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June 2013 Archives

Are Used Cars a Better Buy?

Recently CBS Moneywatch's Jerry Edgerton wrote an article alerting bargain hunters to the possibility that used cars might be a better deal than new cars:
"Values for used cars sold at wholesale auctions hit a three-year low in April, according to Kelley Blue Book. The price of an average one-year old used car has dropped to 81.5 percent of the list price of that same model new car, says Kelley analyst Alec Gutierrez. That translates to a $110 per month savings vs. a new car with a five-year loan, he calculates."
In the article, Edgerton suggests considering one or two-year-old models of Vehicles that have recently undergone major redesign, as well as brands that don't hold their values particularly well. He also suggests consumers consider certified pre-owned cars. While the numbers may be particularly appealing on paper, Edgerton's article makes no mention of the additional costs that might be associated with used Vehicles.  Any follower of our blog or facebook page already knows our stance on Certified Pre-Owned Vehicles; they are often a treasure trove of hidden defects.  While consumers may save a few dollars to get into a nice-looking vehicle, our clients often find that the hassles with used and certified vehicles aren't worth the "cost savings."  What consumers might save on their loans can quickly be eaten up by repair costs and headaches. In deciding whether a used or certified pre-owned vehicle is a better buy, there are a few things to consider: 1.  Warranties-  Read the purchase paperwork carefully;  cars that are sold "as is" or without warranties can mean that the buyer has little recourse if something goes wrong. 2. Private Sellers-  Many consumers are not aware that the law provides far greater protections to consumers that purchase from merchants (professional car dealers) than those that buy from private individuals.  Before you buy that car from Craigslist, consider the fact that the seller may not be liable for defects in the same way as a professional dealership. 3.  Lemon Law-  Many consumers are also unaware that the Connecticut Lemon Law applies only to the purchase of a new vehicle.  While warranty laws or fraud laws may require a seller to take certain actions with a used cars, the far more straightforward protections of the Lemon Law will not assist a purchaser of a used or certified pre-owned vehicle. 4.  Vehicle history-  We suggest to all of our clients that they obtain a vehicle history report before purchasing a used car.  Just because a vehicle appears to be in good shape doesn't mean that it doesn't come with baggage.  A test drive at highway speeds and a Carfax (or comparable) vehicle history report will make it much easier to identify latent defects. 5.  Contract Packing-  While used vehicles have a lower price tag, that doesn't necessarily mean that you will pay less for the car. Frequently, we see used vehicle dealers that sneak in GAP insurance or service contracts to drive up the contract price and increase profit.  Be wary of any seller that talks about price strictly in terms of the weekly or monthly payment, and be sure to read the Retail Installment Sales Contract carefully to look for hidden charges. In addition to being aware of the above, consumers should also do their research to make sure they are dealing with a reputable dealer. Sites like Dealer Rater can provide valuable insight to let consumers know if they are buying from a company that will treat them fairly.

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