When buying a pre-owned car, truck or SUV, there are many resources available to make sure that you are getting a fair price on a vehicle. As many people know, buying a car is the second largest investment that many persons make next to buying a house so it is vital to do your research and make sure you pay the right price. The most commonly used resource by banks and dealers is the N.A.D.A. Official Used Car Guide. This is a monthly publication that is based on extensive research and data compiled by the National Automobile Dealers Association. It contains three values for each vehicle make and model covering model years 2000-2007. The three values are called “Loan”, “Trade-In”, and “Retail”. Loan is typically wholesale and what a dealer may expect to pay for a vehicle. Trade-In is the value used by the banks to calculate Loan To Value ratios when approving financing for a vehicle. Retail is the highest value and is a starting point for what a dealer may expect to sell a car for. There is an online consumer version of the NADA Guide that is FREE to use, but it only shows Trade-In and Retail values. Typically, if a customer can purchase a vehicle in between Trade-In and Retail values they are getting a fair price.

Other resources are also available, such as Edmunds.com, Kelly Blue Book (www.kbb.com), and AutoTrader.com that can be used as additional comparisons, but you will find quite a variance on certain models between all of these valuation sources. I believe that www.autotrader.com is the best way to see what a car is worth in the retail marketplace. It shows you what prices all of the competing dealers are asking on vehicles and will show you the mileage as well as the price.

When you are ready to invest in a pre-owned vehicle be sure to do your research ahead of time and let the dealer know you’ve done this as it will indicate both your serious intentions of making a purchase and your knowledge of the marketplace. This way the dealer and you can come to a sensible price where he can make some profit and you get the car for a great value!Â

In this world of rapidly depreciating vehicles many owners find that the vehicle they bought just a few months ago is worth significantly less than the balance on their loan that they owe for the vehicle. This can be a very precarious position for the owner to be in and can cost you thousands of dollars in the wrong situation. If you total your vehicle in an accident your insurance policy will only pay you the book value of the vehicle. Any other remaining balance on the loan must be paid by the owner in cash! This is where GAP insurance serves its purpose. GAP insurance is a policy that you can purchase when buying a vehicle for a few hundred dollars. You can even finance it in with your overall loan for the vehicle. GAP will pay any difference in the vehicle’s value and the loan payoff so that you don’t have to pay the larger amount of money due to pay off the loan if your vehicle is a total loss. I recommend GAP insurance to clients that are financing all or a large portion of their vehicle purchase price. A good rule of thumb is that if you are not putting down at least 10% of the vehicle price and you are not paying the tax, title, and license fees in cash at the time of purchase then I believe you should purchase GAP insurance with your vehicle.

Credit Life insurance when buying a vehicle is another common type of insurance purchased. It is very simple-Credit Life insurance pays off any remaining balance on a vehicle loan should the owner/borrower die. This is especially helpful when you don’t want to leave loved ones with the burden of continuing to make the loan payments should the unfortunate event of your death occur. I recommend buying credit life only if you know that your family can not make the payments on the loan or pay off the difference in the value of the vehicle and the loan balance if you pass away.

These are two tools of finance available in the automobile business that can help you have peace of mind regarding the financial risks associated with financing vehicles.