Helping you buy a used car
A major expense
The purchase of a car is typically the second largest expense we will ever face as consumers. Buying a $15,000 used car still counts as a large expenditure and therefore should be addressed with as much if not more preparation as a new car purchase.
We have therefore compiled a number of important tips that should be followed when buying a used vehicle.
Given the crafty nature of the business, we've also put together a glossary of commonly used terms and jargon.
Top 12 Guidelines
If you are in the early stages of a used car purchase, we invite you to take a few minutes to browse through our list of top 12 guidelines that will help you avoid precarious situations. Each section includes invaluable tips on how to help you navigate this oftentimes complicated process.
The path towards buying a new used vehicle should always begin by identifying needs and budget. Every person and family will have different requirements or expectations from any given vehicle.
Needs must take into account what the vehicle will be used for. A two-child family (that does not play hockey) will get away with a 5-seater crossover whereas a family with 3 kids will need to look into a larger, three-row vehicle. Other considerations include towing, ride height (if aging parents need rides), fuel consumption and how the vehicle fits into the garage.
Sometimes, oftentimes, that extra grand cash-wise quickly turns into a financial headache far more than one would expect. The catch is that, after all, it will only cost an extra $150 a month. The key, as in buying or leasing a new vehicle, is looking at the total cost. Here again, fuel consumption may make or break the deal. Insurance is another hefty amount to include in the sum.
- A fixed budget will keep you away from terrible temptation. It is dangerously easy to get carried away with the desire for the slightly better equipped model for only $3,000 more. This is especially true when considering that the difference may have been 2 or 3 times that amount when the vehicle was new.
There are more sources for car information than you can shake a stick at. Be it online or in print, the used car business is a huge generator of revenue for dealers.
Numerous publications take the time to evaluate the worth of vehicles once they are a few years old.
These media typically painstakingly take note and tabulate complaints, recalls and other safety issues in order to paint a complete picture of a given car's merit. These stats along with crash test results from sites such as the National Highway Traffic Safety Administration (NHTSA) and the Insurance Institute for Highway Safety (IIHS) will point you in the right direction for the near perfect used car purchase.
Elements to consider
The most important elements to strongly consider are reliability, safety and ownership costs. Reliability is tied into ownership costs but beyond that, the thought of purchasing a vehicle that is notorious say for, transmission failures, is clearly not a good idea.
Ownership costs relate to everything from insurance coverage to replacement parts. Some brands charge premiums for certain components whereas other higher volume brands have lower retails prices.
You can find all of this great information in magazines such as:
- As a car evolves through the years of a given generation, issues are generally addressed. Therefore, it is usually best not to purchase a model from its first year of production.
It is always difficult to say where you might locate the perfect car or if it even exists. There are numerous points to take into consideration when starting the shopping around process.
Private seller or dealer?
As you will see later on, you will be faced with choosing between a private seller and a dealer. This consideration will have to figure in your budget as there may be additional taxes and fees involved when dealing with a professional.
Reputation is an important factor when digging through potential sources for buying a car. If a family member or neighbour purchased a car at Dealer "X" and has had nothing but trouble with the car and servicing, odds are you should look elsewhere.
Keep in mind that it is always possible to find the best car at the worst place or the worst car at the best. It is a well-known fact that dealers are not always 100% aware of what it is they have on their lots. Because of this, it's important to take the time to do all of the necessary legwork and homework.
- Patience is key. A used car, even if the amount spent is no more than $5,000, will most likely be among the most expensive items you own. Take your time.
The World Wide Web
The most common, comfortable and effortless avenue to start your search is by going online. There are countless websites, such as our own auto123.com, where thousands upon thousands of ads are available at your fingertips.
While you browse through this large inventory of cars, as you narrow your search to one or two models, you will get an idea of what the average selling price may be for the type of vehicle that interests you most.
Ads in newspapers and specialized magazines, published on a daily or weekly basis, are other options.
By far the greatest advantage to shopping online is the ability to compare models side by side, read reviews by owners and professionals. All you need to do is look up specs from the cars you like and compare them side-by-side.
