Category Archives: buying

Used Cars Not to Buy

buy used carAll used cars are not the same, even those of the same year, make, model, and mileage. However, certain models have proven over time to be much less reliable than other similar models.

Consumer Reports magazine publishes its Annual Auto Issue each year in April. In it, they reveal the results of a survey of thousands of car owners who have provided detailed responses to questions about the reliability of their vehicles.

From that data, the magazine’s staff compiles reliability ratings and rankings for nearly every make/model used vehicle for the last 10 years.

The ratings are based on responses to specific questions about problems with the engine, cooling system, transmission, drive system, fuel system, electrical, climate control, suspension, brakes, exhaust, paint/trim, body hardware, power equipment, and electronics.

They not only publish a list of the best used cars, but also a list of those vehicles that represent the worst used cars — the ones that should be avoided.

This year there are 108 vehicles on Consumer Reports‘ Worst Used Car list.  Here are samples from that list:

  • Acura TLX ’15-16 (model years 2015 and 2016)
  • Audi A3 ’16
  • Audi A4 ’09-10
  • Audi Q7 ’15
  • BMW 1 Series ’11
  • BMW 3 Series ’08-11
  • BMW 4 Series ’14
  • BMW 5 Series ’08, ’12
  • BMW X3 ’07-08, ’11
  • BMW X5 ’11-12
  • Buick Enclave ’08-11
  • Buick LaCrosse ’07
  • Buick Lucerne ’08

Chevrolet has the most models on the list — 15. Ford, GMC, and Volkswagen also have a significant number on the list — 9, 7, and 9 respectively.

Conversely, popular brands such as Toyota, Honda, Kia, Hyundai, and Mazda have very few — 2 models or less — on the list. Lexus has none.

It’s significant to note those vehicles on the list that have a string of multiple years of unreliability. The Ford Focus is an example with the years 2012 through 2016 listed as not recommended — 5 straight years of unreliability. The Dodge Grand Caravan also has 5 years noted, as does the Chrysler Town & Country.

The Mini Cooper has 7 model years listed, and the GMC Acadia has 8 models, the most of any make/model.

Several have 4 model years on the unreliability list:

  • BMW 3 Series
  • Chevrolet Silverado 2500HD
  • Chevrolet Suburban
  • Chevrolet Traverse
  • Jeep Grand Cherokee
  • Volkswagen Jetta

In summary, not all used cars are the same. Some are great choices based on actual owner surveys, and some are not. Making the right choice when you buy can save you money and problems in the future.

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Negative Equity Car Deal – How to Make it Work For You

What is Negative Equity ?

upside down car loan - negative equityWhen you get a car loan and agree to pay it off over, say, 5 years there can be times during that loan in which you owe more than the car is worth. It’s called being “upside down” or “under water.”

If you wanted to sell or trade your car during this time of negative equity, you would need extra money to pay off your loan because the value of your car doesn’t cover the full amount you owe.

This situation can happen for a number of reasons:

  • You paid too much for the car initially, which means your loan can be “upside down” from the very beginning
  • You agreed to a very long-term loan that doesn’t get paid off as fast as the car depreciates in value
  • You have a very high interest loan, possibly due to bad credit, which creates payments that pay down your balance very slowly
  • You made little or no down payment and the value of your car depreciated at a faster rate than the rate at which you pay off your loan
  • You purchased a car make/model that loses its value faster than similar cars of other brands
  • Your car becomes damaged or not well maintained, which decreases its value
  • You drive an unusually large number of miles each year, which creates a “high-mileage” vehicle with high loss of value

Who is most likely to have a negative equity car loan?

People who are most likely to find themselves in a negative equity situation are inexperienced young people who have limited income and less-than-great credit.

Inexperience temps these buyers to purchase more car than they can afford, with insufficient down payment and a high interest rate. They also opt for a much-too-long loan term as a way to create affordable monthly payments.

The result is almost certainly to be an upside down loan situation.

What can you do if you have negative equity and want to sell or trade?

Sell or trade? The two situations are different if negative equity is involved.

If you sell your car, the money must be used to pay off your loan. If that amount is not sufficient to fully cover the loan, you must come up with the difference in cash. Your loan company will not allow you to continue paying on the loan.

If you trade your car, you may have some other options.

If the amount of your negative equity is relatively small — less than 10% of the value of the new car — a dealer may be able to “roll” the amount into the new loan. It increases the monthly payment amount on the new car, and likely puts you right back into another upside down situation — not a good habit to get into.

