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The Guide toBuying Used Cars        By        James Rickman 3rd.        Date April 2011        www.sustainablevirtualbiz.com
TABLE OF CONTENTS    TOPICS                                                     PAGES    SECTION   EXAMINE YOUR NEEDS RATH...
THE GUIDE TO BUYING USED CARS    To start try examining your needs rather than wants. You will quickly    discover what th...
Used Car Markets      The three most common places to buy a used car are:    • Private parties    • New car dealerships   ...
Private Party vs. Dealership        Buying a used car from a private party is a very different experience from        purc...
Model Year -- Obviously newer is better, but try to avoid model years    that were the first version of a body style, like...
multiple owners. Make sure your conversation establishes the following:    Do you have receipts for any recent work? -- Ca...
Down payment. How much cash can you put down to reduce your    monthly payments?    Purchase price of the car. Answering t...
- Be prepared to walk away. If the seller absolutely refuses to negotiate,        you may have to walk away from a deal. I...
performs well. But do you want the same used car everyone else wants? If        so, you will pay a premium for it. In some...
Here is an often overlooked fact of car ownership: one car might be     cheaper to buy, but more expensive to own. Why? Ev...
requests and narrow your search based on the tone of e-mail responses. If     you called the Internet department, tell the...
Certified Used Cars     You might want to consider buying a certified used car that has been     inspected and is in good ...
Take the Car to a Mechanic     If you are serious about buying a used car and have doubts about its     condition, take it...
- Inspect the ground underneath the car. Are there any fresh puddles     from fluid leaks?     - Look out for smoke from t...
Used car shopping will involve inspecting the vehicle to determine its         condition. This process is simplified if yo...
mountains, test the car on a steep slope. You dont want to find out — after         youve bought the car — that it doesnt ...
greater to the dealer than to the private party owner.         You should, however, follow these guidelines when negotiati...
Finally, you should inspect the car before you take possession of it. If any     repair work is required, and has been pro...
True, there are new cars that could be purchased in this price range. But by     buying used, Phil felt he could get "more...
In Phils test case, his target cars were all 1999 models: the Altima, the         Galant and the 626. The prices of a Gala...
applications over the Internet. They then call within 15 minutes to let you     know if the loan is approved.     Phil had...
Infiniti FX 35        Infiniti FX 45         Infiniti I30               Infiniti I35        Infiniti G35          Infiniti...
Country (AWD)                   (AWD)                                                                                     ...
"And s ome of t hose that ha ve s tood out , and ha ve of ten m ade our good         choices lists, models l ike t he Hond...
o   Call the seller and verify the pertinent information. Get the VIN. Run a         Carfax report on the car.     o   Tes...
BIBLIOGRAPHY     First References:     ConsumerReports.org, Samarins.com, Carbuyingtips.com, CarFax.com,     Federal Trade...
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The Guide to Buying a Used Car

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The Guide to Buying a Used Car

  1. 1. The Guide toBuying Used Cars By James Rickman 3rd. Date April 2011 www.sustainablevirtualbiz.com
  2. 2. TABLE OF CONTENTS TOPICS PAGES SECTION EXAMINE YOUR NEEDS RATHER THAN WANTS 2 SECTION BEGIN YOUR CAR-BUYING PROCESS 2 SECTION COMMON PLACES TO BUY A USED CAR 3 SECTION USED CAR SEARCHES (INTERNET, NEWSPAPERS, ETC.) 3 SECTION PRIVATE PARTY VS. DEALERSHIP 4 SECTION CRITERIA YOU USE TO JUDGE YOUR RESULTS 4 SECTION PREQUALIFY YOUR TARGET CARS 5 SECTION CAR QUESTION SHEET 5 SECTION CARFAX REPORTS 6 SECTION HOW MUCH CAN YOU AFFORD? 6 SECTION DOWN PAYMENTS 7 SECTION NEGOCIATIING USED CAR PRICES 7 SECTION RESEASONS TO BUY USED CARS 8 SECTION NO DEAL, WALK AWAY 8 SECTION RELIABILITY 9 SECTION BUY OR LEASE 10 SECTION SCHEDULE YOUR TEST DRIVE 10 SECTION HOW TO TEST DRIVE 11 SECTION CERTIFIED USED CARS 12 SECTION USED CARS STILL UNDER WARRANTY 12 SECTION TAKE THE USED CAR TO A MECHANIC 13 SECTION LOOKING AT THE BIG PICTURE 13 SECTION SETUP FINANCING 14 SECTION TEST DRIVE EVALUATION 15 SECTION FINANCING OPTIONS 16 SECTION CLOSING THE DEAL 17 SECTION THE TEST CASE 18 SECTION IDENTIFY TARGET CARS 19 SECTION ARRANGE FINANCING PRIOR TO SHOPPING 20 CONSUMER REPORTS USED CAR RANKINGS # SECTION RANKING OF THE BEST USED AUTOMOBILES 21 SECTION RANKING OF THE WORST USED AUTOMOBILES 22 SUMMARY BUYERS CHECKLIST 23-25 BIBLIOGRAPHY 261
  3. 3. THE GUIDE TO BUYING USED CARS To start try examining your needs rather than wants. You will quickly discover what the right car is for you. Take a moment to think about and define what you use your car for. How many people do you need to transport? What kind of driving do you most often do? How long is your commute? Is it important that your next vehicle get good gas mileage? Its no surprise that more used cars are sold every year in America than new cars. One reason is obvious -- theyre less expensive, which has become an even bigger factor as new-car prices, not to mention fuel costs, keep rising. And, by opting for a used car, you avoid the biggest expense associated with buying a new vehicle -- depreciation. “If you buy a new car, depreciation represents 48 percent of the cost of owning that car over the first five years. Used cars — even those that are only one year old — are 20 to 30 percent cheaper than new cars.” (Consumer Reports 2009) In too many cases people choose a car because it has an eye-catching style or it is a trendy favorite. If you go in this direction, you may either break your budget or have to go car shopping again soon. Let your needs, not your wants, drive your decision. Here are a few other questions to keep in mind when you begin your car- buying process: Do you want a manual or automatic transmission? Do you really need four-wheel drive? Or all-wheel drive? What safety features do you want? Do you require a lot of cargo-carrying capacity? Will you be doing any towing? Will the car easily fit in your garage or parking area?2
