HOW TO BUY A USED CAR

Most people consider buying a used car an unpleasant experience. It can be difficult to find the vehicle you want and negotiating a price can be frustrating. There is always the concern that while you may be saving a lot of money versus buying a new car, you could be buying someone else's lemon.

We will take you through the buying process, give you some pointers that will tilt the odds in your favor, and ultimately try to make the whole experience a little less confusing.

But remember an important fact. Ultimately, your instincts are your best guide. If something about the car or the deal just doesn't seem right, our advice is to go with your instincts and walk away from it, no matter what the car magazines or various guidebooks say. You are the one looking at the car, you are the one talking to the owner or dealer and you will be the one that has to live with your decision.

First, we'll show you how to prepare for the purchasing process. We'll look at where to buy used cars, vans and trucks. Then, we'll give you some key suggestions on how to inspect and evaluate a used vehicle. Next, how to negotiate your price. Finally, there is information on your rights as a used car buyer.

PREPARATION
Preparation is the single most important thing you can do to help ensure that you are successful in your used car or truck purchase. Sure, it can be a pain in the neck, but it may just save you years of regret.

When to Buy
The best time to buy a car is when you don't really have to! The benefits of planning ahead and taking your time cannot be emphasized enough. If your car or truck is due for some major work and you've decided not to put any more money into it, don't wait until the last minute to start looking for a new vehicle. You are far more likely to get a better deal on both sides of the equation (the vehicle you're buying and the one you're selling or trading in) when you have time to look around and have a vehicle that is still roadworthy to sell.

Drive a few different examples of the same model to give you a feel for what the vehicle should drive like. Time will also buy you negotiating power, enabling you to wait out a seller or simply walk away and find something better. Being without wheels can bring on enormous pressure to get them -- sometimes forcing bad decisions.

In the real world most of us don't follow that advice, but there are some basic procedures to follow that you will find helpful.

Determine Your Budget
How much do you want to spend? Before going through the whole selection process, you need to establish your buying parameters. The amount of money you want to spend will greatly influence the type of vehicle you buy. Consult the used vehicle pricing data in this guide to set your buying parameters.

And then stick to it! Buying a car often stirs up emotions that aren't particularly sensible. It's not always easy, but don't get caught up in the heat of the moment and bust the bank.

Narrow Your Choices
You need to decide on the type of vehicle you want. Do you want a sedan or a coupe? A sport utility or a wagon? Make the decision! This will save you a lot of running around and wasted time. Keep in mind that the same amount of money can get you into a late model cream puff compact or a 5 year old sport utility with a lot a miles. Determine your priorities.

Now that you've decided the type of vehicle, you're confronted with dozens of makes, models and trim variations. Again, try to narrow down your list to a few vehicles.

A good place to start is the annual April auto issue of Consumer Reports, available in most libraries. Check their frequency-of-repair data to determine if there may be one or more trouble areas in the particular model(s) you are considering. Focus on these areas when you go to look at the vehicle. Ask if they have been replaced.

Even if a vehicle seems to show good overall reliability you can still get stuck with a problem car. Don not rely soley on published data. Conversely, a model with relatively poor ratings may have received loving care throughout its life and be perfectly acceptable. Check with friends, neighbors, relatives, etc. If any of them had owned a similar model find out what their experiences were. And you will still need to have any used vehicle inspected before you buy.

This is also the time to check with your insurance agent about the cost to insure the vehicle. There can be substantial differences among models.

Another source to check is the National Highway Traffic Safety Administration (NHTSA) at 1-800-424-9393. They have complete recall records for all cars sold in the US. Simply leave a message for the vehicle(s) which you would like a recall report. We've tried it, and it works. These reports are also available on the world wide web through our website (www.vmrintl.com). You can also call your local dealer or the manufacturer and ask if they can tell you if a specific example (you'll need the VIN number) has had its recall work completed.

Check with your local new car dealer about any Technical Service Bulletins (TSB's) that have been issued by the manufacturer for the model(s) you are looking at. Some of these may involve mechanical work paid for by the manufacturer, either partially or in full. You can also contact the manufacturer directly and request a list for your records.

