Benefits of Buying a Used Car

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There are many good reasons to buy a used car, including ample selection and the improving reliability of older cars, but the big draw for used-car buyers? Affordability.

Price

Buying a new car is definitely more expensive than buying a used one. Unless you decide to lease, your initial costs on a new car will be hefty. Financial institutions typically require down payments of at least 10 percent on a new-car loan (but it helps to add more). If you pay less money upfront, your monthly payment will be higher. Two other key considerations may tip the balance in favor of used cars: certification programs and new-car depreciation.

Certification Programs

One trend that makes buying used a better option is the proliferation of certified pre-owned programs. The idea started with luxury brands such as Lexus and Mercedes-Benz. Today, most manufacturers have instituted these programs.

General benefits of CPO cars include:

• Manufacturers usually consider only late-model, relatively low-mileage used cars and trucks with no history of major damage for their certification programs.
• CPO vehicles undergo a rigid inspection process of mechanical and cosmetic items before they obtain certification.
• CPO vehicles are normally covered by a warranty that extends beyond the original factory warranty. The warranty often includes the same features as a new-vehicle warranty, such as roadside assistance.
• Several manufacturers offer special financing on CPO vehicles, usually at lower rates than those on new-car loans or the typical, higher used-car loan rates.

Buyers should be aware that they pay more for a CPO car than for a typical used car, but the higher price should be worth it for the extra attention, coverage and the peace of mind buyers receive.

Avoiding Depreciation

Once you drive your new car off the dealership lot, its value will drop immediately in your early years of ownership. On mainstream vehicles, expect your new car to lose at least 30 percent of its value in the first two years of ownership. Consult used-car value guides to get an idea of what a particular model will be worth in the future. Leasing guides are another good source, even if you intend to buy instead. Lease payments are calculated based on residual, or resale, values.

H/T Source: Cars.com

4 Questions to Help You Decide on a New or Used Car

• The reasons to buy new or used aren’t the same for everyone
• Depreciation is the single largest expense of car ownership
• Maintaining a used car requires more time and money

Once you’ve finally decided to replace your current car, the next question to ask yourself is: Should I buy new or used?

That depends. Unfortunately there is no one-size-fits-all answer. There are sound reasons to buy new and sound reasons to buy used.

Too often the only questions we ask ourselves: Will I look good behind the wheel? and How big a monthly car payment can I afford? Neither of these questions will help you make smarter car buying decisions.

Here’s a tip: Buying a car based on how much car payment you think you can afford per month will almost always ensure you buy too much car and pay too much for it. It’s also the wrong question to ask yourself when deciding between new and used.

When making the new vs. used decision, each of us must examine our unique set of financial and life requirements. A little introspection is good for the soul and the wallet.

For most people, we think it makes more sense to buy used, but there are some exceptions.

Here are four questions to help you be a smarter consumer and navigate the new-used decision-making process.

Do you have a down payment or a trade-in with equity?

If your credit is good, you may have less problem buying new with little or no down payment than buying used. That’s because many manufacturers offer incentives for new cars that simply aren’t available in the used-car market. These are typically in the form of rebates, cash incentives and discounted financing.

Financing a used car will almost always require money down, whether in cash or a trade-in with equity.

If you do your research and wait for the right opportunity, you may find a new car with a large enough manufacturer incentive to cover the down-payment requirements.

Is there a good reason you, rather than someone else, should take the huge new-car depreciation hit?

Depreciation, or the loss in a car’s value over time, is sneaky because it’s a hidden cost most of us don’t face until trade-in time.

But if a car depreciates, say, $7,500 from the time you buy it to the day you sell it, that’s like throwing $7,500 away. That’s $7,500 you will never get back and won’t have available to spend on other things.

There’s usually an emotional tie with a car that’s missing in our relationship with the vacuum cleaner or washing machine; but in reality, a car is just another appliance. It’s not a buddy; it’s not an investment. It can convey status and provide some pleasure, but it won’t make us smarter, better looking, more interesting or wealthier.

Because of depreciation, generally it makes more sense to buy used and here’s why: On average, a new car loses between 20 and 30 percent of its value the moment it rolls off the dealer’s lot. Some cars can depreciate up to 50 percent in the first three years.

You don’t have to take our word for it. Kelley Blue Book has a Cost of Ownership calculator designed to figure the average five-year costs of any vehicle, including depreciation.

According to that calculator if you purchased a 2012 Honda Accord EX Sedan with a suggested retail price of $25,875, it would depreciate a whopping $6,735 in your first year of ownership and $1,883 in the second. That is, it would be worth 74 percent of its original value after the first year and 67 percent after year two. It would only be worth $15,525, or 60 percent of its original value, after three years. And Honda has a better track record for retaining value than many other brands.

How do you feel about throwing away $10,000 every three years?

If you purchased a two-year-old EX, the average retail price, according to KBB.com, would be $20,675. That’s a purchase-price savings of $5,200 – all of which is depreciation.

Depreciation, though, has little affect on owners who drive a car until the wheels fall off. After more than a decade or two, that old beater won’t be worth much in terms of trade-in or resale value any way. Those same owners, however, don’t seem to mind driving an older car, so why not buy a two-year-old model to begin with and save more than $5,000 on the purchase price?

Buying used should also translate into lower insurance premiums and personal property taxes – meaning even more savings.

Can you afford to maintain and repair a used car?

Some carmakers offer free maintenance for the initial years of new-car ownership. That’s in sharp contrast to the average cost of upkeep for a used car. It can be argued that buying used is just assuming someone else’s problems. It’s a roll of the dice.

