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What to Look for When Buying a Used Car

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Used car checklist
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You probably already know the biggest advantage of a used car over new: lower cost. The average used car price was $16,000 below the average new car price in the third quarter of 2018, according to Edmunds. But is the potential savings worth the risk of buying a vehicle with a mysterious past?

Perhaps — if you’re armed with the right know-how. We’ll tell you where to find reliable information about the car you’re considering and what to look for in your own vehicle inspection.

What to look for when buying a used car: 6 steps

Step 1: Research the specific used car

Before you leave home to go test drive the car, do some internet sleuthing. It may save you a trip to see it if you find that type of vehicle usually has issues.

Expert reviews and user reviews

Look for expert and user reviews for the specific model you’re interested in, which could tell you whether that type of car is reliable or has major issues. Almost every used car has some type of common issue, from simple things that may not affect you, like the AM radio not working, to large things that can result in the engine melting.

Steer clear. If that car tends to have major or expensive problems, you may want to find another used car.

Where to find it. In Google or another search engine, type in the car’s year, make, model and the words “review” or “problems” to see what pops up. You could also use a free industry standard site like Kelley Blue Book or Edmunds to see their reliability scores and auto expert reviews. And you can look up safety reviews at the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety.

Vehicle history report

If the car passes your preliminary internet research, you could look up a vehicle history report on the car, which can tell you whether the car is marked as stolen, was in an accident, got flooded, is considered salvage and how many owners it’s had and more.

Steer clear. If it is stolen — report it to the police. Otherwise, ask the owner about any red flags you see on the vehicle history report. If it’s a small thing, like fender bender, you could use that to negotiate a lower price. If it’s a large thing, such as a major accident, you may want to pass.

Where to find it. Many car dealerships provide free vehicle history reports. If they are not willing to give you one, that could be a red flag in and of itself. If you are buying a car directly from another person, you could ask them to provide one or buy one yourself from National Motor Vehicle Title Information System, AutoCheck or CARFAX.

Vehicle value

Before you go look at the car, an easy and useful thing is to look up its value. You should not pay more than that to buy the car and if you can negotiate a price less than that, you got a good deal.

Steer clear. Before you go look at it, if the car’s advertised price is exceedingly low compared with its value, it might be a scam. After you look at it, if the car’s seller refuses to sell it for around that value, you can probably get a better deal elsewhere.

Where to find it. You could use NADAguides or Kelley Blue Book. Both are free internet resources. You can put in the car’s information and it will tell you the fair price for it depending on the car type, condition, location and seller (a dealership or a person).

Step 2: Perform a visual inspection of the car

The best time to inspect a used car is in daylight on a dry day. If you’re meeting a private seller rather than buying from a business, a public parking lot near an interstate is usually ideal. Have the car parked on even, flat pavement that doesn’t have any oil marks or puddles on it already.

Leaks

Turn the car on and have it idling for at least 30 seconds, or leave it on while you check the cosmetics. Then pull the car forward enough so that you can check the ground where it used to be parked for any puddles or fluids that the vehicle may have leaked.

Steer clear. Any leaks is not good news, especially oil. If the AC was running, some water is normal.

Where to look. Any fluids that leaked from the engine will of course be on the ground from where the front part of the car was. A gas leak may have come from the gas tank, which is usually at the back of the car.

Cosmetics

Look for any sagging, dents, scratches, uneven gaps between the car doors and the body of the car, rust and duct tape. While some of these things may be just cosmetics, lots of rust isn’t good and dents in certain places can seriously affect the car.

Steer clear. A ton of rust could mean there are or there may soon be holes in the car, and people generally like their vehicles to be watertight so you don’t get rained on while driving or have to deal with mold inside. Dents in the car’s frame could affect its driving and safety.

Where to look. Don’t forget to look at the roof of the car for rust. To check the frame, either look or feel under the front and back bumpers for the metal bar. The bar shouldn’t have dents, kinks or lots of rust. You could also look in the trunk in the spare tire compartment, if the car has one. This compartment is usually made of curved metal, to fit the tire. If the shape of the metal isn’t smooth, the car may have been in an accident.

Tire tread

Looking at the tread on the tires can tell you more than just whether they are old or new. They can tell you whether the suspension of the car is good.

Steer clear. The tire tread should be “penny deep.” An old tip is to use a penny to check the depth of the tire tread. If the penny shows, then the tread is low and the car will likely soon need new tires. And if the tread is worn unevenly, the car probably has a suspension problem.

Where to find it. To fully check the tires, turn the car’s steering wheel sharply in one direction so you’ll be able to see the whole flat of the tire. Do look at all of the tires and check for uneven tread on both the right and left sides of the car.

