Buy wisely in today’s frenetic used car market

The shortage of new cars has put pressure on the used car market. Although used car prices are stabilizing down they are always 22% more than in 2021. And according to the consumer price index, in June 2022, used car prices were more than 44% higher than in the first quarter of 2020.

Buying a vehicle has always been expensive, but at least you could still get a break from buying a used car. Not anymore. So it’s more important than ever to shop around and make an informed buying decision. How do I find and buy a used vehicle? What are the pitfalls to avoid ?

Match your vehicle and your budget

The best way is to start with your budget. By browsing the web, you will know what inventory is available. You will also get an idea of ​​the type of budget you will need to buy a car.

If the type of car you want has a higher average cost than your budget allows, take a realistic view of what you can afford. Don’t look for a used Lexus SUV when your budget is in the Ford SUV range, no matter how good a deal Lexus is.

Once you are comfortable with the type and average cost of a vehicle, decide how you will pay for your purchase.

Car prices have skyrocketed over the past two years. This includes used vehicles. (YAKOBCHUK VIACHESLAV/Shutterstock)

Car loan or cash?

There are two ways to buy a used car. You can either pay cash or take out a loan.

If you pay cash, be careful not to use up your savings all at once. You will always need a nest egg in case of an emergency or if your used car has a problem on the road. Also, don’t forget to set aside funds for taxes, fees, registration, and title.

Taking out a car or personal loan is also a viable option. The advantage of borrowing is that it does not deplete your savings. You will be able to make monthly payments over a fixed period.

If you borrow: caveats

Some used vehicles are selling above book price, especially in today’s inflated market. Be aware that if the price of the car is inflated, it could upset your car credit: in other words, the value of the car could be less than what you borrowed.

Also, if you buy a vehicle with an inflated value and it is totaled or stolen, there may be a gap in your insurance coverage. Auto insurance companies settle claims based on the actual cash value. This means that if your car depreciates, you will not be refunded the sale price. Instead, you will be paid for the depreciated value. It could be a big difference, preventing you from easily buying a replacement.

buying a used car, used car, car loan
Paying cash for your dream car is ideal but not always feasible. (G-Stock Studio/Shutterstock)

Find the car you want

There are several ways to find a used vehicle that meets your needs and your budget. Private sellers list cars online and dealerships sell used cars that they trade in. While switching from one dealership to another — or one website to another — is an option, using a central vehicle listing site like Auto Trader will save you time.

Auto trader features both dealers and private sellers. Search filters include location, vehicle type and model. You can also search by budget, including a desired monthly payment. And since all Auto Trader sellers, whether dealership or private, have to pay, you are less likely to run into scammers.

Craigslist also lists used cars. Listings are free and can be a good source for high-end or low-end vehicles. However, since sellers don’t have to pay to use Craigslist, it can attract scammers.

Used vehicle valuation

Once you have found the vehicle you are interested in, there are several factors to consider. Check the year, make and model. Look what options he has. Does it have a navigation system or a reversing camera? These increase the cost but also add to the fun. Decide which options are important.

Mileage is an important factor. How much mileage does the car have? Keep in mind that the more miles a car has, the more likely the car will need major repairs, sooner rather than later.

And finally, what is the condition of the car? There are several levels used to assess the condition of a vehicle. In the USA, conditions ranging from 0 (ineffective) to 5 (excellent). When it comes to the value of a vehicle, even a single difference in quality can significantly affect the price.

If you are buying the vehicle from a private seller, have a mechanic drive the car and evaluate the engine. You will also want to examine the body. Surface rust could indicate deeper issues.

buying a used car, used car, car loan
If you buy a vehicle from a private seller, have a mechanic run a diagnostic. (Africa Studio/Shutterstock)

Search vehicle history

Is the title proper? If you are buying from a private seller, does the person really own the vehicle? Beware of stolen cars. It’s always a good idea to run the Vehicle Identification Number (VIN) through the National Insurance Crime Bureau (NICB) VIN Check. This free service could save you a lot of trouble.

Check if the title contains “recovery”. A salvage vehicle might be a bargain — and it might look great — but it could have hidden structural issues from an accident.

Finally, run a CARFAX or similar vehicle history report. Carfax currently charges $39.99 for a report, but the company offers several report plans that can save you money when shopping.

A vehicle history report includes major accidents, airbag deployment, and red flags such as ‘mileage not actual’ or ‘actual mileage unknown’. While this could mean that someone simply typed in the wrong mileage at some point, it could also mean that the odometer was cleared.

buying a used car, used car, car loan
“Not the actual mileage” could signal an odometer rollback. (Courtesy of David Taylor)

Negotiate a price

With the current landscape, this one could be difficult, but it can’t hurt to bargain.

If you’re buying a car from a dealership, salespeople will often focus on the monthly payment. Don’t negotiate for a lower monthly payment. Instead, the goal is to negotiate the total cost of the vehicle. The monthly payment may seem low, but it would have been even lower if you had negotiated the overall price of the vehicles.

Note the prices that are launched so as not to be mistaken. And ask about fees and taxes, as these can inflate the price.

Finally, don’t fall in love with the car until you’ve bought it. Be ready to walk away if things don’t go your way.

The essential

The shortage of new vehicles has increased the demand for used vehicles. This makes buying second-hand. car more delicate than usual. So be prepared when talking to that seller or dealership. Check vehicle history. And don’t be afraid to walk away if the negotiations don’t go your way.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are intended for general informational purposes only and should not be construed or construed as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or other personal finance advice. Epoch Times assumes no responsibility for the accuracy or timeliness of the information provided.

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