Tips for purchasing a used car with your tax refund

How to purchase a used car with your tax refund

By Ruth Berklich

                We’ve all done it.  When the tax preparer says that we will receive cash back from the government, we immediately plan where we will spend it.  Most often, the cash is a nice size to purchase a new or used vehicle.

                Buying a new vehicle is relatively simple — find a dealership that sells what you want and then lease or purchase the vehicle.  Finding and buying a pre-owned vehicle you want is much tougher.

                Since leasing is not an option for used vehicles, purchasing can seem daunting.  Finding the right vehicle at a good price can take some phone and Internet legwork.

In my business, we have heard stories about people buying cars from private individuals who cannot offer a guarantee, paperwork on vehicle maintenance and very little information is revealed on an Internet auto history report making buyers leery of purchases.

Auto history is checked on every vehicle during the trade-in appraisal process at dealerships.  If you are not purchasing from a dealership, search for an Internet auto history on the vehicle before any money changes hands to see if the car was in any accidents.  Accidents are not always reported and they devalue the car often by thousands of dollars even when repairs have been made.  Also, see if maintenance services on the vehicle were logged electronically by qualified technicians. 

Keeping in mind the vehicle you wish to purchase, check manufacturer Internet websites for warranties that could still be on the vehicle.  To get good warranties on a pre-owned car at a dealership, you may wish to opt for a certified used vehicle.  Some certified vehicles can be up to 5 years old and may include 24/7 roadside assistance, courtesy transportation and a 3 day/150 mile customer satisfaction guarantee.  Dealerships inspect and repair every vehicle before it will be sold on the lot, so certified vehicles are good choices.

Some people pay cash for pre-owned vehicles, but if you must finance, be aware that rates can be higher than new car purchases.  Dealerships have access to several lending institutions and can often match the rate at your favorite bank, so tell them the rate that your bank has advertised on its website and the dealer will try to match that rate. 

To purchase a pre-owned vehicle, banks generally ask for a down payment.  If the vehicle is more than 3 years old, you may only be able to finance up to 60 months, not 72.   If your vehicle price is $15,000, a 20 percent down payment would be $3,000.  The amount of down payment required by banks for used vehicles is often surprising to many people. This is one of the reasons why many people turn to new car leasing since little cash down is required, payments are lower than purchasing and all warranties are in effect.

Since vehicle manufacturers have made cars to last longer with better warranties and the Internet can provide so much information, purchasing a pre-owned vehicle is easier than in years past if you are an educated shopper.

Ruth Berklich is a freelance journalist and a new/used car salesperson for Golling Buick GMC on Lapeer Rd, Lake Orion.  She can be reached at rberklich@gollingbg.com, (248) 693-5900  www.gollingbg.net