|Gary Foreman is a former Certified Financial Planner (CFP) who currently writes
about family finances and edits
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I'm a struggling, hard-working single mother who is in dire
need of a car, but I can't stand the thought of making car payments
for 5 years because of my bad credit. I have $3,000 saved and I'm
considering going to an auto auction. If this is not a feasible way
to get a car, could you please tell me the best way to get one?
Julie is wise to avoid car payments.
Paying interest on a car loan only jacks up the price of the car.
And, while Julie should be able to find an acceptable car in her
price range, an auction might not be the best place to look.
She probably already knows that any
car in this price range will have some defects. The trick is
avoiding major repairs. She would be wise to ask a mechanic or
knowledgeable friend to look over any car before she buys it. Most
major failures do not happen suddenly. There are warning signs.
Watch out for cars that have been 'totalled'
or flooded and rebuilt. Many are recycled to unsuspecting consumers.
Julie might want to visit carfax.com. For a small fee she can check
a car's VIN number for accidents and other problems.
Always make sure that you get a good,
clean title with your car. If a seller cannot produce the title at
the time of sale don't buy the car.
Unless Julie is in desperate shape
she should take her time. There will be many junkers within her
price range. It takes time to find the good rides.
Julie can expect to spend some money
on repairs each year. But that's not an argument for a new car.
Payments would be more expensive than repair bills.
Should Julie begin her search at an
auction? There are some good buys to be had. But there are also big
The best deals are at wholesale
auctions. Julie will need a someone who has a dealers' license to
get her in.
If you want to try an auction, plan
on getting there early. Examine your potential purchase carefully.
Take a Kelley's Blue Book or NADA guide with you to help with
pricing info. Then hope that no one else bids on your favorite car.
Auctions bring some risks. Cars are
sold 'as is'. So if it doesn't run that's just too bad. Generally
you'll be unable to get out of an auction purchase unless the title is
So you need to carefully examine any
car that you bid on. And you must do it at the auction site. You
can't take the car down to your favorite mechanic for an unbiased
The vast majority of auction sellers
are honest people that you'd be happy to do business with. But
auctions are an easy place for the dishonest to move a car with a
bad history. It's hard to judge a seller's honesty when you don't
even meet them.
Finally, Julie should remember that
auctions have something called a "buyer's premium". That's
a commission that's added to the winning bid. Sometimes it's a fixed
amount. Other times it's a percentage of the winning bid.
Perhaps a safer option for Julie
would be to buy from a private party. It's takes more time, but
could get her a better car. Remember her goal: a well maintained
Where can she find one? Naturally she
can look in the local paper. But, Julie's best bet is to tell
friends and co-workers that she's looking for a car.
A well maintained car won't get much
more as a trade-in for the seller. So they'd actually do a little
better by selling to Julie. She'd have the advantage of knowing more
about the seller. And she'd have enough time to have her mechanic
look at the car.
What can Julie expect to find? We
went to KelleyBlueBook.com for pricing. We priced three popular
family models. All three cars were assumed to have 100,000 miles.
And all three were 4 door sedans with automatic transmissions, air
conditioning and the standard engine. A twelve year old Toyota Camry
and eight year old Ford Taurus were under Julie's $3,000 limit. A
twelve year old Honda Accord was slightly over.
So it is possible for Julie to find
the bargain that she's looking for. She'll need some patience. A
good mechanic or friend who knows cars will be helpful. Hopefully
Julie will find a dependable set of wheels for her family.