How to Buy a Used Car, Step By Step

New cars are sleek, shiny, full of impressive tech and smell amazing — mmm, new car smell. But they also come with price tags that can take your breath away — and not in a good way.

According to Kelley Blue Book, the average price of a new car in November 2020 was more than $39,000. Yowser.

If you’re in the market for a set of wheels that’s more affordable, steer your sights over to the used car lot to save a little money. Or even a lot of money.

Why Buying a Used Car Is a Smart Money Move

If you’ve ever heard someone refer to a car as a depreciating asset, it’s true. The longer you have a car, the less it’s worth. The first year of owning a new vehicle is when depreciation really packs a punch.

Jim Sharifi, formerly a content editor at Carfax, said research shows a new vehicle can lose as much as 10% of its value within the first month.

“In the first year of ownership, depreciation can continue, and that same car could be worth up to 20% less than its original sale price,” he said.

When you buy a used car, the original owner has already taken that initial hit on depreciation and the price you pay accounts for that, so you don’t have to shell out as much cash.

Just because you’re buying a car at a lower price point doesn’t mean you’ll be stuck with a clunker that was manufactured decades ago. Cars that are just two or three years old often hit dealership lots when their previous owners reach the end of their lease.

Those vehicles often have low mileage and are in great condition, having had only one previous owner. Sometimes they even still retain a hint of that new car smell.

So that covers the why. Now let’s get into how to buy a used car.

The Best Time to Buy a Used Car

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Unlike new car releases, used cars come on the market throughout the year. It all depends on when their previous owners end their leases, put them up for sale or decide to trade in their vehicles.

However, there are certain times when you’re more likely to score a better deal.

Matt DeLorenzo, senior managing editor for Kelley Blue Book, said when dealerships host big sales events for new models that can also benefit used car shoppers.

“[Dealerships] will have more used vehicle inventory as a result of those types of promotions,” he said.

Think of the big sales that fall around holidays like Memorial Day, Fourth of July and Labor Day.

The end of a model year — around September or October — is another good time to shop, DeLorenzo noted, as salespeople are looking to make deals to clear out their used vehicle stock to make room for new inventory.

It’s best to avoid shopping for a car on the weekend when there’s an influx of customers and sales staff is spread thin, Sharifi said. You’ll get more attention from the sales team by visiting on off hours, specifically on weekdays.

“The end of the month (or the end of a quarter) can also be a good time to strike a deal, since dealerships may need to hit monthly or quarterly sales goals,” he said.

Of course, when you need a car might not align with a particular sale or time of month. Shopping for a vehicle before you’re in critical need of one will allow you time to search for the best deal rather than having to settle for something quick.

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Where to Shop for a Used Car — and Where to Avoid

Where you shop for a used car matters so you can avoid purchasing a lemon.

DeLorenzo recommends shopping at franchised car dealerships that have certified pre-owned cars — used vehicles that have been thoroughly inspected and typically come with some type of warranty coverage. Non-certified cars aren’t bad — and they’ll typically cost less — but they’re more likely to have higher mileage and more maintenance needs.

Be wary of independent car lots that boast they can make you a deal regardless of your credit or circumstance.

“Typically they’ll try to get you in with a low price, but you may not be getting the best quality car,” he said. “The other thing is that if you get your financing through those types of dealers, they typically charge you a much higher interest rate.”

Pro Tip

DeLorenzo recommends pre-qualifying for a loan at a bank or credit union before visiting a dealership. You can compare the offer with the dealer’s financing terms for better negotiating leverage.

For any dealer you visit, do some due diligence and check customer reviews online. If you know others who’ve recently purchased a car, ask for recommendations.

Outside of dealerships, look for cars online at trusted sites like Autotrader, Kelley Blue Book, Carfax or Edmunds — or buy from a private seller.

When you’re buying from a private party, you may be able to get more accurate information about how they’ve driven and maintained the vehicle and what particular issues it might have, said Ron Montoya, senior consumer advice editor at Edmunds.

