Useful Things to Know When Buying a Used Car
Buying a used car? Learn the most important things to know when shopping for your next car purchase.
IN THIS POST, WE COVER:
- Difference between wholesale and retail value
- Certification/safety and extended warranty coverage
- Remaining factory warranty
- Vehicle mileage
Buying a used car can be a good way to keep your budget in check while purchasing a reliable vehicle. The average Canadian car-buyer holds on to their vehicle for 11.5 years so if you’re planning to make a long-term investment, it pays to do your research first.
Specifically, there are four things that are helpful to know when buying a used car.
1. Difference between wholesale and retail value
The first thing to keep in mind when buying a used car is how it’s valued. Wholesale and retail value are two different ways to measure what a used vehicle is worth.
A used car’s wholesale value is the price a dealer would pay to purchase a vehicle. For example, if someone were trading in their used car on another car purchase, the dealer would pay them the vehicle’s wholesale value.
Retail value is the price at which the dealer would then turn around and sell that car to someone else. If you’re buying a used car from a dealership, you’d want to compare both numbers to make sure you’re getting a good deal.
Here are a few tools you can use to estimate the value of a used car you’re buying or trading in:
Shop around at multiple dealerships to compare values, since individual dealers may value vehicles differently.
2. Certification/safety and extended warranty coverage
Many Canadian dealerships offer certified pre-owned vehicles but don’t necessarily take that at face value as a guarantee of the car’s condition or safety.
Certified pre-owned means the dealer has taken steps to ensure that the car meets certain requirements. Vehicles are subject to a safety and maintenance inspection but you should still get your own inspection for extra peace of mind.
An independent mechanic can go over the car from top to bottom and let you know if there are any major or minor problems that were overlooked in the certification process.
With a certified vehicle, you may also get an extended warranty for a set number of months or years. Read over the terms of the extended warranty carefully so you know what is and isn’t covered.
If your mechanic’s inspection turned up an issue that wouldn’t be covered by the warranty, you’d then have to decide whether it’s worth it to pay for repairs out of pocket. Remember also to check the car’s safety ratings to see how well it performs in crash situations.
3. Remaining factory warranty
Newer used cars may still be covered by the original manufacturer’s warranty. While that’s good if you’re looking for some reassurance that repairs will be covered if needed, it’s important to read the fine print.
The factory warranty likely has specific guidelines on what types of maintenance and/or repairs are covered and under what conditions. For example, it may be a given that you’ll need to maintain the vehicle regularly (i.e. getting the oil changed and the vehicle inspected annually) to be covered if something breaks down.
You’ll need to get in the habit of keeping good maintenance records if that’s not something you’re used to. The dealership may ask to see those records as proof that you’ve met your obligations under the warranty if you need to file a claim for repairs.
Also, pay attention to when the manufacturer’s warranty ends and how that coincides with any extended warranty coverage you may have if you’re buying a certified pre-owned vehicle. The goal is to make sure you’re covered for as long as possible, based on how long you plan to own the car.
4. Vehicle mileage
One final question to consider is how many kilometers are on any used car you’re planning to buy. High-mileage by itself doesn’t mean you should take a pass but you should be aware of how that can affect the car’s life span.
An easy way to gauge whether a car is truly high mileage is to look at its age, versus the number of kilometers logged on the odometer. The average Canadian drivers around 15,200 kilometers per year so you’d expect a used car that’s five years old to have 76,000 kilometers.
If the car has double that amount, then you’d want to check the car’s maintenance records to see how well the previous owner took care of it. That can give you an idea of how much longer the car is likely to last. At the end of the day, you want your investment in a used car to pay off for years to come.
Birchwood Credit Solutions offers a car loan calculator to help you determine your budget for buying a used car. You can browse our inventory online or apply for a pre-approved car loan today.
