Buying a Used Car With Poor Credit
October 22, 2007 - 8:44 PM EST
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If you are considering taking out a loan to buy a used vehicle, there are a few things to consider:
Annual percentage rates usually are higher and loan periods generally are shorter on used cars than on new ones. There are advantages to getting a new car loan, even with bad credit. However, new cars and trucks have been sold in greater numbers by automakers, due in part to rebates and low interest financing. This has created a larger inventory of used cars, which will continue to grow. That gives you the ability to shop around and better compare prices for a used vehicle, as well as have a larger selection to choose from. Unlike new cars, which have a fixed cost set by the manufacturer, used cars are acquired through a variety of methods, include trade-ins and automobile auctions. The dealership's ability to purchase cars at low wholesale prices is an advantage for the customer who has bad credit. You can also shop rental car companies, leasing companies, and superstores that specifically sell used cars. A seller that helps the buyer purchase a used vehicle with a lower monthly payment than a new vehicle makes both the lender and the buyer more comfortable.
The more time you spend researching a potential vehicle, the more money you can save. This savings is not just realized on the purchase price of the car, but also over the life of the automobile. If possible, try to find out the maintenance costs and frequency of shop visits. The Internet has a ton of information on models, options, costs, repair records, safety tests, and mileage. You can usually find some of this information in consumer automotive magazines, libraries, and book stores. Also look at many of the certified pre-owned car plans. This has the added advantage of supplying added protection to the used car buyer.
Consider your driving habits. When and how will the vehicle be used? If you intend on putting a high degree of mileage on the vehicle, you want to look for a vehicle with relatively low mileage and a good track record of accumulating miles. If the used car you are interested in is a more recent model, you may be able to take advantage of the original factory warranty, which is transferable to a second owner. Certified pre-owned cars will typically allow you to add additional time to a warranty.
Finally, be aware that auto dealers are not required to provide a right to cancel time period for used cars. Most dealers do have some sort of "love it or leave it" policy, but this is only exists if instituted by the dealership. Before buying any vehicle, find out about their return policy, get any such policy in writing, and make sure you understand it fully. Even though most states will also require a dealership to sell cars of "reasonable" quality, some dealerships can use terms such as "as is" to waive any implicit warranty. On any car loan or purchase contract, the most important thing to do is read the fine print. Remember, there is no such thing as a "standard" contract! Read every word and then make the right choice.
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