However, you also need to be OK with buying the vehicle as-is and securing your own financing. And be sure the owner has clear title to the car — in other words, don’t let anyone sell you a car they don’t legitimately own.

If cost is your primary concern, a private seller is likely to offer a lower price. A dealer folds overhead, repairs and marketing into its price.

What to Look for When Buying a Used Car

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Knowing when and where to buy a used car is just half the battle. Figuring out how to vet a used car can be tough, especially if you have little to no car knowledge.

These tips will give you some guidance to make a good choice.

1. Find a Vehicle That Fits Your Needs

It’s easy to focus on the numbers — age of the car, mileage and cost — but you also want to make sure you’re buying a car that’ll fit your needs for however long you expect to have it. If you have a growing family, you might want to rethink that two-door coupe or compact vehicle.

“You want to make sure there’s enough room for you,” Montoya said. “Take a look at the cargo area. Take a look at how easy it is to see out of the vehicle. Test out the entertainment system.”

2. Determine How ‘Used’ You’re Willing to Go

The older a car is, the cheaper it’ll be — but the more it’s likely to have issues requiring repair. Everyone has a different comfort level when it comes to what they’re willing to handle. A general rule of thumb is that a car is driven about 12,000 miles per year. A higher average could mean the car has more wear and tear.

Montoya said used car buyers must strike a balance between the age of the car, the amount of miles and what price they’re willing to pay.

Buying an extended warranty or service plan can give you peace of mind that certain repairs or maintenance jobs will be covered.

Pro Tip

Montoya said plans sold by auto manufacturers or reputable dealerships are better options than those sold by third-party companies. Make sure you understand exactly what your plan covers.

3. Make Sure The Price is Right

Before you accept a sales price, research the value of the car to make sure you’re not overpaying. Carfax, Kelley Blue Book and Edmunds all have price appraisal tools online.

You can also compare similar vehicles on the market to get an estimate of a car’s value, but keep in mind, no two used vehicles will be the same due to how they were driven and maintained. Use all this information when you sit down to negotiate — and don’t be afraid to walk away if you don’t think you’re getting a fair price.

When you’re budgeting for a car purchase, make sure you’re factoring in all the associated costs, like sales tax, insurance and getting the car registered.

4. Check the History of the Car

Sometimes just looking at a car will give you some idea of its history. Rust, worn out pedals and a side panel painted in a different color are red flags.

But don’t just assume a car’s history. Getting the car’s history report, such as through Carfax, is a crucial step when buying a used car.

You’ll have to purchase the report if you’re buying from a private seller, so wait until you’re seriously interested in a particular vehicle. If you’re buying from a dealership, the salesperson should provide a copy of the vehicle history report for free.

Sharifi said to watch out for discrepancies with the odometer reading and if there’s a branded title, which indicates that the car has been significantly compromised in some way.

“Severe accidents and instances where a car has been declared a total loss should signal the buyer to use caution,” he said. “That said, a small fender bender shouldn’t always mean that a buyer should walk away from a great deal.”

5. Go for a Test Drive

Always, always, always take a car for a spin before buying it. If you can bring a mechanic with you, even better.

“Some general things you can do on your own without being super knowledgeable about cars is [to] turn off the radio [and] listen for any strange noises,” Montoya said. “See if the steering wheel stays straight when you drive down the road. Does it pull to one side? Look at the tires to see how old they are.”

Pro Tip

Don’t just look at the tires’ tread. Each tire should include a four-digit number marking the month and year it was manufactured. Tires older than six years can be dried out and need replacing.

For any used car purchase, but especially if you’re buying from a private seller, have your mechanic inspect the vehicle before committing to buy.

Knowing the ins and outs of how to buy a used car will make the whole process less stressful and, most importantly, save you money.

