by Brenda Johnson

Created on: June 09, 2008   Last Updated: November 07, 2008

I have owned 7 cars, 6 of them were purchased used, all from major dealers. I am an advocate of buying used cars, because you allow the original owner to take the huge depreciation hit, but you must buy smart if buying used. Here are some tips on buying used cars:

1. Shortlist 3 three models and do thorough research. Picking three cars that you already know you would like to try prevents you from being persuaded to test drive other cars when you actually visit your dealer. The internet provides the best portal for doing this research. Once you have three models nailed down, research price, standards features, fuel efficiency and consumer ratings. Ony you know what is important to you as a consumer (sunroof, side air bags, CD player, trunk space, etc.) All of this can be done online so that when you visit dealerships, you will have enough information to know as much or more about the model you want than the salesman, who must master the features of tens of cars if not more. Good websits are www.kbb.com www.edmunds.com www.autotrader.com www.carmax.com - these can all help you establish comparative baseline cost for the model year you like.

2. Know how much you can afford before you shop. Review your monthly budget and know exactly how much you can pay in a monthly payment, as well as how much you have saved to put down. So not forget to consider the increase in auto insurance, which your carrier can easily quote for you. If you stay within a range that is acceptable and comfortable, you will not have to worry about smoke and mirror financing that puts you in a bind after you've fallen in love with the car. Typically it is expected that you can finance a car that costs 50% of your take home pay annually. However, this is an estimate that is suitable for a person that does not have a heavy debt load. If you are burdened with student loans, child care costs, a large mortgage, etc. you will drop that percentage significantly from 50%, maybe down to 15 or 25% of your annual income.

3. Arrange your financing in advance. This is a must. Over the 7 financing deals I made on used cars, the last one I was a member of a credit union, and their rate was 6 points lower in interest than any of the options the dealer came back with. It might take the credit union a few days longer than traditional financing to get the deal done, but it is worth every dime in interest saved. Also talk to your credit union about their rates for warranties and gap insurance (covered later).

4. Test

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