The ideal way to resolve negative equity is to simply have the cash to pay it off.  When trading, this means adding the cash to your down payment for your new loan.

Leasing is another option that can work for some people with negative equity

Since leasing provides much lower monthly payments than buying with a typical loan, rolling negative equity from a loan into a new lease can soften the impact.

However, this strategy will only work if the amount of negative equity is not too great.  Furthermore, only brand new cars are leased, which means you might have affordability issues.

For more details on leasing, see LeaseGuide.com.

Are there other problems with negative equity?

Yes.

If your car is stolen or is totally destroyed in an accident, your insurance (or the insurance of the at-fault party) only pays current replacement value, not the amount you owe on your loan.

If you are upside down when this happens, your insurance settlement, minus your deductible, doesn’t fully pay off your loan — which means you must arrange for the difference on your own. This can often be a financially devastating situation if you have a great amount of negative equity.

When does negative equity not matter?

So it seems negative is only a problem if you will want to sell or trade before your loan is paid off — or if your car is stolen or totaled.

If you keep your car and complete your loan, it’s not a problem. In fact this is the easiest and least expensive way to get out of a negative equity situation.

How to avoid negative equity and its problems

  • Make sure you don’t over-pay for your car
  • Never take a loan that is more than the purchase value of your car
  • Make as large a down payment as possible on your car loan
  • Shop for the lowest interest rate loan at banks and credit unions
  • Avoid very long length loans of 72 months or more (60 months max on used cars)
  • Repair damages and keep your car in good condition

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Beware of Buying Hurricane Flooded Cars

Flood Damaged Cars from Hurricane Harvey and Irma Will Soon Begin Showing up on Used Car Lots All Over the Country

flood damaged carsEarly estimates indicate that as many as half a million cars have been flooded and damaged in the path of Hurricane Harvey and Hurricane Irma. That number might be a low estimate given the breath of the disaster.

These are not only personal and business vehicles but brand new and used vehicles on dealers’ lots.

Most will have suffered damages caused by water in the engine compartment, the interior, the trunk, and inside door panels. Electronic and electrical systems as well as computers will have been destroyed. Exteriors and paint will also be affected.

Most of these vehicles have been insured, including those on dealers’ lots and in showrooms. Owners will receive some compensation, although probably not enough to cover a replacement vehicle or cover loan or lease balances.

What happens next?

Historically, what we know will happen is that insurance companies will declare almost all these vehicles as total losses (“totaled”). Once that happens, they  will try to recover as much of their losses as possible by selling many of the vehicles to “rebuilders” and others, some of which may not be competent or reputable.

Rebuilders will attempt to repair these flooded and damaged vehicles and put them back on the road by selling or auctioning them to used car lots around the United States. Depending the state, they may or may not come with a salvage or rebuilt title. Many will have purposely had their titles “washed” to eliminate the salvage indication.

In some cases, dealers may not know they are receiving water damaged goods when they buy. And most won’t inspect or look for such damage before selling to unsuspecting customers.

What’s the problem?

Anyone looking for a used car in the months, even years, after a major weather event such as Hurricane Harvey should take extra caution to avoid buying a water damaged vehicle. They are often difficult to spot.

Since water destroys practically everything in a vehicle that it touches, repairs can be major and costly. However, rebuilders often take short cuts, using cheap parts, and ignoring hidden damage to keeps costs down and profits up — all of which won’t be obvious to inexperienced car buyers.

Buyers should look for common signs of water damage before buying. It might be unusual rust in the trunk, musty damp smelling carpets, discolored upholstery, non-working electrical or electronic equipment, mud and debris in the engine compartment, corroded wiring under the dash, hints of extensive repairs and replacement of parts, and possibly a poor repaint job.

In summary, used car buyers are exposed to the very real risk of unsuspectingly buying water damaged and poorly repaired vehicles for a long time after a major national weather event such as Hurricane Harvey and Hurricane Irma.

High Mileage Car – Good or Bad?

Is It Smart to Buy a Car with High Mileage?

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  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.

Continue reading High Mileage Car – Good or Bad?

Dealer Wants Car Back – Legal or Not?

Can a Dealer Take Back a Car After Papers Are Signed? Is it Legal?

dealer wants car backThe short answer to the above questions are Yes and Yes.

