealer, but always carefully read how it’s worded.
- Get a warranty that suits your needs. Make sure the warranty matches with your car usage and has enough coverage to give you peace of mind. For instance, you won’t need a five-year contract if you change your car every three years. An “as-is/no warranty” on an older/cheap vehicle means you buy the car as you found it as it doesn’t qualify for a warranty.
- Consider a certified pre-owned vehicle. If you don’t know a lot about cars, “certified” vehicles from dealers are by a factory-licensed mechanic. This may also work out to be more expensive than buying from a private individual as the coverage may be similar to that of a new car.
- Maintain your vehicle. Keep all receipts from any repairs and maintenance on the car, such as oil changes, tire rotations and belt replacement. You may need to prove you correctly maintained your vehicle; otherwise your claim could be denied.
What not to do when buying a used car.
- Don’t be afraid to complain. If your dealer fails to uphold your warranty if you return with a problem, ask to speak to his supervisor or, failing that, complain to your local consumer protection agency or state attorney general. But beware of buying from a private seller: there may be more flexibility on price, but make sure he has the title of the car is not in someone else’s name and don’t take his/her word for the condition of the car.
- Don’t believe everything the seller tells you. The stereotype of a “used car salesman” is someone who will say anything to make a quick buck, but there are a lot more respectable dealers and private individuals out there.
- Don’t skimp on the test drive. Too many buyers take the car for a quick 15-minute spin to see how it runs. You need to take all the time you need and consider other issues like leg room and how it copes with everything from suburban streets to highways. Most experts advise not buying a used car with 155,000 miles and over on the odometer and one that is 10 or 12 years old, unless you’re searching for a high-risk, low-cost bargain.