There has been a lot written on this site about what you need to do to buy a used car. This piece, though, will tell you the top 5 tips for buying a used car in 2009 regardless of your credit situation. Plus, I’m going to tell you a class of used car to avoid. These are difficult economic times so it makes sense to have updated info – and not advice published in 2005 when the living was easier.
Get Pre-Approved for a Loan
Know that you have the money to spend before you attempt to buy a used car. Go to your bank or credit union and take out a loan, or at least get pre-approved. Two important pieces of information are going to be handed to you: how much you can afford and what your interest rate is going to be.
Interest rates for 36-month used car loans are ranging from anywhere from 5.64% to 12.59% in Greater Hartford, CT (where I happen to live). You can find sample used car loan rates at BankRate.com that are fairly up-to-date. If you qualify for a 5.64% rate, depending on how much you can afford, you can buy a used car anywhere you want. If your loan is approaching 12%, I’m going to send you to a dealer, but get there fast because prices are starting to inch up.
Have Excellent Credit? Buy from a Private Seller
Prices for used cars being sold by private sellers have dropped 10% in the last year. Why? Supposedly, nobody has the credit to buy used cars unless there is dealership financing available.
The savings can be significant. Take a 2006 Ford Five Hundred for example. According to Edmunds.com http://www.edmunds.com a middle-of-the-road model is going to cost $11,137 at a dealer, but only $10,109 at a private seller. You’re going to save at least 10% in most cases and you’re going to be able to strong arm a private seller, most of whom are selling out of necessity and want to get the car out of the driveway.
Have Only Fair Credit? Get to a Franchised Dealer
Dealers have a lot of access to credit from different sources. A good finance manager is going to be able to find you money because they are not going to turn you away if there is any way the deal can be made.
Plus, the used car market is starting to rebound. As banks and other financial institutions realize this, they are going to recognize there is money to be made in the marketplace. Be on the cusp as the money starts to open up.
Have Bad Credit? Get to an Independent Dealer
It is possible to save some money with bad credit, but you have to take a bit of a gamble by heading to an independent dealer. By the way, look for one with a parts and service department. They’re a little more financially stable.
Independent dealers are not rebounding as quickly as franchised dealers. They’re going to be willing to deal for a little while longer.
Don’t Buy a Certified Pre-Owned Used Car
I’m usually a big fan of certified pre-owned used cars but you’re going to save money by not buying a certified pre-owned used car this time around. Dealers are just dying for areas when they can exploit market conditions and charge higher prices.
For example, on the above mentioned Ford Five Hundred, the certified pre-owned price is $13,700, or $2600 more. It gets even more expensive when you finance. Assuming no money down, on a 9% 48-month loan, you’ll pay $3120 more or about 23% higher.
The secret is you need to make sure you get a quality inspection of the used car. It’s $150-$200 well spent when you consider that you could save $3120.
