Buying a used car – making the right choice - Austin, TX.

Buying a used car in Austin, TX can be an incredible way to save money and obtain great value in a vehicle. Used cars in most cases provide the best bang for your buck; however, not all are created equal. Mileage, maintenance, model and manufacturer of the car, all play a role. The goal of this article is to provide a sound foundation for buying a used car and to provide insight concerning possible obstacles along the way.

The Budget

Determining the budget for a used car can be a daunting task altogether. Unfortunately for most people, there is a difference between what one would like to own and what an individual can afford. It is important to remember that a car is a depreciating asset; i.e. it most likely won’t go up in value for the foreseeable future. Age, mileage and overall condition determine a cars value over time. Additionally, when determining your budget, consider some important factors:

1. Insurance – the more expensive the car, the more expensive the insurance. Sports cars yield higher premiums as they generally attract aggressive drivers and thus higher risk. Additionally, if you are a male, unmarried and under the age of twenty-five your rates will be higher, irrespective of the car – sorry nothing you can do about this but get older!
   
   
2. Property tax – the more expensive the car, the higher the property tax. Most localities have some form of property tax. Check with your local government to determine the applicable tax rate.
   
   
3. Premium or 87? – Numerous used cars require premium fuel. Are you willing to pay $4.50 a gallon to drive a car which requires premium?
   
   
4. Weight – The larger the vehicle and the more it weighs, the more gas you are going to need; don’t forget wind resistance. Pick something which reflects your driving habits. Buying a used SUV to when commuting one-hundred miles a day will be expensive.
   
   
5. Maintenance – Some used cars have higher maintenance requirements. Buying a used Mercedes is going to cost you more in maintenance than a Honda on average. Furthermore, sports cars require frequent brake and tire replacement.
   
   

If you have the available capital purchase your car outright if you intend to keep it. If you intend to trade the car in within five years, then a loan or lease might be the best choice. If you are fortunate to have enough money to buy a used car outright; do so. Make payments to yourself vs. the lending organization. Buying a used car outright has the advantage of not paying interest on a loan. If you are disciplined, then why not pay yourself back vs. the bank?

Who should I use for my used car loan? Using a third party to provide financing can often save you money. Using the car dealer to provide financing often costs you more money and it puts the dealer in control when negotiating over price. It is strongly suggested that you secure financing via a third party as it will provide more leverage when negotiating with a used car dealer.

How long should I get my loan for? In short, the longer the term, the more you will pay in interest. Often loan organizations will offer terms for 36, 48, and 72 months, if possible go with the shortest term as you will save money in the long run.

Finally, choose the model of the used car wisely. Can you simply add the additional options over time? If so, then don’t purchase the loaded model as you are paying interest on what you could purchase outright and add later.

Dealer or Private Sale in Austin, TX

Buying a used car from a dealer or private individual are both good options; however, both have drawbacks. Most used car dealers offer vehicles which have been inspected and or certified; when a private sale is generally as-is. Basically, this means a qualified mechanic has inspected the car; it does not mean the used car is problem free. However, a dealer will generally offer a warrantee at additional cost, which will cover any mechanical problems. Additionally, it is wise to get a used car inspected by a third party mechanic (no financial interest with the selling party), irrespective if the seller is a dealer or private individual.

Used Car Dealers – Often used car dealers have better margins than new car dealers which should tell you something. Used car dealers generally have plenty of wiggle room in the price they are offering for the car. Never take the first price offered, they are expecting you to haggle. In many cases when financing is offered via the dealer expenses will be shifted between the interest rate, term and additional fees to make the car look cheaper – be aware. Overall the basic advantage of a used car dealer is the grantee or warranty offered with the used car.

Private Seller – Private sellers generally sell the used car as-is; however this often means the price is lower as there is no middle man (unlike the used car dealer). This is done to limit the seller’s exposure to liability for any future problems. If purchasing from a private seller there are several important things to do.

