10 Tips: How to Buy the Best Used Car for the Money
So, after saving for a down payment, the time’s finally come to buy a new (to you) vehicle. The only problem: You’ve got high standards and a budget that absolutely cannot be busted. How are you supposed to find the best value used car or SUV under such restrictions?
When it comes to snagging a sweet deal on four wheels, it’s all about being a savvy shopper and having the know-how to separate the diamonds from the rust buckets. Once you steer through our road map of shopping tips below, you’ll be much better prepared to navigate the twists and turns of the used car market and cross that finish line.
1. Make/Model Reputation:
Researching the specific make, model, and year of the car is crucial. Every vehicle is different. Some are extremely reliable, while others have toxic issues that plague the model’s entire generation. Avoid used cars for sale that fit in the latter category, of course.
How to Check:
Utilize online resources, manufacturer websites, forums, and consumer reviews to gather information about the specific make, model, and year.
Look for patterns of reported problems or recurring issues on NHTSA.gov.
Pay attention to any recalls associated with the vehicle, as these potentially indicate significant safety or performance concerns.
2. Maintenance Records
Always review the vehicle’s maintenance history to see how well it’s been taken care of. A well-maintained vehicle—one that gets on-time oil changes, tire rotations, recall work, etc.—is much less likely to be a lemon.
How to Check:
Request the maintenance records from the seller, used car lot or even the service center.
Look for regular servicing at normal intervals, which can range from 3-month oil changes to bi-annual tire rotations to yearly brake inspections.
If there are gaps in service or, worse yet, no maintenance record at all, reconsider moving onward with the sale.
3. Vehicle Usage & Mileage:
Never judge a book (car) by its cover (odometer). Even if everything looks like it’s in tip-top shape, you can infer the vehicle’s overall condition based on its usage history. Understanding where it was owned, as well as how and how often it was driven, can provide critical insights into its wear and tear, engine longevity and more.
How to Check:
Speak with the seller to identify what the vehicle’s purpose was prior to being on the market.
Vehicles used for long-distance travel, such as business or company cars, may have more highway miles, but that doesn’t necessarily make it a high-mileage car. Oftentimes, these types of used vehicles have fewer engine problems than comparable vehicles with a lower odometer reading.
Vehicles used for daily commuting, especially in urban environments, may have less mileage than the average. Due to conditions like potholes and stop-and-go traffic, however, other issues may soon be evident, including brake failure, suspension damage and bent rims.
Vehicles used for off-roading are going to be risky investments, no matter which way the wind blows. Know what you’re doing before you buy a used 4×4 SUV or off-road truck.
In any case, always examine every nook and cranny. Check the upholstery and pedals for unusual wear. Look at the brakes for signs of corrosion. Inspect the tires to see if you notice any balding or odd tread patterns.
4. Resale Value:
The best used cars hold value long after they’re purchased. For a variety of reasons, such as overall brand reputation, low long-term ownership costs, safety and features, these types of vehicles are the most popular models in their class.
How to Check:
When you’re researching options, be sure you’ve investing in a vehicle that is not only reliable but also comes with a virtual guarantee that you won’t be upside down on your used car loan.
Use reputable online resale value tools to identify the vehicle’s anticipated 5- and 10-year depreciation rate, sale value and demand in the used car market.
You can also use our “Value Trade” calculator to see the vehicle’s current exchange price.
5. Accident History:
We all know accidents happen. (To err is human, or something like that.) When it comes to cars, those accidents can really affect resale value. Once stock parts and components are replaced—even when those replacements are OEM parts—overall vehicle reliability and quality can take a hit. That’s why most vehicles involved in past accidents are priced lower than their counterparts.
How to Check:
Inspect the car for signs of auto body repair. This can include mismatched paint, uneven panel gaps, replaced parts, etc.
Always get a pre-purchase inspection performed by an auto mechanic who can give the vehicle a more thorough look.
Check the VIN/vehicle history report for any official accidents on record. These services can uncover important details such as theft records, flood damage, or salvage history. Be wary of sellers who are reluctant to provide the VIN or who offer incomplete or incorrect information.
Never buy a used vehicle with flood damage or a salvage title—they’re uninsurable, which makes them basically junkyard material.
6. Ongoing Warranty:
Any time you see a good price for a used car, you should assume it isn’t still covered by the manufacturer’s limited warranty. However, if you do come across an affordable used SUV, car, truck or van that is still backed by its warranty, strongly consider jumping on that deal. A pre-owned vehicle with a new vehicle warranty is like the unicorn of the automotive world.
