A used car, wisely bought, is a much better buy than a new car for many of us. You can buy more car, lose less in depreciation up front, and enjoy lower payments – three good reasons to smile. But if you're not careful, buying a used car can be a disaster! You might pay too much for an unsafe car that's a lemon and vastly overpriced.

But do it the StreetWise way, and you'll be driving a fine car every time. Do it like this...

You have an exact amount of money available to you right now to buy a used car. It's made up of the cash your payment will give you, the cash your trade-in will give you, and any other cash. How do you know that amount? Easy! Our Available Cash Calculator can help you through a really easy budgeting process. After you've determined your Available Cash, jot the number down and continue.

We tell you how to get these answers in a minute.

Don't worry about the car's asking price. That's what the dealer dreams you'll pay.

Incidentally, the reason you're looking for cars $800 under your Available Cash figure is to leave room in your budget for dealer profit, taxes, and the like.

And don't worry about where you shop, either. We can send you to one of the services that works with us. Or you could see someone drive by with a for-sale sign in the window. The source really doesn't matter. When you buy a used car, where you shop isn't nearly as important as how carefully you shop. Look in the newspaper. Look on used car and new car lots.

On rainy days, it's hard to see body damage and you're less likely to give the car a thorough check-over. Don't be in a hurry. Each used car is unique. A car that looks just fine can be a monster.

If you're looking for a car by yourself at a dealership, and have found one you like, without fail, get the name and number of the previous owner. If a seller won't (or can't) give you this information, don't buy the car. Now, talk to the previous owner and ask them...

A note on rental and lease vehicles: you probably won't get the name of the actual person who drove a rental or lease vehicle. But you do have the right to know if that vehicle was a rental vehicle, driven by many persons, or a lease vehicle, usually driven by one person. The title of the vehicle will generally tell you, so insist on seeing it.

Take the car to a mechanic of your choice. If the seller won't let you have a vehicle inspected, don't buy the car. Don't even take it as a gift.

With your list of problems from the prior owner, ask your mechanic to check the car carefully and tell you how much he'll want to put the car in good running order – not to make it like new. Taking a car to a mechanic is the most important step you must take. Don't buy a used car if you don't do this.

Auto service centers, such as tire dealers or department store auto service facilities, are good for pre-purchase inspections. Also search used-vehicle inspection services on the web for inspection services in your area.

Budget the repair costs and use them as bargaining chips. If your Available Cash figure is $5,000, and a mechanic says you need to spend $1,000 on repairs, you can't spend more than $4,000 on that particular car. Don't be shy in telling the seller that.

Start bargaining up from loan value (or less), a figure your DCU will give you.

After you agree on price, negotiate a warranty. Don't even mention warranties until you agree on price. If you do, some sellers will just add the cost of a warranty to their selling price without telling you.

The warranty to fight for is a free ninety-day, 100% Drive Train Warranty. Under the terms of this warranty the seller will repair anything that makes the car run for three months. Power windows and the like aren't covered, but you can live with that. If you can't get a free ninety-day warranty, try for a sixty or thirty day.

The warranty to avoid is any “50/50” warranty. It's you pay half, they pay half. What's the problem here? If you have a $50 repair, some dealers shops will bill you $100. Your fifty percent now just happens to be the whole bill.

What about used car “service agreements” and the like? Extended service agreements can be good. But many dealers charge two or three times as much for their agreements as they are worth. Don't automatically fall for the dealers' sales pitch. Shop around. If you are an auto club member, see what they offer.

Lots of fun and games happen at dealerships, and if you're not prepared, your pocketbook is not going to like you. So, before heading to the dealership, you'd be very smart to read the entire StreetWise Auto Buying Guide.

© 2008. Digital Federal Credit Union