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Nervous about what's under the hood? Used car dealers are feeling your pain all the way to the bank. In an ironic twist, "pre-owned vehicle" dealers have found a way to profit from their bad reputation.
No, they're not just selling overpriced used car extended warranties anymore. They're charging a 10%-25% markup on used cars "certified" (by them) not to be pieces of junk. The accompanying "certified" used car warranties in fact usually carry much less protection than the best used car warranties, which you can buy yourself online. Who needs a used car warranty if your jalopy is a "certified" machine?
But even paying 10%-25% more won't eliminate risk. Thorough extended warranties for used cars are necessary, "certified" or not. In some cases, a half-hearted inspection means the certification may not be worth the paper it's written on. Used car problems often only appear months or years after purchase. That's why even for mint used cars, used car extended warranties are essential.
Worse, "certified" used cars don't always come with any extended used car warranty coverage. When a "certified" used car warranty is included, it usually has much less coverage than a new car warranty. Even most standard pre-owned vehicle extended warranties offer much more protection than most "certified" used car warranties.
You can almost always do better on your own. An independent inspection and a used car extended warranty provide better peace of mind, often at a lower price.
Certified Used Car Inspection: Used Car Extended Warranties Still Needed
The cornerstone of a "certified" used car program is the supposedly super-thorough inspection. There are good reasons to think that the inspection does not replace an independent inspection or used car extended warranty coverage.
*Are inspections really added value? Don't you wonder why dealers aren't inspecting all their cars before taking delivery themselves? Car dealers aren't idiots, at least not with cars. Anyone who's had to haggle over a trade-in knows that. The big question is whether the dealership will disclose everything it knows. Trust is still an issue with "certified" cars.
*Certified by whom? Think about it: the same people who are trying to sell you the car are also "certifying" it. Yes, you read right: the "certification" is usually done by the dealership selling the car. If there's any manufacturer oversight, it's often just an occasional inspection of the dealer's inspection.
*Duplicate inspection. You should have any used car, "certified" or not, thoroughly inspected by an independent mechanic. You're up against an industry that demonstrates about as much trustworthiness as, well, used car dealers. Do not give up your first line of defense.
*Limits of inspections. No inspection in the world can foresee every possible problem. Oftentimes, something that breaks a few months after purchase really was fine when the car was sold--or was virtually undetectable. When--not if--something gives out, you'd better have a used car extended warranty.
"Certified" Used Car Warranty Coverage under the Hood
The implied selling point of "certified" used cars is they won't break. That kind of makes used car extended warranties seem unnecessary. Naturally, some buyers may wonder what will be happen if something does break anyway. In order to ease those inquiring minds, "certified" used car warranties often come included, or are at least implied. Sadly, too few people will inquire further about what the "certified" used car warranty covers.
*Does certified mean "under warranty"? Not necessarily. The major manufacturers' "certified" programs usually include some extended warranty protection. But oftentimes, "certified" cars sold outside of manufacturers' programs do not come with any extended warranty coverage. If it does break, tough luck.
*How good's the warranty? The GM Certified Used Vehicle Warranty is only for 3 months or 3,000 miles! Ford offers longer "certified" warranties. But they generally aren't bumper-to-bumper, covering only the "power train." Forget about the little extras like the roof or the doors. Right off the internet, you can buy extended warranty used car coverage that is generally bumper-to-bumper and lasts several years.
"Certified" Used Cars: Extended Warranties Still Needed
"Certified" used cars offer two things: an inspection and a used car extended warranty. Arguably, neither is worth the price.
*Inspection. Let's face reality. The junky used car problem doesn't exist for want of dealer inspections. Lemons get sold for one of three reasons. a) The defect did not show up in the dealer's own inspection. b) The dealer is trying to sell a car whose defects were already known. Or sometimes c) the buyer knows about the defects but is guilty of wishful thinking. In none of these cases will a "certified" inspection provide the protection of an independent inspection and extended used car warranty.
*Warranty. A "certified" used car will often cost 10%-25% more. For a $10,000 used car, that's $1,000-$2,500. An extended used car warranty from an independent auto warranty company will often cost about the same. But the best used car warranties will provide a lot more protection than "certified" used car warranties. Given that fact, you may end up getting an independent extended car warranty anyway.
Worst of all, certified used cars come with an expensive risk. They tempt you to let your guard down. Ford even issued a press release headlined "Pre-Owned Vehicle Program Reduces Customer Buyer Beware." As if that were a good thing.
