The Used Car Buyer's Guide
A glut of trade-ins -- caused by the rush of low-interest financing -- makes this an ideal time to shop for a pre-owned vehicle.
By Cameron Huddleston, Contributing Editor, Kiplinger.com
February 1, 2006
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Most people typically tune out boisterous used-car dealers. But for now it might pay to listen up. A glut of trade-ins -- caused by the recent rush for 0% financing on several new-car models -- makes this an ideal time to shop for a pre-owned vehicle.
But before rushing down to the showroom, arm yourself with the pricing and safety information you'll need to avoid the lemons. The resources and steps outlined below will help you research a used car quickly and thoroughly.
Settle on a price
There are several books and Web sites that help you find the going rate for used vehicles. Most offer several prices including, retail, trade-in and wholesale. If you're shopping for a car, look for retail value -- what you can expect to pay at a dealership. The trade-in value is what you'll get for a car you sell to the dealer. Don't expect to get retail value for your trade-in vehicle. That's because the dealer will spend money to improve its condition before reselling it and wants to make a profit, too.
Since used car prices vary widely depending on condition and mileage. Lynn Peacock of the National Automobile Dealers Association recommends using at least two or three of these sources to develop a reasonable price range.
- Kiplinger's Car Finder. Retrieve a list of cars that meet your price and needs. Search by year and make, or any combination of type, price and year. Chrome Systems Corp. provides the data, which are a compilation of information from the NADA Official Used Car Guide, Kelley Blue Book and the Black Book, a wholesale price guide for dealers. Values also are based on inventory in used car lots, auctions and seasonal adjustments, says Phyllis McCanna, vice president of sales and marketing for Chrome. The information is updated monthly.
- NADA Official Used Car Guide ($9.95). Find the retail, trade-in or loan value (what banks use). The values in this guide are based on information gathered from new- and used-car dealers, auto shows, trade periodicals, vehicle classifieds, magazines, newspapers, advisory boards, associations, and car clubs. NADAguides.com provides a free price quote on the retail and trade-in value of vehicles dating back to 1926.
- Kelley Blue Book ($9.95). Provides retail, private sale, wholesale (or loan) and trade-in values. The book's editors monitor the wholesale market, rental car companies, dealerships and financial institutions to derive values, says Blue Book editor Charlie Vogelheim. The Blue Book Web site does not provide values for vehicles more than 21 years old, but it does factor in condition when estimating values (the NADA online guide doesn't).
- Also search Cars.com or AutoTrader.com for actual retail prices of used cars on sale throughout the country. Or check manufacturers' Web sites for a listing of their used-car inventory and prices.
You likely will find discrepancies from guide to guide. We priced three models (2000 Acura Integra LS sedan, 1999 Jeep Wrangler SE and a 1996 Pontiac Sunfire coupe) and found retail values ran about $500 to $1,000 higher in the Kelley Blue Book, while trade-in values were as much as $1,500 less. McCanna says the Blue Book is designed for dealers, not consumers. Vogelheim agrees that retail values in Kelley Blue Book traditionally are higher than those in the NADA guide, especially for imports and light trucks. Kelley relies more heavily on data from the West Coast, where cars depreciate slower, he says.
Banks and credit unions in different parts of the country also tend to rely on different guides, so find out which guide your lender uses. If you pay more than your banker expects, he might not finance the entire amount.
Go shopping
Start by going to a franchise dealer -- one linked to a particular manufacturer. They usually get first pick of the trade-ins and off-lease vehicles and tend to have a stronger inventory. The cars passed over by franchise dealers are sent to auction, where most other used car dealers get their vehicles.
Pre-owned autos at franchise dealerships likely will receive a "certification" and carry a limited manufacturer's warranty. "It's as close to buying new as you can get," Peacock says.
To be certified, low-mileage, late-model vehicles must pass a 40- to 100-point inspection, depending on the manufacturer. Warranty lengths will vary by manufacturer, but generally cover major driveline components. For example, Mercedes provides a comprehensive one-year warranty plus the remaining portion of the original warranty. Toyota provides a six-year warranty (from the original date of use) on the major engine components only. For more on certification and warranties, see "Car-Company Cachet."
If you don't want to waste time driving from lot to lot looking for the perfect car, most manufacturers list their inventory online. For example, the BMW Web site lets you search certified pre-owned inventories within a 500-mile radius of your home town. If you live in the Southeast, Great Lakes region, Texas or California, check out CarMax, which also lets you search its inventory of used cars online.
Do your homework
Research is the key to getting a deal on a used car, says Kerry Pipes, editor of Used Car Dealer magazine, published by the National Independent Automobile Dealers Association. Once you've found the car you might buy, check its history and safety record.
History. Get the VIN, or vehicle identification number, to check a car's history at Carfax or Auto Check. Be on the lookout for a mileage discrepancy or a salvage/junk record. Also note if the car has crossed state lines. State salvage laws vary, and a state-to-state move could be an attempt to hide problems, Perry says. If you're checking just one vehicle, Auto Check and Carfax charge $14.99. But for $19.99 you could do an unlimited number of checks for two months.
Consumer Reports provides reliability histories on used cars based on surveys of thousands of car owners. The survey results are published each April in the magazine and are available to online subscribers.
Safety record. Crash-test results, consumer complaints and manufacturer's technical bulletins, which alert dealers to problems, can all be found at the National Highway Traffic Safety Administration's Web site.
Research won't guarantee that you'll find every problem with a car, but it will help you steer clear of a clunker.