Once a car has caught your eye, the time has come to make phone calls. Be well aware of the shady phenomenon known as the curbsider or fake private seller.
- If the average price through five ads of a model of car you want is of $10,000 and one is listed at $6,000 in similar condition, odds are that it has issues. "To cheap to be good" are words to live by when shopping for used cars.
Making this choice is not as simple as it might seem. There are advantages and disadvantages to dealing with both types of sellers.
When buying from a private seller, you can expect to pay a lower price. As the person has no overhead or costs involved in selling the car, he or she has no need to make an actual profit. As well, depending on regional laws, you may save on sales taxes given that you are not dealing with a licensed professional.
The down side include not being able to purchase an extended warranty should that interest you and, more importantly, it limits any if not all recourse against the seller in the event that something goes awry in the transaction or with the car itself.
By purchasing a car from a dealer, you may have the option to purchase an extended warranty. Be warned that this may not always the best idea as some warranty-issuing companies are difficult to deal with. On this issue, we would suggest that you contact the APA for further information.
Licensed dealers must be bonded. In the event that something does go amiss in the transaction or with the car itself, this bond gives the buyer some guarantees in the event that the dealer closes down or chooses not to pay up following a lawsuit.
Negative points to consider here are the fact that you will most likely pay more for the car itself and will have to pay total sales taxes, administrations fees and other related costs.
- Beware of fraudulent ads that require a deposit before you can see the vehicle that is for sale.
After you have increased your level of knowledge on the vehicle that tickles your fancy and have found one that fits your criteria, the time has come to make an appointment with the seller.
One more quick look around
Just before you do, check out another site or 2 before you make that call. There are so many sources of ads out there that you simply can't afford to visit only one site.
Once at the dealership (and having taken your first look at the car), the second (but cheapest) thing to do is to take the car for a test drive. Most people have a general idea of how a car should behave so look for odd noises, rattles and make note of them. The drive will also tell if this car satisfies your needs and wants for performance and handling.
If the vehicle seems fine, take down the VIN number (Vehicle Identification Number) that you will find at the bottom of the windshield or in the door jam. It will serve important purposes when you get back home.
- Contact your insurance company with the make, model and year to get a quote on the car you are about to go and see.
The car has passed your preliminary verification and you like it. The next step is to put a "hold" on the car because you must get it inspected.
In most cases, the seller will require a deposit for you to get the "hold" on the car for a defined amount of time. This short period of time will be necessary while you do some more digging on the vehicle.
The deposit is a "promise" to buy the vehicle without actually promising to buy the vehicle as you will not be signing any contract. If the document is a standard contract, ink in the line: "Receipt for deposit only" and/or "Contract void" or "Contract not binding."
While there are no specific rules or laws regulating this "mini transaction", you can protect yourself by always requiring a receipt and clearly indicating on both copies the make, model and year plus the car's VIN number and the following: "Fully refundable if transaction is canceled."
$500 to $1,000
As well, there is no set amount for the deposit. For an average transaction, $500 should suffice. If the car considered for purchase is either rare, in demand, or pricey (say over $20,000), the deposit should ideally not climb over $1,000.
- If the seller requires a far larger amount, say 10% on a $20,000 vehicle and is not negotiable on the demand, walk away. Once again, there are other cars out there.
The VIN number, or Vehicle Identification Number, is the car's birth certificate. It can tell you where the car was built (country and factory), the year it was built and a number of other items including powertrain and finish colour.
With this number, all departments of transportation across Canada and the United States keep track of every vehicle on the road. Accidents, recalls and various other activities are all assigned to this number.
With VIN in hand, you'll be able to get the vehicle's history by visiting a number of dedicated websites such as Carfax (American), Carproof (Canadian) or by using auto123.com's VIN check section.
VIN history report costs
The cost for a detailed vehicle history report runs between $35 and $45 and may be well worth the investment. It will potentially tell you the number of owners that car has had and how long it has been registered. If you are lucky, it may even indicate the mileage that it had at the time of the last transaction.
- Look up the Canadian Police Information Center to find out if the car you're looking at has been declared stolen. This search is free and takes mere moments to complete.