  4. 4. Used Car Markets The three most common places to buy a used car are: • Private parties • New car dealerships • Used car lots Of these sources, private parties usually have the most reasonable prices. It is also a more relaxed transaction to buy a used car from a private party rather than to face a salesman at a dealership. Still, there are advantages to buying a used car from a new car dealership. Many used cars, on new car lots, are trade-ins. Dealerships usually get these cars at rock-bottom prices. If you make a low offer — but one that gives them some profit — you just might get a great deal. Furthermore, many dealerships offer certified used cars that have been thoroughly inspected and are backed by attractive warranties. Your goal is to locate three cars that seem to fit the criteria you are searching for. Why three cars? If you have a number of cars to choose from, you are in a stronger position when it comes time to bargain. If your top choice falls through, you have a fallback position. You wont be emotionally tied to one car. Your used car search should be conducted using a number of different sources: • Online classified ads such as those found using the Internet • Daily newspaper classified ads • Weekly shoppers and giveaway papers • Listings on college and business bulletin boards • Word of mouth -- ask all your friends if they know of any good used cars for sale The Internet is a powerful tool for finding a good used car. Once you have configured the car you want through the used car section, you can type in your zip code and read a list of classified ads of cars for sale in your area. Many of these ads are for cars on dealership lots. Try using AutoTrader.com or Craigslist.org, which brings you a mixture of local dealer and private party ads in your area. A rule of thumb is your total monthly car payments — whether you own one car or more than one — shouldnt exceed 20 percent of your monthly take-home pay.3
  5. 5. Private Party vs. Dealership Buying a used car from a private party is a very different experience from purchasing through a dealership or a used car lot. Many people are intimidated by the dealership experience, fearing pushy salesmen and professional negotiators. But here are several advantages offered by shopping for a used car at a new car dealership: • A wide selection -- the dealership might have two or more cars youre considering • Increased availability -- dealerships have hours that suit your schedule • Financing -- if your credit is weak, a dealership might still finance your loan • Potential bargains -- private party prices are usually lower, but there are still bargains on the lot, particularly at the end of the month • Certified Used Cars - a dealership can sell you a certified used vehicle that has many of the same benefits as buying a new car On the other hand, buying a used car from a private party offers these advantages: • Low price -- a dealership marks up used cars to recoup its overhead • Low-keyed negotiations -- you are dealing with an amateur, not a pro • Accountability -- the previous owner usually has the cars service records • Trustworthiness -- a private owner probably wont cover up mechanical problems While the Internet has come of age and presents a lot of flexibility in searching for a used car, you should still check the newspaper. John and Phil found that there were cars listed in the newspaper that werent found online. When shopping for a used car, take advantage of every source in finding the right car for you. Set a maximum price in your search criteria thats just a bit over your budget. While its important to keep that budget as a firm number (or youll end up really over-paying), most sellers are willing to negotiate slightly, and it’s always worth seeking out well preserved examples. As mentioned earlier, use specific keywords (search for one type of car at a time) and try many variants of the same word (Chevrolet and Chevy) to catch ads that may not get many hits. Make sure you set a minimum price too (say, half the maximum youre willing to pay) to weed out blatant fraud offers. Price should be the last criteria you use to judge your results. Start evaluating your options by what’s obvious:4
  6. 6. Model Year -- Obviously newer is better, but try to avoid model years that were the first version of a body style, like the 1999 VW Jetta or 2002 Nissan Altima. These cars tend to have bugs the manufacturer fixed in later years. Mileage -- Mileage is an important indicator of wear on a car, but only to a point. Most modern cars can be expected to last 200k with proper maintenance. Make service records a priority over mileage. Pictured Condition -- Are the photos clear? Do they show the whole car? Beware blurry images that dont frame the entire vehicle... the seller may have something to hide. Whos Selling? -- Dealers rarely have any idea what services a car has had, unless they performed them. Try to buy from an owner who knows the cars history. Use the Phone to Prequalify Your Target Cars There are a number of questions you should ask about each car before you take the time to test-drive it. Some information may already be listed in the ads, but it is important to verify the facts. You might consider creating a form for yourself to keep track of the different cars you call about. Search for your car by using Internet sites such used vehicle listings or the on-line classifieds of your local newspaper. Some sites are very flexible and allow you to search specific criteria such as make, model, options and price range. In some cases you can search the used car inventory of new car dealerships through their Web site. While the Internet is an amazing resource, you should still try the conventional sources. Ask friends and relatives if they are selling a used car. Keep your eyes peeled for cars with "For Sale" signs in the window. Scan the bulletin boards at supermarkets or in local schools and colleges. Finally, dont forget old faithful — the newspaper classifieds, particularly on Saturday and Sunday. A lot of time can be saved by calling the party selling the car before you go to see the vehicle. In this way, you can eliminate cars that have problems such as excessive mileage or a salvage title. Use your own Used Car Question Sheet when calling to help prompt you to ask key questions. Verify the asking price in the ad. Once you’ve got your list narrowed down, it’s time to contact the sellers. I prefer email, because it lets you easily track and communicate with5
  7. 7. multiple owners. Make sure your conversation establishes the following: Do you have receipts for any recent work? -- Cars go through brakes, tires and oil frequently. They should also be serviced or inspected at least every 30,000 miles by a qualified mechanic. Do you trust the previous owner has kept up with the car? Has the car ever been in an accident? -- Small fender benders are not an issue if theyve been professionally repaired. But steer clear of cars that were once in major collisions. These are chancy, at best, and difficult to completely fix. Emissions testing up to date? – If not, prepare for headaches when you go to register your new ride. Is the price negotiable? -- Of course we already know the price is negotiable -- it always is! -- but asking this in your initial emails will help prepare the seller to come down on price when you actually negotiate with them. After talking to the seller, set up an appointment for a test drive. If possible, make this appointment during the day so you can more accurately determine the cars condition. Also, ask for the VIN number so you can run a Carfax report. At the beginning of your used car-buying process you should sign up with Carfax to get its 30 day unlimited car reports service. Every time you get a line on a used car, run the VIN. This will tell you if the car is clean. How much Can You Afford? Regardless of whether you decide to buy or lease your next car, establishing a realistic monthly payment that will fit into your budget is a crucial first step. How much should this be? A rule of thumb is your total monthly car payments — whether you own one car or more than one — shouldnt exceed 20 percent of your monthly take-home pay. The smart shopper will consider how to finance the car at the beginning of the shopping process. This will avoid unpleasant surprises later in the game and help you make an unemotional decision that fits your budget. You will need to estimate three figures that will guide you as you go shopping: Monthly payment. If you are going to take out a loan, how much can you afford to pay each month?6
