One way to save money on a car purchase is to avoid buying brand new vehicles. New car prices are inflated for various reasons including dealerships adding additional, often unnecessary services and the ability to finance the cost with debt. As a result new cars often suffer from steep depreciation, a decrease in value, as soon as you drive them off the lot. You may be familiar with this by the common phrases “upside down” or “under water”, referring to owing more on the car loan than the car is worth. Depreciation will continue throughout the life of the car, but it becomes more gradual with time, and the value becomes a reflection of how well the car has been maintained, overall condition, and its mileage. This makes buying a used car a good option for potentially saving money.
The benefit to purchasing a used car is that the depreciation can be accounted for, so you are more likely to get the car at a price closer to its real value. However, the trade-off with buying a used car is that there are fewer protections for consumers, making due diligence very important before closing a deal.
One major consumer protection lost is the ability to hold anyone responsible for a “lemon”. Lemon cars have serious, warranty covered problems, which fail to be corrected after a reasonable number of repair attempts, or cause the loss of use for over 30 days. If a car is a lemon, you may be able to get a refund or a replacement from the manufacturer. This only applies to new cars; lemon laws do not apply to used cars.
Buying a used car that has serious defects requiring costly repairs, leaves you stuck with the bills and a potentially useless car. It is in your best interest take steps to protect yourself before deciding to drive away with that new-to-you used car. Below is a list of some things the Missouri Attorney General recommends before buying a used car:
- Look at the car during daylight. Any damage, defects or other problems will be easier to spot.
- Run a title search to learn more about the vehicle’s history.
- This will show you if it’s been in accidents.
- If there have been many different owners, it could be a sign of problems.
- Test-drive it. Any seller should allow this.
- Be sure to test out all of the features, switches, buttons, etc.
- Have a mechanic (chosen by you, not the seller) put the car on a lift and inspect it.
- You can also get an on board diagnostics (OBD) scan free from most car parts stores. Helpful for finding out what’s causing that check engine light.
- Get proof of inspections for safety and emissions if applicable. Missouri law requires a seller to take care of inspections before the sale. Exception: New vehicles are exempt from these inspections in the first two model years.
Buying a used car can be a great way to save money on the up-front cost of a car. But, if you don’t take steps to make sure the car is in good working order, you may end up paying much more than you bargained for in repair charges. For more information on the subjects covered in this financial tip, please see the Missouri Attorney General’s informational letter, “All About Autos, New Cars, Used Cars, and Repairs”, found at this link: https://www.ago.mo.gov/docs/default-source/publications/allaboutautos.pdf?sfvrsn=4