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The KwikGuide to
Buying a used car
Section 1: The Search
what to look for
check the costs
where to look
where to buyarranging to viewSection 2: The Car

oily bits
test driving
Section 3: The Dealhagglingarranging to payI've been conned!
useful links
Kwik checklist
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Buying a used car

arranging to pay for a car

If at all possible, save your money and use cash. Putting savings together
with the trade-in value of cars already owned is the way most people buy. Cash
is popular with sellers and a top deal closer when haggling over price. It's also cheapest in the long term. On the downside, carrying cash is risky and you
have little leverage over the dealer that sold you the car if something goes wrong.

Cheque: no problem at a dealer but tricky when buying privately, as the seller probably won't let you take the car away until the cheque clears. When you
return to pick the car up you could find no seller and no car, especially if you
haven't met them at their home.

KwikTip: always get a car insurance quote from Direct Line too,
as they don't take part in the price comparison websites.

Banker's Draft: basically a secure form of cash. You'll pay the bank a fee to get one, but they're as influential as cash and just as good to the seller. Expect the seller to want to check whether the draft is genuine, so also take along the
contact details of the bank branch that issued it.

Other finance options:

If you don't have the cash or would prefer to spread the cost, there are many
ways to borrow money.

When looking at ways to finance your next car and the different deals available from providers, with so many variables involved like size of deposit, rate of interest, number of repayments and more, make sure you compare like-with-like. Look at each deal's APR (Annual Percentage Rate). You're after the lowest rate, to borrow the money you need at the least cost.

Don't just accept a car dealer's rate - find a better deal and use it to bargain the dealer's rate down. Ensure factors like deposit and repayment periods are
the same between deals you're comparing
. Ideally look at the total cost of
the deals including interest, not just the monthly payments. Then you can really
see how much more you're paying than the price on the car's window.

And don't forget to look at the cost of getting out early, if you need to down
the line - there are often penalties. Aim for a deal that strikes a balance between affordable monthly payments and total cost of the loan.

Consider other factors like length of the loan (shorter = cheaper overall, but will cost more monthly) and what sort of security you have to borrow against.
Secured loans, for example against your house, are usually cheaper. But you
risk your home if you do not keep up payments for any reason. The cost of the loan will also depend on any (often expensive) insurance or payment protection you sign up to. Plan how you would make the payments if you lost your job or become ill. Expect a hard sell on this, as commissions for salespeople are hefty. So decide whether you want it before you go to do the deal.

If you're refused finance, you can find out why. Rather than being due to something you've done, it could just be caused by where you live, wrongful financial association with someone else in your family, or a mistake on your
credit history. Rather than pay a fortune with a dodgy lender just because they'll take you, see if you can sort out whatever the problem is with the credit
reference agencies. For a small fee from Experian you can get a copy of your credit record and can dispute any mistakes.

And if a lender wants to charge you an 'Admin' fee, try refusing to pay it. You
might well get away with it. It's not as if the lender isn't making money on your loan.

Bank/Personal Loan: Provided by a wide range of banks, building societies
and finance companies, this is often the most easy finance to obtain. You don't need any security (like putting your house on the line) and arranging a loan
often takes only a phone call or a session on the internet. You will need a clean credit history though. Setting up a personal loan in advance means you can
still be flexible when it comes to buying, and you own the car immediately.
There's no deposit to pay either. On the downside, interest rates tend to be
higher than other types of loan and the bank mightn't lend you enough for more expensive cars.

Dealer finance: as above but provided by a car dealer rather than direct from a bank or finance company. Interest rates can be lower for smaller loan amounts
and you might get a more flexible repayment period for more expensive cars
than from a bank. If using dealer finance, you also stand a chance of haggling
an even lower price for the car you're after, as the dealer will also get
commission on selling finance. And don't forget to haggle over the interest rate itself as much as you did over the price of the car. Just make sure you read the small print - ensure that cheap finance headlines don't mean over-priced cars or
a large deposit.

Hire Purchase: you pay a deposit and make monthly payments over an agreed period, but you don't own the car until you make the last payment. Neither can
you sell it until you've settled any amounts outstanding. Missed payments
could mean you lose the car. HP is often used to finance more expensive purchases or by those with a poor credit history, and it can work out cheaper
than a bank loan. Like other dealer finance, signing up to HP can help drive
down a car's ticket price, as the dealer will get a kick-back from the finance company. But it's likely to cost you if you want to get out of the deal early.

Personal Contract Plans (PCPs): more popular with new car buyers than for
older cars and is a bit like leasing a car. You pay a deposit and then monthly payments (likely to be smaller than HP) over an agreed period - usually just a
few years. At the end of the contract, you can either pay a lump sum to take ownership of the car, use its agreed value to part exchange it for another car, or simply give the car back and walk away. Lower monthly payments are handy for driving a better car than you can afford, but interest rates tend to be higher and make sure you budget for that final big payment. You may also be limited to a fixed annual mileage and, unless you pay extra, will have to keep the car
properly serviced or be penalised.

Lease / Contract Hire: you never get to own the car. You make monthly payments with no cash up front. Servicing costs, road tax and disposal of the
car at the end of the contract are down to the leasing company. You could face
big penalties though if you go over your agreed annual mileage or give the car
back damaged. High monthly cost but can be cost effective.

Extend your mortgage: interest rates are on the up but extending your mortgage to fund a large purchase is still one of the cheapest ways to borrow. Just check fees for amending your mortgage and ensure you can afford the increased repayments if rates continue to rise, or your house may be at risk.

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know your rights when buying a used car >>



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