FINDING A USED VEHICLE
There are lots of places to buy used cars and trucks. Of the 19 million used cars, vans and trucks that will be sold at the retail level in the US and Canada this year, about 7 million will be sold by new car dealers (called "franchised" because they hold a franchise agreement with a manufacturer).

Another 2 million will move through independent used car lots. The largest number, 8 million, will be sold by private parties. The rest will be sold directly by rental car companies or through government auctions.

You will find pros and cons with each supply channel of used cars. We've highlighted the major ones below.

Dealers
Unlike a private party who may sell one used car every five years, one factor that all franchised and independent dealers have to consider is their reputation in the community. If they upset or intentionally mislead too many people, they will lose business.

Dealers are regulated by federal and state laws. They have to ensure that the vehicles they sell meet all basic state and federal requirements. That means the brakes, lights and emissions systems work properly. The car must also meet all safety requirements. While this does not assure your satisfaction, or even a reliable vehicle, regulations give you and the dealer a set of rules for playing the game. It is easier (though far from easy), to seek remedies if the vehicle you purchase has been misrepresented, intentionally or not.

Also, the Federal Trade Commission (FTC) requires that all new or used car dealers in the US display a "Buyers Guide" sticker on a used vehicles window. This also applies to new car "demos." Its primary benefit to you is that it makes the dealer put the main points of the deal (except the price) in writing before you commit to purchase. If you purchase the vehicle, you should get the original or a copy of the Buyers Guide that was affixed to the window.

In particular, the sticker tells you what the warranties (if any) come with the car and informs you of any rights you may have. If the "AS IS" box is checked, the dealer offers no warranty. Unless you can prove the dealer absolutely lied to you (like tampering with the odometer or misrepresenting the condition or age of the vehicle) you may have little recourse.

Do not confuse this with the stickers some dealers put on the window that describe the vehicle list an asking price. Those are window dressing used to make the dealer's asking price seem firm, legitimate, and less open to negotiation.

Franchised New Car Dealers
This is usually the most expensive option. New car dealers make a large portion of their profits from used vehicle sales. And with intense and unprecedented competition in the new vehicle sector depressing margins ever further, their determination to wring as much profit as possible out of used cars, vans and trucks is all that much stronger.

On the other hand, new car dealers have large selections, especially of the make they sell. Often, dealers get first shot at the best cars being auctioned by the manufacturers they represent. These may be one-owner "off-lease" vehicles or returns from rental firms or from other fleet sales. Another plus: If you buy a car in which they have expertise, you can take advantage of their factory-trained service department.

Independent Used Car Dealers
Like new car dealers, used car dealers (independent dealers not affiliated with a manufacturer) have to ensure the vehicles they sell meet minimum federal and state requirements. They have to use the Buyer's Guide sticker. And they are subject to your state or province's laws.

Because they do not have the overhead of a new car dealership and generally operate on thinner profit margins, you can often get a better deal from an independent. New car dealers capitalize on the perceived stability and prestige of a new car operation by charging higher prices. Used car dealers cannot.

Of course, there are downsides: First, low overhead means they usually do not have service or repair facilities or any expertise in any particular make or model. You may be relying on a service department that does not know your vehicle. There are exceptions, of course.

Second, the quality of vehicle may be lower. Generally speaking, these dealers get auction leftovers or vehicles that have been wholesaled from another dealer. This doesn't mean the vehicle is bad, just that you'll have to keep your guard up. Hard-driven examples are far more likely to end up on these lots. An inspection by an independent mechanic is essential.

You may want to consider the used car dealer that specializes in one or two specific makes. Since they limit their service to one or a few makes, often they have developed a thorough understanding and expertise of the models they sell.

We recommend buying from used car dealers who have been established in your community for at least a few years, preferably at the same location. Ask for references. Be extra careful of transient operators and "Buy Here, Pay Here" or "Tote-the-Note" lots that offer second-rate vehicles and onerous credit terms, usually to people with poor credit histories.

If you know a local mechanic whom you trust to maintain and repair the car after you buy it, a used car lot can offer you a good deal.

Private Party Sales
Although somewhat riskier than purchasing from a licensed dealer because of your limited recourse, often private parties offer the best deals. Newspapers, auto trader magazines, the internet and even cable TV are full of cars, vans and trucks for sale by individuals.

