New Cars Versus Used Cars

Used car dealsThis web site focuses almost exclusively on buying and leasing brand new cars but we realize that previously-owned used cars are the best solution for many people.

To set the stage for our discussion of used cars and getting great deals, let’s first point out that there are many more variables to consider when buying a used car than when buying or leasing a new car. With used cars, there’s the matter of condition, age, mileage, maintenance history, clear titles, accident incidents, price valuation, problem disclosure, and repair history —  all of which are not factors when buying a brand new car.

When you buy or lease a brand new car, the MSRP price is stated on the legally required sticker on the side window. Every dealer in the country who sells that same car has the same “sticker” price (although selling prices may vary). Therefore values of new cars are fixed, unlike values of used cars, which are highly variable depending on market conditions, region of the country, mechanical condition, mileage, and other factors already mentioned. Furthermore, with a little searching online at web sites such as Edmunds, you can find a dealer’s invoice price for any vehicle, the price he paid the manufacturer. There’s no way to do that for used cars.

All new cars are sold by manufacturer-franchised and authorized dealers. Their new cars are covered by manufacturers’ warranties and state-mandated new-car Lemon Laws. Although a handful of states have a watered-down form of used-car lemon laws or warranty requirements, most do not. Most used car sales by dealers are “as-is,” meaning that there are no guarantees, no warranties, and no right of return — and all used car sales by private individuals are considered “as-is” in every state. Unless a dealer specifically provides a warranty or if the car is new enough to have some remaining manufacturer’s warranty, any problems encountered by a buyer are his responsibility after the sale.

Used cars can be sold by new-car dealers who also have used-car lots, or by independent used-car dealers and national chains such as Carmax, or by small local dealers who usually sell older and cheaper cars. Another kind of used car dealer is known as a “buy-here-pay-here” (BHPH) dealer who specialize in selling older model cars to people who have credit problems — people who can’t get conventional auto loans.  They finance their own loans and generally charge very high interest rates.

Large dealers get used cars from trade-ins and lease returns, and normally only sell newer cars in good condition. Many sell “certified” cars that have been completely inspected, repaired, and warranted. Prices are higher but many customers feel the extra cost is worth the peace of mind that certification provides.

Smaller dealers typically sell older cars that have been obtained from dealer auto auctions. The cars frequently have excessive high mileage and problems. Contrary to popular belief, most dealers do not thoroughly inspect the cars they sell. Many don’t have repair shops to fix problems even when discovered.  Although, illegal in many states, dealers often don’t disclose known problems to potential customers. Of course, it’s very easy for a dealer who doesn’t inspect his vehicles to not know about problems. Sales by individuals are generally not covered by disclosure laws. Therefore, it’s smart for any buyer to always get a professional mechanic’s inspection before a used-car purchase.

Knowing what to pay for a used car is much less straight-forward than for brand new cars. Used cars don’t have “fixed” or standard prices, although it’s possible to roughly determine a car’s value from web sites such as kbb.com, and nadaguides.com. Many dealers and sellers use these values as guides to set their own prices. One excellent source of good dealer pricing is Edmunds.com where you can see the dealer’s price compared to average prices for that car in your area.

In summary, it’s possible to get excellent deals on used cars but it requires a bit more effort and research than when buying  brand new cars.

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