It's my first time at a used car dealership.

December 8, 2008 7:28 AM

Urgently need advice on used car shopping.

So, I was babying my old car along, planning on buying a replacement after the holidays. Unfortunately, it gave up the ghost earlier than expected and now it's time to go car shopping. Fortunately, there is a long line of used car dealerships just a mile from my house that I can walk to.

The thing is, I've always just bought cheap older used cars from private sellers and paid cash. This will be my first time going to a dealer, using credit, and getting the newest car we can afford.

Considerations/Limitations:

Both my wife and I have terrible credit. (Hers is slightly better, but I make most of the income). I know that I see dealership ads saying "Bad credit? No credit? No Problem!", but I'm sure this will affect our available choices.

I've worked out our budget and determined that we can afford monthly payments of up to $200/month and a down payment of up to about $1000.

Our prime concern is getting the most reliable vehicle, with the lowest mileage, that we can afford.

We live in Lexington, Kentucky, if that's relevant.

My Questions:

Given our credit and the budget I've listed above, how much car are we likely to get in the current market? (Should I be looking at the $6,000 cars, the $10,000 cars, or what?)

Given our poor credit, do we need to just go to certain dealers (the ones with those ads) or will most used car dealers be willing to work with us?

Given that my wife has better credit and I have most of our income, would we likely both be signing for the loan? (I'd kind of prefer that - most of my poor credit rating comes from the fact that I've never ever bought anything on credit, so this would help me establish my credit.)

How much haggling is expected over price? I have no experience with this and would obviously prefer not to grossly overpay.


Thanks in advance for all your answers. If you think of any additional info which I should know but which isn't covered by the above questions, feel free to offer it as well.

posted by tdismukes to shopping (17 comments total)

Do you have a credit union? You might be served better by going there first to see what type of loan they'd give you. This gives you a bit more bargaining power with the car dealers.
posted by jrishel at 7:45 AM on December 8, 2008

While I can't address your other questions, I can address this:

How much haggling is expected over price? I have no experience with this and would obviously prefer not to grossly overpay.

I'd use Edmunds to find out the price that others in your market are paying for the same car. Pick a reasonable amount that you're willing to pay for the car before you even go into the dealer, and stick with it. If the dealer won't haggle for a used car (ridiculous, but I've had it happen), then don't even talk to him. Do your research on the make & model you want, and don't be afraid to leave if your dealer won't go low enough--you can always find the same, or a comparable used car, elsewhere.

Also, don't forget to check the carfax report. Red flags: flood damage and front-end damage.
posted by PhoBWanKenobi at 7:54 AM on December 8, 2008

Don't get financing from a car dealer. You will generally get a better rate from a credit union, and they may be able to work with you on your credit. What with car dealerships being in pretty big trouble, and few people buying cars right now, you should be able to get an exceptional deal. Be willing to walk away from any deal you don't love.

Googling How to buy a car get a lot of results. Study up.
posted by theora55 at 7:57 AM on December 8, 2008

No credit union, unfortunately. I have been with the same bank a long time, but I don't know if that will help. They turned me down for a credit card the last time I applied (about 4 or 5 years ago), based on my not having any credit history. I'm making more money now, but I may also have added a small ding or two to my credit, so it probably balances out about the same.
posted by tdismukes at 7:57 AM on December 8, 2008

Another possible venue might be a car-buying service. I've used them twice - once via our credit union, and another time with our insurance company. IIRC, the credit union got us a better deal. You end up purchasing from a fleet or commercial salesperson (rather than one of the guys on the floor), but the price is pretty good and pre-negotiated, which means no haggling required. A downside is that you may be limited in terms of color, options, and suchlike. Costco, among others, offers it as a service to members.
posted by jquinby at 8:01 AM on December 8, 2008

Yeah, forgot to mention - many of those 'no credit, no problem' shops are just interested in carrying the paper at usurious rates. If it all possible, try to lock down financing before you walk into anyplace. (on preview, seconding theora55)
posted by jquinby at 8:03 AM on December 8, 2008

Ask to see the title for the particular car you've selected. Generally, if it says "Salvage" anywhere on it, walk away. I say "generally" because we actually DID buy a car with a salvage title a few years ago. It was cheap and the repair work was checked-out by a chop we did business with. For the money, the car has been as dependable as a non-salvage car of the same make and year. But, of course, it's a big roll of the dice.

