How To Buy A Car With No Credit Or Bad Credit

BUYING A USED CAR

People with credit problems are better off buying a used car rather than buying a new car.  While the reasons for this might be obvious, keep in mind that what you are trying to do is not only get yourself transportation but also establishing or re-building your credit.

A used car is going to be less expensive than a new one and you won’t be stuck making huge car payments for a long period of time.  Plus, by purchasing a used car, you can buy from a private party instead of having to go to a dealership where their prices are going to be higher.

The good news is that you can still obtain things like financing and warranties on used cars.  Let’s look at some general guidelines to follow when buying a used car.

The obvious first place to look for your car will be the newspaper classified ads or regional trader magazines.  There are some places you can look online as well such as www.cars.com or www.carsdirect.com.  Savvy consumers sell used cars online on cheaper and heavily traveled auto classified web sites.

Many services keep your ad online until your car sells, which newspapers don't do. This is an advantage of used car classified sites, many have 200,000 or more cars listed.

Once you’ve found a car you might want to buy, call and ask questions.  We provided you earlier in the book with a checklist of things to ask the seller so keep this list handy and use it when talking with the buyer over the phone.

In addition to this checklist, also be sure to ask the following very important questions:

1.                   Why are you selling the car? Put them in a defensive position and they must answer quickly. If they hesitate, they have something to hide. Why do most people sell their car? Maybe they lost their job, or there's too many things wrong with it and they don't want to fix it, they'd rather sell it to you. Maybe they bought a better new car and are selling it themselves.

2.                   How many miles are on it? The moment of truth for most sellers. This can really reduce the selling price if there's too much mileage. The standard is 12,000 miles per year. If they have more than that, the pricing sites shown above have charts that deduct off the market value of the car.

3.                   Do they have all the maintenance records, proof of tune ups, and oil change receipts? You just nailed them with 3 defensive questions in a row. They probably will not have this information, however, everyone SHOULD! This can be a powerful negotiating tool plus if you go to sell a car, it can bring a quick sale.

The seller might say "No one keeps that stuff". Your reply will be "I do and everyone I know does.  Without it, I have no validation that you properly maintained the car."

4.                   Have them describe the condition of the interior, the seats, make sure the dash is not cracked, find out about the paint, tires, A/C compressor, ask if the A/C runs cool. Is there any other known issues or needed repairs that you should know about?

After you’ve asked all the appropriate questions and still think you’re interested in the car, it’s time to make an appointment with the seller to look at and test drive the car.

Make an appointment to see the car during the day. At night you can't see all that's wrong with it. If you make an appointment with a seller, show up 15 minutes after the agreed time.

Once the agreed time has passed, the seller is now going through total hell, thinking you are not going to show. He's probably had a few no shows, so this might make him more anxious to sell the car. By time you show up, his confidence has been knocked down a notch. You are using psychological tactics and, legitimate methods of pricing a car.

Always show up with at least one other person, and make sure you have your license with you, most sellers won't allow anyone without a valid license to drive their car. It's harder for a seller to say no and challenge 2 or more people than just one person, so always show up with an aggressive companion.

If you visit a seller to test drive the car and they don't let you drive it, leave immediately. There's no reason to stay because you are not buying that car.  You should never, ever buy a car without driving it first. 

When you get to the location, check the driveway or garage floor for signs of fluid leaks. Rust colored stains indicate a leaking radiator. Black or Brown puddles and stains indicate an oil or transmission fluid leak, and purple puddles indicate transmission fluid leaks. The seller may tell you that his car does not have any leaks, but a driveway never lies. Make sure the seller sees you bending over to scrutinize the driveway and garage for signs of leaks.

You’ll also want to look for evidence of a previous wreck or rebuild.  Check the tires and windows carefully for evidence of paint over spray. Sellers put a cheap paint job on the car and lie about it being in a wreck. The cheaper the paint job, the sloppier the body shop gets. They get over spray all over the place, and that's your singing telegram that the car was in a wreck or rebuilt.

Take the seller with you on the test drive and ask questions when noises pop up. Listen for noises, rattles, or grinding sounds. If you hear rattling in the quarter panels, the car may have been in a wreck.

If the car is a manual transmission, see if the shifting is smooth. Ask the seller if the clutch has been replaced.  Clutches tend to fail after 4-5 years. This sets up the seller for a low ball offer. Most people are unaware that manual transmission vehicles have lower market values than automatic.

Check the heater and the air conditioning to be sure they work.  Drive it in the daylight when the sun is hottest, to see how the air conditioning performs. Listen for grinding noises when the A/C kicks in.  If you hear anything like this, the bearings in the compressor are worn.

If the car has a voltmeter, make sure the voltage stays at 13.6 volts when the A/C is on. You may want to bring a portable volt meter with you. Not everyone has one, but many people do. You can usually buy them for around $20.