How to Check:
Contact the vehicle manufacturer and review all warranty documentation to determine if the warranty transfers when the vehicle is resold.
Request all warranty information, service contracts and other pertinent details from the seller.
Always read the warranty’s terms and conditions, limitations, requirements (such as regular maintenance at authorized service centers, and coverage length.
If the warranty is or will soon be expired, ask your used car dealer if there are any pre-owned warranty options available.
Looking for something with a long warranty? Ask your dealer to show you their best used EVs for the money. Electric vehicles come with battery warranties that typically cover replacement for 8 or 10 years.
7. Aftermarket Modifications:
Did you know that third-party accessories and vehicle mods can actually decrease a vehicle’s resale value? Non-stock or non-OEM items such as spoilers, spinning rims and custom paint jobs are not only too personal for the overall market, but they also mean someone had to perform work on the car. Can you guarantee that work was done correctly?
How to Check:
If there’s an aftermarket modification, you’ll probably notice it. Ask the seller for more details.
Look for signs of workmanship quality. If the part was installed or applied improperly, you may find loose bolts, scrapes, rust or other red flags.
Ensure modifications comply with laws.
If needed, request the seller to pay your trusted auto technician for the removal of these parts.
8. Thorough Test Drive:
The biggest and best reason not to buy used cars online is the inability to take a test drive. Although some people couldn’t care less about testing the vehicle they’re buying, we think that’s a bad decision—a test drive is always necessary! How else are you supposed to know if you’re buying a cheap, reliable car or simply a cheap car?
How to Check:
Test drive under a variety of conditions that allow you to evaluate the vehicle’s performance, handling, acceleration, braking, steering, noise levels, suspension and overall comfort.
Drive on highways and busy urban streets, rural and gravel roads, and any other type of reasonable surface.
If you’re searching for the most affordable used SUV for your family, be sure to bring them all for a test drive so everyone can assess the ride.
Consider taking several test drives on different days and in various types of weather. The car you liked in the sun might not be so hunky-dory in the rain or snow.
Read more about Carvana vs. car dealerships to see why in-person shopping is still the preferred way to purchase a used vehicle.
9. Expand Your Search:
Although it may be more convenient to shop at a used car lot near you, sometimes it pays to cast a wider net and search for pre-owned vehicles for sale in neighboring areas. Pricing and availability are all dependent on location, and that usually means more populated regions will have larger selections of the best affordable used cars.
How to Check:
Utilize online car listing websites, classified ads, and dealership websites to search for used cars in a wider radius.
If you live in a smaller town like Big Springs, KS, you can find hundreds more secondhand vehicles if you search for “used cars for sale Kansas City” or another larger city.
Consider factors such as travel distance, transportation logistics, and potential cost savings when exploring options in different locations.
Be aware of potential differences in vehicle history, climate conditions, and local regulations that may impact the condition and value of used cars in different areas.
Check to see if the car dealership offers free vehicle transportation. (Read about our free vehicle delivery service in the Kansas City region.)
10. Timing Matters
In the housing market, it’s location, location, location. When finding the best price for used cars, it’s timing, timing, timing. Strategically making a purchase at the right time or during the right season can result in loads of savings.
How to Check:
Understand seasonal trends, sales patterns and dealership operations to identify the prime time to buy or finance a used car near you.
The most favorable times for shoppers to negotiate and score a deal on a car or the best used SUV for the money are at the end of the month, quarter, year and even vehicle model year.
Assess pricing and sales trends of specific car models based on the season. For instance, people may pay more for large SUVs and used trucks for sale during the winter, while sports cars and used minivans sell better in the spring and summer.
Don’t rush into a purchase solely based on timing; thoroughly inspect the vehicle and ensure it meets your requirements.
By taking these tips and insights into account—and avoiding these dumb mistakes when car shopping—you’ll be able to fine-tune your strategy and get your hands on the most reliable and affordable pre-owned SUV, car, minivan or truck for the money.
Ready to start shopping? Visit any of our used car lots near Kansas City to get our best pricing on a large selection of pre-owned vehicles, including used Chevy, Buick, GMC, Nissan, Hyundai, Toyota, Honda and Subaru models. Find the closest McCarthy car dealership near you today!
