Buying a Used Car - Part I

Before you start shopping for a used car, you'll need to do some homework. Spending time now may save you serious money later.

Think about your driving habits, your needs, and your budget. You can learn about car models, options, and prices by reading newspaper ads, both display and classified.

Libraries and book stores have publications that compare models, options, and costs, and offer information about frequency-of-repair records, safety tests, and mileage. Many of these publications have details on the do's and don'ts of buying a used car.

There is also a wealth of information on the Internet: enter "used car" as the key words and you'll find additional information on buying a used car, detailed instructions for conducting a pre-purchase inspection, used car reviews and ads for cars available for sale, among other information.

Once you've narrowed your car choices, research the frequency of repair and maintenance costs on the models in auto-related consumer magazines. The U.S. Department of Transportation's Auto Safety Hotline (1-800-424-9393) gives information on recalls.

Payment Options

You have two choices: pay in full or finance over time. If you finance your used car, the total cost of the car increases. That's because you're also paying for the cost of credit, which includes interest and other loan costs.

You'll also have to consider how much you can put down, your monthly payment, the length of the loan, and the annual percentage rate (APR). Keep in mind that annual percentage rates usually are higher and loan periods generally are shorter on used cars than on new ones.

Dealers and lenders offer a variety of loan terms and payment schedules. Shop around, compare offers, and negotiate the best deal you can. Be cautious about advertisements offering financing to first-time buyers or people with bad credit.

These offers often require a big down payment and a high APR. If you agree to financing that carries a high APR, you may be taking a big risk. If you decide to sell the car before the loan expires, the amount you receive from the sale may be far less than the amount you need to pay off the loan.

If the used car is repossessed or declared a total loss because of an accident, you may be obligated to pay a considerable amount to repay the loan even after the proceeds from the sale of the car or the insurance payment have been deducted. If your budget is tight, you may want to consider paying cash for a less expensive car than you first had in mind.

If you decide to finance, make sure you understand the following aspects of the loan agreement before you sign any documents:

the exact price you're paying for the vehicle;
the amount you're financing;
the finance charge (the dollar amount the credit will cost you);
the APR (a measure of the cost of credit, expressed as a yearly rate);
the number and amount of payments; and
the total sales price (the sum of the monthly payments plus the down payment).

Dealer Sales

Used cars are sold through a variety of outlets: franchise and independent dealers, rental car companies, leasing companies, and used car superstores. You can even buy a used car on the Internet.

Ask friends, relatives and co-workers for recommendations. You may want to call your local consumer protection agency, state Attorney General (AG), and the Better Business Bureau (BBB) to find out if any unresolved complaints are on file about a particular dealer.

Some used car dealers are attracting customers with "no-haggle prices," "factory certified" used cars, and better warranties. Consider the dealer's reputation when you evaluate these ads.

Dealers are not required by law to give used car buyers a three-day right to cancel. The right to return the car in a few days for a refund exists only if the dealer grants this privilege to buyers.

Dealers may describe the right to cancel as a "cooling-off" period, a money-back guarantee, or a "no questions asked" return policy. Before you purchase a used car from a dealer, ask about the dealer's return policy, get it in writing and read it carefully.

Buying a Used Car - Part II.

Buying a Used Car - Part I

Payment Options

Dealer Sales

Articles