Used Car Buying Tips

Here's some used car buying tips that can protect your wallet and lead you to a reliable ride.

Financing
Let's start where it really counts: financing. Before going to the dealer, check with your bank or credit union to see what rates they are offering on used car loans. Most banks will only offer a loan up to the current value of the car, which can be found on sites such as the National Automobile Dealer Association's NADA Guides.

If the car you want to purchase is listed at a higher dollar amount than what it is worth, you can put some money down to bring down the price, or the bank can offer you a separate loan for the difference. If you bank with a credit union, chances are that the rate it offers is better than what you will get at the dealer, and that means lower monthly payments.

When you go to the dealer without going to the bank first, you may have to wait a few months before being able to refinance your car at a lower rate. If you do business with a few different banks, compare their current rates, and find out which one is better. If you prefer one bank over the other and let that bank know, the bank might match the better rate you received so it can earn your business.

Next, check your credit score so that you know the rates for which you will qualify. If you have good credit, you will qualify for the best rates from the bank. Good credit will decrease your monthly payment and increase your savings. If you don't know your credit standing, you can find out at a variety of free credit report Web sites. Some credit card companies offer credit information at no charge as part of their services. Check with your local bank as well to see if it offers credit information at no charge.

If you have financed your car through your bank and it has given you a check, the goal is to buy the car for the amount of the check or less. If you get a check from the bank for $30,000, and the car you are looking at is $31,000 or $31,500, stick to your guns. Chances are the dealer isn't going to walk out of a cash deal. You can even say that dealer X has the same car with about the same miles for $1,000-$2,000 less in the same condition. Once the dealer knows you've looked elsewhere, you can start haggling.

Buying From an Individual
You can still apply for a loan at your bank with that same great rate. You'll fill out less paperwork, and you won't have to pay dealer fees. It is recommended, though, that you take the car to your local mechanic or at least have someone else check out the car to make sure it is in good working order.

You can get a CARFAX report on any used vehicle, but you should know that if the car has been in an accident that has not been reported it will not be on that CARFAX report. Also make sure the seller has the title to the vehicle. If he cannot provide the title, he is probably not the owner of the vehicle, and you should start looking elsewhere.

Other Used Car Money Matters
Gap insurance is a must if you owe more than the car is worth. If something happens to the vehicle-say, it gets totaled or stolen-the gap insurance will cover the total amount you owe.

If you are planning to keep this car for a while, an extended warranty is not a bad option. You want your investment to be protected, especially if the current warranty has expired or has little time left. You can go through your dealer or another company. An extended warranty on a used car can save you thousands of dollars should something go wrong with the vehicle.

Which Vehicle to Choose?
Once you have narrowed it down to a few models, go out and test drive the cars. Look for a car with decent mileage. A car should average about 12,000 to 15,000 miles per year. If you find a car with fewer miles, go for it. With those numbers, it is likely that the car was very well kept and hardly driven. Some dealers also offer better warranties on "certified" cars. Ask your salesman to show you his certified car selection on the lot. These cars go through a more in-depth inspection, and you get a better warranty.

The more research you do and the more cars you test-drive, the less likely it is that you'll get stuck with a lemon.