Tips on Buying Reliable Used Cars and Trucks for a Fair Price
Presented by the Consumer Affairs Committee of the Antitrust, Trade Regulation, and Consumer Affairs Section of the District of Columbia Bar
Primary Author: Mark Steinbach
Disclaimer
This pamphlet is a public service of the Consumer Affairs Committee of the D.C. Bar. It is not, and shall not be considered legal advice. Consult an attorney if you have any legal questions regarding vehicle purchase, financing, or warranty rights.
Table of Contents
Before You Visit a Dealer
Finding a Reliable Car or Truck
Paying a Fair Price for a Used Car or Truck
Financing Your Used Vehicle Purchase
How to Handle Your Trade-In
Your Legal Rights if Things Go Wrong with a Used Car or Truck: A Brief Explanation of Warranties
Should You Buy an Extended Service Contract on a Used Car?
Should You Buy Credit Life, Disability or "Gap" Insurance?
Should You Buy a Low-Mileage "Demonstrator," "Program Car," or "Executive Model"?
Safety
Consumers considering the purchase of a used car or truck can increase their chances of getting a good vehicle at a fair price—and avoiding real "lemons"—by following these tips.
I. Before You Visit a Dealer
Before you begin looking for a car, shop for the money you’ll need to pay for it, from several lenders. Learn how much a bank or credit union will lend you, and at what interest rates. Armed with this information, you will know whether you should accept the financing the dealer offers.
Before you start shopping, figure out how much you can afford to spend. Your lender can tell you what the monthly payment will be to finance different amounts. (Don’t forget to add in the cost of taxes, title, registration, insurance.) Be sure your family budget can really handle the monthly payment involved. Remember, even the best used vehicle may need costly repairs from time to time.
Before you begin, think carefully about what kind of car you need so you are less likely to make an impulsive purchase. Do you need seating for six? The fuel economy of a four-cylinder car? Make a resolution not to buy any car or truck night on the spot: instead, think about any decision overnight, research a fair price for the vehicle using the tips below and make arrangements to have it inspected by a knowledgeable mechanic. Don’t let the sales person pressure you into buying a vehicle by telling you that someone else is interested in it and that the car probably will be gone by tomorrow.
Before you talk with the first salesperson, think about how you will approach negotiations over the price for a used vehicle. Using the tips set out in Sections III and IV below, avoid the Number One Mistake made by both new and used car buyers: Telling the salesperson how much you are willing to spend monthly on your car loan. Instead, negotiate first on the price of the car, and then, once you have a fair price, negotiate over the financing which the dealer will offer.
II. Finding a Reliable Car or Truck
The more you know about a car before buying it, the better. If you knew a car hadn’t had an oil change in 20,000 miles, or that its frame had been damaged in a serious accident, you would look for another car. By contrast, if you are buying a car from someone with a complete set of service orders on the car, which show that it has been well maintained, you can be cautiously optimistic that it may provide good service in the future.
III. Paying a Fair Price for a Used Car or Truck
When a salesperson spots you checking out cars on a dealer’s lot, he or she will wander over and offer to help you find a vehicle suitable for your needs. One of the very first questions you will be asked is: "About how much are you looking to you spend a month?"
It seems like a perfectly reasonable question. The salesperson will have a look that says "Hey, I’m just trying to help you out." But if you give away this valuable information, you have just lost a great deal of control over the negotiations.
Why? Because some dealerships want you to focus on only one thing: Can I afford the monthly payment? If that is all you care about, you won’t care whether the amount you borrow is higher than it has to be (because you’ve been charged much more for the car than it’s really worth), or whether the interest rate on your loan is higher than it has to be. (Dealers often make a profit on the financing, too).
The Number One Mistake made by car buyers is telling a dealer how much you are willing to spend a month. Think about it: the dealer is really selling you two separate products. First, there is the car. Second, there is financing for the car. If the dealer gets you to combine the two, by telling how much you are willing to spend a month—you lose a lot of negotiating power. Why? Because the dealer can almost always get you into a car at your monthly payment. It’s just that you’ll be paying for it for an extra year or two!! Telling the dealer up front how much you are willing to spend monthly is the same as opening up your wallet and saying "help yourself."
Instead, you must negotiate carefully over both the sales price of the car, and the financing of the car. These are—or should be—two separate transactions. In this section, we offer tips on figuring out what is a fair price for the car. In Section IV immediately below, we offer tips on how you can get the best interest rates for your car loan.
The price of a used car or truck is negotiable. You need not, and probably should not, agree to pay the price you see marked on the vehicle’s windshield. It is the dealer’s asking price, but consumers often are able to negotiate a lower price.
