Buying a used car... did you know?

Do you know the differences between purchasing a new car vs. a used car? There are a few things to take into consideration...

1. A new vehicle will have a MSRP (manufacturers suggested retail price). For a used car, the selling dealer sets the price, usually based off the values provided by an outside company like NADA or Kelley Blue Book. There are several factors that will impact the price of a used car: interior and exterior condition, miles, additional equipment, vehicle history, etc. Every vehicle is different, even if you are comparing two vehicles of the same make, model and year. Each vehicle has "lived a different life" and therefore, makes it impossible to compare apples to apples.

2. Financing options will be different on a new car vs a used car. You'll find the best financing rates and longer terms on a new car. As a vehicle ages, banks increase the interest rate and decrease the length of time you can finance. The reason why, is because the older the vehicle, the more likely 'something' will happen to it, which increases the risk for the bank. More risk = higher rate. Make sense? Keep this in mind when considering vehicles to fit your budget. A payment on a 2009 Dodge Charger priced at $15,995 won't be the same as a 2006 Dodge Charger priced at $15,995.

3. The magic number is 100,000. Typically, once a vehicle reaches 100,000 miles, most banks won't loan you money to purchase the vehicle. This too, has to do with the risk. For whatever reason, 100,000 is considered the end of a vehicle's life cycle, and the value of the vehicle decreases dramatically. (Also good to keep in mind if you are trading in a vehicle with over 100,000 miles.) If you're looking to purchase a vehicle with over 100,000 miles, be ready to pay cash, or keep in mind, acquiring financing will be more difficult.

4. New vehicles will come with a warranty from the manufacturer, which is probably the best protection you can have on a vehicle. Some used vehicles may still be under the manufacturers warranty (you'll have to check with each manufacturer to be sure), but for the most part, if you want additional security, you'll need to purchase an extended service agreement (ESA). Most of the time you can add this into your financing at the time of purchase or buy the protection at a later date. If you have questions about different ESA plans, ask to speak to the finance manager or a service writer.

5. On a new vehicle, the history starts with you. On a used vehicle, the history is something to take into consideration. Now-a-days we have great resources like CarFax and Auto Check, that provide you with a pretty good account of the vehicles past. While these are a good reference to check for service records and accidents, keep in mind, they aren't perfect! Make sure you check the vehicle out yourself or have a mechanic look at it.

Hopefully these items will better prepare you for purchasing your next vehicle. Buying a car, new or used, shouldn't be scary! Being prepared for your big purchase will help make the experience more enjoyable and knowing this information puts you way ahead of most people. =)