In most parts of the US, having a car is a must. For most families, it is also one of their biggest expenses, along with housing and health insurance. That’s why it is important to invest time in researching all of your options, both online and in your general area, to find the best deal, which very well might be a used car.
First question… New or used?
While the idea of a new car is fun, let’s be honest, we have other priorities in life, right? Also, new cars lose their value faster than used ones. The good news: You can find high quality and reliable used cars nowadays.
For families or individuals on a budget (aka all families!), especially one with other important needs, used cars are a great choice. Keep these thoughts in mind before buying yours!
Narrow your options
There are so many options available. To help you narrow down the selection and make the right choice, consider the following:
Ask yourself: “What will I use it for?”, “How often?”, “What roads will I drive on?”, “Do I need extra space for kids?”, “How often do I transport or store stuff in my car?”, “Will anyone else need to drive it?”, “How often will I need to take it on long trips?”. Be honest about your primary needs so you can determine:
- How many miles should be on the used car already? You’ll want a car with fewer miles if you need to drive long distances or have the car last longer.
- Do you really need all-wheel-drive? If you live in the snow belt, consider getting an extra set of wheels with snow tires mounted instead. It could end up being the same or lower cost, and offer better gas mileage as well as better traction.
- How many passengers will you be transporting on a regular basis? How many doors and seats do you need?
- How much “stuff” needs to fit? Do you need a big trunk or will a small one do? If you only need to haul large loads occasionally, can you borrow or rent a larger vehicle for those times?
- How important is good gas mileage? The environmental impact?
Think about the maximum budget you can afford and how you might get the money you need. Will you need to take out a loan? If so, ask yourself these 3 questions before choosing a lender. Also know that dealers and retailers have relationships with banks and might be able to help you get a loan.
If you want to pay for the car in cash, how much would you need to set aside each paycheck and for how long, in order to buy the car?
How to find a used car worth your money
Start with an online search to learn about available options on websites for used car retailers, like Carmax, used car dealerships, or through private sales found on Craigslist or eBay.
Check reviews about retailer / dealership businesses online to see which ones seem trustworthy and if other people have had good experiences. In the Google search bar, simply type the name of the company followed by “review”, to find customer opinions.
If you opt for a private sale, try to figure out if the seller is a reliable person. You could also consider buying from a trustworthy friend, a friend of a friend, co-worker, or neighbor.
With a private seller, you might have a better chance to negotiate the price, but it could be riskier in terms of liability, since retailers and dealers might offer warranties.
Once you see that dream car…
No matter how in love you might be with a car, don’t forget to take these precautions before making the commitment to purchase:
- Safety comes first! Always keep that in mind.
- Inspect the car by closely looking at windows, seats, tires, suspension, car body, lights, controls, trunk, roof, engine, etc.
- Take it for a test drive on a highway and in traffic, and in conditions similar to those in which you drive most often.
- Ask for an independent inspection from a professional mechanic (you should be willing to pay for this). If the seller does not agree to an inspection, think twice before buying it.
- Look at the miles driven and age of the car. A car with 12,000-15,000 miles could last many years. If it has more than 100,000 miles driven, it may need repairs more often, but could also still last years. Keep that in mind.If you do decide to buy this car in a private sale, take a picture of the dashboard for a record and in case of any oddities during the pink slip transfer
- Check if it is a fair price: Using the mileage and year, check the value on Kelley Blue Book’s website.
- Do internet research to find out if this particular kind of vehicle is affordable to maintain. Look at fuel consumption, for any typical breakdowns, cost of maintenance, etc.
- Does the car have a warranty? If it does, the seller should show you a written document saying so.
Your car insurance costs could change depending on the auto. Check it out before buying!
Finally: “finance” steps
- Negotiate. Do not be afraid to discuss the price and conditions. Remind yourself that you are in control and that you must feel convinced about the deal before you take it. If not, push back and leave. It is as simple as that.
- Ask for the real final price, including registration fees, to avoid surprises.
- Dealerships sometimes offer extended warranties. Check what the warranty on your car choice covers and double check that your car insurance doesn’t already cover it.
- Finally, sign the deal and…
More info and sources at: Federal Trade Commission
The information in this site, including any third-party content and opinions, is for educational purposes only and should not be relied on as legal, tax, or financial advice or to indicate the availability or suitability of any Oportun product or service to your unique circumstances. Contact your independent financial advisor for advice on your personal situation.