  8. 8. Down payment. How much cash can you put down to reduce your monthly payments? Purchase price of the car. Answering the first two questions will help you determine a realistic price range for your used car. Once youve determined how much you can spend for a down payment, a monthly payment and the purchase price of the car, print out these figures. Later, in the heat of the moment, when you are negotiating for a used car, you might need to check the card to bring yourself back to earth. Check the many online "Financial Calculators" to help you estimate what your monthly payment will be based on purchase price, down payment, interest rate and length of loan. Take the time to run the numbers now, before you go car shopping, print out the result and put this information into your car-buying folder. It will not only show you what you can afford, it will also help you control the numbers when you negotiate with a car salesman. Negotiating Used Car Prices I advised keeping the price a secondary concern while evaluating potential used cars. No ride is a good deal if its not the right car for you and well taken care-of. That said: price is still at least a little important to most people buying a used car. And nobody wants to get ripped off. So, keep these quick and dirty negotiation techniques in mind. - Wait to negotiate the price until after youve driven the car. Not on the phone. Not while looking at the car in the lot. Wait until youve checked everything out and are sure you want it. If the seller can tell youre a serious buyer ready to bring their baby home, they are much, much more likely to work with you. This tactic works just as well with dealers as it does with private sellers. - Expect the seller to knock off 10 to 15 percent of the asking price. Even if they described their price as firm on Craigslist, theres always room for negotiation. Sometimes even more than that 15 percent! - Be an informed negotiator. Tell them why you wont pay the full asking price by citing other local cars for sale, or pointing out imperfections on the car. These arguments are much more persuasive than saying something like "I only have $5,500 to spend."7
  9. 9. - Be prepared to walk away. If the seller absolutely refuses to negotiate, you may have to walk away from a deal. If the cars irrefutably well priced, you can be excused for paying in full, but otherwise, give the seller some time. Call back in a week – if he still has the car, you can expect him to sing a different tune. And if you don’t end up buying it, just remember there are plenty of others to choose from. If youve decided to buy a used car, youve already made a smart decision. You can get a car thats almost as good as a brand-new one, without suffering the depreciation that wallops new car buyers as soon as they drive the car off the lot. Used cars — even those that are only one year old — are 20 to 30 percent cheaper than new cars. But there are other good reasons to buy a used car: • Buying a used car means you can afford a model with more luxury/performance. • Youll save money on insurance. • The glut of cars coming off lease makes finding a near-new vehicle, or "cream puff," easy. • Bigger bargains are possible for the smart used car shopper. Furthermore, the classic reasons to avoid used cars — lack of reliability and the expense of repairs — are less of an issue. Consider these related thoughts: • Used cars are more reliable today than ever before. • Some used cars are still under the factory warranty. • Most new carmakers now sell certified used cars, which include warranties. • The history of a used car can easily be traced using the VIN number. • Financing rates for used cars have dropped in recent years. • If you buy from a private party, the negotiation process is less stressful. True, you cant be the first one on the block with the trendiest vehicle. But your consolation will come with the knowledge that you got a great deal and made a smart financial decision. So read on, as we guide you along the road to used car happiness. Its possible that you need to expand your horizons when considering what to buy. You might want to think of other vehicles in the same class. For example, if you are considering a Toyota Camry you should also look at the Honda Accord, Nissan Altima, or Mitsubishi Galant. These cars were built for the same market, but they often have different features at lower prices. The cost of a used car is based on its condition, mileage, reliability, performance and popularity. Of course, you want a car that is reliable and8
  10. 10. performs well. But do you want the same used car everyone else wants? If so, you will pay a premium for it. In some cases, the only difference is the nameplate. How much difference in price separates good-but-popular cars from the good-but-overlooked counterparts? Two Edmunds.com editors recently shopped in the family sedan class. They found that two-year-old Camrys and Accords were about $3,000 more than comparable 626s and Galants. It is highly recommended that you run a vehicle history report on any used car you are considering buying. Several companies sell these reports, which are based on the vehicle identification number (VIN), but Carfax.com seems to be the most comprehensive. You will find out the vital information about the used car including whether or not it has a salvage title (it has been declared a total loss by the insurance company) or evidence to reveal if the odometer has been rolled back. This is also the time to decide if you want a Certified Used Car. If you do, find which certified used vehicle programs are offered by each manufacturer. Should You Lease or Buy Your Next Car? A lease requires little or no money up front and offers lower monthly payments. But when the lease ends you are left without a car and a need to replace it. Buying a car is more expensive initially and the monthly payments are higher. But at the end of the loan, you will own a car you can still drive or sell. Other key factors that differentiate leasing and buying include: Advantages of Leasing • You can drive a better car for less money • You can drive a new car every few years • No trade-in hassles at the end of the lease Advantages of Buying • When interest rates are low, it makes more financial sense to own a car rather than lease it • No mileage penalty • Increased flexibility — you can sell the car whenever you want If you are still unsure whether to lease or buy, try letting the numbers help you make the right decision. Go to the many online Finance Calculators to calculate your monthly auto loan payment vs. your monthly lease payment.9