It’s a fairly common situation.

You buy a car from a dealer who arranges a loan, you sign the papers, possibly make a down payment and/or trade an old vehicle, and you drive away — thinking the deal is done.

Not quite.

You may have received the impression from the dealer that your loan was approved, which is presumably why you were allowed to drive away in your new car.

However, most dealers don’t provide or approve loans (except for buy-here-pay-here used car dealers). They use outside banks or finance companies. One of the papers you signed was a loan application, not a loan approval or grant.

Continue reading Dealer Wants Car Back – Legal or Not?

Five Biggest Mistakes When Buying a Car

Used Car Buying Mistakes

Buying a car is not like buying a toaster at Walmart. It’s much more complicated with lots of opportunities to make mistakes, not to mention that a large amount of money at stake.

Five Mistakes Made Buying a Used Car

1. Not Doing Enough Research

To many people, buying a car is nothing more than an emotional decision based on color, styling, image, or initial impressions — much like buying a pair of shoes.

However, this can be a mistake when buying a car. Doing proper pre-purchase research is essential. Use Consumer Reports magazine/website to review reliability, safety, and performance ratings.  Get a vehicle history report from Carfax on the car you are interested in. Visit online car forums to get owner opinions and experiences.  Talk to service shop personnel for opinions.

2. Not Test-Driving the Car

A good long test drive is essential to discovering critical problems and issues with a car — and avoiding a big mistake. This should be more than simply driving around the block. It should involve low speed and stop-and-go on city streets, and higher speed on highways.

This is also the chance to check to see that all equipment works — A/C, heater, sound system, lights, and to check for tire wear, body damage, and low fluid levels. Look underneath for signs of leaks.

3. Not Having the Car Inspected by a Mechanic

Never take the word of a used car seller or dealer that his car “runs great” or “has no problems.”  He could be less than honest, or he might simply not be aware of hidden problems.

A professional mechanic’s detailed inspection and problem report can cost $75-$150 but is the only way you can know the real condition of a car you are considering to buy. It could prevent you from making a huge mistake.

4. Paying Too Much

Used car sellers and dealers always set an “asking” price that is higher than the price they are willing to sell for. If you don’t negotiate a lower price, you will probably pay more than the car is worth.  Generally, a 10% discount is reasonable.

However, even with a discount, you could still be making a mistake by paying too much. Use vehicle value guides such as those from Kelley Blue Book and NADA Guides to get a ball-park estimate of the value of the car you want to buy.

5. Ignoring the Car’s Title

Many buyers make the mistake of not examining a seller’s car title before buying.  If it’s an individual seller, the name on the title should be the same as the seller’s name. The VIN on the title should match the VIN of the car. There should be no indication of a lien or salvage/rebuilt status.

If buying from a used car dealer, he might not have the title if he recently bought the car at auction. He’ll send you the title later, and the name on it will be the previous owner, not the dealer’s name — which is not a problem.

Summary

Don’t make common mistakes when buying a car. Investing a little time and effort in the process will reward you with a successful purchase.

Buying a Used Car – Pros and Cons

Most people know that buying a used car is smarter than buying a brand new car.

But is that always true?

A used car can certainly save money, but at higher risk.

Most cars depreciate rapidly in the first 3-5 years, losing 50% or more of their original value, even those in near perfect condition.  Furthermore, car manufacturers only make major style changes every 4-5 years.

This means you can pick up a relatively new used car for about half the cost of a brand new model and still get essentially the same styling.

It’s also possible to find used cars that are 10 years old or older that are in excellent condition, and make excellent buys.

Sounds great but what’s the catch?

A used car is — well — used, previously owned and driven.  Those other owners may have driven the car sensibly, or not. They may have taken good care of it and maintained it as recommended by the manufacturer, or not. They may have damaged it and had it repaired by professionals, or not.  They may have driven excessive miles, or not.

A car is a mechanical machine and all mechanical machines suffer wear and tear with use.  They can have problems, some serious, some not.

Some makes and models tend to have more problems than others. Consumer Reports magazine, in the annual Auto Issue, publishes the results of a survey of thousands of car owners. It rates and ranks each model according to number and type of reported problems.

Furthermore, every used car is different. No two are alike. One can be a jewel that has low mileage, has been driven and maintained properly, and never wrecked. Another of the same make, model, and year can be junk with hidden problems, excessive wear, and poorly repaired damages.

