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Personal and Business Banking

Buying a Used Car

StreetWise Auto Buying Resources

  • Summary
  • Article

Buying a used car

  1. Determine Your Available Cash
  2. Do Your Homework
  3. Get Previous Owner Information
  4. Get your Car Checked by a Mechanic
  5. About Service Agreements
  6. Important Negotiating and Buying Tips

Buying a used car

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

Determine your Available Cash

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.

Do your homework

  1. Where can you find a good used car that fits your Available Cash?

  2. How do you find a specific used car? For instance, a red, 2008 Mustang?

  3. How can you know if that used car has been wrecked?

  4. How do you know if it's safe?

  5. How do you price a used car?

  6. Which used cars have good resale value and maintenance histories?

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

Shop for cars with a loan value about $800 under your Available Cash figure

Don't worry about the car's asking price. That's only where the negotiations start.

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. 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.

Quick Tip – don't shop on rainy days

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.

Get previous owner information

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, at least check the a vehicle history report. See How to get the history of a used car before you buy. If you are able to talk to the prior owner, ask them...

  1. How many miles were on the car when it was traded in?

  2. What was wrong with the car? Make a list of the car's problems, in detail.

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.

Get it inspected by your mechanic before you set the price

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.

Quick tip – chain auto service centers do inspections

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.

Use estimated repair costs to negotiate a better price

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.

Quick tip – forget the asking price

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

Negotiate warranties after price is set

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. Note that some states require the seller, even a private party, to provide a minimum warranty on cars they sell.

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.

Quick tip – used car service agreements

What about used car service agreements and the like? Extended service agreements can be good, but generally are not available unless the car still has time left on the manufacturer's warranty. 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. See what DCU offers. If you are an auto club member, see what they offer.

Dealing with the dealer

Before heading to the dealership, you'd be very smart to read the entire StreetWise Auto Buying Guide.