Measure the voltage across the battery terminals with the engine running, and the meter set to DC Voltage. The voltage should be at least 13.6 Volts with the engine running, and no more than 14.8 volts. If it's not, there is a problem with the charging circuit, most likely the alternator, which is a costly component, usually about $150 rebuilt. If the battery is not at least 13.6V with the engine on, the 12V battery will not remain charged, and will die soon.

Drive with the radio on and off. Test the speakers to see if they are cracked. Make sure the CD player works if the car has one. Take the car on a highway, main streets, and side streets to see if the car loses alignment, or bears to the left or right.

See how well the car brakes.  Drive sharply around some corners, and your companion is writing everything down. Make sure all the seat belts work, that electric seats work, look for missing or burned out bulbs inside and out. If the car has retractable headlights, make sure they pop up and turn on. Make sure the brake lights, reverse lights and directional lights work. Ask the seller when the brake pads were last replaced.

Check under the hood to see how clean the engine is. Is the radiator fluid green? If not, it's been a while since the radiator was maintained and the fluid has turned brown. Is there any windshield fluid? If it's low, you should be getting bad vibes, a sign that you're dealing with a lazy owner, who couldn't spare a few seconds to add a few ounces of windshield fluid when he's about to sell.

Ask if he did his oil changes on time and when the last oil change was.  Pull out the dipstick and check the oil level of the car as well as the consistency of the oil.  If it’s sludgy looking and black, it needs to be changed or hasn’t been changed in awhile.  Good oil is a golden brown color and the consistency of syrup.

Check the transmission fluid; it should be purple if it's fresh and slightly brown if it's older. It should NOT be black. Check the air pressure in the tires and check for uneven wear on the tread. Ask the seller when the tires were replaced last.

Ask the seller to point out all known defects, problems, issues, etc. with the car. If there are any subsystems, alarms, or computer indicators that are not functioning, have them point it out to you.

Ask if there is an extended warranty with the vehicle, and if it is transferable to you. Verify this with the warranty company. Ask to bring the car to your mechanic to check it out. If they say no, you have to wonder what they are hiding.

Once you’ve talked the seller’s ear off with all these questions, there are a couple of things you can do.  You can start negotiating price or you can take your information home with you and make a decision later.  In general, it’s a good idea to check certain things out before you start negotiations.

First and foremost is to get a Carfax history report at www.carfax.com.  All you need is the vehicle identification number (VIN) off the car itself.  Car companies began assigning VIN numbers in 1981.  It is a unique 17-digit code that identifies a lot of information about the car.  The average Joe won’t know how to decode the VIN number, and frankly, who really wants to?  This is what Carfax will do for you – decode the VIN and tell the story of that particular car.

The VIN appears on all cars, in the dashboard on a metal strip. You can also find the VIN inside the driver side door on a factory sticker, the passenger door, the trunk, the hood, and sometimes the engine and other major parts have one, or it's engraved.

Car makers place VIN stickers on the major accident parts like doors, engines, and quarter panels, which are broken down from a car when it's stolen. If they show up on another car, something is wrong; the car was stolen, or junked and rebuilt. Check, doors and panels make sure all VINs match.

When you input the VIN into the Carfax website, you will be given all the information about that car including previous owners, whether or not the car has been wrecked, and much more.  This can be especially helpful in determining whether or not the owner is being honest with you.

You will also want to find out what the fair market value is of the car by looking up its Kelley Blue Book value.  Go to www.kbb.com and input the information about the car such as the year, the mileage, extras like A/C, CD player, etc.  This site will tell you what you should expect to pay for your used car.

You may be able to do this before you even go to look at the car.  See if the seller will give you the VIN over the phone so you can do your homework before you take the car for a spin.  Then you will be fully prepared to begin negotiations.

It’s important to note here that you should never rush into a car deal if you’re not comfortable with doing so.  Some sellers may try to pressure you by telling you that there are many other people interested in the car and you should jump quickly if you really want to own it.  While that may very well be true, you should be completely sure that this is the car you want to commit to.  If the car gets sold to someone else, there will always be another car out there, so don’t be pressured.

In fact, it’s YOU who needs to be tough with the seller.  After all, you are going to be paying for the car, so you need to get the best deal you can.  Despite what you have been told, you CAN negotiate at car dealers as well.  Most dealers pay $3,000 to $4,000 less than market value for their cars, so they do have some room to work with.  Remind them of this and watch them give you a great offer.

With a private buyer, negotiating is much easier.  They know what their bottom line price is – the trick is getting them down to it from the asking price!  We told you that you should bring someone along with you when you look at the car.  They can be amazingly beneficial to you during negotiations!

Have your partner be negative, pointing out every little item that erodes away at the seller's asking price, and confidence. A great tactic with huge psychological impact is to rub your finger over every major scratch or dimple, and shake your head in disappointment. The car dealers use this all the time, so learn from the best. You don't have to say a word, the seller reads it right off your face, and you've set him up for the low ball offer. Have your partner write down all damage.

Ask for the maintenance records expecting that he'll have nothing to show you.  You should keep this in mind yourself.  It’s important to save every record, and oil change receipt in a notebook. Just add each new one to the end, and you have a nice history record. Now buyers of your car years later can't say you did not take good care of your car.

