Online used car loan

How to buy a pre-owned car

Why buy a used car? Why not? According to Robby Stamps, automotive consultant and author of the online used car buying guide www.goodasnew.com, a recent automotive study showed that 45% of families earning $75,000 or more would consider buying a used car.

"The stigma attached to owning a used car is melting away," Stamps says. "Because of the competitive climate to sell, cars now are a different animal. In the past 10 to 15 years, there have been tremendous improvements in technology, design, and metals."

Cars are--to borrow a slogan--built to last, with lengthier warranty options. For example, you could purchase a 3-year-old car and it will still fall under factory warranty. Some warranties are good for up to seven years or 100,000 miles.

"This is also becoming more of a buyer, s market," explains Darryl Brooks, author of How to Save Thousands on Your Next Car (Consumer Consulting Services, $16.95) and president and CEO of Consumer Consulting Services, owners of the buying and leasing site www.autobysave.com. "The growth of leasing has loaded the marketplace with used cars. Consumers have more of a choice."

Why are many people still skeptical? Cars have advanced, but the depreciation curve, usually determined by banks, has not. "There is no reason why a 4-year-old car with 40,000 miles should be worth 35% less than when it was first purchased. That car is an excellent bargain," says Stamps.

FINDING YOUR PEACH

There are several places to buy a used car--new car dealerships, used car dealerships, auctions, and private sellers. Where you buy will depend on what you're looking for and what you're willing to spend. Used car prices could range from $1,500 to $60,000. New car dealerships are likely to charge the most for a car.

"Used cars are bought very cheap by the dealership, because the seller is usually anxious to get their new car," explains Brooks, "so the markup is high. They tend to make at least a few grand in profit, with the consumer thinking they got a great deal. But a reputable dealership will sell sound cars and will offer financing."

Used car dealerships offer the widest variety, particularly of hard-to-find vehicles. These cars come from various places, including auctions and leasing and insurance companies. You may have significant history to consider. But, Stamps says, mom-and-pop dealerships usually meet your specifications on a car, or come close.

Auctions can be a great place to buy luxury vehicles--but not a public auction, warns Brooks. The quality of the cars sold is questionable, and you typically won't know what you're getting until you've bought it. Contract with a dealer or auto broker to buy at a closed dealer auction. The contract fee ranges from $500 to $1,500, but you could save up to $2,000 on the price of the car.

Buying from a private seller could be the least expensive route, since most private sellers just want a decent profit. It can also be the most exhausting, since it requires locating, calling, and then visiting each one. The car's history may be more questionable. Private sellers tend to mask the truth.

SAVVY SHOPPING TIPS

* Don't believe just your mechanic. "Mechanics are notorious for misdiagnosing an auto problem," offers Stamps. "Get an extended warranty to protect yourself. You will have to spend at least $5,000 to $6,000 to get a car that's eligible for a warranty."

* Don't believe long-standing industry references as reliable sources. Stamps explains that "blue books" often list inflated retail prices to protect the car dealers, their biggest subscribers. "Many dealers advertise that their prices are below blue book rates. It's a ruse to make consumers think they're getting a bargain."

* Establish a budget beforehand. Factor in car options, loan rates, and insurance. Stamps uses this as a guideline: Subtract your fixed expenses (rent, credit card payments, utilities, etc.) from your monthly take-home pay. Use one-third of what remains for your monthly car payment and maintenance.

* Never buy the first year's production of a new model. Says Stamps, "No one knows for sure how a new model is going to perform in the real world."

Before You Buy

* Do extensive test drives before you purchase any vehicle.

* Check out these Websites: www.edmunds.com for True Market Value (TMV) pricing; www.autotrader.com to review vehicles that meet your requirements and budget; and www.warrantybynet.com for extended warranty information and free quotes; www.autobysave.com for money-saving tips; and www.goodasnew.com is the most comprehensive site for used car purchases.

* Run the Vehicle Identification Number (VIN) through www.carfax.com for a complete car history, including odometer reading.