The following tips will help you avoid common pitfalls and paying more than you have to when buying and financing a used car. Finance used Cars
Check the vehicle history.
You don’t want to be responsible for paying off a loan if the automobile has major issues or hidden crash damage lowers its resale value.
Car history reports can miss flood, collision, and other damage, so check several for any automobile you’re considering buying.
CarFax reports are cheap, and the National Insurance Crime Bureau offers free VIN checks. . The National Motor Vehicle Title Information System also offers links to numerous approved vehicle history providers. And always have a vehicle inspected by a trusted mechanic before you buy it. Finance used Cars
Check your credit score.
Whether buying new or used, the best interest rates generally go to those with the best credit. Melia Zabritski, senior director of automotive financial solutions at Experian, a credit reporting agency, says that the average interest rate for a used-car loan is 5.53 percent for someone with the highest credit rating, and 16.85 percent for someone with the lowest credit rating. The difference between those two could be a couple thousand dollars over the course of a traditional loan. It’s a good idea to check your credit score periodically to see if there are any areas that need improvement. You can do this using a number of free credit-reporting services, such as annualcreditreport.com, Credit Karma, or Experian. Zabritski says that, in general, the best ways to keep your credit score in good shape are to pay bills on time and to keep the balances on your credit card as low as possible. Experian Boost is a free service that can help beef up your credit score by including paid-on-time utility and other bills. (Learn how to fix your credit score.) Finance used Cars
Get pre-approved.
This is important advise for any car purchase, new or used, and essential for financing a used car from a private seller.
Pre-approval gives you a starting point and allows you to reject a dealer’s financing if it’s unfavorable. Zabritski says not to worry about making multiple inquiries for auto loans. If they were all made within 30 days, they may be excluded from your credit report.
Carvana and Vroom offer online prequalification and financing through third-party lenders, as do most dealers. But you may get a better rate from your own financial institution. Be sure to shop around to see who has the best rates.
Make a sizable downpayment.
Put as much money down as you can comfortably afford, says Bell. The more you pay upfront, the less money you’ll lose to interest payments. For example, if you put $3,000 down on a $29,000 car, you’ll pay a total of $32,341 on a 48-month, 5.53 percent APR loan (not including sales tax, which varies widely by state, and can add thousands to the price). If you put down $5,000, you’ll save more than $200 over the life of the loan. If you compare how much interest your money would make in a savings account, it’s probably less than what you would save by making a larger downpayment.
Avoid long-term loans.
A loan that lasts 60 months may keep your monthly payments low, but you’ll pay more in the long run, and will probably pay a higher rate as well. Using Navy Federal Credit Union numbers as an example, if you finance $23,000 at 5.44 percent over 36 months, the total amount you’ll pay will be about $31,280. Taking out a 60-month loan incurs a higher 5.74-percent rate, and the total cost would be $32,812—more than $1,500 higher than the shorter-term loan. The chances that you’ll find yourself “upside down,” or owing more on the car than it’s worth also increase with longer-term loans.
Avoid dealer add-ons.
Once you’ve agreed upon a price, there’s a good chance that a dealer may try to pressure you into buying an extended warranty. (Some will tell you it’s required to get a loan, which is rarely the case.) Make sure the original factory warranty is expired before even considering extended warranty coverage (some certified pre-owned cars already have extended coverage and may not need more). As a general rule, CR doesn’t recommend buying extended warranty coverage: It’s often not worth the money. Instead, keep a rainy day fund for car repairs. That money may even gain a little interest if it’s in the right type of account.
Factor in potential maintenance costs.
If you’re buying an older vehicle, you’ll definitely save money over the price of a new car. But don’t forget the inevitable cost of eventual repairs. Consumer Reports recommends CR Recommended models for safety, reliability, and fuel efficiency to reduce costs.
Our suggested used cars list illustrates owner contentment and reliability.
CR’s online auto repair estimator can help determine a general annual maintenance budget based on a car’s age and mileage. Then factor that into your monthly payment estimate to see how much money you’ll actually save by buying used. Finance used Cars
