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Buying Tips
Used Car Buying Quiz
By Philip Reed, Senior Consumer Advice Editor
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Buying a used car should be pretty simple. Right? Well, actually, there are some
pitfalls that could be costly. So just to make sure, take our used car buying
quiz and see if you are ready.
Give yourself one point for each correct answer. If you score nine or above you
can expect to get a cream puff. If your score is six to eight, memorize your mechanic's
home phone number. Scores of five and below, you'll probably be getting a visit
from the repo man soon.
1. The best way to judge the mechanical condition of a used car is by pressing
the preset radio station buttons on the car's sound system. That way, you can
avoid buying a car from a heavy metal headbanger or someone else who would abuse
the car. True or false?
2. When you go to inspect a used car, the only thing you need to do is ask for
the service records. That tells the whole story of a used car. True or false?
3. Used cars should be taken to a mechanic for inspection before you buy it. But
there is one time when this isn't necessary. That is when:
a) The owner seems trustworthy.
b) The car comes with a certified pre-owned factory warranty.
c) The asking price is low and you don't want to blow the deal.
4. Name two places where the used cars on a new car dealer's lot come from.
a) ______________________
b) ______________________
5. The dealer makes more on used cars than on new cars. True or false?
6. Establishing the price for a used car is total guesswork. Look at the price,
roll the dice and start haggling. True or false?
7. If your credit is weak, the place that will give you the best interest rate
is:
a) The dealer
b) An on-line lender
c) A credit union
8. The best strategy in negotiating for a used car is to:
a) Try to intimidate the seller by using a lot of technical terms.
b) Ask the seller to throw in extras to get a good deal.
c) Make a low starting offer and gradually increase your price.
9. Leasing applies strictly to new cars. You can't lease a used car. True or false?
10. In comparison to new cars, interest rates for used cars are almost always
higher. True or false?
Answers:
1. Uh, false. There are much better ways to find out about the potentially
checkered past of a car's past life. See next answer.
2. False. Asking for service records is important. But the best thing to
do is run a vehicle history report on the car you are interested in buying. Companies
such as Carfax
can reveal odometer rollbacks, salvage titles and, in some cases, accidents. Running
a vehicle history report on a used car is essential.
3. B) The car comes with a certified pre-owned factory warranty. A certified
used car means it has been thoroughly inspected by factory-trained mechanics.
If something goes wrong after you buy it the repair will, for a limited time,
be covered under the warranty.
4. Trade-ins and used car auctions, that sell one-year-old rentals and
cars coming off lease. See the next answer for more on this subject.
5. True. Dealerships make more money selling used cars than new cars. (And,
they make as much servicing cars and selling parts as they do on both new and
used cars combined.) The reason used cars are so lucrative is that there is a
higher margin of profit. If you understand why, it might help you get a good deal
on a used car.
The used cars on a new car dealership's lot come from trade-ins and auctions.
The idea is to buy low and sell high. They buy as low as possible, meaning that
they will give the lowest possible price for a car that is offered as a trade-in.
If they give an $8,000 credit for a car, they might try to sell it for as much
as $14,000. This means they can comfortably bargain down to $9,500 or even $9,000
and still make money on the car. So, when you see a used car on a new car dealership,
assume it has been marked up — way up. Moral of the story: know beforehand
how much a used car is worth by using Edmunds.com's TMV.
6. False. Several sources list current values for used cars. Edmunds.com
has prices for used cars going back to 1980. Make
sure to click the "Customized Appraisal" bar and be realistic about the condition
of the car.
7. B) An on-line lender. If your credit is weak, a dealer will likely mark
up the interest rate and claim they are doing you a favor by letting you buy their
car. In some cases, "nonprime" borrowers can pay as much as four interest points
too much. It's a good idea to check your credit before you go to the dealership.
Some on-line lenders have become very popular with consumers because they have
tried to humanize the process by not humiliating "nonprime" borrowers. Try getting
a loan through an on-line lender such as Capitaloneautofinance.com.
For more information read "Tips
for Subprime Borrowers."
8. C) Make a low starting offer and gradually increase your price. Even
though there are pricing guides, such as Edmunds.com's True Market Value, you
might be able to get an even lower price. It doesn't hurt to start low (but in
the ballpark) and hear them say "no" several times. When they finally do say "yes"
you'll know you are getting the lowest possible price. If you are negotiating
in a car dealership, however, you might need to threaten to walk out before they
will know it is your "take it or leave it" price.
9. False. Leasing is just another way of financing which can be applied
to used cars as well as new cars. LeaseCompare.com
is a good example of an on-line lender that has streamlined the leasing process.
10. True. Higher interest rates are one of the few bad things about buying
a used car. The no-interest and superlow interest rates offered by manufacturers
usually pertain to new cars. However, the amount you save in depreciation will
more than offset the higher interest rates.
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