Step 3: A closer look inside the car

This is where you will hopefully spend most of your time with the vehicle, so make sure it doesn’t smell like mold, have a lot of wear and tear, and that it’s generally up to snuff.

Diagnostic check

This is the first thing many mechanics will do when testing a vehicle. There’s little point in popping the hood and getting dirty when you can get a full overview by only plugging in a scanner. The scan reports problems so you can quickly know what, if anything, is wrong with the car.

Steer clear. If the scanner reports a lot of “fails,” states only one result that means “all codes were cleared,” or says “not ready” or “pending” on many items, be wary. The seller could have cleared warning codes to hide major problems. In any of these cases, the car may have many costly problems. Each item should ideally say “OK.”

Where to find it. At an auto parts shop, such as AutoZone or O’Reilly Auto Parts, an employee could run the test for you for free. Or you could buy a scanner from them or online for less than $20, which could be especially useful if you’re going to look at a few cars.

Internal equipment

As you may take the car on a test drive soon, make sure you can comfortably see via the mirrors and sit well. Adjust the mirrors and the driver’s seat. Blast the AC, heat and radio to test that they work. Push buttons to see that the power windows, navigation, touchscreen backup camera and any technology the car may have works.

Steer clear. You shouldn’t smell anything burnt when you turn up the heat. You shouldn’t hear any crackling from the audio speakers. Everything should work as it’s supposed to. If it doesn’t, you could look up the cost to fix it and ask the owner to deduct that cost from the price of the car. Or you may decide buying a car without a working heater in the dead of winter isn’t worth the trouble.

Where to find it. If the car is supposed to have something that you can’t find or figure out how to work, ask the owner or the salesperson. If they don’t know, you could consult the owner’s manual or look it up on the internet.

Step 4: Pop the hood

Checking the part of the car that makes it go – the engine – is a good idea. You don’t have to be a mechanic to look at a few basic things.

Engine oil

The oil lubricates the moving parts of the engine. It should be dark brown or black and very smooth when you rub a dab of it between your fingers. With the engine off, take the dipstick out, wipe it off, put it back in and take out it again to check the level of oil. It should come up to the appropriate mark on the dipstick showing it has enough oil; not too much, not too little.

Steer clear. If it is very gritty, has metallic flakes or is light colored. These signs mean the engine is damaged and could fail soon. An odd level of oil is not the best either, especially a low level.

Where to find it. The dipstick to check the oil may be yellow and should be marked as “oil.” If you have trouble finding it, ask the seller, check the owner’s manual or look online where the oil dipstick is located for that type of car.

Transmission fluid

The transmission is the part of the engine that allows you to go different speeds, instead of forever putting along at five miles an hour. It needs a different type of lubricant that is much thinner than oil and should be a light red color.

Steer clear. If it is brown or black or smells burnt. This means the transmission is in bad shape, might stop working soon, and a new one is usually at least a couple thousand dollars.

Where to find it. There should be a cap maybe four inches wide that is labeled, but usually not clearly, so a flashlight may help. Again, check online, check the manual or ask the seller if you have trouble.

Belts and hoses

Touch the belts and hoses you see to feel whether they’re firm, not frayed, not cracked and don’t have leaks.

Steer clear. The belts and hoses should be taut and flexible but should not be loose. If you can wiggle them or pull them free, that’s not good. If they are leaking, coming apart by fraying or cracking, that’s also not good. Most of these things are easy enough and relatively cheap to replace, but leaking hoses could mean the engine hasn’t been getting enough fluids and could be damaged.

Where to find it. These should be easily visible. Lean down and peer around the engine in the front and on the sides to see more.

Exhaust

The color of the engine exhaust can tell you a lot about the engine’s health. Ask the owner or a friend to turn the car on and rev the engine while you stand behind the vehicle and watch for the exhaust.

You should check this twice; once when the engine is cold and once when it is hot. An engine is “cold” when it hasn’t been running for a while and “hot” when it’s been running and warmed up.

Steer clear. A small amount of water vapor is normal, but blue, white, black and gray smoke are all signs of a problem that could mean anything from a small, easily repaired crack in the coolant container to a split engine block. If there is smoke but the car has passed your other tests thus far, consider taking it to an independent mechanic to determine the problem.

Where to find it. The exhaust pipe should be at the back of the car near the rear bumper. There may be two pipes and the pipe itself may be under the bumper, not easily visible.

Step 5: Take a test drive

If the car has passed all of your tests so far and you think you’d like to buy it, take it for a test drive. Drive it over potholes and speed bumps. Listen for any squeaks and rattling.

Accelerate

When appropriate, such as on an on ramp to a highway or interstate, punch the gas and accelerate quickly. Go from a low speed up to the speed limit.

Steer clear. If the car jerks or makes funny noises there may be a transmission or engine issue.

Brakes

Give the owner or salesperson in the car with you a warning that you’re going to stop quickly to test the brakes. Make sure there is no one else around that could hit you or whom you could hit if the brakes don’t work.

Steer clear. The car should come to a smooth stop without a lot of noise. A jerky or particularly loud stop means the brakes need work.

Turns

When appropriate, turn the steering wheel sharply to one side and then the other to test that the car will indeed go where you want it to go.

Steer clear. If the steering squeaks a lot, it may be a case of needing more steering wheel fluid (a simple fix). If it is awfully loose or tight, there may be a bigger problem.

Looking for auto financing? Check out our top picks for auto loans.

Step 6: Check the paperwork

Check the VIN

Finally, if everything seems good and you want to buy the car, make sure the VIN on the paperwork matches the VIN on the car. And if you’re buying from a private seller, make sure the name on the title matches the name on their driver’s license so you’re sure the person has the right to sell the car. If the title lists two names as the current owners with the word “or” between them, you don’t need the other owner to sign as well. However, if the word between the name is “and,” you will need both owners to sign the title over.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at [email protected]

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Auto Loan, Reviews

Review: Wells Fargo Auto Loan

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Wells Fargo Auto Loan

If it’s time to get a new or used car, it’s time to do your research. Perhaps you’ve picked out the car of your dreams and you want to figure out the best way to pay for it.

When it comes to financing a vehicle, you have a ton of choices. Wells Fargo, founded in 1852, is one of many places to consider getting an auto loan from.

Wells Fargo Auto, a division of Wells Fargo Bank, serves more than 3 million auto loan customers throughout the United States.

About Wells Fargo

Wells Fargo offers new and used vehicle financing through its network of 11,000 active car dealerships, but it’s possible to apply with the bank directly if you’re interested in financing outside of the dealership or refinancing an existing auto loan. You could also use a Wells Fargo personal line of credit or loan to buy a car from a private seller or buy out your leased vehicle, but you may have to pay an annual fee or origination fee. A home equity loan or line of credit is another possibility but puts your home at risk should you default on your car payments.

It’s worth noting that Wells Fargo continues to compensate auto loan customers who were charged for insurance they didn’t need or add-ons after their car loans were repaid or their vehicles repossessed. The bank’s redress program came after a December 2018 settlement with attorneys general from all 50 states calling for $422 million to be repaid to auto loan customers.

Wells Fargo: At a glance

  • Loan terms up to 72 months
  • Loan amounts between $5,000 and $100,000 for new and used auto loans.

Because a majority of Wells Fargo’s loans are through dealerships, what’s known as indirect lending, you may not know your exact rate or terms until you apply through a dealership. A Wells Fargo spokesperson said rates are based on a number of factors, including the borrower’s credit history. While the best rates and terms tend to go to those with the best credit, it’s possible to be approved with less-than-stellar scores at Wells Fargo.

Wells Fargo also offers loans for those looking for specialty vehicles like motorcycles or recreational vehicles. Existing customers may be eligible for a discount if they use autopay to make their vehicle payments from a Wells Fargo consumer checking account.

A closer look at Wells Fargo auto loans

Highlights of Wells Fargo auto loans

  • Multiple ways to pay: You could make your car payment through the bank’s online eServices function, automatic loan payments or at any Wells Fargo branch.
  • APR discount: Wells Fargo offers a 0.25% discount for existing customers who use a consumer checking account to make automatic payments on its car loans.

Lowlights of a Wells Fargo auto loan

  • Mix of direct and indirect loans: While it’s possible to apply directly through Wells Fargo for an auto loan, most of its auto lending is through dealerships.
  • Negative press: In addition to fines Wells Fargo has had to pay in regards to its auto loan customers, it has been fined for the way it treated mortgage customers as well. In all, the bank has agreed to pay billions in settlements and consent orders.

How to apply

As we’ve already mentioned, most customers apply through one of 11,000 dealerships in the Wells Fargo network. But applying outside of the dealership is possible — a Wells Fargo spokesperson said customers may call or visit a branch for more options. It’s possible to apply for a refinance loan online, in person or by calling 800-289-8004. We’ll talk more about refinance loans in more detail, below.