Nicole Dow is a senior writer at The Penny Hoarder. Former staff writer Carson Kohler contributed to this post.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

9 Ways to Recover from Overspending During the Holidays

The post 9 Ways to Recover from Overspending During the Holidays appeared first on Penny Pinchin' Mom.

The packages have been opened. The kids are loving their new toys.  You are enjoying your coffee one morning and reading your mail when you see them…

THE BILLS! Yikes!

It seems you went a little over your budget. It was fun and the joy you brought to your kids’ faces was worth it.

However, now you need to find a way to recover from overspending during the holidays. It is not fun, but is necessary. Here are nine steps you can take to recover from any spending mistakes you made during the holiday shopping season.

1. Put the credit cards on ice – literally

The first thing you need to do is stop spending.  You need to put the credit cards away. Take them out of your wallet and put them in the safe.

Or, if you want to make sure you really do not use them – freeze them in a block of ice! That way, if you do feel the pull to shop, it will take time to thaw out and the urge to spend my pass by then.

2. Calculate the damage

You can’t bury your head in the sand when it comes to seeing the damage done to your budget. Face it head-on.

Total every receipt and credit card statement to find how much was spent. While it may be painful to see the balance due, it is necessary.

When you see that figure in writing, it helps you know what you are facing and where you may need to cut back.

3. Review the budget

 Once you know the amount you need to pay off you also need to review (or create) your monthly budget.   That means including those new monthly payments to the credit card companies.

Make sure your budget is balanced, in that you are not spending more than you take in each month.

4. Create a repayment plan

Up next, you have to create an exit strategy – which will be to pay off those credit card bills. Grab the statements for each and then list them by including the balance and the interest rate.

You may be tempted to pay the highest balance first (which is what I recommend when it comess to getting out of debt). However, when it comes to this debt you just incurred, I recommend starting with the highest interest rate first.

By eliminating that bill quickly, you are reducing the amount of interest you will pay to the credit card company. There is no need to pay them any more than you need to!

Once the first card is paid in full, roll the monthly payment amount into the payment for the next card. Repeat until they are all paid in full.

You’ll not only pay them off quickly but also minimize the total interest paid as well!

5. Reduce your spending

When you have bills to pay it means you need look at the budget to find areas where you can cut back.

It may mean cutting cable or eliminating dining out. You may need to cancel the subscription to the gym or find frugal date night options.

Be willing to make short-term sacrifices for long-term gains as the sooner you can eliminate these bills, the better.

6. Use your bonuses

If you are fortunate enough to get a holiday bonus don’t blow it on what you want. Use that to pay off your holiday bills.

If you don’t get a bonus then use any of that Christmas cash you received for your bills! Look ahead to see if any other money will be coming your way such as birthday money or a tax refund. Earmark that to pay off your holiday spending.

7. Get a side-hustle

If you need to tackle your balances then a side-hustle may be the solution – even if temporary. Look around the house for items to sell. If you are a teacher, consider tutoring students.

Every penny earned can be money used to put towards that holiday spending.

8. Build your savings

You don’t want to find yourself in this same situation again next year. It is not a fun cycle of rinse and repeat.

The holidays come at the same time each year. It is not a surprise or an unplanned expense.  You need to plan for it.

Review the total spent this year and divide that by 12. Focus on saving that amount each month, all year long, and you’ll be able to pay CASH next year and not even use the credit cards.

9. Save using the coin challenge

One simple way to save money for holiday shopping is to switch to a cash budget. Then, save the change and any “leftover” money each pay period.

For example, if you budget $300 for groceries and spend only $270, don’t blow that left-over $30…put it back for the holidays!

The same premise works with change. If the total is $7.49, hand over $8 and put $0.51 into your savings jar.

Saving doesn’t have to be hard

Simple tricks can help you quickly build your savings!

It is easy to spend too much during the holidays but with some smart strategies, you can get your budget back on track.

The post 9 Ways to Recover from Overspending During the Holidays appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com