  11. 11. Here is an often overlooked fact of car ownership: one car might be cheaper to buy, but more expensive to own. Why? Even if two cars cost about the same to buy, one can depreciate at a different rate or cost significantly more to insure or maintain. Before you commit to one car, you should estimate the long-term ownership costs of the vehicle you are considering. These include depreciation, insurance, maintenance and fuel costs. Several reference sources detail the true market value and the cost to own values, which presents this information in an easy-to-read table. By following the prompts you can find out what a fair price is for the car you are considering. Ask friends and associates, what a fair market price for the vehicle. Find out the average price other buyers are paying for the same car in your area. The true market value represents a good price for you and a fair price for the dealer. By using true market value and total cost to own, you can make a smart decision up front and then save hundreds of dollars over the life of the car. Researching Your Options By completing steps one through five, you should now have a good idea about what car will work for you. Maybe there are a few cars that fit your criteria. Its time to narrow it down. Car buyers have been trained to visit local dealerships to find the car they want. In the Internet age, this is a waste of time and money. You can quickly cover more ground by shopping on-line. Car dealers are waking up to this new breed of shopper and have created Internet departments within their dealerships to serve the educated buyer who already knows what he wants and what hes willing to pay. The only things you have to do in person are test drive the car and sign the contract. And in some cases, you can even have the car "delivered" to you by the salesperson. You dont want to go to the dealership until youre really ready. Schedule Your Test Drive Its a good idea to make your initial contact with a dealership by phone before going there in person. This can give you some sense of the business atmosphere you will be dealing with throughout the buying or leasing process. Additionally, if you can establish a rapport with the Internet salesperson, it can boost your confidence before you visit the lot. Call the Internet department (sometimes also called the fleet department) and ask if the car youre looking for — in the right color and trim level — is actually on the lot. You make your initial contact with the Internet manager either with an e- mail message or over the telephone. You can also send multiple dealer10
  12. 12. requests and narrow your search based on the tone of e-mail responses. If you called the Internet department, tell the salesperson that you want to set up a test drive — but that you wont be buying right away. However, assure them that you will buy there if you decide to purchase this particular make and model, and if they can offer the vehicle at a fair price. Keep in mind that if you deal with the standard salesperson, he or she will try to start the negotiations at a high price with the expectation of being negotiated down. However, the Internet manager will often quote you a "rock-bottom" price as soon as negotiations begin. A few minutes taken to set up an appointment with the Internet manager can save you both time and money. How to Test Drive Cars The goal of a test drive is to experience — as closely as possible — the same type of driving conditions the car will be used for after purchase. If you commute, drive the car in both stop-and-go traffic and at freeway speeds. If you frequently drive into the mountains, try to find some steep grades to climb. Drive over bumps, take tight corners at aggressive (but not dangerous) speeds and test the brakes in a safe location, such as a deserted parking lot. Get in and out of the car several times and be sure to sit in the backseat, especially if you plan on carrying passengers. In short, ask yourself what it will be like to live with this car for a number of years. If you test-drive a car, you are usually pretty serious about buying it. This is well known in the new car buying process where veteran salespeople say, "The feel of the wheel will seal the deal." In other words, if you drive the car, youll fall in love with it and buy it. But you should not become emotionally attached to the car; your focus is on evaluating the vehicle. Evaluating cars breaks into two main considerations: 1. Do you like the car? It could be a good car, but maybe you dont like the color, the interior or the options. It might not have enough legroom or headroom. You might decide you dont like the styling. But once youve decided you like the car, then you need to ask: 2. Is the car in mechanically sound condition? In other words, if you go to look at a used car and find you like it and want to buy it, thats the easy part. Now you need to turn off your emotional side and become technical. At this point, a lot of people might throw up their hands in despair and say, "But I dont know anything about cars!" You can work around this problem by exploring the following options.11
  13. 13. Certified Used Cars You might want to consider buying a certified used car that has been inspected and is in good running order. Furthermore, if anything does go wrong with the car within the period of the warranty, it will be fixed for free. This means that if you are considering buying a certified used car, and it appears to be in good condition, you dont have to do any further checking to make sure it will be reliable. Certified used cars are usually found on new car lots. Take Volkswagen, for example. Its certified used cars are subject to a 112-point inspection. VW then certifies the car with a two-year/24,000-mile limited warranty that even includes a roadside assistance program. At Edmunds, we bought a certified used 1999 Passat GLS. Four months later, it overheated. The repairs (not extensive) were covered by the warranty. While buying a certified used car removes a lot of the guesswork about the vehicles mechanical condition, you pay for this service. Certified used cars that sell in the $10,000 to $20,000 range are estimated to be $500 to $1,000 more expensive. So the real bargains actually fall into another class that we will talk about next. Used Cars Still Under Warranty Most new cars are sold with a three-year/36,000-mile warranty. Therefore, if you buy a car that is from one to three years old, it will still be under the factory warranty. For example, if you buy a car that is one year old, with only 15,000 miles on it, you have two years and 21,000 miles remaining on the warranty. And if there is anything wrong with the car when you bought it, the problem will be fixed for free. How can you use this to your advantage? Heres what John and Phil did. They drove to the Hertz used car lot to see the 2000 Mazda 626. The salesman there let them take the car for a test drive unescorted. They drove the car under a variety of situations (a checklist is included below) then parked on a quiet side street. They looked under the hood, poked and pried and inspected the car as thoroughly as they could. It appeared to be well maintained and in excellent condition. Furthermore, if anything were to go wrong, they knew the warranty would pay for their oversight. The vast majority of bumper to bumper warranties are transferrable to subsequent owners. But some automakers long-term power train warranties, such as Chrysler, Hyundai and Kia, only apply to the original registered owner, so the coverage is invalid if the car is resold. Most automakers websites list the details of their warranties, so check there for more information if this is a deal breaker for you.12
