Used Car Buying Mistakes That Cost You Money
When you’re shopping for a used car, one mistake can cost you a lot of money. Buying a vehicle that needs expensive repairs and not negotiating can mean the difference between saving money and spending more than you’d like. After reaching record highs, used car prices are starting to fall, so if you must buy now, avoid these common used car buying mistakes that translate into dollars.
Not knowing a vehicle’s history
When you buy a used car, you don’t know how well it was maintained. CarFax and AutoCheck provide vehicle history reports which tell you if the car was in an accident, if it’s been rebuilt, who owned it and lists its service, inspection and registration history.
After you get the vehicle’s records, have an independent mechanic perform a pre-purchase inspection. For about $75 to $150, the mechanic will be able to tell you if the car has any major mechanical problems or will need expensive repairs. If a private seller won’t let you have the car inspected, this is usually a red flag that something is wrong.
David Hays, a 25-year automotive industry veteran and former owner of Wrenchmasters in Rockville, Md., says that even if you aren’t a mechanic, you can inspect the car yourself, and there are specific things you should look for.
“On the exterior, look for oil or other fluid leaks under the car, odd wear or worn-out tires and new or different paint,” Hays says. “A car that has been painted indicates crash damage and is a red flag. Crash damage can be extensive or minor but always affects the value negatively. Look for ‘orange peel’ paint on body panels, paint fading at different rates on different parts of the car, irregular gaps in between body panels and overspray on weather seals.”
Pop the hood and look for cracks on the back of drive belts, excessive black crud under the oil fill cap, which indicates a lack of oil changes, and stickers under the hood, Hays says. If there aren’t any stickers, the hood panel may have been replaced, a red flag that the vehicle was in an accident.
“During the test drive, listen to the exhaust,” Hays says. “Does it sound normal and not overly loud? Make sure the blower (fan) works, and the power windows and locks are functional. Check to see if engine lights or other dash lights are on. On a level road, does the car track straight if you were to remove your hands from the steering wheel? Does the car drive to one side or does the brake pedal pulsate when braking?”
Not negotiating the price
“A consumer’s best weapon in the dealership is their feet,” says Jack Nerad, executive market analyst at Kelley Blue Book. “They can walk out at any time and they’ll probably find as good as or better deal the next day or week.”
It’s easy to get excited about buying a car, but it’s best to take some time and think about the purchase.
“There are tons of used cars out there for sale,” Nerad says. “Finding a good used car is not like finding a diamond at the bottom of a mud puddle.”
Since used car values are up almost 20 percent since January, according to KBB.com, Nerad suggests comparing used and new vehicle prices. You may be able to get a new vehicle at a comparable price and eliminate the worries associated with vehicle condition.
“This is one of the few times where a new vehicle is almost as good a buy as a late-model used vehicle,” he explains. “Buy as new a car as you can comfortably afford because a newer car has better resale value.”
Not negotiating the price of your trade-in
Because used car prices are at their highest levels in years, you can easily command more money for your trade-in, especially if it is fuel-efficient. The National Automobile Dealers Association said in May that trade-in values of small cars would increase more than 30 percent in June. First, look up the value of your trade online. Then shop your used car around to local dealerships to see what they’ll offer you. Also look online to see what similar cars are selling for in your area for a better idea of your trade-in’s market value.
Not negotiating the financing
Nerad says that when many shoppers finance a used car, they don’t shop around. He suggests going to your credit union or bank to get a pre-approved rate before applying through the dealership.
Shoppers should realize they can make counter offers on the interest rate the dealer offers them, he explains.
As you cross-shop financing, don’t focus on monthly payments, which is a common mistake shoppers make, Nerad says. “Dealers can lower the monthly payment by a considerable margin by lengthening the loan term,” he explains. The longer the term, the more interest you’ll pay, so run the numbers and research all your financing options.
Not researching add-ons and extended warranties
Many dealers will offer you add-ons, like paint and upholstery protection, VIN etching and an extended warranty.
Nerad says that add-ons are negotiable and with a little online research, shoppers can get an approximate price range of what these features would cost if they purchased them aftermarket.
Deciding whether or not to purchase an extended warranty depends on your “tolerance for risk,” Nerad explains. The extended warranty is really more like an insurance policy that will protect you from “catastrophic problems, like the engine falling apart or the transmission breaking down,” he says. Small repairs are generally not covered.
“Ask to look at the warranty coverage,” Nerad says. As long as you understand what is covered, purchasing an extended warranty might make sense. “If you have tolerance for risk and you feel comfortable about the car you bought, then you probably don’t need the extended warranty,” he adds.