Get a deal on a used car

If you’re in the market for a used car, you may have noticed that prices are higher than they used to be. Blame limited supply (following reduced production and fewer leases amid the financial crisis) combined with higher demand. Used cars are now keeping about 12.5% more of their value than they did three years ago, says Alec Gutierrez, manager of vehicle valuation for Kelley Blue Book. As a result, prices on pre-owned autos have been closing in on fresh models.

But you can still save as much as 10% to 15% on a one-year old car vs. a new car, and about 30% on a three-year-old car, Gutierrez says — even more if you follow this advice:

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  • Use a car’s past against it. Once you’ve found an auto you’re interested in, use the vehicle identification number to discover any history involving accidents and damages, which you can use to bargain down. Buy a report from sites like CARFAX and AutoCheck; eBay Motors provides this for free. Also, hire a mechanic to inspect the car. Even the smallest of damages — say, an air conditioner that needs to be recharged — can help you take dollars off the price. And if you’re interested in purchasing a car hundreds of miles away, mobile inspection services can be worth the $150 or so they cost.
  • Line up financing first. Planning to buy from a dealer? Shop around for the best loan rate before you start negotiating; you might even see if the bank will issue you a check, with enough to cover the purchase plus fees and taxes, good for at least 30 days with no obligation. “It puts you in a more powerful position and allows you to be a cash buyer,” Reed says. The dealer will know you are ready to buy and won’t want to see you turn away. Also, because dealers often try to deceive by negotiating a monthly payment plan, preapproved financing forces them to focus on the price of the vehicle itself.
  • Benefit from the seller’s market. On the plus side, this tight market will be in your favor when you try to get rid of the car you’re replacing. Prices on small compact cars have appreciated about 20% to 25% since the beginning of the year, says Jonathan Banks, executive auto analyst at the National Automobile Dealers Association's NADA Used Car Guide. “I think a lot of people don’t realize their vehicle is worth more than what they owe,” he says. However, these values won’t hold through the end of the year, so act now to sell. Use sites like ClearBook, Edmunds.com, and Kelley Blue Book to determine how much yours is worth. But don’t bother going to the dealer: The value you'd be offered on a trade-in is probably the lowest price you’ll get. Instead sell your old car on your own and use the proceeds toward your new ride.

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