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Five Steps for Buying a Used Car the Right Way

Buying used can make smart money sense--if you follow these five easy steps:


1. Always have a mechanic check out a used car before you buy it. Even if you're buying from your mother. Use an independent service shop or diagnostic center. Most charge about $125 for a complete check.


2. Budget any needed repairs as part of your purchase price. So, if a seller wants $7,000 but the vehicle needs $1,000 in repairs, budget $8,000 for your vehicle. Or, better yet, negotiate the selling price down to include the cost of repairs.


3. Forget about a used vehicle's "asking price." Smart used-vehicle buyers never negotiate down from asking price, they negotiate up from "loan value." Loan value is what most lending institutions will actually lend on a particular vehicle. Your credit union loan officer can tell you this figure. For instance, if the seller is asking $7,000, but the loan value is $6,000, you want to negotiate up slowly from $6,000.


4. Talk warranty after you've settled on the price. And never accept a 50/50 warranty--the dealer pays half of warranty-covered expenses. On any vehicle, fight for at least a 30-day, 100% drivetrain warranty. If you're also thinking about buying an extended service agreement, remember that the price of a service agreement usually is negotiable, too.


5. Always shop used-car financing rates. Most states allow dealers to charge much higher rates for financing used cars than for financing new cars. For instance, a new car might be financed at 8% while a two-year-old used car might be financed for 15% or higher. How do you find the cheapest rate? Ask the seller to give you a completely filled out copy of the finance contract, and compare it with your credit union's rate. A tip: Denali Alaskan finances used cars at or near new-car finance rates.

Copyright 2008 Credit Union National Association, Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved