Used vehicles often come with the perception that they may not be as reliable as a new vehicle. But used vehicles may be the way to go depending on your needs and the value of the vehicle. Assistant Vice President of Consumer Lending at GECU Barbara McMillen gave insightful feedback on what to look for when purchasing a used vehicle. McMillen has been with GECU for 27 years with experience in lending for her entire career.
Can you describe the benefits of purchasing a used vehicle?
One of the biggest benefits of purchasing a used vehicle is that the depreciation on the vehicle has already happened so you are closer to the true value of the vehicle. Typically, a new vehicle has a higher rate of depreciation.
What is depreciation of a vehicle?
As time passes, vehicles lose value; this is considered depreciation. Let’s say that you purchase a vehicle today and it gets stolen or it is totaled in an accident. When replacing the vehicle, your insurance payoff may not be the same as your loan payoff. You could still have a significant outstanding balance on the loan once the insurance payment has been applied.
There seems to be stigma surrounding purchasing a used vehicle in regards to their reliability. Are used cars reliable and do they come with any warranties?
One helpful option is to purchase a certified used vehicle. These vehicles are available at franchised dealerships. With a certified used vehicle, the dealer has performed a series of tests to make sure that it is in good shape. They may even offer you a factory warranty to cover it. If you buy a used vehicle, there is a risk but a used vehicle from a certified dealer that is under the certified used vehicle program is a good option to take advantage of. Another option is to buy an Extended Service Agreement for your vehicle regardless of what year it is.
What if you purchase a vehicle from a third party that is not certified?
Have a mechanic or a dealership look at the vehicle for you. They will tell you what condition it is in. It is always good to have a second set of eyes. And again, consider buying an Extended Service Agreement to cover your vehicle. You also want to make sure that the title is transferred properly to avoid any confusion if something happens to the vehicle in the future.
Approximately how much does it cost to buy a warranty?
It depends on the vehicle and how long you are purchasing the Extended Service Agreement for. You can spend $1,000 or more depending on the coverage you are looking for. You can purchase it separately or add it to the vehicle loan. The cost can be determined by the coverage that you are looking for, how many years you want it and the type of vehicle you are purchasing.
What tips do you have for people that are preparing to purchase a used vehicle?
Do your homework. If you see something that you like, Google it or take a look at the manufacturer’s website. Go and take a look at it in person. When I purchased my vehicle, I went and looked at various options and sat in them to make sure I was comfortable. What do you like? What are your needs? Are you going to put a lot of miles on it? If so, you want to look at the maintenance and gas mileage. Also, check with your insurance. You may want to call your insurance agent to find out how much it is going to cost and then budget that into your monthly car payment. That homework will help you. If you have questions or need help, call us or visit us at one of our branches. We are here to help you.
(Some answers have been edited for brevity).
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