Your used car search should begin with some basic research and planning. How much can you spend? Do you have good credit? What are the current loan rates? What are your car needs? Do you know which makes and models are typically more reliable than others? Having answers to these questions before you start your search will help you avoid some of the pitfalls.
Determine Your Financing Before Starting Your Used Car Search
Before you begin your search, determine how much you can spend. Lenders look closely at your income as well as your current debt-to-income ratio to determine how much they can lend you without overburdening your monthly finances. You should know how much you can afford before the search begins. Check with your bank or credit union to see how much of a loan you qualify for before you start.
How’s your credit? A credit score of 680 or higher should bring the best rates with most lenders, though some lenders reserve their very best rates for credit scores above 730. You can access your own credit score online, but you’ll have to pay a little for it, usually between $13 and $16 at Experian.com or Equifax.com. Once you know your score, don’t be afraid to shop more than one lender for rates.
Specific Vehicle Research Will Save You Time in Your Used Car Search
Now that the financing is out of the way, the next step is determining your car needs. Do you need a vehicle for towing? How many passengers do you frequently carry? Do you really need 4-wheel drive? Knowing what you need before you begin will save you time and ensure you get a vehicle suited to you and your lifestyle. Two of the best resources are Edmunds.com and Consumerguide.com.
Once you’ve decided on the type of vehicle, you should consult the experts. Consumer Reports and J.D. Power and Associates are probably the best sources for reliable data during a search. Consumer Reports has limited information on their Web site, but your local library should have a subscription to their magazine and yearly car buying guide. J.D. Power is available at: jdpower.com/cc/auto.
Perhaps one of the most commonly overlooked issues in the search is getting an insurance quote from your auto insurance company. Let’s say that you’ve decided to buy a used BMW M5 to replace your old BMW 525i. The two cars are similar to the untrained eye, but not to your insurance company! The M5 is one of the most expensive sedans to insure.
Know All About “Book Value” Before Starting Your Used Car Search
Once you’ve decided on some specific parameters for your used car search, you should know how to determine fair pricing. The two industry standards for used vehicle pricing are Nadaguides.com and Kellybluebook.com. When dealers refer to book value, they’re referring to one of these two guides. Both guides are reputable, but make sure the dealer is using the same guide for both trade-ins and sales. You should also know which of these two guides your lending institution uses when determining loan value.
By Aaron McCullough
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