1. Run a title check (car fax report) to make sure the title is clean. This will report if the car is stolen, and leans against the car and if the car has been in an accident. Additionally, it will tell you if the car has been in a flood.
   
   
2. Take the used car to a certified mechanic that you trust and have it inspected. Usually, this will cost between $100.00 and $300.00; however, it will identify any potential problems.
   
   
3. Test drive the car hard. Don’t be afraid to put your foot down or take the car hard in turns. Driving the car hard will help to identify an potential problems; a basic look, listen and feel is the goal of this test.
   
   
4. Inspect the car – perform a rigorous inspection of the car. Look for potential additional costs due to replacement of parts. Also ask the owner if they can provide maintenance records and receipts. Furthermore, turn the car on and make sure the AC works. We will provide additional details of the inspection below in this article.

The Inspection:

1. Tires – Check the tires for tread depth, toe wear (excessive wear on one side of the tire), dry rot, sidewall wear and any patches. If any of these exist when you may need to replace the tires soon which will cost you a minimum of $400.00.
   
   
2. Glass - Check for cracks, chips or any defect in the glass which might cause you to fail inspection. Gas replacement generally runs $300.00 for the windshield which is an additional expense.
   
   
3. Body Damage – Body damage can indicate the car was in a previous accident. Body shops are generally expensive, so check carefully for: rust, shotty repairs, obvious accidents. Additionally, pop the hood and look inside the engine bay. Check for missing bolts on the frame and the bumpers.
   
   
4. Interior – Check over the interior of the used car carefully. Check for stains, burn marks, and the headliner. Check all switches and test everything. Check the following items: locks, windows, turn signals, mirrors, lights, dash lights/indicators, glove box, wipers, floor boards, seat belts, seats, trunk, etc.
   
   
5. Engine – Check over the engine bay carefully. Check for signs of new parts, as the owner might have replaced items due to wear. Check how old the battery is and fluid levels.
   
   
6. Fluids – You will want to check the following items: transmission fluid, oil, power steering and the radiator coolant (Danger - not when it is hot!) Check for signs of water within these fluids (excluding coolant), if water is present do not buy the car.
   
   
7. Oil Cap - Check the underside of the oil cap. If you see yellow sludge then there is a chance water/coolant has entered the motor/emission system – buyer beware.
   
   
8. Hoses – Check for any old and cracking hoses. Also check for coolant leaks around the radiator, hoses and engine block. All are expensive fixes.
   
   
9. Oil – Check the car over well for oil leaks. Check under the car, in the engine bay and the tail pipe. If the inside of the tail pipe is greased with oil, don’t buy the car. Additionally check for black/blue or grey smoke. This is an indicator that the car is burning oil and most likely an expensive fix. Furthermore, white smoke usually means you are burning coolant, again an expensive fix.
   
   
10. Transmission – check for transmission fluid leaks around the bell housing (location where the motor and transmission meet). If a leak is present, then the seal is potentially bad and expensive to fix.
    
    
11. Under the car – Check for rust, dry rotted bushings, exhaust leaks, loose or damaged muffler, and make sure catalytic converters are present (newer cars).
    
    
12. Bell Housing – Check for fluid leaks on the bell housing (rear axle).
    
    
13. Brakes – If possible pull the wheels and check the brake pads (assuming disk brakes). The drum brakes you will not easily be able to check, however they wear out much slower. Ask the owner when the last time the brakes were replaced and if he or she can produce receipts.

Test Drive

Test drive the used car rigorously as previously explained. Take the car around hard turns and repeatedly test its acceleration. The car should shift smoothly through the gears and should be responsive once in gear. Additionally, take the car on the highway (listen for vibration) and in traffic if possible. Make sure the brakes do not grind/squeak. Check to make sure the car does not overheat when running the AC and that the car idles well. Finally, put the car in reverse and check the steering. The car should shift easily and the steering should be responsive.

Enjoy your new used car.