Car Buying 101 Tutorial
Car Buying 101 Part IV
One of the little known secrets of the car business is that used vehicles typically have more profit in them than new ones. So when you hear a car salesman trying to do you a favor by suggesting a used car, also keep in mind they are looking to increase their profits.
People have primarily one reason for wanting a used car, or pre-owned vehicle if you want to use the industry jargon, and that is they want to save money. This doesn’t always work out the way they think it will.
For one thing, banks typically charge higher interest rates on used cars than they do on new vehicles because there is more risk in the loan, so unless you are paying in cash in full, factor in the difference in the interest rate and what it will do to your monthly payment.
Another consideration for used cars is maintenance issues. Here is where a car dealer has an advantage over auctions and private parties because the dealer can offer extended warranties, which they, if they are not completely crooked, might actually honor. Of course you have to pay extra for these warranties, so again, factor that into your payment, especially if you are comparing it to a new car.
Car dealers try to buy cars at least a couple of thousand dollars below low Kelly Blue Book value, so it’s reasonable to try to negotiate close to that number for the selling price. Unless the dealer is exceptionally hungry for a sale, you will have difficulty convincing him to sell it for below low Kelly Blue Book.
Expecting a car dealer to take a loss on a vehicle is not reasonable and becomes obnoxious, so there is no point in going into a dealer and offering them half of low Kelly Blue Book; they will probably just show you the door.
The dealer is not obligated to sell you the car at any particular price, so if it is a popular model, they may try to hold out for a higher price than you are offering. That’s when you have to decide whether or not it’s worth it for you take the deal or continue your search.
Buying a used car through a dealer can offer a relative degree of safety since the industry is regulated. You are less likely to get that rock-bottom deal, but you do get more support on the sale. Of course there are crooks in any business, so always be diligent and careful.
