7 Mistakes to Avoid When Buying a Used Car
Buying a used car can be a smart investment when you are in need of a replacement vehicle. While new car purchases have increased with the rising economy, used cars can provide a great alternative as long as you know what to look for.
With a used car, you can get the most bang for your buck. While this provides an opportunity to live more economically, a used car, by definition, has issues from regular wear and tear. Therefore, it's important to avoid making these costly mistakes when you're shopping for a used car.
1. Failing to line up financing before shopping
If you're buying a car from a used car dealership, it's possible to avoid the dealer-offered financing, which normally carries a hefty premium. Dealer financing is built like a wholesale insurance offer, but then it adds additional interest rates. When you have a loan from a third party or you paying for the used car in cash, you can avoid these additional rates.
Whether you purchase your used car through a dealer or from a private owner on a website such as craigslist, financing allows you to understand the upper limit of your price range. When you know how much you can spend on a used car, you know exactly what your budget is, which makes negotiating prices easier.
2. Shopping for a used car based on monthly payments alone
Often, when people look for a new car, they think about the monthly payments they'll have to make. While a lower monthly payment is good for your monthly budget, a longer payment period actually means that you end up paying back more money overall. Due to compounding interest, it could make more sense for you to take on a higher monthly payment since it's possible to pay back the principle in a shorter time period.
Also, don't be fooled by the difference between a lease payment and a car payment. While your monthly lease payments can be lower than your monthly loan payments, you have to return a leased car at the end of your lease. If you bought your used car, you can sell it or trade it in at your discretion.
While monthly payments are an important part of financing a used car through a loan, don't forget about cash. If you have enough funds to buy your used car outright, you can actually save a lot of money over the long term and eliminate the mistake of buying a used car based on monthly payments.
3. Foregoing a chance at a test drive
As many as 20% of buyers of used cars don't test drive the car prior to making the purchase. On the other hand, first-time buyers of new cars test drive as many as seven new cars, on average, prior to making a purchase.
This disparity in statistics might be why there are many third- and fourth-owner used cars on the streets. When you don't test the asset that you're purchasing, you run the risk of experiencing a bout of buyer's remorse. In the case of used cars, it's imperative to test drive a few before making a purchase decision. This protects against buyer's remorse and also ensures that the car is running properly.
4. Foregoing a chance to have the car checked out by a mechanic
While many people test drive cars prior to purchasing, few have used cars checked out by mechanics prior to finalizing the deal.
Even if you have to pay for the inspection yourself, it could save you a lot of money in the long run. However, it's possible to have the seller pay for the inspection. If the seller is a car dealer, chances are it's already an offer, but make sure it is. If it's a private seller, he probably won't offer, so it's important to ask.
5. Making initial negotiations in person, rather than over the phone or by email
If you are purchasing a used car from a dealership, it's going to be the salesman's main goal to get you down to the dealership. Once you're on the dealership property, you are much more likely to leave with the car you're interested in; it's an easier sell for the salesman. To combat this, ensure that you've done all of your research and comparisons at home, and try to negotiate over the phone or by email. It's much easier to walk away when the car isn't there, which gives you the upper hand in negotiations.
If you're purchasing a used car from a private seller, chances are the seller isn't a professional salesman. By mentioning a few used car statistics over the phone, it's possible to gain the upper hand prior to seeing the car in person.
6. Buying a car based on looks, rather than on need
Before you even begin looking for a car, whether online or in person, it's important to assess exactly what you need from your car. If you're looking for a commuter car, don't waste your time looking at trucks. If you're looking for a vehicle that can tow a trailer, don't bother to look at sports cars.
By understanding what your needs are first, you mitigate the risk of making an impulse purchase based on what you want instead of what you actually need.
7. Choosing not to run a vehicle history report
In addition to performing a test drive and having the car inspected by a mechanic, it's important to run a vehicle history report. With a vehicle history report, it's possible to check for any prior accidents, problems with the car and the number of previous owners. Dealers usually pay for this third-party service, but if the sale is through a private seller, the purchaser will most likely have to foot the bill. Whether you use CARFAX, AutoCheck or another service, it's always important to check the history of the car and the stories of its owners.