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Kristin Kay
Kristin Kay

How To Buy A Preowned Car From A Dealership EXCLUSIVE

Not sure if you want to take the leap into a used car with no warranty coverage? There is a used car option that does have factory warranty coverage. Manufacturer-certified pre-owned cars (CPO cars) offer a blend of used-car affordability with manufacturer-backed warranty coverage. They're usually low-mileage cars that are just a few years old, with service records and no history of accidents. They are often cars returned at the end of leases, dealership service loaner vehicles, or vehicles driven by dealer or automaker staff.

how to buy a preowned car from a dealership

If you're sitting on a pile of money and plan to pay cash, you can skip this section. If, however, you're like most used car buyers, you'll need a loan to help pay for your used vehicle. It's true that you can have the dealership's finance office arrange your financing. Still, if you want to save money, you need to get a pre-approved financing offer before you get anywhere near a car dealer. A dealer may be able to beat your pre-approved loan, but if you don't have one, they'll have no incentive to do so.

If you're buying from a private party, you have no choice but to find your own financing. The process can be different for private-party buyers, so be sure to talk to your lender about what they'll need to move your loan application forward.

Getting all of your financing plans in place well before your car shopping starts is the best way to be prepared when the right car comes along. That means before you think about heading to a dealership or meeting with private-party sellers. Step one in the financing process is looking at your credit score and exploring the credit reports behind your credit rating.

A finance company is similar to a bank, except that their only business is lending. Instead of accepting deposits and then lending that money back out, finance companies borrow from other financial institutions, then make loans to consumers using that borrowed cash. Many finance companies specialize in making loans to certain types of borrowers, such as those with poor credit.

Just as smart buyers should talk to multiple car dealerships and other sellers before buying a used car, you should apply at multiple lenders to find the best financing deal. It's critical to do so during a short span of time, so the credit reporting agencies don't think you're taking out multiple loans and ding your credit score over and over. Do your shopping over a week or so, and they'll just see it as one transaction. That's important, because each transaction that pulls a credit report lowers your credit score by a few points.

Just as there are many places to get used car financing, there are various places where you can purchase a used car. Each has its strengths and weaknesses in terms of service, ease, and price. Like the car you want to buy, you should strive to learn as much as you can about the dealership or private seller trying to sell it to you. Checking the company out with your local Better Business Bureau or consumer protection agency is an easy way to find out about their track record. You don't just want to look at the number of complaints, but how they responded to correct the problems.

Most new car franchises have adopted strict COVID-19 protocols, mandated by their manufacturers, to protect both customers and dealership staff. Some have robust online buying processes and home delivery options.

When it comes to used car dealerships, national or regional used car superstores are the new kids on the block. They offer many of the same advantages of franchised new car dealerships, such as expertise in handling paperwork, step-by-step buying processes, and access to an array of lenders. Many sell their own line of add-on products, such as extended warranties valid at any of their locations.

They also have access to a vast selection of used cars. With most dealerships, you're limited to the pre-owned vehicles they have on their lots. That's not the case with used car superstores such as CarMax, which can draw on inventories from across the country and bring those vehicles to your local outlet.

Independent used car dealerships are typically small, locally owned businesses. They buy and sell used vehicles, arrange financing, and take care of the purchase paperwork. Their inventory typically comes from wholesale auto auctions. Most don't have service departments and have less total overhead than a typical new car dealer.

When you buy a car from a person or business that's not in the business of selling cars is known as a private-party purchase. It can be the cheapest way to buy a used car because you don't have to pay for a dealership's overhead or profit. A private-party sale generally provides the seller with the best return, and the buyer with a lower price than they would find at a dealership.

Because private-party sales are mostly unregulated, you don't enjoy the same consumer protection laws you have at licensed car dealerships. You'll need to be a skilled negotiator to overcome the emotional attachment a private seller will have for their old car.

Accidents: While it may not show very recent collisions, a vehicle history will include information about major reported accidents a car has been in. It uses data from state DMVs, insurance companies, police agencies, and other sources. In some cases, information as detailed as airbag deployment and structural damage will be noted.

Flood, Fire, or Other Damage: A vehicle history report will also indicate other damage, such as water damage from a flood, fire damage, or damage from a hailstorm. The first two should disqualify a vehicle from your consideration, due to the high potential of hidden damage.

Maintenance and Service History: A car that a seller can show was properly maintained is worth more than one without any service records. You can get a sense of its maintenance history with the information included in a vehicle history report. You'll also want to get copies of the vehicle's service history from the seller, and have the mechanic who does your pre-purchase inspection assess the quality of the work.

Sales Information: The sales information section of a vehicle history report will show when the vehicle first entered service and how many times its ownership has been transferred. Watch for vehicles that have been moved repeatedly from state to state, or from an area that has recently endured floods, fires, hurricanes, or other natural disasters. Not only is moving a car one way to mask title issues, but it can also be used to hide flood damage.

When the time comes to start looking at used cars in person, your first impression of both the vehicle and the seller should tell you if you should move the process forward or walk away. If you're looking at a car from a private seller, it's a good idea to treat it like a blind date and meet somewhere public away from your home and theirs. You want to look at cars in the daylight, as the dim light of evenings can prevent you from spotting damage.

A proper test drive starts well before you start moving. You want to get comfortable in the vehicle by adjusting the seats, steering wheel, and mirrors. Ensure you can reach all of the controls and see what you need to see from the driver's seat. If you can't get comfortable on your test drive, the car isn't going to magically become more accommodating after you buy it.

While you should note every flaw during the drive, not all should eliminate the car from consideration. Some issues can be used as bargaining chips when negotiating a price. All issues should be brought to the attention of your pre-purchase inspection mechanic.

A great test drive may have you ready to write a check and drive the car home right away. However, there's another critical step you have to complete before you decide to buy. With just one exception, you should not buy a used car without a comprehensive pre-purchase inspection by an independent mechanic. The only exception would be if you're buying a relatively new certified used car with factory warranty coverage from a franchised new-car dealership.

Different states require different documents for a private-party sale. At the very least, you'll have to reassign the title from the seller to you and register the car in your name. In some states, you'll also have to file an odometer disclosure or have the odometer reading verified. If you're moving the car to an area with safety or emissions testing, you'll need to have that done before registering the vehicle. Some states will require you to have proof of auto insurance coverage and require payment of any taxes when applying for registration.

If that happens to you, the first call you want to make is to a local bank or credit union to determine what kind of a deal you qualify for and get approved for a new deal. Take that pre-approved loan back to the dealer and use it to buy the car. If you can't qualify for financing from an outside lender, take the vehicle back to the dealer and demand they undo the deal. In some states, the laws regarding spot financing are in the buyer's favor. In some states, however, they favor the dealership and leave you with few options.

You can avoid falling for this unethical practice by financing your used car purchase outside of the dealership and ensuring all of the documents are finalized before you sign. Watch out for phrases such as "conditional approval" or "conditional delivery." Don't sign any papers with those terms.

Before you do, you want to do your research. In many cases, the products can be purchased outside of the dealership at better prices. Products such as extended warranties can be purchased from many lenders and insurance companies. The same goes for gap insurance coverage, which can usually be packaged with the rest of the car insurance coverage you buy from an auto insurance company.

The time pressure will come from the dealer's desire to include the products in your car's financing. "It will only add a few dollars per month to your payment," you'll be told. The truth is, you rarely want to finance these add-ons. They add no little value to your vehicle but raise your financing's loan-to-value (LTV) ratio, potentially putting you underwater. The "just a few dollars per month" argument also hides the real cost of the products. 041b061a72


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