Of course, in the end, you may buy a "certified" used car anyway. These days it seems there are fewer and fewer used cars that aren't "certified." Just make sure to get an independent inspection and an independent used car extended warranty. "Certified" or not, it's still a used car.
Joel Walsh, a freelance automotive writer, recommends Auto Service Warranty, Inc. Where you can get quotes for a used car warranty in five seconds: http://www.AutoServiceWarranty.com [Publish this article on your website! Requirements: 1. Live link for above URL/web address. 2. Link anchor text: "used car warranty" OR leave this bracketed message intact.]
Auto Loans: Don’t Dig A Money Pit In Your Garage
By Joel WalshChoose the wrong auto loan and you might drastically increase the chances of defaulting and losing your car. Find out step-by-step how to avoid a money pit.
Car loans are certainly less costly than home mortgages, student loans, or other kinds of loans. So why do so many people end up defaulting and losing their cars? Find out these hidden dangers:
Biggest Hidden Car Loan Danger: The Inherent Money Pit
Unlike home mortgages, student loans or other big-ticket loans, car loans are inherently money pits. A house can build equity; higher education can increase earning potential; even jewelry can sometimes be re-sold for as much as was paid for it. If you borrow to buy one of those things, you may eventually get a return on investment. But every single car loses significant value and keeps losing it as time goes by.
Solution: spend as little on your car as possible.
Of course, in order to spend as little as possible over the life of the vehicle, you need to get a well-made, fuel-efficient car, rather than the one with the lowest price on the windshield.
But a pickup truck, SUV, sports car, or “luxury” model is a guaranteed money-loser. Don’t worry about what other people will think. Think about it: when was the last time you saw an expensive automobile and thought, "I really like and respect whoever owns that!"
The best buy? Many economists actually recommend buying a used car that's a year or two old. That way you can actually benefit from the fact that cars only drop in value. Even a car that’s just six months old may offer you a substantial savings. Just have it inspected thoroughly so you don't lose what you've saved on maintenance payments.
Hidden Car Loans Danger: Dangerously High Monthly Payments
Unfortunately, most people never figure out the total cost before signing on the dotted line. They end up staying up late at night trying to figure out how to make ends meet. They live in smaller houses. They skip going out at night. They don’t go on vacation.
All that sacrifice to have a brand-new SUV in the driveway!
Take a hard look at your finances, and figure out how much you can pay total each month for your car. Be sure to take into account insurance, tax, maintenance, and fuel. Usually, when people actually do calculate the total monthly cost of the car they’re considering buying, they’re amazed by how high it is.
How Much Car Debt Can You Afford?
1) Make a list of your average monthly non-car expenses, and subtract them from your earnings.
____your monthly after-income-tax income
-___any other taxes
-___housing (including any fees and property taxes, and utilities)
-___food
-___health insurance or HMO
-___life insurance
-___debt payments
-___401 (k), IRA, or other long-term savings
-___short-term savings
-___telephone, cellular phone, cable, internet, etc.
-___entertainment and fun stuff (be honest!)
-___cost of yearly vacation(s) divided by 12
-___other expenses
= ____what you can spend on a car
2) Subtract your monthly car-related expenses from the amount you have left over from your other expenses.
___What you can spend on a car (from above)
-___Amount you’re spending per month on gas (raise or lower this figure depending on whether you are getting a car with higher or lower gas mileage).
-___Monthly maintenance (remember: your new car won’t stay new long, so maintenance will be an issue).
-___Monthly insurance (remember that for a new car, your insurance premiums may go up).
-___Tax.
= ____ Maximum monthly loan payment.
Now plug the number above into a vehicle loan rate calculator to figure out big of a car loan, and how much interest you can afford.
Final Hidden Auto Loan Danger: Unnecessarily High Rates
If you simply take the first loan the dealer offers you, you are probably paying too much. Do some comparison shopping on the internet, and bring a list of the best loans with you when you negotiate loan terms with the dealer.
Don’t let the dealer cheat you by shifting the cost from the car loan to the car price to the deal on your trade-in. Make sure you get a good deal overall.
Congratulations! You now are far better prepared to stay out of an auto loan money pit than the vast majority of car buyers. Now you’re ready to go shopping for a loan.
About the Author: Joel Walsh is a regular contributor to cars-auto-loans.com. Read his other articles, with even more information on getting the best car loan: http://cars-auto-loans.com [Web publication requirement: use "car loan" as the anchor text/visible link text for the URL: http://cars-auto-loans.com