It may be safest to buy from someone you know, especially if you know that they had few problems with the car and took care of it properly.

If you don't know the person, take a look at their house and how they dress. If the outside of their house is a mess and they are not clean in their personal habits, it is unlikely that they took proper care of the vehicle.

Always ask for service records. The ideal private party transaction is buying from the original owner who has maintained the vehicle properly and has the service records to prove it. The records will also give you a great deal of confidence in the odometer reading.

There are downsides: First, it's a good idea to ensure that you are really dealing with a private individual and not a dealer. There are thousands of "front-yard" dealers. One way of weeding out these dealers is to respond to their advertisement by asking about "the car" without actually saying the model name. If they have multiple cars for sale, they won't know which car you are calling about and will have to ask. Second, unless you are buying a vehicle still under it's original warranty, you are not getting any guarantee. Third, in the absence of outright fraud, you have little recourse against a private party.

Rental Companies
Rental car companies sell most of their cars back to manufacturers who then sell them at auction or to their own dealers. Rental vehicles are also available directly from the rental companies. Check your area yellow pages to find locations and check availability.

Approach them as you would a new car dealer. The cars have been well-maintained and many have low mileage, by some examples may have been abused by the renter. Many also have warranties that have not expired.

Consumer Auctions
There is a growing number of auctions targeted at consumers. You can get a good price, but not if the vehicle is in demand on that day. Do not assume that just because you can buy it at an auction that you will get a good deal. And often these vehicles are rejects from wholesalers or other dealer auctions.

A problem with any auction is that you may not get a good chance for a thorough inspection or test drive. Also, you may not have the chance to get out of a deal if the car is a lemon or is not what you thought it was. Be sure you understand what your rights are before you make an offer.

As a result, we do not recommend buying at these auctions unless you know what you are doing.

Government Auctions
Government auctions are held around the country as the federal government renews its Interagency Motor Pool. They are usually driven for six years or 60,000 miles, whichever comes first. Maintenance records are available. The vehicles can be inspected on site and the engines can be started but they cannot be driven, which is a major downside in our opinion. Contact the US General Services Administration in the US government section of the phone book for more information.

INSPECTION OF THE VEHICLE
Now you are at the point of physically looking at and test driving vehicles. At this point, you should be looking for reasons not to buy the car. Do all you can to verify its history. Inquire about accidents, major repairs, previous owners and what the vehicle was used for. Was it used as a tow or plow vehicle? Those two activities accelerate wear on major components.

If buying from a private party or if the car had been serviced by the selling dealer, ask to see service records.

Although you should have any used vehicle inspected by a qualified mechanic before buying, there are some things you can check out on your own that may help you spot a clunker that isn't worth pursuing.

Exterior/Body
The body should be straight and have uniform color. Paint that looks like an orange peel generally means that an inferior paint job has been applied. In a late model car that may indicate that it has been in an accident.

Check for rust along the body and under the car. Too much rust can eventually destroy a car. Once it starts it can progress very quickly.

Transmission
Check the transmission fluid. It should be pink, without any burnt smell. On automatics, gears should change smoothly.

On a manual transmission, gears should shift without any loud noises, especially grinding. If the clutch only activates at the top of the pedal's range, it could mean that the transmission is due to be replaced. That can be expensive.

Cooling System
Check the engine compartment for leaks and the floor of the passenger compartment for moisture. Both could mean that the cooling system is faulty.

Take the cap off the radiator (CAUTION: Don't do this when the engine is hot - check the owner's manual for specific instructions). The coolant fluid itself should be clean and free of floating debris. Dirty fluid means the car has not been well maintained or has an internal cooling system problem.

Engine
The engine should start quickly and turn over smoothly. Have someone push down on the accelerator to rev up the engine. Check the exhaust for smoke. Blue smoke is a warning sign as it can indicate excess oil consumption. The engine may need rebuilding or replacement. Lots of white smoke (not just a trace on a cold day) means that the coolant is leaking into the engine, which could be expensive to repair.

With the engine running, put a clean page of newspaper under it to check for leaks. If you see any within a few minutes, it could be a simple fix such as a gasket or there could be substantial repairs needed.

Turn the engine off. There should be no run-on, it should stop immediately.

