Five Tips for Buying a Used Car the Right Way
by Remar Sutton

Buying used can make smart money sense - if you follow these five easy tips:

1. Always have a mechanic check out a used car before you buy it. Even if you're buying from your mother. Use an independent service shop or diagnostic center. Most charge about $125 for a complete check.

2. Budget any needed repairs as part of your purchase price. So, if a seller wants $7,000 but the vehicle needs $1,000 in repairs, budget $8,000 for your vehicle. Or, better yet, negotiate the selling price down to include the cost of repairs.

3. Forget about a used vehicle's "asking price." Smart used-vehicle buyers never negotiate down from asking price, they negotiate up from "loan value." Loan value is what most lending institutions will actually lend on a particular vehicle. Your credit union can tell you this figure. For instance, if the seller is asking $7,000, but the loan value is $5,000, you want to negotiate up slowly from $5,000.

4. Talk warranty after you've settled on the price. And never accept a 50/50 warranty--the dealer pays half of warranty-covered expenses. On any vehicle, fight for at least a 30-day, 100% drivetrain warranty. If you're also thinking about buying an extended service agreement, remember that the price of a service agreement usually is negotiable, too.

5. Always shop used-car financing rates. Most states allow dealers to charge much higher rates for financing used cars than for financing new cars. For instance, a new car might be financed at 8% while a two-year-old used car might be financed for 15% or higher. How do you find the cheapest rate? Ask the seller to give you a completely filled out copy of the finance contract, and compare it with your credit union's rate. A tip: Air Force Federal Credit Union finances used cars at or near new-car finance rates.

Editor's note: Remar Sutton's car-buying tips have been featured on "Good Morning America," "Today," "20/20," "Nightline," and in magazines such as People, Newsweek, and Credit Union Magazine. He's president of the national Consumer Task Force for Automotive Issues. He writes this column exclusively for credit union members.