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Buying a Used Car 101

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Here’s how to snag the best deal

by Jean Chatzky

New isn’t always better — especially when it comes to the used car market right now. Why? Car leasing took a backseat after the 2008-2009 recession, but it’s been heating up every year since — especially in 2014, when 27 percent of vehicles were leased, says Jessica Caldwell, senior analyst and director of pricing and industry analysis at Edmunds. Interest rates are also lower — for people with excellent credit buying used cars, the average interest rate has fallen nearly 28 percent since early 2014, according to a recent WalletHub report — and there are good financing deals available (more on that in a moment). Then there’s the fact that the amount of information available on the Internet has made the shopping process more transparent than ever before. Here’s what you need to do to swing the best deal.

Weigh your wants.

When you’re purchasing a used car, you’re probably going to go one of two ways — either purchasing something an older vehicle, likely without warranty, to get you where you need to go, or a newer model (maybe certified pre-owned with a manufacturer warranty). Sit down at your computer and compare prices based on: car (year/make/model), mileage, condition and options. CarMax is great for comparing both older and newer used cars, and you can visit a location to compare models in person. If you’re shopping among primarily older cars, surf your way to Craigslist, Facebook Marketplace and AutoTrader are all good bets. And if you’re looking for a newer, perhaps certified pre-owned model, check dealer supply through aggregator sites like TrueCar.com, CarGurus.com or Edmunds.com.

Work the supply/demand equation.

As I noted, used car inventories are particularly high right now — but not across the board. In 2014, people were hungering to lease small, mid-sized and compact sedans. So those are the ones currently coming back on the market in droves, says Dave Sullivan, manager of product analysis at AutoPacific. Some of the hot contenders making a reappearance are the Nissan Altima, Ford Fusion, Hyundai Sonata, Chevy Cruise, Volkswagen Jetta and even luxury vehicles like the BMW 3 Series, Mercedes C Class and Infiniti G-35. Towards the end of the year, more SUVs and crossovers will be coming on the market — but if you can’t wait, the Ford Escape and Jeep Grand Cherokee are both good to look into. As for light trucks (the Ford F-150) and body on frame SUVs (Jeep Wrangler, Chevy Suburban), they’ve stayed in consistent demand, so the deals are harder to find.

Make the call on a Certified Pre-Owned vehicle.

When you buy a Certified Pre-Owned (CPO) vehicle, you know it’s been thoroughly checked by a manufacturer and comes with additional warranty protection, but what you’re really paying for is peace of mind says Caldwell. The price difference between two identical cars (same make, model, options, mileage), one certified and the other not? About $1,000. You also know that the car was likely cherry-picked by the dealer due to better condition or lower mileage, says Eric Lyman, vice president of industry insights at TrueCar. You’re likely only going to find these at franchise dealerships (e.g., Ford, Chevy, etc.). And if you see the word “certified” on a big sign in a non-manufacturer used car lot, that doesn’t mean it’s certified pre-owned, so ask for clarification and to see the paperwork. If you decide to go non-CPO, get a local mechanic to look at the car — this will probably set you back about $100.

Focus on the financing and other costs.

When it comes to financing a car, interest rates matter — and they can mean a difference of hundreds of dollars or more over your car’s lifetime. If you’re going CPO, look for subsidized loan deals with the car manufacturer. (These are better financing deals for cars they’d like to sell sooner rather than later. For example, the BMW 3 series has 0.9 percent financing through August.) If you’re not going with a manufacturer’s subsidized financing deal, shop for financing yourself and start at credit unions, which often have the best used car loan rates. Finally, check out the overall cost of owning the car — Edmunds.com and KBB.com have calculators that can help you figure out the true costs of ownership.