Suspension
Bounce on all four corners. If any corner takes more than 2 bounces before it stabilizes, it may need new shocks or struts.

Test Drive
First, always test the brakes before moving. The pedal should feel firm. Drive the car over a variety of road conditions and speeds. Don't be rushed or pressured into a short test drive. Ideally, the seller will let you take the car out yourself. At the very least, spend 15 minutes behind the wheel. Be sure to save at least for some part of your test at highway speeds and try to drive over roads you are familiar with.

It's also a good idea to find a really rough road to find out how well the suspension performs and if there are any squeaks or rattles not noticeable on smooth roads. Make a note of any unusual or obtrusive noises, rough operation, and things that simply don't feel right.

When you get back, leave the car idling for another 5 minutes and check the temperature gauge (if it has one). Check your impressions of the test drive against our inspection checklist

If it seems to have few or no problems, the next step is to negotiate a price.

NEGOTIATING
As distasteful as it may be to some, negotiating is the key to getting the price you want. Dealers are masters at the game of negotiating; they do this every day. Your best weapon is information and preparation, but don't expect to outwit or outmaneuver the dealer - they've seen it all. Your best bet is to show the dealer you are serious about purchasing a vehicle and are sincere in your offer. Grandstanding, losing your temper, or wasting the dealer's time benefits no one.  Sometimes a simple "Thank you for your time, but I simply won't pay that price.  Here's my number if you change your mind. Good day." works wonders if you follow up by walking out the door.

When buying from a dealer, we strongly recommend paying no more than the retail numbers in this guide. It may not be unusual to see asking prices hundreds or thousands over our retail level. Buying at that level would make any dealer very happy. It is not unusual for a dealer to mark up even moderately priced used cars three, four, or even five or more thousand dollars. Some of the upper end luxury cars may be marked up even more. Do not be afraid to haggle aggressively. Dealers may feign indignation but rest assured, they will not be offended.

If you are buying from a private party, you should pay under retail and as close to wholesale as possible.

Finally, make sure the deal is subject to a professional inspection. In other words, make sure that if your mechanic or diagnostic service finds a problem, you can either deduct the cost of the repair from the agreed price or, if the seller is a dealer, have the problem fixed at no cost to you.

MECHANIC'S INSPECTION
If you have a mechanic you trust, he is probably the best choice for inspecting the vehicle. He should not be affiliated with the dealer or seller because you want to be sure of objectivity.

If you do not have a mechanic, try the American Automobile Association (AAA) affiliate in your state. (In Canada, try the CAA.) In some states, the AAA runs diagnostic centers. A list of those states with AAA Diagnostic Centers with telephone numbers follows.

State                                         Telephone
California (LA)                        213-741-3111
California (Bay area)               415-565-2012
Massachusetts                      617-871-5880
Missouri (St. Louis)                314-523-7350
New Mexico                           505-291-6611
Pennsylvania (Phila.)              215-864-5000

If AAA does not have a diagnostic center in your state or if the center is too far away from your location, the AAA can recommend mechanics.

Many repair shops have ASE (American Society of Engineers) certified mechanics whom have completed formal repair and diagnostic training. Usually they will display the ASE logo at their establishment. Make sure their certifications are current.

Be sure to get a written estimate of repair costs from the mechanic or diagnostic center specifying the work that needs to be done. If repairs are needed, go back to the dealer or seller and use it to get a lower price or a free repair.

OTHER FACTORS

Warranties
Newer used vehicles may have a factory warranty that can be transferred to you. In many cases, but not all, you will need to sign a warranty transfer. Check with the manufacturer's consumer information line for this information.

Extended warranties will most likely be offered by a dealer, but at a price. You may be able to use an extended warranty as a bargaining chip. You may be able to get the warranty added to the deal at no additional cost as an incentive for you to buy the car. Warranties not backed by auto manufacturers have at best, a dubious reputation. Find out who underwrites the warranty work, who authorizes work to be performed, how many years the company has been in business, and where they are located. Check with your state's attorney general's office for any complaints against them.

In some states it is required that the contract be underwritten by an insurance company. Contact your State Insurance Commission and ask about the solvency of the company and whether any complaints have been filed against it concerning it's warranty program.