Before you negotiate over the price of a used vehicle, try to learn what similar cars or trucks are worth. You should look in local newspapers to find the asking prices of similar models. You also can go to the library to look up the vehicle in the NADA Used Car Guide, which will give you some guidelines for determining the value of a car offered by a dealer with a typical 30 day warranty. If you can’t find a price guide in the library, call the consumer loan department of your bank or credit union for this information. You also can look up used vehicle prices on the Internet, at www.kbb.com.
As a last resort, you can ask your salesperson to show you the "Black Book." Salespersons often carry this small book with a black cover in their shirtpockets. The Black Book shows the average wholesale prices of vehicles sold at dealer-only auctions. It tells you what a dealer should expect to pay for the car at an auction, depending on its condition.
You should expect to pay anywhere from $1,000 to $2,000 over the Black Book cost, since the dealer is likely to insist on a reasonable profit (but will be delighted to charge you more, if you agree to pay).
Prices are based on the condition of the car. If a car is in top condition, the dealer probably paid top dollar for it at the auction, but this means that it may have cost thousands of dollars more than a car in average condition, even though they are of the same style and model year. Therefore, as a rough rule of thumb, you generally should not spend more than $500 over the Black Book value for a car in "extra clean" condition, as it will already be at the top price range under the Black Book.
You may find that prices are not written on some of the cars on a dealer’s lot. Be especially careful, because the dealer may be saving these cars for particularly vulnerable buyers (see the "Second Chance Credit Buyers" section). Some cars may not be marked with a price because the dealership intends to sell the car not based on its value, but based on whatever is the maximum amount a finance company is willing to lend a particular buyer. So, be especially careful when you are shown a used car that has no price marked on the windshield, if most other cars on the lot are marked with prices: There may be an increased chance of mechanical problems, and there may be an increased chance of paying far more for the car than it is worth.
IV. Financing Your Used Vechicle Purchase
If you are not going to pay cash for the car’s full price, you should be sure to investigate financing before you shop for a car. This will help you get the best possible rates. It also will help you learn how much car you can afford.
Although many people do not realize this, dealers often make a profit providing you with financing on a new or used car. If the dealer can borrow money at 8 percent interest and loan it to you at 13 percent interest, the dealer will enjoy a substantial profit on the financing. There’s nothing wrong with that, but for your part, you don’t want to pay more than you have to. Remember, just as the price of a car is negotiable, the interest rate on your car loan is negotiable. If you do not do some investigation on what rates are available from banks or credit unions, and you do not negotiate with the dealer on the rate it is offering, you will pay substantially more than you have to for your car.
To shop for financing, contact your credit union, if you have one, or your bank. Fill out an application for a motor vehicle loan, and discuss with their representative how much money the bank or credit union will loan to you, based on your income and expenses. Once you know how much you can borrow, and the rate at which the lender will provide the loan, you can begin figuring out whether your monthly budget will allow you to borrow the maximum amount the lender is willing to lend. It is not always advisable to borrow as much as a lender is willing to offer, especially if you have little flexibility in your budget.
To get the best possible rates, look in the newspaper for banks or other lenders advertising their rates for car loans (especially the Business Section of the Sunday and Monday Washington Post). Fill out loan applications at several of the most promising banks.
Once you have a solid understanding of what you can afford, and how much it will cost you, you are in a better position to evaluate the financing that the dealer will surely offer you. If the dealer can beat the best rate you have been quoted, take it. If the dealer can not do better than your best rate, you should firmly insist on arranging your own loan. In any event, pay very close attention to the loan agreement which the dealer presents for your signature. Be sure it accurately reflects the purchase price, interest rate and car payment that you have agreed to pay. Make sure the dealer does not slip any "extras" in that you haven’t asked for, such as extended warranties or GAP insurance.
One final note of caution: many people believe there is a three day cooling off period, during which you have a right to cancel your purchase. This is a myth. Unless the sale qualifies as a "door-to-door" sale, you do not have a three day right to cancel. So, before you sign anything, be sure you want the car and that the contract papers are properly prepared.
If you have had previous credit problems, such as a bankruptcy, court judgments against you or just many late payments on your bills, you may have to work harder to get a good deal. But it can be done.
You should still shop for financing. Sometimes, by obtaining a cosigner or purchasing the car jointly with a friend or family member who has good credit, you can obtain a loan at conventional, low rates. Putting down a significant cash downpayment also can help.