If you've come this far in the transaction, the time has come to talk turkey. We all know money walks so it's negotiating time.
At this point, you should have an excellent idea of what the car you are interested in is worth, in other words, the market value of the car (the same goes for your trade-in) and a vehicle history report in hand. You can therefore negotiate a fair price with the seller.
As best as you can, try and have basic arguments as to why the price might be too high other than the above mentioned items: visual damage on the car, higher than average mileage (based on your research), condition of tires or interior flaws, etc.
- When dealing with a professional, an extended warranty may be offered. Costs are typically high and more often than not, are not worth the asking price. Go to the used car warranty section in the Consumer Info on the APA website.
This is without a doubt the most important step in the entire transaction. Once the price has been agreed upon, it's time to take the car to an independent garage for a thorough inspection.
Look at it this way: Would you buy shoes without trying them on? Exactly.
This inspection will paint a complete portrait of what it is you are about to purchase. Average costs run between $70 and $150, depending on the depth of the investigation that will be performed.
The price of the inspection is nominal when taking into consideration the fact that you are buying a $5,000 or $20,000 car. This is the final, absolutely crucial step that must be taken before signing the sales contract.
The best type of inspection will include a "car-body" once-over. Not only should the main structural and mechanical components of the car be checked out but the body panels should be looked at as well. A simple paint depth gauge will let the inspector know if the car has been re-sprayed or worse, was involved in an accident.
- In some cases, used car dealerships may have an adjoining garage or one nearby, where the seller will suggest you take the car to be checked. Odds are they work together. You are better off taking the car to your regular garage or to an independently recommended one.
If you do not know of a good garage or the one you typically deal with does not perform the important and often overlooked body inspection, you can find a good reliable garage in a number of ways.
You may contact the Automobile Protection Association (APA) as they provide some names to the general public. For the full list of garages for both inspections and regular maintenance, you must become a member. Depending on where you are situated in Canada, they can recommend an accredited mobile inspector which is the best alternative.
Another option is contacting and joining a local chapter of the Canadian Automobile Association (CAA).
Your immediate entourage, be they family or friends, probably have a number of suggestions for you. A word-of-mouth recommendation is also an excellent and inexpensive way to find a reliable repair shop for an inspection.
New-car dealer of the make in questionA new-car dealership of the make is a plausible alternative. Their knowledge of the brand and the car you fancy gives them an advantage but they usually do not perform car-body verifications. The other issue could be the price of the inspection which can run upwards of $125.
- In any case, an inspection is of the utmost importance if only to show that you did your due-diligence prior to signing on the dotted line. Should you ever have to sue the seller, proof of this could make the difference between winning or losing your case.
With a dealer
The contract is the binding element that ties one party to another. In these types of transactions, it defines obligations and recourse. It is therefore imperative that the contract state every possible element describing the transaction, its limits or exclusions and inclusions, if any.
Contents of the contract
In a dealer transaction, they will normally supply the paperwork. The document will contain areas for both the seller and the buyer's personal information, a description of the car including the serial number or VIN as well as details pertaining to the price paid, taxes and other fees. If the car is sold with a warranty, its details should be included.
In many Provinces, a car sold by a professional or dealer, automatically includes some form of minimal coverage for a set period of time or kilometres traveled. A dealer can typically not sell a car "without any warranties" or "As is" unless specific details are noted about the vehicle not being roadworthy.
With a private individual
Between private individuals, in many instances, it is not necessary however highly recommended, to have a documented contract. It should contain the vehicle's make, model, year, mileage, and most other details found in the contract.
Here also, the mention of warranty is important. A private individual can typically sell a car "without any warranties" or more commonly "As is." This then means that, upon signing the document, the buyers agrees to waive all recourse against the seller.
In any case, the inspection prior to signing the contract will have disclosed a crucial amount of information about the car's condition.
Important note: Before signing ANY contract, be sure to read the entire document. Putting your John Hancock on the document means that you ACCEPT and UNDERSTAND all clauses. In the event of a lawsuit against the seller, saying "I did not read the contract" or even "I didn't understand what I signed" will not stand up as a valid defence.
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