Used Car Buying Quiz
Buying a used car should be pretty simple. Right? Well, actually, there are some pitfalls that could be costly. So just to make sure, take our used car buying quiz and see if you are ready.
Give yourself one point for each correct answer. If you score nine or above you can expect to get a cream puff. If your score is six to eight, memorize your mechanic's home phone number. Scores of five and below, you'll probably be getting a visit from the repo man soon.
- The best way to judge the mechanical condition of a used car is by pressing the preset radio station buttons on the car's sound system. That way, you can avoid buying a car from a heavy metal headbanger or someone else who would abuse the car. True or false?
- When you go to inspect a used car, the only thing you need to do is ask for the service records. That tells the whole story of a used car. True or false?
- Used cars should be taken to a mechanic for inspection before you buy it. But there is one time when this isn't necessary. That is when:
- The owner seems trustworthy.
- The car comes with a certified pre-owned factory warranty.
- The asking price is low and you don't want to blow the deal.
- Name two places where the used cars on a new car dealer's lot come from.
a) ______________________ b) ______________________
- The dealer makes more on used cars than on new cars. True or false?
- Establishing the price for a used car is total guesswork. Look at the price, roll the dice and start haggling. True or false?
- If your credit is weak, the place that will give you the best interest rate is:
- The dealer
- An on-line lender
- A credit union
- The best strategy in negotiating for a used car is to:
- Try to intimidate the seller by using a lot of technical terms.
- Ask the seller to throw in extras to get a good deal.
- Make a low starting offer and gradually increase your price.
- Leasing applies strictly to new cars. You can't lease a used car. True or false?
- In comparison to new cars, interest rates for used cars are almost always higher. True or false?
1. Uh, false. There are much better ways to find out about the potentially checkered past of a car's past life. See next answer.
2. False. Asking for service records is important. But the best thing to do is run a vehicle history report on the car you are interested in buying. Companies such as Carfax and Autocheck can reveal odometer rollbacks, salvage titles and, in some cases, accidents. Running a vehicle history report on a used car is essential.
3. B) The car comes with a certified pre-owned factory warranty. A certified used car means it has been thoroughly inspected by factory-trained mechanics. If something goes wrong after you buy it the repair will, for a limited time, be covered under the warranty.
4. Trade-ins and used car auctions, that sell one-year-old rentals and cars coming off lease. See the next answer for more on this subject.
5. True. Dealerships make more money selling used cars than new cars. (And, they make as much servicing cars and selling parts as they do on both new and used cars combined.) The reason used cars are so lucrative is that there is a higher margin of profit. If you understand why, it might help you get a good deal on a used car.
The used cars on a new car dealership's lot come from trade-ins and auctions. The idea is to buy low and sell high. They buy as low as possible, meaning that they will give the lowest possible price for a car that is offered as a trade-in. If they give an $8,000 credit for a car, they might try to sell it for as much as $14,000. This means they can comfortably bargain down to $9,500 or even $9,000 and still make money on the car. So, when you see a used car on a new car dealership, assume it has been marked up way up. Moral of the story: know beforehand how much a used car is worth by using Edmunds.com's TMV.
6. False. Several sources list current values for used cars. Edmunds.com has prices for used cars going back to 1980. Make sure to click the "Customized Appraisal" bar and be realistic about the condition of the car.
7. B) An on-line lender. If your credit is weak, a dealer will likely mark up the interest rate and claim they are doing you a favor by letting you buy their car. In some cases, "nonprime" borrowers can pay as much as four interest points too much. It's a good idea to check your credit before you go to the dealership. Some on-line lenders have become very popular with consumers because they have tried to humanize the process by not humiliating "nonprime" borrowers. Try getting a loan through an on-line lender such as Capitaloneautofinance.com. For more information read "Tips for Subprime Borrowers."
8. C) Make a low starting offer and gradually increase your price. Even though there are pricing guides, such as Edmunds.com's True Market Value, you might be able to get an even lower price. It doesn't hurt to start low (but in the ballpark) and hear them say "no" several times. When they finally do say "yes" you'll know you are getting the lowest possible price. If you are negotiating in a car dealership, however, you might need to threaten to walk out before they will know it is your "take it or leave it" price.
9. False. Leasing is just another way of financing which can be applied to used cars as well as new cars. LeaseCompare.com is a good example of an on-line lender that has streamlined the leasing process.
10. True. Higher interest rates are one of the few bad things about buying a used car. The no-interest and superlow interest rates offered by manufacturers usually pertain to new cars. However, the amount you save in depreciation will more than offset the higher interest rates.