Best Ways To Buy A Used Car
If ever there was a good time to buy a used car, this is it.
The coronavirus pandemic is slowing the economy and causing new car sales to steeply fall, but used-car lots are as busy as ever.
Sales of used vehicles dropped 38% in April when states were shut down and some dealerships had to close. But they bounced back in June to 17% above pre-pandemic forecasts, according to research firm J.D. Power.
Several factors are making it easier to afford a used car during the Covid-19 outbreak:
- Federal stimulus checks have been used to buy used cars.
- Interest rates during the pandemic have fallen to an average of 4.73% for a 36-month used-car loan.
- Rental companies are purging their fleets, putting more cars on the market.
- Auto makers closed their plants for nearly two months this spring, leading salespeople to redirect customers to the used-car lot.
- Returns of leased vehicles are increasing, creating more used-car inventory.
How Much Can You Save On A Used Car?
Used car sales often increase during economic downturns as people look for ways to get to work without having to buy a new car for a lot more money.
Used cars also depreciate less, don’t require a large loan, and are usually cheaper to insure.
Prices for used cars can be all over the map, depending on where you’re buying, the type of car you’re looking for, and inventory. Your credit score can also affect the ultimate price you pay. A poor credit score can lead to a higher interest rate on a used-car loan, while a high score may drop it.
The good news is there are almost always plenty of used cars for sale. It’s just a matter of finding one you like and that fits your budget.
Certified pre-owned cars, which are typically two to three years old and are reconditioned by dealerships, cost an average of $15,471 less than buying a new one, according to Edmunds. Some cars offer more savings than others when buying used.
A 3-year-old Honda Civic has an average savings of $6,670 off a new one, according to Edmunds. The same year Ford Explorer saves $21,098 on average.
With that much savings on the table, it’s worth shopping wisely for a used car so that you can get a good used car that will last and hopefully pay less than the average price. Here are some of the best ways to do that:
Consider 7 Years Old
A car that was built three or fewer years ago is ideal, but you can save more and possibly avoid needing a car loan by buying a car that’s seven years old or older.
It won’t have the latest safety technology, but it should last five to seven years more and the price should be in the four-figure range.
Look for an older car that hasn’t been driving many miles and that has an excellent maintenance history.
Research The Best Used Cars
We won’t get into which type of used car is best for you, but some used cars are better than others and can last 10 years or longer if taken care of.
Sites such as Consumer Reports and Dashboard Light rate used cars for reliability and can give you an idea of which have higher repair costs. If a car has a history of needing engine or transmission repairs, for example, then it’s likely to be more expensive to fix than one with fewer powertrain issues.
To get a history report on the specific car you want to buy, go to CARFAX or Auto Check, or ask your used-car dealer for one. If you’re buying it in a private sale, then pay the $40 or so it costs to get the report yourself.
It’s also worthwhile to take the car to a mechanic you trust to go over it.
Once you’ve determined how well the used car you want runs, it’s smart to check pricing guides to see what a similar used car costs. There are many places to find prices, among the ones to look for pricing for your particular model are:
- Kelly Blue Book
Then look at dealer listings. Remember that the advertised price is what they’re asking for and isn’t what they’re willing to offer. Once you know how much Edmunds and other sites list the car you want for, you’ll have a good starting point for negotiations.
Do Your Own Financing
Financing is a big money maker for car sellers. Sometimes it can be worthwhile and can save you more money than if you went to your bank and got a loan on your own.
However, it’s worth shopping for the best finance rates. If you don’t have enough money to buy a car outright, be prepared for a little bit of shock when shopping for used car loan rates.
Used cars cost more to finance than new ones. The reason is simple: Used cars don’t hold as much value as new ones, giving a lender less in value if it has to repossess the car if loan payments aren’t made.
Get pre-approved for a used-car loan from your bank or credit union before negotiating with a used-car dealer. This will at least give you a financing option if the dealer’s offer doesn’t beat it.
Don’t let them talk you into buying more car than you can afford, and don’t negotiate the price based on what monthly payment you can afford. Dealers may try to lower the monthly loan payment by stretching out the loan over years, requiring you to pay more in interest than if you had a lower overall car price to pay.
When you walk off the lot with your new (to you) used car, you definitely don’t want to still be paying for it after it wears out and loses all of its value.