Even if your credit is sufficiently bad that you are going to be charged the highest allowable interest rate, you still have a significant degree of bargaining power, which you can and should use to get a fair deal.
To do this, you will need to focus especially carefully on the price you pay for a particular model. Some dealers mark up the cost of a used vehicle, beyond the normal asking price, just because a buyer has poor credit. Those who do may feel that such buyers have few choices, and are more likely to agree to pay an inflated price because they know they have credit problems, and believe they have few options. But just because you have credit problems does not mean you have no power. If the dealer refuses to sell you a car at a fair price, just say no. Tell the dealer that unless the price comes down into a range of what is reasonable, you will take your business elsewhere. Make it clear that if you leave, you are not coming back, and one of his competitors will get the sale. If the dealer still will not budge, get up and leave. Some dealers will stop you before you’re out the door, and be more reasonable; others may call you the next day and talk about working something out. But remember, the car business is extremely competitive, especially in Washington, DC and its suburbs. Someone definitely will want your business.
V. How to Handle Your Trade-In
If you have a car to trade-in, you have additional work to do before you are in a position to make a fair deal.
The most important thing to recognize is that your current car has definite value. Your want to make the most of it. Find out how much it is worth by looking in the papers at the asking price for similar cars, and in the NADA and Black Books, as described in Section IV above. Again, do your homework before you see any dealer, so you are prepared.
If you are going to trade this car in as part of the transaction, avoid the Number Two Mistake made by consumers: failing to keep negotiations about the value of their trade-in separate from the negotiations over the price they are going to pay for the newer vehicle. If you do not keep these negotiations separate, you may find all of your equity in the car disappears into the monthly payment, and you will have nothing to show for it.
When the contract papers are written up, be sure they show that you are receiving a fair, agreed upon price for your current car.
If you still owe money on the car you are trading in, the car has a negative value, so it will cost you to trade it in. You will have to pay off the amount still due, as part of the transaction. This is done, usually, by adding the amount of your loan pay-off to the cost of the newer car you are acquiring.
Instead of trading your current car in to a dealer, you can sell it yourself. You may be able to obtain a better price from a private buyer than a dealer is willing to give you in trade. Some people feel it is not worth the hassle, expense and potential problems of advertising it in the paper and then having to deal with total strangers who answer your ad. It’s up to you.
In any event, after you have negotiated a fair price for the car, for your trade-in and arranged a loan at a fair interest rate, what should you do when the dealer recommends that you buy other products, like extended warranties, and various kinds of insurance?
VI. Your Legal Rights If Things Go Wrong With a Used Car or Truck: A Brief Explanation of Warranties
Consumers get different warranty rights with new and used cars. Someone buying a new car typically receives a detailed, written warranty by which the manufacturer agrees to take care of most problems during the terms of warranty, which now is often for three years or more.
Used car and truck buyers need to be more cautious. If you are buying a low mileage vehicle, check whether the manufacturer’s warranty (or an extended service contract, as described in Section VII below) can be transferred to you.
If no manufacturer’s warranty coverage is available, you will have to look primarily toward your immediate seller for help with repairs.
Nearly all sales by private owners are "as is" (which means no warranty of any kind is provided), while most dealers will provide some form of warranty. If a dealer refuses to provide any warranty, be extra cautious: when a dealer won’t offer you any warranty protection, it implies he or she has no confidence in the car (and neither should you). Carefully read the terms of any warranty which the dealer does provide.
When You Buy From a Dealer
Many local dealer warranties are only for 30 days, 1,000 miles, and cover only major items like the engine and transmission. With such an express, limited warranty, any problem not specifically mentioned would not be covered. So, for example, if your air conditioning compressor or brakes fail on your way home from the lot, the dealer may refuse to cover the repair.
Few consumers try to negotiate for a better warranty than a dealer initially offers, but like the purchase price, warranty coverage is negotiable. After all, if you are paying several thousand dollars or more for a vehicle—and it’s going to take you two to four years to pay the car off—it would be comforting to know the dealer is willing to stand behind it for more than 30 days, and to cover all major expenses for a reasonable period of time.
In the District of Columbia and in Maryland (but typically not in Virginia), consumers who purchase vehicles from a dealer also usually receive protection through an "implied warranty of merchantability." This warranty, imposed by law regardless of a dealer’s wishes, means that the car must be reasonably fit for its intended purpose, as of the date of your purchase. In other words, even a used vehicle must provide you with reasonably safe, reliable transportation, for a reasonable time, taking into consideration the price you paid for car, and its mileage and condition on the date of sale. Thus, even if a 30 day or other written warranty has expired, you may be entitled to have a dealer repair items that go bad fairly soon after the written warranty is up. In Maryland, dealers may be able to avoid responsibility for the implied warranty if the car is more than 6 years old, or has more than 60,000 miles, by having the consumer sign a special form waiving these rights.