Of course, you should ask if the car has been in a wreck, staring them right in the eyes waiting for their answer. If the answer is yes, inspect the area that was repaired, and point out every tiny little flaw in that repair.

It’s not a good idea to just try and chisel down their price.  Your offer will be based on sound research yielding the fairest price possible, ignoring the asking price altogether. Offer what the car is worth based on market values given by car pricing sites and your research.

They will all have varying values, so get an average figure, and print out from all the sites. Don't forget to subtract for over mileage, and add for options. Many used car pricing sites have three categories of condition of the car which they report the market value of. The condition will be listed as bad, fair, good, and each has its own dollar value listed, similar to the blue books in the stores.

Most sellers don't know how to price a car, so when you give your offer, it may be far less than the seller's "Hail Mary" price. They'll get all insulted, and tell you you're crazy, that's way below their asking price. You must then educate the seller that his asking price was wrong to begin with.

That's when you show him the printouts from all the pricing sites. The seller may show you other cars in the newspaper and say "See, they are asking the same amount". Just tell the seller that very few sellers get their asking price when they sell a car, so those newspaper prices he's showing you are inflated.

It may be that the seller has no research and may be arrogant and indignant over your offer. They are unaware their asking price is off base.  They get infuriated with your "low ball offer", and may refuse to deal with you. They could simply need the money; the car is taking up space in their driveway, or any number of reasons. His pride won't let him sell the car at your price.

He may say, "Why don't you buy one of those other cars if they are cheaper? If my car is not worth it, why do you want it at all?" It's their last ditch futile effort to justify their price. He's trying to divert you from the fact that he cannot justify his selling price. Any seller using this strategy has just told you he has no valid research on the value of the car.

A seller who knows the market value would say "Here are my printouts from the car pricing websites.  My price is in line with accepted standards". Tell him "We like your car, but the research we have shows that it is not worth your asking price". 

Point out the defects, lack of maintenance records, etc. Tell him the printouts specify a car in good condition. Point out scratches, dings, rust, carpet stains, cracked dash, and any justification to offer even less than the car pricing printouts. Keep hammering him for his research and justification until you are the clear victor of that debate.

Tell the seller "You'll have your garage back, you'll have this cash which I'm sure you can use, no more no shows, no wife nagging you about getting the car sold, no more renewing your ads." Just because he did not get his asking price does not mean he lost. Your suggestion that he's a winner puts him at ease.

Then your buddy chimes in, heads for car, motioning to leave. Your buddy says "he's not going to lower the price, you are just wasting your time, and you should go back to the other seller who was flexible". Your buddy reminds you the "other car" had lower mileage. The seller is listening to this exchange and panics.

He knows you're on your way out the door and his sales tactics have failed him. You must always be prepared to walk. There will be other cars. If his car was so great, it would have been sold already. Make your ultimatum to the seller.

There is no way you will pay more for any car than fair market value. Right after you say this to the seller, turn to your buddy and ask him where the next stop is on your list.

Your buddy pulls other ads out of the folder, and reads off the info. At this point you can head toward your car to leave. Hopefully this will make the seller hop into action and accept your offer.

This is what gets you a good deal. Your strategy is to keep the seller on the defense. Whoever asks the questions is in control of the conversation. Continue firing difficult questions at the seller, but be polite. Let your printouts be the "bad guy", not you.

Don't say "You're crazy! I don't think your car is worth this". Instead tell the seller "the research I have here shows that your car is only worth this". Now your friendly relationship with the seller is still intact, and you are the messenger relaying information.

How can the seller argue with data from car sites who are experts at pricing cars? Skillful treatment of the seller gets your deal signed for you. You can let them know their deal is lousy without hurting their feelings.

Eventually, you’ll get to the point where one of you will say “Yes”.  That’s the fun part because you’re getting a car!  Before you drive away from the seller's house, make sure you have the title, a signed copy of the bill of sale or a receipt, the maintenance records, and don't forget to ask if there is a special wheel lug key or you cannot change a flat tire, and a repair shop cannot replace your tires.

Make sure you have all sets of keys, owner’s manuals, repair manuals, and spare parts that the seller may have, like extra lamps, headlights, wiper blades that they forgot about. Be sure the car has a spare tire and jack. Make sure all brake lights and other lamps work, and check the fuse box for blown fuses, replacing any as necessary. You don't want to get pulled over by the cops for no brake lights on your way home.

You may want to have another oil change done. Ask the seller for receipts for the battery or alternator. Many auto parts stores have lifetime warranties on alternators, or will prorate a failed battery ONLY if you have the original receipt, so be sure to hold onto these receipts and keep them in a safe place where you can always get your hands on them.

One last note, it’s always a good idea to have your financing lined up BEFORE you even go to look at a car.  Whether you go to a bank or apply online, you’ll have an easier time negotiating when you can say you are pre-approved or even better when you have the money on hand!

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