  14. 14. Take the Car to a Mechanic If you are serious about buying a used car and have doubts about its condition, take it to a mechanic you trust. A private party will probably allow you to do this without much resistance. And this option was offered to Phil at the Hertz car lot. However, some new car dealerships may resist letting you take the car off their lot. If it is a certified used car, there is no reason to take it to a mechanic. If it is still under the new car warranty and it appears to be in good condition, you might also decide this is unnecessary. What can a mechanic find that you cant spot on your own? For one thing, the mechanic will put the car up on a lift. Oil or fluid leaks are easier to spot. The mechanic might also do a compression check that would show engine wear. And finally, the mechanics expert eye might spot a problem you overlooked. There is a lot to cover when evaluating and test-driving a used car. Here, though, are a few general recommendations. Look at the Big Picture Before you drive the car, do a "walk-around." Look at the Big Picture First: Crouch next to the front bumper and sight along the lines of the car. Make sure there are no ripples in the door panels and that the gaps between the doors and along the hood are even. Open all the doors and the trunk. Test all the lights, controls, heater and air conditioner. Open the hood and make sure there are no leaks or sprays on the underside of the hood lining that would indicate a burst hose or fluid leak. With the engine running, listen for noises that might indicate a mechanical problem. - Make sure you set an appointment during the daylight hours. Preferably, the weather will be decent too as rain can obscure dull paint as well as dings and dents. - Tell the seller not to warm up the car or drive it around the block before you get there. Engine issues such as oil or head gasket leaks are much more likely to manifest themselves when the motor is started cold (check the temperature gauge when you turn the key in order to verify the car wasnt running before you showed up.13
  15. 15. - Inspect the ground underneath the car. Are there any fresh puddles from fluid leaks? - Look out for smoke from the tailpipe when the car is started. A little bit of vapor or visible emissions isnt cause for alarm. White smoke that smells a touch sweet is usually indicative of coolant consumption, while burning oil creates a - Under the hood, make sure all the fluids are topped off and free from sludge. The important liquids to cover are: oil, antifreeze (check the overflow tank, dont open the radiator cap!) power steering fluid, transmission fluid and brake fluid. - What kind of shape are the tires in? Is the tread safe? Do all four tires match? Look closely at the wheels too. If theyre covered in brake dust (see the picture for an example) odds are its been a while since the seller changed brake pads. - Do all the panels fit smooth and even? Doors, fenders, etc. that hang slightly askew or are a different shade than the rest of the car signal that your prospect may have been repaired after an accident. - Is there any rust on the body? Check for bubbling paint around the wheel wells, and near where the bumper meets the fender. Even the slightest trace of rust is costly to fix -- and once it begins to form, rust always gets worse. While you are evaluating the car, dont be distracted by the salespersons pitch. Dont drive with the radio on — you can evaluate that later. A new car is a big investment; make sure you spend enough time really looking at it. And then, consider one last thing: your intuition. If you are uneasy about this car, follow your instincts. A vehicle purchase decision is too important (and expensive) to undertake without total confidence. After the test drive, you should leave the car lot. Why? Because you will probably need to drive other types of cars at other dealerships. Its a good idea to do all of your test driving in one morning or afternoon. Driving the cars back to back will help you uncover even minor differences, which will lead to a more educated purchase decision. So, how do you get out of the clutches of the salesperson? Generally, Internet salespeople are pretty mellow and wont pressure you to buy on the spot. Besides, you can remind them you still have other cars to drive and you cant make a decision yet. Most good salespeople will respect that. If they dont, you probably wont be coming back to make a deal with them anyway.14
  16. 16. Used car shopping will involve inspecting the vehicle to determine its condition. This process is simplified if you buy a certified used car that has passed a thorough inspection and is backed by a manufacturers warranty. But while buying a certified used car removes a lot of the guesswork about the vehicles mechanical condition, you pay for this service. Most new cars are sold with a three-year/36,000-mile warranty. Therefore, if you buy a car that is from one to three years old, with less than 36,000 miles on the odometer, it will still be under the factory warranty. If anything goes wrong with the car you just bought, the problem will be fixed for free. (Warranties vary from one manufacturer to the next. Always read the restrictions of the warranty before buying the car.) If you are serious about buying a used car but have doubts about its condition, take it to a mechanic you trust. A private party will probably allow you to do this without much resistance. But at a dealership, it might be more difficult. If it is a certified used car, there is no reason to take it to a mechanic. Once you get behind the wheel, your first impression will be the way the car feels when you sit in it. Is it a good fit? Does it offer enough headroom? Legroom? Are the gauges and controls conveniently positioned? Try to arrange your test drive so that you start the engine when it is completely cold. Some cars are harder to start when they are dead cold and, when doing so, will reveal chronic problems. Turn off the radio before you begin driving — you want to hear the engine and concentrate on the driving experience. On the test drive, evaluate these additional points: • Acceleration from a stop • Visibility (Check for blind spots) • Engine noise • Passing acceleration (Does it downshift quickly and smoothly?) • Hill-climbing power • Braking • Cornering • Suspension (How does it ride?) • Rattles and squeaks • Cargo space On the test drive, take your time and be sure to simulate the conditions of your normal driving patterns. If you do a lot of highway driving, be sure to go on the highway and take the car up to 65 mph. If you go into the15