In the District of Columbia and Maryland, some dealers attempt to limit their responsibility to 50 percent of parts and labor needed for repair. However, this may not be allowed by law. If the dealer will not honor its implied warranty responsibilities and you have to take your claims to Small Claims Court, ask the judge to apply D.C. Code Section 28:2-316.1 or Section 2-316.1 of Maryland’s Commercial Law article, respectively, so that you are covered for 100 percent of repairs within the scope of an implied warranty.
Federal law requires that every dealer selling used cars post a "Buyer’s Guide" on the windshield, giving you basic information about any warranty being offered. If the dealer does not have such a notice on the car you are looking at, you should wonder whether the dealer is complying with other basic requirements of law; consider moving on to another dealer who does comply.
When You Buy From a Private Seller
Typically, cars sold by private sellers do not come with an implied warranty of merchantability. If a private seller writes the words "as is" or words to that effect on your receipt or sales contract, you may have no warranty protection at all. All repairs will be at your own expense. However, if the seller misled you about important facts (for example, that the car had never been in an accident, but it was), and you relied on these representations in deciding to purchase the car, you may have a claim against the private seller for fraud. Also, where a seller does not specifically tell you the car is sold "as is," in certain limited circumstances, another implied warranty may apply: if you tell a private seller some special purpose for which you need the vehicle, and that you are relying on the seller to furnish a vehicle suitable for that purpose, the law may impose an "implied warranty of fitness for particular purpose." So, if the car does not meet your particular purpose which the seller knew about, you may be able to insist that the seller correct the problem without expense to you.
Before you give a private seller any money, make sure you see the title to the car, and that the Vehicle Identification Number for the car (which you will find standing outside the car and looking through the windshield to the top of the dashboard on the left side of the car) matches the number on the title.
"Secret Warranties"
A brief, general word about "secret warranties." From time to time, a manufacturer may become aware that many of its cars of a certain model are having the same problem, which they should not have. In recognition that consumers may become upset with manufacturers who do not stand behind their products, some manufacturers may offer special "adjustments" for these repairs. Instead of providing direct notification to consumers, the manufacturers may give discretion to their dealers or zone officials to pay for repairs for those customers who complain the loudest. Consumer groups have criticized this practice as the issuance of "secret warranties." However, even if you are the second or third purchaser of a car, if you experience a problem covered by one of the "policy adjustment" or "secret warranties," you should consider asking the manufacturer to cover your repair. Even if there is no formal or informal "policy" for certain repairs, some persistent consumers are able to have the manufacturer pick up all or a part of the cost of some repairs, even when they are not the original purchasers of the vehicle.
Due to space constraints, it is impossible to describe all of your warranty rights in this brochure. If you have further questions, contact your local consumer affairs office or an attorney.
VII. Should You Buy an Extended Service Contact on a Used Car?
Consumers usually are offered the chance to purchase what is often called an "extended warranty" on the car. Technically, what you are offered is not a true warranty, but a promise that a third party will administer a service contract that will take care of certain covered repairs, for a certain number of months or miles.
Although dealers often present these extended warranties at a fixed price, the price is negotiable. Dealer costs for extended warranties typically are less than one half to one third of the asking price.
In the past, some consumers have been denied benefits under these contracts when the warranty company has gone out of business. Insist that the company providing the benefits is a solid one.
Whether you should buy an extended service contract depends on a variety of factors, including your ability to afford the service contract cost up front. Will you be able to afford the cost of repairs later on, if you have no contract? How reliable is the model you purchased; how confident are you in its future performance?
In any event, carefully review the terms of any service contract you are offered. Typically, the extended service contracts available on used vehicles are not bumper-to-bumper. They cover only listed parts. Often, these contracts do not cover a number of important components, which, if they fail, may represent a financial hardship. Ask to review several different contracts so that you can compare them to obtain the best coverage for the price.