Dealer Books
Both dealers and private parties will always be looking to maximize their gain, whether buying or selling. When you visit a dealer, they may have a number of dealer price guides that they will use to justify a price.

In general, dealer oriented guides such as NADA and Kelley Blue Book tend to have high retail prices with large markups over wholesale prices. They usually represent the price that a dealer would love to get and what he starts out with in negotiating. Dealers will most always take less than the retail price in either of these guides or their original asking price. When valuing your trade in, they may use a wholesale guide. If they do, ask them to see the value in that book for the car you are buying.  Be aware that Kelley allows for huge dealer markups and take that into consideration if you or the dealer is using one of their guides.

FINANCING A USED CAR
Just as with new cars, you can finance the purchase of a used car. First, you should shop around for the best deal from banks, credit unions or other finance companies as well as the dealer. Compare interest rates and terms.

In general, interest rates are higher for used cars than for new cars. Avoid high-interest rate "tote the note" or "buy here, pay here" used car lots that deal with buyers with bad credit. In addition to high interest rates, these operators frequently charge much more than the car is worth.

Used Car Leases
There are some lease programs available for used cars, generally from dealers. Like a new car lease, be sure to ask for the capitalization cost. It should include all fees and related charges plus the agreed price of the vehicle. Check also for loosely defined "wear and tear" clauses, residence restrictions and excess mileage charges. If you drive less than 10,000 miles a year, you may be able to get a better lease deal.

In general, we do not recommend leasing a used car. After all, a major benefit to leasing a new car is that the warranty period is as long as the lease term. That means any defects will be covered. With a used car, the warranty (even an extended warranty) may expire before the lease is completed. The last thing you want to do is put money into someone else's car. An exception would be manufacturer-sponsored leases on late model "certified" cars, particularly luxury models, that are backed by an original manufacturer's warranty for the term of the lease.

Bill of Sale
When you have finally negotiated a price and are picking up your vehicle from a private seller, you will need a written bill of sale. A sample bill of sale is included at the end of this article.

Be sure the vehicle is properly described with its vehicle identification number (VIN). Also, be sure the seller has clear title with no legal liens from banks or other parties.

INSURING, TITLING & INSPECTIONS
The rules for insuring a used car are the same as for a new vehicle. If you have any questions on your state's laws, get the number of your state's insurance commissioner, or call your local insurance agent.

If the vehicle is older and does not have much value, you may want to ask your insurance agent about not purchasing collision insurance in order to save money on your insurance bills.

Titling and Registering the Vehicle
In virtually all states, you need to acquire an unencumbered, free and clear title to the vehicle. The car must be registered with your state. In most states, you will need proof of insurance. Check with your insurance agent for your state's rules and regulations regarding titling, registration and insurance.

State Inspection
Each state has different laws for safety inspection., but generally a vehicle must pass an inspection within a certain time period after purchase. Even if the vehicle has a current inspection sticker, have it tested again. If it fails, the seller (particularly a dealer) may be required to take it back or make the necessary repairs so it can pass.

IF YOU FEEL YOU HAVE BEEN MISLED
The state consumer information and protection agencies listed on this website can help you to file complaints against dealers if you feel you have been improperly treated. You can also ask for general information on your rights in the event you want to get your money back. Many states have strong consumer protection laws.

Your case is strongest if you can show written proof of misrepresentation by the dealer. Without written proof it may be difficult, although not impossible, to make your case.

The state consumer protection agencies are best in handling problems with dealers. If your problem is with a private party they may not be able to help, and private legal action through small claims or civil court may be necessary.

Used Car Superstores. An idea whose time has come -- and gone?

It is too early to pass final judgment on these operations, but early returns suggest to us that you will get an ok price on the car you are buying, and a low wholesale price on any trade-in you may have. There is some concern as to the quality of the vehicles on their lots. Often they seem to have second tier vehicles on their lots.

We wonder, too, how long they can keep up their "no haggle" policy when there are four of them on the same block competing for the same customers. Recent reports, in fact, are pointing to rougher times in the marketplace for this concept than was anticipated. (update 01/01: it's clear now that this concept is not going to take the market by storm.  For those that are left, there is tenacious competition from established dealers and the promise of operation efficiencies and low prices has not materialized.)

Note: In December 1999 AutoNation announced that it was closing its used car operations.