  17. 17. mountains, test the car on a steep slope. You dont want to find out — after youve bought the car — that it doesnt perform as needed. After the test drive, ask the owner if you can see the service records and if receipts are available. If so, note whether the car has had oil changes at regular intervals (at every 5,000 to 7,500 miles). Be cautious of buying a car that has had major repairs such as transmission rebuilds, valve jobs or engine overhauls. If necessary set up financing for your used car You have three ways to pay for your used car: Cash. Need we say more? Money talks — you-know-what walks. Financing through a bank, on-line lender or credit union. We highly recommend this route because it will usually save money and give the consumer the most control over the transaction. Financing through the dealer. This can work for some people depending on their credit scores and the current interest rates offered. Also, by prearranging financing through an independent source, the dealer may sometimes offer to beat the rate with a low-interest loan. Financing through an independent source (on-line lender, bank or credit union) offers several advantages: • Keeps negotiations simple in the dealership • Allows you to shop competitive interest rates ahead of time • Removes dependency on dealership financing • Encourages you to stick to your budgeted amount • Low interest loans can be arranged online Whether you are buying a used car from a dealer or a private party, let them know you have the cash in hand (or financing arranged) to make a deal on the spot. Preface your offer with a statement like, "Im ready to make a deal now. I can give you cash (or a cashiers check) now. But we need to talk about the price." At this point, you need to have a persuasive argument about why the price is too high. So lets talk about pricing. The foundation of successful negotiation is information. This is particularly true when buying a used car. And yet, the condition of used cars means prices will vary widely. Dealers have lots of experience negotiating. Most private parties do not. Therefore, buying a used car from a dealer or a private party will be two very different experiences. But there is one overriding similarity — they both want to sell the car. In fact, the incentive to sell the car might be16
  18. 18. greater to the dealer than to the private party owner. You should, however, follow these guidelines when negotiating: • Only enter into negotiations with a salesperson you feel comfortable with • Make an opening offer that is low, but in the ballpark • Decide ahead of time how high you will go and leave when your limits reached • Walk out — this is your strongest negotiating tool • Be patient — plan to spend an hour or more negotiating • Leave the dealership if you get tired or hungry • Dont be distracted by pitches for related items such as extended warranties or anti-theft devices • Expect a "closer" (another salesman youve havent previously dealt with) to try to improve the deal before you reach a final price Once you have a deal, you need to make sure the transaction is completed properly. The next section, which is the final step, will tell you what to expect and what you need to do. Closing the Deal If you are at a dealership, you still have to go through the finance and insurance (F&I) process. If you are buying a car from a private party, you have to make sure that payment is made and the title and registration are properly transferred. In both cases, you also need to make sure you have insurance for the car you just bought before you drive it away. Also, the F&I person will probably try to sell you a number of additional items: an extended warranty, alarms or anti-theft services such as LoJack, prepaid service plans, fabric protection, rust proofing and emergency roadside kits. Some people swear by extended warranties, so this is something you might want to consider (unless your used car is certified or still under the manufacturers warranty). However, the other items typically sold in the F&I room are expensive and hold little value for you. The F&I person may seem like a financial advisor, but he or she is really an experienced salesperson. Some F&I people can become very persistent trying to sell these items. Be firm. Say, "Im not interested in any aftermarket extras, thank you. I just want the car." Once the contract is ready, review it thoroughly. In most states, it will contain the cost of the vehicle, a documentation fee, a smog fee, a small charge for a smog certificate, sales tax and license fees (also known as DMV fees). Make sure you understand the charges and question the appearance of any significant, sudden additions to the contract.17
  19. 19. Finally, you should inspect the car before you take possession of it. If any repair work is required, and has been promised by the dealer, get it in writing in a "Due Bill." Make sure the temporary registration has been put in the proper place and — youre finally on your way. When you buy a car from a private party, you will probably be asked to pay with a cashiers check or in cash. But before money changes hands, request the title (sometimes called the "pink slip") and have it signed over to you. Rules governing vehicle registration and licensing vary from state to state. Check with the DMV in your state (much of this information is now available on DMV Web sites). Once all of the paperwork is complete, it is finally time to relax and begin enjoying your new purchase: a good used car. The Test Case When you go car shopping, the first question you are likely to run into is this: Should you buy a new or a used car? New cars are a shock to your budget, but they will probably be trouble- free for several years. Used cars cost less, but how can you be certain youre not buying someone elses problems? We spend much of our time dispensing advice on new car buying. But there is a huge used car market. In 2006, for example, an estimated 44 million used cars will be sold as compared to an estimated 17 million new cars. While the average sale price of a used car is estimated at about $13,900, the average price of a new car is estimated at roughly $27,800. Its often said that there is a steep decline in the cars value in just the first year of the cars life — from 20 to 30 percent. In other words, that car that was worth $21,800 when it was new can be purchased only a year later for as little as $15,260. Thats a savings between $4,360 and $6,540. This is proof that the consumer pays dearly for that new car smell. You might be thinking that all of this sounds good in theory. But whats happening in the real world? Well, we decided to find out. Let’s say Phil and John decided they would be guinea pigs in the used car buying process. Phil actually needed a car to replace the one he just sold. So he decided to get the best car he could for between $11,000 and $13,000.18
