How to buy a good used car — without going deeper into debt

OK, so you need a car to get to work. Or look for work. Or get to school. But you have no credit, or your credit score has taken a nosedive. Now what?

Most credit-challenged people head to the local auto dealer strip, where they are lured by ads trumpeting “No Credit? No problem!” “Bankruptcy? No problem!” There, they are steered into buying overpriced, junky cars that often break down soon after sale, and need expensive repairs.  The kicker — usually, the down payment is more than the car is worth. In other words, if you can afford the down payment, you could buy the same car elsewhere — and not have to make any car payments at all.

Of course, the dealers are eager to sell you their overpriced clunkers, and get you into a loan that lasts for years. Then when the car doesn’t work, they are very eager to repossess them and sell them again. Each time the car changes hands, they make a profit. The sweet spot for them is when they end up with multiple consumers paying the deficiencies for loans on a single car they repossessed over and over again.

The trade association that represents the “buy here pay here” dealers in California has admitted to legislators in Sacramento that a whopping 30% of its customers end up defaulting on their loans. Often, that is because the car broke down and the consumers couldn’t get to work, and lost their jobs.

Meanwhile, your credit is even worse, and you have no car — and an even bigger debt.

Many people assume they have no choice. They feel trapped into buying from a “buy here pay here” dealer. But — there is a much better route you can take.

You can buy a car from another consumer. It’s simple, and you can get a good, safe used car for under $5000, if you do it right. You can an either take out a loan in advance — usually you’ll find the best rates if you join a credit union — or you can save up and pay cash.

Here’s how to do it: CARS Car Buying Tips

Today’s cars last longer and many makes and models provide safe, reliable transportation for years, even after they have over 100,000 miles on the odometer.  Recently,’s Consumer Advice Editor Ron Montoya initiated a project to demonstrate that you can find a good car for under $5,000 — and pay cash. Instead of handing over $300 in monthly payments to a shady dealer, it’s smarter to save that money and keep it on hand, for maintenance and repairs.

More about Edmunds’ advice onhow to buy a good used car — with cash


Buyer beware: Dealers selling cars they don’t own

Thousands of car dealers across the nation have been selling cars they don’t even own. Don’t be victimized by shady dealers who engage in what’s known as “car kiting” — selling cars they take in trade, without paying off the outstanding liens.

How do they do it? Dealers who are having trouble making ends meet, or are just crooked, take cars in trade from consumers who still more than the cars are worth — known as being “upside down” or “underwater.” The dealers promise to pay off the rest of the loan, and the amount the consumer owes is rolled over and added on top of their next loan.  Then the dealer fails to pay off the loan. Instead, he “kites” the car — selling it without first paying the lender and getting proper title to the car.

If you buy the car that was traded in, you may be out of luck. That’s because the former owner’s lender still has the title to the car, and expects to be paid. When the dealer fails to pay, the lender can repossess your car. They can seize it even if you are a very responsible borrower and make every payment in full and on time, to your lender. When your car is repossessed, that can leave you without a way to get to work, and cost you your job. Plus a repossession typically stays on your credit for 7 years. Many employers check credit reports before they hire, so a repo can also become a barrier to employment.

How can you protect yourself from car kiting?

1. Insist on seeing the title before you buy. If the dealer doesn’t have the title, it may be because they failed to pay off the outstanding balance.

2. Double-check with your state’s motor vehicle department to make sure the title is legitimate (it’s too easy for a shady dealer to counterfeit a title).

Want to learn more about car kiting scams?   Here’s one case that caught the attention of New Mexico’s Attorney General:

Senator Boxer challenges rental car companies to take safety pledge

California’s U.S. Senator Barbara Boxer has issued a challenge to the 4 major rental car companies to pledge not to rent or sell vehicles that are being recalled due to safety defects.

Hertz immediately responded and took the pledge. But its competitors — Enterprise-National-Alamo, Avis-Budget, and Dollar-Thrifty so far have failed to take the pledge. Hertz is the #2 rental car company in the nation, in terms of its share of the rental car market.

Earlier this year, CARS announced that we reached a historic agreement with Hertz, which split from its competitors and agreed to support federal legislation, named for Raechel and Jacqueline Houck, two sisters, ages 24 and 20, who were killed by an Enterprise rental car that was under a safety recall.

Enterprise received the recall notice from Chrysler about 30 days before renting the killer car to Raechel and Jacquie, but didn’t bother taking it to a dealership to get it fixed, before renting it to them.

Instead of taking the pledge, Enterprise, Avis, and Dollar complained they are being treated unfairly, since individual consumers are not required to ground recalled cars until they are fixed. They just don’t get it — no one should have to worry about a rental car company deliberately renting them an unsafe car.

Sen. Boxer’s safety pledge simply says:

“Effective immediately, our company is making a permanent commitment to not rent out or sell any vehicles under safety recall until the defect has been remedied.”

Enterprise told the St.Louis Post-Dispatch that it insists on being able to pick and choose whether to ground recalled cars, or not. A spokesperson for Enterprise raised the example of a car with a seat belt chime that doesn’t work, as the type of defect Enterprise thinks is safe enough to keep renting to consumers.

However, according to Robert Vinetz, MD, FAAP, of Los Angeles, a leading pediatrician who is well-known for his work to improve safety for infants and children, such a defect endangers kids. Many parents rely on the chimes to alert them if a child is not buckled up, or if their buckle has become unfastened. Without the warning chime, a parent may not realize their child is unsecured — with disastrous results.

Instead of being an example of why rental car companies should be allowed to second-guess auto manufacturers and the National Highway Traffic Safety Administration, Enterprise’s example is a classic argument for why they should be required to ground recalled cars until they are fixed. Period.

Read more — St Louis Post-Dispatch report:

My car broke down — and I just bought it!

One of the most frequent complaints CARS gets — “I just bought the car, and as soon as I drove it off the lot, the check engine light came on.” Or “the engine blew up.” Or “the transmission stopped shifting.”

This happens all the time. And it can be catastrophic, resulting in losing the car and your job — and having your credit trashed.

How can you avoid the pitfalls of buying a used lemon, that needs expensive repairs right away?

#1 — ALWAYS insist on getting your own, independent inspection by a reliable auto technician, BEFORE you agree to buy. Don’t trust the seller — even if it’s a large dealership and the salesman seems nice and friendly. They are out to make a profit, and you don’t want it to be at your expense.

A good place to find an independent technician is Car Talk’s Mechanics Files, at
Car Talk Mechanics Files — reviews written by consumers

#2 IF you already bought the car AS IS, and you do have problems, don’t take it back to the dealership for repairs. It’s a trap. Think about it. What are the chances a dealer who cheated you over the condition of the car will suddenly get religion and fix it properly?

Instead, they usually keep the car for weeks and do band-aid repairs, that don’t last, in hopes you will give up and stop paying for the car. Then they spring the trap — and repossess your car. Then they have your down payment, and any payments you made, and — the car. Then they can sell the same car again and again to other hapless consumers. Meanwhile, you lose your car, and maybe your job, and the repo stays on your credit for 7 years. A disaster.

Instead, take the car to a reliable mechanic and get if fixed right. Then you can seek reimbursement from the seller. If he refused to pay for the repairs, you can try small claims court. But it’s better to just get it inspected first, and avoid a huge hassle.