You can take some steps to minimize the likelihood that you are buying a “problem” used car by having it inspected by a qualified mechanic and obtaining a detailed vehicle history report from an agency like Carfax or AutoCheck before buying, but some issues may still go undetected.

No matter how well a car has been cared for, at 30,000 plus miles, some bits and parts are going to naturally wear out; consequently, maintenance and replacement costs will be higher for a used car than a new one.

Unlike depreciation, repairs and maintenance are hard costs that must be addressed as they arise. KBB estimates that a two-year-old Honda Accord EX will cost $1,838 in maintenance and repairs the first year you own it. Those costs drop to $880 the next year, but it’s still a substantial amount. These are costs for which you will need to budget. Do you have the discipline to do that?

If you buy a nearly new used car, you may inherit some portion of the new-car warranty providing some protection for a few months or even a couple of years. Many car companies now provide powertrain warranties for five, six or even ten years. But be sure to check the automaker’s rules on transferring the warranty before you buy.

Many car companies also offer certified pre-owned cars that cost a little more, but offer a factory-backed limited warranty.

Can you cope with the time a used car spends in the shop?

Not only does a used car cost more to keep operating, but it will likely spend more time in the shop. It may only be a day here and there, but could be a week or more for bigger repairs.

On average, new cars spend less time in the shop. Moreover some manufacturers or dealers offer loaner cars during routine maintenance visits while a car is under warranty. Can you deal with a used car’s extra down time?

Once you answer these questions for yourself, you will figure out whether it makes more sense for you to buy a new or used car.

H/T Source: AutoTrader.com

Tips on Getting a Used Auto Loan with Bad Credit

More and more people are coming to realize the benefits of buying a used car. If you’ve decided the same, you have definitely made a smart decision. The fact of the matter is you can purchase a car that is almost as good as a brand-new one and save up to 50% off the original price. Even cars less than two years old can be up to 30% cheaper than new cars.

Obviously, there are other reasons to buy a used car: save money on insurance, certified used cars are available, traceable history, and typically a less stressful negotiation process. In order to buy used cars, many drivers choose to apply for a used auto loan. However, there is one thing that might prevent them from buying the car of their dreams – bad credit. With a bad credit, your options as a potential buyer are greatly limited, as most banks and traditional finance companies prefer to help out only those with a good credit score.

The good news is that Wayne Westland Federal Credit Union can help you finance your next car purchase. Here, you can easily apply for a loan and get the best deals. If you also get pre-approved, you have even more chances to find a great deal. In order to buy a used car with bad credit and save as much as possible, there are some things you can do.

Optimize your Credit Score

First of all, you can take some practical steps to improve your credit score. Order your credit reports from all three credit bureaus: Equifax, TransUnion and Experian. Next, verify that all information is accurate. It is not unusual for these credit agencies to make mistakes that could hurt your credit rating. Additionally, make sure to pay off small judgments and past-due accounts. Nothing can impact your credit score more than nominal reports. Lastly, ensure that you wait at least 6 months after cleaning up your credit report before applying for your loan.

Prepare a Budget

Another practical step you can do to get the best deal on a used auto loan is to set up a budget. List all your expenses and revenues and then compare these two. This way, you will know whether you can afford a loan. Otherwise, you might endanger yourself and your credit.

Save For a Down Payment

If you have bad credit, it is quite difficult to get a loan approved. However, if you can put down at least 10% of the car’s value, you might get a much better deal.

Negotiate the Price

Once you find a nice used car that meets your needs, sit down with the manager or with the salesperson and negotiate the price. If you are good at negotiating, you just might save up to 10% of the original price.

The Bottom Line

Used auto loans are becoming increasingly popular nowadays. If you live, work, or worhsip in Westland or Wayne, MI, and you need a used auto loan for your next purchase, do not hesitate to contact Wayne Westland Federal Credit Union.

Seven Key Points About Auto Financing

The automobile is an essential part of American life. Even high school students, the ink barely wet on their drivers’ licenses, often expect to have a car at their disposal. Most of us would have a hard time getting to work, doing our shopping and leading our daily lives without a car.

The problem is the cost. For most people, a vehicle is the most expensive purchase they make except for a house. Therefore, financing a new or used car is a major transaction. However, there are seven simple steps to financing a car that you should keep in mind. Follow these steps when you’re planning to finance:

1. Shop for your financing first. Don’t wait until you have a car picked out and the salesman is dangling keys in front of your face. You may make an impulsive decision that isn’t your best deal. Check around for financing before looking for a car. Credit unions are often the best deal for car loans, so be sure to contact your credit union for rates. Figure out what you can afford and stick to it. You won’t help yourself if you spend more than you can afford.
2. Remember that there are three steps to the car buying process. You can win or lose on all three. The process includes a) buying your new car, b) selling your old car, and c) financing your new car. Look at each step separately and make your best deal on each.
3. Any car you look at is not one-of-a-kind. There will always be another vehicle. Get your best deal from one dealer, and then take that to another dealer to see if there’s an even better deal for you.
4. All things are negotiable. This includes price, features, financing, terms, trade in, and warranties. Don’t be afraid to ask questions, make counter offers, or even get up and walk out of the dealership.
5. Although the differences can be small, there is a better time to cut a deal. At the end of the month, the dealership sales department is running up against its monthly quotas and the pressure to meet the goal intensifies. Sometimes, if the salesman or sales department hasn’t met the quota, they’ll be open to a better deal.
6. Get your best deal in writing then go home and sleep on it. The deal will almost always still be there in the morning and your thoughts will be clearer.
7. If you’re not having fun buying your new car, go home. This is not a time to succumb to high pressure sales pitches or your own tiredness. Buying a new vehicle should be fun.