VIII. Should Your Buy Credit Life, Disability, or "GAP" Insurance?
Many dealers urge consumers to purchase insurance which will pay off the loan in the event of the consumer’s death (credit life insurance), or in the event of the consumer’s disabling injury or illness (credit disability insurance). Consumer advocates caution that this insurance is very expensive for the protection you get. They generally recommend against its purchase. If you do want the protection these policies give, you can and should negotiate for a more reasonable cost. Some dealers may deny that the price is negotiable; however, it is. Dealers can always waive a portion of their commission. If you refuse to buy it unless it is available at a lower cost, the dealer may well agree to significantly reduce the price. You can always purchase this insurance from an insurance agent of your own choosing, so do not feel pressured to buy it from the dealer.
Increasingly, dealers are promoting "GAP" insurance. Typically, "GAP" insurance is designed to pay off your loan in the event your car is stolen and not recovered, or the car is totaled in an accident, even if the car is worth less than the amount still due on your loan. Again, this insurance may be offered to you at prices up to $500, but the dealer cost is far, far less. Negotiate hard on the price, if you want this insurance, but think carefully about whether it is a wise investment.
Some dealers may say that to get a car loan, you must purchase some or all of these insurance policies or an extended warranty. However, it is extremely unusual for a lender to require that you purchase these items as a condition for receiving a loan. If you do not want these items, check with the lender yourself to confirm whether the loan depends on their purchase. If a lender really does insist that you buy one or more of these items as a condition for receiving a loan, the cost of these items should show up as part of the finance charge on your loan agreement. You may well be able to find another lender who does not insist on their purchase.
IX. Should You Buy a Low-Mileage "Demonstrator," a "Program" Car, or "Executive" Model?
Some dealers promote used cars, often with relatively low mileage, as especially desirable because they have been used as demonstrators, or because they were driven by manufacturer representatives and therefore are "program cars" or "executive models."
Carefully examine any such vehicle as you would any other for signs of accident damage, and learn what you can about its prior repair history, too.
Demonstrators
"Demonstrators" are used to provide test drives to prospective new car customers. Chances are pretty good the car has been maintained as the factory recommends. However, people who take test drives in these cars, particularly drives unaccompanied by a salesman, may drive it hard to see how quickly it accelerates, or how quickly it can be stopped by slamming on the brakes. Repeatedly pushing a brand new car to its limits may not be an ideal method for breaking it in. You may want to check the Owner’s Manual to review break-in recommendations, and be cautious about buying a demonstrator where the factory urges gentle driving techniques for the first few thousand miles. Consider whether any price break is really worth it.
Program Cars and Executive Models
The terms "executive models" or "program cars" can mean different things to different people. Be sure you know exactly how the selling dealer is using them. Some dealers use the term "program car" to imply that it has been driven by a manufacturer’s representative for his or her personal use.
However, some vehicles called "program cars" are really cars that have come back into the market after use in the fleets of short-term rental companies. These cars may have received hard use or been damaged in accidents; they also may have been well maintained. If you are interested in a car that comes from a rental company, be sure to ask for the full service and repair history on the car.
If you are interested in a demo, program or executive car, be sure you understand whether any of the original factory warranty comes with the car, and for what period of time and mileage.
Lemon Laundering
One further cautionary note about used cars with relatively low mileage: beware of "lemon laundering." A car bought back by a manufacturer under one state’s lemon law due to unrepaired defects can be resold in another state without disclosure that the car was a "lemon." Depending on state law, this may or may not be unlawful. Even when manufacturers provide appropriate disclosures, these may disappear (or be "laundered") as the car is wholesaled several times, or is processed through auctions. Recycled lemons often have relatively low mileage. Be cautious. If a dealer presents the car as a "reacquired car" or "program car," be especially inquisitive about its prior history.
How to Buy Used Cars Under $5,000
10 Tips on How to Find Used Cars Under $5,000
If you’re looking for a no-frills ride to get you from point A to point B reliably, you don’t need to buy a new car. Finding the best used cars under $5,000 isn’t hard if you know what to do. These tips on how to buy a used car can help you find that diamond in the rough:
Tip 1. Search for single owner cars — sold by owner
Try to find a private seller who’s owned the vehicle since buying it new. Low-cost cars that are high in miles typically last because the car’s been relatively well-maintained. You’ll find most vehicles owned and sold by a single owner are in relatively good shape. That's because they've been willing to take the time to care for their car and elect to sell it on their own to help ensure it goes to a good owner.
Tip 2. Search for base model vehicles
Although you may not get a V6 engine or satellite radio, there’s less to go wrong in a car with standard features. And that can translate into cheaper repairs and reduced maintenance costs. Luxury cars may be fun to drive, but they’re rarely fuel-efficient and can get expensive to maintain.
