Used Car Prices – Pricing and Negotiating

How to Find Used Car Prices and Negotiate Best Deals

how to negotiate car dealsBuyers and sellers of used cars often wonder how prices and values are determined. How are values of used cars set? Who sets values? Are the values reliable?

If you are a buyer, is the seller’s asking price being fair? Are you paying too much? Can you talk the seller down on his price? What price should you offer without being unreasonable? What if the seller doesn’t accept your price?

If you are a seller, how much should you ask for your car? How do you determine used car values? What is a fair price to ask? Should you set a higher asking price to allow room for negotiation?

These are all common questions. Let’s try to answer them here.

Used car prices are not an exact science

We all know that a brand new car’s value begins to depreciate as soon as it’s driven off the dealer’s lot, often as much as 20% of MSRP (Manufacturers Suggested Retail Price – sticker price).

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High Mileage Car – Good or Bad?

Is It Smart to Buy a Car with High Mileage? Good or Bad?

high mileage used carWhen shopping for a used car, you might find a car you like that appears to be in great condition but has what seems to be high mileage.

Since about 15,000 miles a years is average for most cars, anything significantly more than that is considered high mileage. So, for a car that is, say, 6 years old, it should have about 90,000 miles to be considered as “average.”

However, just because a car has an average number of miles — or less —  doesn’t mean it’s worth buying. It could easily have serious problems if it has been driven roughly and not properly maintained, or has been wrecked and poorly repaired.

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Can I trade my car for a cheaper car?

Can I lower my payments by trading for a less expensive car?

trade for cheapere carYes — maybe.

But whether it’s a good thing to do will depend on your particular circumstances. Let’s take a look.

If you want to trade your car for a cheaper car, it probably means you are finding it difficult to afford payments on the car you now have. Or you simply want to trade down to have a little extra money each month by lowering your payments.

Let’s look at the two different possible situations, one of which will probably match your own situation.

Situation #1

You are “upside down” on your current loan. That is, you currently owe more on your loan than your car is worth as a trade-in vehicle. You can determine how upside down you are by first asking your bank or loan company to give you your loan payoff balance. Then compare that amount to the actual trade-in value of your car (see www.kbb.com and www.nadaguides.com). The difference in the two amounts will tell you how much you are behind in your loan (“negative equity”).

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How many miles are too much for a used car?

Should I buy a car with high mileage? How many miles is too many?

high mileage carsWe frequently hear these questions from people looking for used cars for sale.

Generally, 15,000 miles a year is considered an “average” number of miles per year. So a car that is 5 years old would have about 75,000 miles to be considered “average.” Anything significantly more, and a car is considered to be “high mileage.” Anything significantly less, and it’s a “low mileage” car.

What does it mean if a car has high mileage?

Does it mean you should avoid cars with “high” mileage?

Are cars with high mileage a bigger risk? Will they break down sooner?

Not necessarily.

In the last decade or so cars have become much more reliable than years ago when a car was looked at as junk when it reached 100,000 miles. Not so anymore. Many modern cars with 100K miles or more are in great condition and will easily go another 100K.

However, if a car has not been maintained properly and has been driven hard or previously wrecked, it can be junk with only 50K miles on the odometer.

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Can I get a car loan?

Will I be able to get approved for a car loan?

approval for car loanThis question typically comes up if the potential car buyer 1) has never had an auto loan before and doesn’t know how the process works, or 2) has credit or income issues that might prevent them from being approved.

For those who are new to the car loan process, let’s briefly review how it works.

First, in order to get a car loan, you must be at least 18 years old (to legally sign contracts), have good credit, and have a good steady income.

Many young people, such as college students, who have never had a loan before may have no credit history and have little or no income. For them, if they can’t pay cash, getting someone to be a co-signer on the loan is the only remaining option.

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Can I afford this car? What car can I afford?

How much car can I afford to buy?

afford carBased on my monthly income, can I afford the car I want?

This is a common question but doesn’t have a set answer.

The answer depends on the following factors, assuming you will use an auto loan to pay for your vehicle:

  • price of the vehicle, including tax and other costs
  • cost of full-coverage insurance, as required by your lender
  • your monthly income, after taxes
  • your monthly expenses
  • your credit score (affects the amount you can borrow)
  • the amount of down payment you can afford

Some experts say that your car payments shouldn’t be more than 20% of your take-home pay. Others are more conservative and say 10%.

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Trading Car With Bad Credit – Explained

Can I trade my car if I have bad credit?

trade car bad creditIt’s like the answer to a lot of other questions, it depends.

It depends on how bad your credit is, what dealer you want to use, where you’ll look for financing, and the status of the existing loan on your trade vehicle.

Let’s take a look at how it might work.

Scenario

I need a new car,  and have a car to trade, but my credit is not good. How does it work?

In this case, it’s good that you have a  vehicle to trade because it can be used as a down payment on a new vehicle loan — assuming you are not “upside down” and have some equity to use as trade credit.

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Can I Refinance My Car Loan? Answers

Is it possible to lower my car payments?

refinancing a carMaybe.

Let’s explain.

It is natural to consider refinancing as a possible way to reduce monthly car payments but it may not always work as expected.

Under the right conditions, you can lower your payments as well as reduce your total finance charges.

Under other conditions, refinancing may not make sense.

In some cases it might not even be possible.

Let’s explain.

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How to Buy Car With No Down Payment

 Understanding Down Payment on Car Loan

no down paymentWe often hear the questions, “How can I buy a car with zero down payment?”, ” Is it possible to get a car with no money down?”, or “How much down payment will I have to make for this car?”

There are a number of ways to acquire a new or used car without making a down payment, or making a minimal down payment. Let’s take a look.

New car without down payment

Most new-car purchases require a down payment but here are four cases where it is possible to escape that requirement:

1. You get a highly discounted purchase price such that the loan-to-value (LTV) ratio is 100% or less — that is, the loan you need is equal to, or less than, the value of the vehicle. Most loan companies set a new car’s value at sticker price. So, when you negotiate a lower price, you reduce the requirement for a down payment — assuming your credit score, income, and income-to-debt ratio are acceptable.

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Bad Credit Car Loan – Options

Buying a car with bad creditHaving bad credit can cause difficulties when buying a new or used car if you need a loan.

However, most people with a low credit score have options that will allow them to get the car they want.

About your credit history and why it is important

Just to be clear, anyone who has ever had a loan, mortgage, or credit card has a credit history file. That file is a detailed report of every loan or account a person has had. It shows account details, credit amount, current status and balance, and payment history. If there have been late payments, missed payments, repossessions, bankruptcies, or foreclosures, those are also in the file. Negative information in the file can remain there for up to 10 years.

When you apply for an auto loan, the lender (dealer, finance company, bank, or credit union) will check your credit history to determine your credit worthiness — which is a measure of how likely, or unlikely, you are to keep your promise to repay your loan — based on your past performance.

However, car dealers and finance institutions don’t take the trouble to read your detailed credit report. Instead, they look at your credit score, which is a numerical rating that summarizes your entire credit history.

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Used Car Guide – Expert Tips and Advice for Smart Buyers