  20. 20. True, there are new cars that could be purchased in this price range. But by buying used, Phil felt he could get "more" car for less money. By purchasing a used car, he would be able to get a loaded mid-size model instead of a new, stripped "econobox." Besides that, buying a used car that was still under factory warranty could offset much of the uncertainty of buying a used car. In this three-part series, were not only going to give you a system for buying used cars, were also going to tell you how the Edmunds editors faired when putting this system to a real market test.) Step 1: Identifying Your Target Cars John has coined a term he uses to describe good cars that are often overlooked. These are not the "staples" in a given segment and thus can be bought at bargain prices. While this is a mixed metaphor, it describes a type of car that bargain hunters should be aware of. Dark horse cars are virtually as good as the well-known cars — most notably Toyota and Honda — but you dont have to pay for the name. In Phils case, he would have preferred buying a Honda Accord or a Toyota Camry. But by shopping for a Nissan Altima, a Mazda 626 or a Mitsubishi Galant, he hoped to save about 20 percent, while still getting a well-built and reliable car. In whatever class of vehicle you are shopping for, whether it is SUVs, pickup trucks or economy cars, there are the leading brands for which you will have to pay a premium price. But if you are willing to consider the competitors, you will save yourself a bundle. Check the Rating Services As you build a list of cars, consider checking one of the many online used car rating services. This will show how the car is rated in the categories of safety, reliability, performance, comfort and value. The results are then combined to give an overall rating for each car. Using this method, you should select a list of three target cars to shop for. Consult Consumer Reports by write down the True Market Value prices for each vehicle with the anticipated mileage. Keep in mind that cars typically have accumulated about 12,000 to 15,000 miles per year. Anything over this mileage reduces the value of the car; anything less increases the cars value. Select the option marked "Appraise this Vehicle" to generate the adjusted True Market Value prices.19
  21. 21. In Phils test case, his target cars were all 1999 models: the Altima, the Galant and the 626. The prices of a Galant and a 626 with about 30,000 miles were about $12,200; a similarly configured Altima was about $13,300. These were the dealer retail prices listed on the pages of the Used Vehicle Appraiser. Phil printed out these pages for John and himself to take with them when they went shopping later in the process. Step 2: Arranging Financing Prior to Shopping If you can pay cash for your car, you can skip this step. If you are like most people and need to borrow money to buy a car, continue reading. Begin this step by considering what car payment would comfortably fit into your monthly budget. Once you know this figure and how much you can put as a down payment, you will know how much you need to borrow. 1. Take your estimated car payment and multiply it by the length of the loan (we recommend 36 or 48 month loans for used cars). For example, you want to have a $250 monthly payment: $250 X 48 = $12,000. 2. Add to this, the amount of your down payment. For example, you have a $2,000 down payment. That would be $12,000 + $2,000 = $14,000. This is the amount of the car you can afford before interest, tax and fees. 3. Now, compare interest rates at lending institutions for the same term loans 4. Using payment calculators plug in the estimated price of the car you can afford and the best interest rate you have found. Adjust the vehicle price, until you reach the monthly payment you want. In this example, with a monthly payment of $256, at 8 percent, you could afford to buy a $12,500 car. Keep in mind this figure does not include tax and fees, which will vary from state to state. If you arrange financing before you go to the dealership, you are in a much stronger position to negotiate. This important step presents a number of advantages because it: • Keeps negotiations simple in the dealership • Allows you to shop competitive interest rates ahead of time • Removes dependency on dealership financing • Encourages you to stick to your budgeted amount While you may sometimes be able to lease a used vehicle, most people go the more traditional route of taking out a bank loan and buying the car. In Phils case, he decided to borrow from an online lender that takes20
  22. 22. applications over the Internet. They then call within 15 minutes to let you know if the loan is approved. Phil had about $4,000 as a down payment, so he applied for a loan of $8,000 at 8.44 percent. True to the companys promise, one of its representatives called within 15 minutes to confirm that the loan was approved. A check was express-mailed to his house the next day, a Saturday. The check could be made payable to any new car dealer and was good for 30 days. If, at the end of this period, the check wasnt used, there was no further obligation. Consulting Consumer Reports Its no surprise that more used cars are sold every year in America than new cars. One reason is obvious -- theyre less expensive, which has become an even bigger factor as new-car prices, not to mention fuel costs, keep rising. And, by opting for a used car, you avoid the biggest expense associated with buying a new vehicle -- depreciation. "If you buy a new car, depreciation represents 48 percent of the cost of owning that car over the first five years," says Jeff Bartlett, Deputy Editor Online, Autos, for Consumer Reports, which recently released its annual ratings of the best and worst new and used cars in the marketplace. "And insurance rates are lower for used cars as well." Thats why Consumer Reports rates used cars as well as new cars: "All the things that buyers think of when theyre buying a new car -- economics, convenience, reliability -- are the things they should consider when buying a used car," says Bartlett. "And those are the things we look at, as well." Consumer Reports also assembled a "Best of the Best" used vehicles list. The vehicles on this list have performed well in CRs road tests and have boasted better-than-average reliability for several years, according to survey respondents. Ranking of the Best Used Automobiles Acura Integra Acura MDX Acura RL Acura RSX Acura TL Acura TSX BMW M3 Buick Lacrosse Honda Civic Honda Accord Honda Civic Honda CRV Hybrid Honda Element Honda Odyssey Honda Pilot Honda S200021
  23. 23. Infiniti FX 35 Infiniti FX 45 Infiniti I30 Infiniti I35 Infiniti G35 Infiniti QX4 Lexus ES Lexus GS Lexus GX Lexus IS Lexus LS Lexus RX Lincoln Town Lexus SC Lincoln Continental Mazda Millenia Car Mazda MX5 Mazda Protégé Mazda3 Mitsubishi Edeavor Mitsubishi Nissan Altima Nissan Maxima Nissan Murano Outlander Porsche 911 (except Pontiac Vibe Scion tC Scion xB 03) Subaru Baja Subaru Forester Subaru Impreza Subaru Legacy Subaru Outback Toyota 4Runner Toyota Avalon Toyota Camry (except 07 V6) Toyota Solara Toyota Celica Toyota Corolla Toyota Echo Toyota Highlander Toyota Land Cruiser Toyota Matrix Toyota Prius Toyota Tundra (except 07 V8 Toyota Rav4 Toyota Sequoia Toyota Sienna 4WD) Volvo S60 Conversely, ve hicles that w ere r eported ha ving w orse-than-average reliability, over a period of several years, earned a spot on the "Worst of the Worst" list. Ranking of the Worst Used Automobiles Buick Rendezvous Buick Terraza Chevrolet Astro Chevrolet Blazer (AWD) Chevrolet Colorado Chevrolet S-10 pickup Chevrolet Uplander Chevrolet Venture (AWD) (AWD) Chrysler Town & Dodge Grand Caravan GMC Canyon (4WD) GMC Jimmy22