What does this mean to a used car buyer?

Of all the possible issues that might prevent one from buying a used car, only a few are obvious to an average buyer.

It’s not obvious how a car has been driven or maintained by a previous owner — or owners. It’s not obvious that it might have been wrecked. It’s not obvious that it might have had reliability problems in the past, and will continue to do so. It’s not obvious why the previous owner is getting rid of his car. It’s not obvious that there might still be an outstanding lien.

The two major things that most buyers first focus on are 1) appearance condition, and 2) mileage.

First, appearance can be deceiving. There can be hidden problems not apparent to the eye.  Second, mileage is not a good indicator of a car’s condition.  A car with high mileage can be a good car, just as one with low miles can be terrible.

Many buyers look at Carfax or AutoCheck vehicle history reports as a way of researching a used car purchase. However, these reports are often inaccurate and incomplete, and don’t say anything about a car’s all important current condition.

What to do?

Although it’s possible to make some determination of a used car’s condition by asking the owner or dealer questions, test driving, and doing a cursory inspection; this is generally not sufficient.

The best way to know the actual mechanical condition and future reliability of a used car is to have it inspected by your own professional mechanic before you buy.

He can give you a detailed problem report that you can use to make a decision about buying. It can cost $75-$150 but is worth it if it prevents you from making a big mistake.

Let’s sum it up.

Buying a used car is much different from buying a brand new car that has never been driven, has no problems (usually), has never been wrecked, and has full warranty protection from the manufacturer.

There is more risk when buying used, which means a buyer must take more care and expend more time and effort in making a good decision. If done correctly, it can result in getting a great car for a great price.

What to Ask When Buying a Car

Car buying questionsWe’ve heard the question asked hundreds of times: “I’m buying a car. What questions should I ask?”

The answer is different depending on where you intend to buy your car — used car from an individual seller, used car from a dealer, or new car from a dealer.

Let’s look at each situation.

Questions when buying a used car from an individual

Important questions to ask when buying a car from a private seller:

  1. What is the car’s make, model, year, and mileage?
  2. Are you the original owner?
  3. Has the car ever been wrecked or seriously damaged?
  4. What problems does the car have now?
  5. Have you made recent repairs? For what?
  6. How does it drive?
  7. Are you the owner of the vehicle?
  8. Do you have the title?
  9. Is yours the name on the title?
  10. May I see the title?
  11. May I test drive the car?
  12. May I have my own mechanic check it out?

Continue reading What to Ask When Buying a Car

Car Seller Scam Explained

Car Seller Advertises a Car Online – You Buy – Your Money Disappears and You Get No Car

[ If you are selling a used car and suspect a scam by a potential buyer, see our article, Car Buyer Scam ]

How the car selling scam works

car seller scamIt’s a common scam. Here’s how it works.

You find a car being advertised online on Craigslist, Autotrader, or other online classified ad web site. You like the car. You want it. The picture of the car is beautiful, the description is wonderful, and the price is unbelievably low.

You contact the “seller” who emails you details about the car and why it’s being sold so cheap.

By the way, the “seller” often has a woman’s name, which is intended to make him seem more trustworthy.

The seller (scammer) goes to great length to tell the story of his/her personal situation, a spouse’s death, a military deployment,  or other reason why he/she is selling. they explain how they are in a remote location (often military) with no phone, why the car is being sold at such a low price, how it will be “shipped” to you at no cost, and how your money will be “protected” by eBay, PayPal, or Amazon while you inspect the car, and that you can return it at no cost if you don’t like it.

Continue reading Car Seller Scam Explained

Car Auctions for Good Cheap Cars

Public Car Auctions, Government Auctions, Police Auctions, Repo Auctions, and Salvage Auctions

used car auctionsCar buyers who are looking for cheap cars often overlook public car auctions, or dismiss them because they think the auctions are only for car dealers.

It’s true that there are dealer-only auctions, but there are also many car auctions open to the public that provide an opportunity to pick up good used cars for good prices — if you know where to look and know how the auction process works.

What kinds of car auctions are open to the public?

  • Public wholesale car auctions
  • Government surplus auctions
  • Police and law enforcement seized car auctions
  • Unclaimed and abandoned vehicle auctions
  • Repossessed vehicle auctions
  • Salvage vehicle auctions
  • Public wholesale auctions

Continue reading Car Auctions for Good Cheap Cars