Buying a used car can be a smart investment when you need a replacement vehicle. While new car purchases tend to increase with a rising economy, used cars can provide a great alternative as long as you know how to shop for one.
You can get the most bang for your buck with a used car. While this provides an opportunity to live more economically, a used car, by definition, has issues from regular wear and tear. Therefore, it’s important to avoid making these costly mistakes when you’re in the market for a second-hand car.
1- Failing to Line up Financing Before Shopping
Before you purchase your used car, whether that’s through a dealer or from a private owner on a website such as Craigslist, you’ll have to figure out how you’re going to pay for it. Not everyone is able to lay down the cash for a car in full—even for a used one. Those who can’t have to consider financing.
Financing allows you to understand the upper limit of your price range. Knowing your budget makes negotiating prices easier. If you’re buying a car from a dealership, you can certainly take their offer. But remember, dealer financing is built like a wholesale insurance offer, often adding in additional interest rates.
Can you avoid this? Sure you can. The way you can do this is to shop around because different lenders offer different rates. Make sure you have your approval in hand even before you shop for your car—it’ll help keep you in line and within your budget. An auto loan calculator can also help you determine what kind of loan term and interest rate will fit your budget.
One thing to remember is that used car financing rates are generally higher than those for new cars. That’s because lenders want borrowers to buy new vehicles. The reason? It’s simple. If you default on your loan and the lender has to repossess the car, it can get a better resale value on a new car than it ever could on a used one.