  24. 24. Country (AWD) (AWD) Land Rover GMC Safari Jeep Grand Cherokee Kia Sedona Discovery Nissan Armada Land Rover LR3 Lincoln Aviator Mercedes-Benz SL (4WD) Nissan Titan (4WD) Oldsmobile Bravada Oldsmobile Silhouette Pontiace Aztek Pontiace G6 Pontiac Montana Pontiac Tran Sport Saturn Relay Volkswagen Jetta Volkswagen Jetta Volkswagen Volkswagen Cabriolet Sedan (turbo) Sedan (V6) Touareg You probably noticed that some car brands showed up on both lists. Thats why i ts i mportant t o do your ho mework on t he s pecific m odels your e considering, instead of just making your choice based on the reputation of the brand. "We t end to speak in generalities," says B artlett. "We t hink that som e brands tend to be good, a nd some tend to be bad -- but every brand has a spectrum of good -to-poor m odels. So c heck out t he r eliability r atings of the s pecific models, because t here i s som etimes a dif ference be tween perception and reality." Bartlett cited examples from two different brands: "We ha ve t he Buick Lacrosse a s a good be t, but w e ha ve t he Buick Rendezvous and Terraza as bad bets. And with Nissan, some good bets are the Altima, Maxima and Murano, but we have the Armada and Titan listed as bad bets." Although Consumer Reports "looks at and evaluates cars without favoring nation of or igin, one trend w e s ee i s t hat t he J apanese b rands t end t o dominate the good choices lists, while the bad choices lists are represented by an international potpourri," he says, meaning everything from Japanese to Korean to European to American brands. Bartlett notes that, due to rising fuel prices, some of Consumers Reports perennial r ecommendations now ha ve a dded appeal due t o t heir f uel economy. "We really didnt see too many surprises in this years rankings, because most of these cars are pretty familiar to us, and have made the list on both sides pretty routinely -- which goes back to the truth that cars that perform w ell w hen they’re ne w w ill l ikely perform w ell when theyre used.23
  25. 25. "And s ome of t hose that ha ve s tood out , and ha ve of ten m ade our good choices lists, models l ike t he Honda Civic, Toyota Corolla, Toyota Prius and Toyota Rav4, just happen to be among the most fuel-efficient cars in their c lass. So now, with e levated fuel pr ices, those models a re pr obably even better bets." The study also included a list of reliable cars that have performed well in Consumers R eports independent cr ash tests. That safety issue i s an important f actor, no tes Bartlett. "When buyi ng used c ars, p eople tend t o think m ostly a bout pr ice, but t hey should a lso be a ware of how s afe t he vehicle is. So we encourage buyers to look at the results of our crash tests, and our dy namic t est ratings, which measure suc h factors as br aking response an d accident a voidance, as w ell w hether or not t he ve hicle ha s safety features like ABS and Electronic Stability Control." Summary Buyers Check List Using the check list below helps to ensure you Define, Look, and Close. This approach should produce the right used automobile that properly fits your needs and budget including; o Choose the right vehicle for you by making sure the car suits your needs. o Consider all cars in the class you have chosen (compact sedan, SUV, station wagon, etc.) o Look up the car on Edmunds.com and check its reliability and consumer reviews. o Check the true market value price on the car you want to buy (adjusted for mileage, options, color and region). o Decide how much you have to spend on your new car purchase: down payment, monthly payment and purchase price. o Decide how you are going to finance your car. If you are going through a bank, on-line lender or credit union, obtain loan approval before you start shopping. o Search the Internet Used Vehicle Listings. Target searches for the used car youve decided to buy.24
  26. 26. o Call the seller and verify the pertinent information. Get the VIN. Run a Carfax report on the car. o Test drive the car under your normal driving conditions. Take the car to a mechanic if it is not certified by the manufacturer or covered by a comprehensive warranty. o Negotiate your best deal. o Read the contract carefully before signing and always make sure you get a clean title. o Look up the cost to own for the car you want to buy. o If you are financing the car, use the payment calculators to determine the monthly payment for the car you want to buy. o Contact the Internet department and simultaneously solicit quotes from multiple dealers and sellers. o If you are trading in your old car, check its true market value and print out this information. o Once youve reached a good price, ask the salesperson to fax you a worksheet showing all the prices, taxes and fees. o Bring your worksheet with you to the dealership so you can compare these numbers to the figures on the contract. o Inspect the car for dents, dings and scratches before taking final delivery. For more information about buying a used automobile contact: James Rickman 3rd. (503) 621-4953 www.sustainablevirtualbiz.com25
  27. 27. BIBLIOGRAPHY First References: ConsumerReports.org, Samarins.com, Carbuyingtips.com, CarFax.com, Federal Trade Commission, The Auto Channel News, autosmsn.com, autosaol.com, Experian’s AutoCheck, Squidoo.com, ASK.com, Ehow.com, Edmonds.com, AutoTrader.com, CarMax.com, BankRate.com, Yahoo Auto Finance, Cars.com, CarLoanCalculator.net, Intelli Coice Financial Center, Eloan.com, MyAutoLoan.com, CapitalOne.com, AutoLoanFinance.net, Craigslist.org, JD Power & Associates Additional References: • Lemon Law: Got a LEMON? Get AUTOPEDIAS 4 Star Award winning Lemonaid! • HotLinks: Try AutoPedias Hotlinks Pages for that hard-to-find Automotive Info! • Financing Quotes: Use AutoPedias Quote Form to get a competitive bid for Auto Financing! • CARFAX: Dont buy a "used car" without a CARFAX Report. • FREE Record Check: Before buying a preowned car. Protect yourself with an AutoCheck vehicle history report! • 5 Star Shine: PROTECT your new car investment with the only car wax awarded a US patent • Automotive News and other news.from around the world. • Insurance Institute for Highway Safety "THIS YEARS TOP SAFETY PICK AWARD WINNERS" • Auto Repair & Technical Info - Books, Manuals, Service Bulletins and Diagnostic Information • Warranty, Repair and Service Tips • CAR-FINDER - Get the lowest price with no hassle. • Export and Import - Exporting A Vehicle -- The Ins and Outs • Auto Insurance Check-Up - Are you paying too much? • Complete Auto, Truck, MiniVan and Sport Utility Information • Vehicle Pricing Including MSRP and Dealer Invoice Costs • Financing and Leasing Information • Negotiating Tips - How to Get the Absolute Best Deal • Consumer Incentives and Rebates • Used Car Buyers Checklist - Everything you need to know. • Extended Warranties (new & used) Companies - Shop and Compare. • Buying tires? Read what owners have to say in our Tire BBS" • Stereos, Alarms, and Accessories • Loan Payment Calculators • AUTOPEDIA™ SimulSearch™ • Recall Information - NHTSA Database • AUTOPEDIA™ Honored Guest Registry. • Both NHTSA and IIHS crash test results • #1 Rated Limousine Service in Germany (German)26

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