As for Carfax...well...let's just say my experience with a Carfax report has been less than impressive. You will find out whether an accident has ever been reported on the car, but you will rarely, if ever, see any indication as to the particular damage or severity of the accident, unless it was totalled. Then you might see particulars as to why it was totalled. You will also see if the car was totalled and subsequently restored and retitled as salvage.

Before you go shopping, speak face-to-face with a loan officer at your bank and see just how mush of a loan they will approve you for. This will help you focus on the cars you can actually afford.
posted by Thorzdad at 8:36 AM on December 8, 2008

Try the bank first for financing (whether a car loan or a line of credit). If they say yes, then that's something for the dealer to try to beat.

Don't let the dealer play a shell game. If possible, agree on the price of the car before discussing (or, at least, agreeing to) financing. Otherwise they can take a bit from one and add it to the other, appearing to make a concession that wasn't really a concession after all.

Ask about all the fees, etc. charged by the dealer before agreeing to a final price. Otherwise you might think you've agreed on the price you want but then they add this $400 fee and that $200 fee, etc. (also make sure you know what taxes apply)
posted by winston at 8:38 AM on December 8, 2008

given your credit (what do you have on your report? how many baddies, any BK7 ?) I'd say you're about to get hosed. think 27% interest rate. your should be looking at a car for as little as possible ($3500 should buy you something that won't break down once a week) and repair your credit first. ask people on creditboard.com for help, they will give you an excellent primer on what to do.

also watch this video on how to buy a car. this will save your butt big time.

consider purchasing a vehicle from a private individual via a site like cars.com as you will get it cheaper than from a dealer. you're probably gonna end up with a car that's sold as-is (aka. without warranty) anyway. when I was in your situation back when I had no credit and needed a car for college, I did it that way and got myself an old buick lesabre from an elderly couple. it was an ugly boat but I loved it for it's massive couch in the back, the fact that I never got pulled over (because the cops seem to think you're old when they see a buick) and because it never ever broke down. I took a lot of abuse from the other college kids though.
posted by krautland at 8:52 AM on December 8, 2008

Nth try the bank.

I found this "True Cost to Own" thing worth using.

Be prepared for a lot of hard sell re. the dealer doing the financing, added warranty, etc, beyond just the car.

Here are my pre-car-purchase questions. I did far too much on-line research. We did a test drive and said "Okay. Will you take $XX,XXX?" and got it for our price without bother, and felt we got a fairly good deal. If you have the time I recommend the on-line research/fixed price in mind route.
posted by kmennie at 9:04 AM on December 8, 2008

"given your credit (what do you have on your report? how many baddies, any BK7 ?)"

Well, I just tried to run my credit report with Equifax, and they tell me that they can't generate a report for me, apparently because I have no credit history. I guess my student loans were too long ago and those bills that I thought might show up as dings on my credit never got reported. I'm reading a site now that tells me what my options are if my credit score is above or below a certain point, but it doesn't mention the possibility of not having a credit score at all.

Now I'm off to run my wife's credit report and see what that shows.
posted by tdismukes at 9:24 AM on December 8, 2008

I'd use Edmunds to find out the price that others in your market are paying for the same car.

Do this, but for some kinds of car that are worse hit by the recession than other types, they may be selling below the Edmunds blue book price, because an unexpected sharp drop takes a while to be reflected due to its deviation from average and regular depreciation.
posted by -harlequin- at 9:38 AM on December 8, 2008

These days, car loans are somewhat easier to get than a credit card. Why? because they're secured loans (and for people with marginal credit, they're at huge interest rates, so they're quite profitable for the lender). If you don't pay, they'll repo your car, and sell it to recover some of the bad debt -- so it's a somewhat safer loan for them to offer. Talk to your bank and/or a local credit union... not only will they be able to offer better loan terms, but they may have access to a garage of repo'ed vehicles for sale that aren't on the open market yet. FWIW, I'd probably make an appointment and visit the bank in person... have a conversation, rather than a phone call.

