When you don't have money for wheels

Finding A Cheap Used Car

by Gary Foreman

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Dear Gary,
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 $5,000 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 risks.

The best deals are at wholesale auctions. Julie will need a someone who has a dealers' license to get her in.

Are you paying too much for auto insurance?
Make sure you're getting the lowest rate.

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 be unable to get out of an auction purchase unless the title is defective.

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 an unbiased opinion.

Are you one of the many people heading for debt trouble without knowing it? This simple checklist can help you find out and tell you how to avoid it.

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 car.

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.

Get free quotes on local used cars.

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 in 'good' condition. And all three were 4 door sedans with automatic transmissions, air conditioning and the standard engine. A twelve year old Toyota Camry and twelve year old Honda Accord were under Julie's $5,000 limit. An eight year old Ford Taurus came in at slightly about $4,000.

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.

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter. Gary is also available for audio, video or print interviews. For more info see his media page.

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