But don't discount your own needs. Look for used cars that have creature comforts and make your drive safer. Options like cruise control, power windows, a roomy rear seat and front wheel drive for better winter weather handling. Cars like the Honda Civic, with front and rear air bags and anti-lock brakes offer a lot of value for the money.
Tip 3. Get the facts on the car’s history
Educate yourself about the car by requesting a CarFax or another third-party vehicle history report. With one in hand, you’ll get details on the car’s accident and maintenance history. These reports are a great means to verify mileage of the car because you’ll be able to see many of the maintenance details. That little odometer reading can be cross-checked against the seller's service documents.
Another key reason to have a car history report is to help verify overall car value against others on the market just like it. Some reports fold in pricing data from Edmunds.com or Kelly Blue Book resale value database, which can help you understand whether the car your considering is priced correctly.
Tip 4. Search online carefully
Build a list of keywords for searching craigslist.org or carfinder.com that can help you find used cars under $5,000 worth buying. Think about your ideal seller, someone who’s taken great care of the car and paid for extra services that extend the car’s life, and search for cars with terms like:
Undercoated
One owner
Highway miles
No rust
Regular oil changes
Mint condition
All maintenance records
No accidents
Synthetic oil
Part of the family
Immaculate condition
Dealer maintained
Garage kept
Keyless entry
Electronic door locks
Cruise controls
Full size spare tire
Tip 5. Go for cars with highway miles
Used cars with verifiable highway miles are a better bet in many ways. They’ve typically seen less wear and tear than their city-driven counterparts. But even good used cars under $5,000 may have issues along the way — that's why it’s wise to pick up emergency roadside assistance coverage to best protect your investment.
To help verify highway miles, here’s what to look for:
Few signs of wear on the brake pedal
Stone chips on the hood and bugs in the radiator fins
A door sill that’s still in good shape
A driver’s seat that’s in good condition
Tip 6. Work with a mechanic and inspect the maintenance records
The best used cars to buy under $5,000 are those that were well-maintained over the years. Take the car on a test drive and stop by your mechanic to review the car’s condition:
Verify that the automatic transmission’s fluid levels are good
Remember: owners who keep all their service records likely take better care of their car
Have your mechanic perform a quick inspection of the car and ask their opinion on the car’s condition
Request a printout or email of all service documents directly from the dealer when possible
Ask if OEM parts were used during repairs and maintenance
Review tire rotation schedules
Verify that vehicle recalls are resolved
Tip 7. Choose cars that were dealer-maintained
The odds of good cars under $5,000 lasting several years are better when maintenance occurs at the service department of a dealership. Call the customer service department listed on the records and ask about the car — they may know the owner.
Be sure to compare the factory-recommended maintenance schedule against the owner’s records. If you’re looking at a single-owner vehicle, explore the terms of service on the warranty. Was just the powertrain covered or did the owner get extended bumper-to-bumper coverage? If so, the car might have been serviced more frequently because parts and service costs were covered under the contract.
Tip 8. Avoid cars with accidents
Vehicles that have experienced a collision can suffer structural damage or other hidden issues. And if the car’s been involved in a flood, electrical problems can emerge and cause real headaches. Look at the car history report carefully for details of damage and be sure to the car's title status. If the car is listed as a total loss, learn all you can about the damage before making any commitments.
Tip 9. Estate sales are a good resource
It’s key to be creative when looking around for a cheap car under $5,000. One great way to find that a great used car is to look at estate sales — they’re a good alternative to cheap car lots or used car dealerships.
Tip 10. Japanese and foreign cars last longer
According to zebra.com, foreign-made cars (from Germany, Japan and Korea to be specific) typically outlast their American-made counterparts. But that gap in quality and durability is closing fast in more recent years.
The Benefits of Buying a Cheap Used Car
In addition to finding a great car that will last, there are other financial benefits when purchasing an inexpensive car. Here’s a quick look at a few more reasons to buy one:
Parts are typically inexpensive
Lower monthly car payment
Typically less expensive rates on auto insurance
Cheaper to maintain
Get the Right Coverage For Your Used Car
Finding affordable coverage is easy with American Family Insurance. Now that you’ve done what you can to keep your monthly car payments low, check in with your agent (Opens in a new tab) and request a quote on coverage that won’t break the bank. Better yet, get an instant auto quote right now! Just plug in a few quick facts about yourself your new ride, and you’ll have a quick insurance cost estimate in no time!