You are about to get screwed on the interest rate, so you should really be looking at very inexpensive cars... $3,000 or less should pick up something that's a little rough around the edges, but reliable enough. $6,000 is going to be on the edges of your budget (if your monthly car budget drops below $200 at any point during the next four years, you'll be in trouble).

The 10k cars are absolutely out of your price range. $9,000 car loan + $200 monthly payment + high interest rate (bad credit) == a loan that will very likely outlast the car.

Also, be aware that until you make the last payment, your bank has an interest in the car... if some thug steals it and drives into a tree, the bank still needs to get paid -- so they'll require the car to be insured, to protect their investment. You'll need to add comprehensive and collision insurance to your policy, which is going to significantly add to your monthly car expenses.
posted by toxic at 9:47 AM on December 8, 2008

"You'll need to add comprehensive and collision insurance to your policy, which is going to significantly add to your monthly car expenses."

Yeah, I've got that figured into my budget, along with some buffer in case we have additional expenses or reduced income down the line.
posted by tdismukes at 11:27 AM on December 8, 2008

they tell me that they can't generate a report for me, apparently because I have no credit history

those were US-student loans? you have a social security number? if you answered yes to at least the second question then there is a credit file. they probably can't confirm your address. try truecredit.com and pester their reps via the phone if the site can't do it on its own. try multiple old addresses.

if you had no credit history at all, you'd automatically be at around 330 points. I know this because that is the number I got punching in my then brand-new social security number. this should allow you to get a secured credit card (use bankrate.com to find one) and within one year your score should be around 550. two years of never exceeding 49% usage of your credit limit and always paying on time and you are a 650.
posted by krautland at 2:11 PM on December 8, 2008

Thanks for the advice, krautland. Unfortunately, I need to get the car now and can't wait two years to build up my credit.

My wife's credit score comes out over 600 but under 670, which is too low to qualify for a loan from my bank. According to this page, with that score we should check out AutoCreditFinders for a sub-prime loan. If anybody has any info on them, please let me know.
posted by tdismukes at 3:03 PM on December 8, 2008

I don't think that this is what you are wanting to hear, but I have to say that setting out to look for a subprime car loan, when you don't have either cash or negotiating experience, is just one of the worst things you can do to yourself.

If you are careful in your shopping, $1500 can buy you a surprisingly decent car -- you need to avoid the racer-boy specials, and the "needs some work" beaters, but that leaves you with thousands of grandma-driven Buicks and Mercury's out there to choose from. I have some neighbors, actually, who are selling exactly this sort of car (it's an honest-to-god grandma-driven Buick, I kid you not, she even does the blue-hair over the steering wheel thing going down the road; thank heavens her kids are making her sell it because her driving is getting scary). They'll probably sell it for $1000 to $1200, because it is twelve or so years old and has a few dings from parking lot errors. But it has been maintained at the dealer since the day it was driven off the lot, has low miles, and is in superb mechanical shape. A car like that is good for five years or a decade of reliable service, as long as you give it at least minimal maintenance.

Wherever you are living, there are similar cars that come up for sale. You have to be willing to phone twenty classified ads, go and look at five or so cars, and grab the first gem you see. But compared to going to the used car lot, overpaying, and ending up with a 6 year loan at a usurious interest rate, plus full insurance, you will be financially ahead within a few months.

Ethically, I think this is the right answer to your question, rather than step-by-step instructions about how to overpay for more car than it sounds like your finances can bear. Subprime loans are called that for a reason, and they aren't something you want in your life.

Lastly, if you are dead-set on getting a loan, please do call every credit union in your area -- they almost always have better rates than banks (and always better than the "we finance everyone" used car dealers) and many are open membership -- as long as you are a state resident, or something equally simple, you can join.
posted by Forktine at 3:50 PM on December 8, 2008 [1 favorite]