Here’s what the bank will want to know about you and your car:

  • Personal information: Address, contact information, date of birth and Social Security number.
  • Country of citizenship information
  • Marital status (Wisconsin only)
  • Housing information: Whether you rent or own and for how much as well as information about previous recent addresses
  • Income information: Your occupation, gross monthly income and previous employer
  • Information about your car: Year, VIN, mileage and remaining loan balance. You can find out your remaining loan balance by calling your current lender.

The fine print on an auto refinance loan

The only way to make sure you’re getting the best deal on a loan for a new car or to refinance the one you have is to shop around. Make sure a refinance really is in your best interest and that you understand Wells Fargo’s criteria before you sign:

  • Minimum loan amount of $7,500
  • Co-signers allowed
  • Not offered in Alaska, Arkansas, Hawaii, Louisiana, North Dakota or Washington, D.C.
  • May be difficult to get approved if your vehicle has more than 100,000 miles or is 8 years or older.

Once you have applied, Wells Fargo will contact you by phone, mail or email. You’ll have the option of signing and returning the loan package by mail or finishing the process online.

Who is a Wells Fargo auto loan best for?

Wells Fargo auto loans can be a good fit for those in the market for a new or used vehicle, or folks looking to refinance a current loan. It may be the best option for existing Wells Fargo customers looking to refinance — it’s possible to apply directly through the bank, online and, if you’re willing to make auto payments, you may score a lower interest rate.

A Wells Fargo auto loan might be good for anyone shopping for a new or used car as well, but the only way to make sure you’re getting the best rate, particularly if it’s one offered through the dealership, is by comparing it with your preapproval offer from another bank, credit union or online lender.

A Wells Fargo auto loan is not a good fit for anyone interested in a private party auto loan. For those, look to competitors such as Lightstream, Bank of America or a credit union.

Lindsay Martell contributed to this report.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

MagnifyMoney
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Have a question to ask or a story to share? Contact the MagnifyMoney team at [email protected]

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Auto Loan, Reviews

Review: Bank of America Auto Loan

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Bank of America Auto Loan

The history of Bank of America dates back to more than two centuries, but that doesn’t mean its banking services are stuck in the past. In recent years, Bank of America has modernized its service offers by adding mobile auto lending services that allows buyers to choose a car and a car loan in one place. Yes, you can apply for its loans in person at a branch or over the phone, but it’s hard to beat the speed and convenience of applying from home or anywhere you use your smartphone.

According to Bank of America, you could receive a loan decision within 60 seconds of applying, which is about as fast an approval as you can get from any lender, whether in person or online. But don’t be so quick to gloss over the details. While you may get approval decision within a minute, you might not be getting your lowest rates. Bank of America offers competitive rates for new car financing and a discount for certain customers, but other lenders may be able to beat Bank of America when it comes to used car loans and refinancing.

About Bank of America

Bank of America’s online auto buying experience starts when you submit an electronic application through its website where you have the option to use your loan approval to shop for and buy your car through Bank of America’s network of participating dealerships. Once you get your loan approval you can visit the Bank of America website or use the banking app to search a national inventory of more than one million cars, then visit dealerships for test drives and to finish the paperwork.

You can also use a Bank of America loan to buy a vehicle outside of the network. The bank offers loans for:

For specific rates for used and new cars as well as loans you could use to refinance your existing car or to buy out your leased vehicle, see the chart below.

Bank of America: At a glance

  • Loan amounts starting at $7,500
  • Terms between 12 and 60 months

Bank of America offers a wide variety of loans, but its loans aren’t available for specialty vehicles such as motorcycles or RVs. Financing is available to residents of all 50 U.S. states who borrow a minimum of $7,500 ($8,000 in Minnesota), but it can’t be used to buy cars that are over 10 years old or with more than 125,000 miles.

Advertised rates for new car loans are comparatively low, but to find the lowest APR for your loan you’ll need to do some comparison shopping. Rates vary depending on what kind of purchase you’re making, where you shop and the condition of your credit, with the lowest rates available for buyers with excellent credit when they purchase a new car from a dealer. Bank of America advertises much higher rates for private party purchases.

Compare Auto Loans
 New from dealerUsed from dealerUsed from private party*RefinanceLease buyout*
Bank of America3.19%3.39%5.99%3.99%4.19%
Chase4.24%4.24%N/A4.89%N/A
LightStream3.99%3.99%4.99%3.99%4.99%
*Bank of America lease buyout and private party loan rates are current as of Sept. 18, 2019.

If you bank with Bank of America or have an investment account with its wealth management subsidiary, Merrill, you may be eligible for lower rates. Preferred Rewards members get a rate discount at 0.25% for Gold members, 0.35% for Platinum members and 0.50% for Platinum Honors members.

Your eligibility for Preferred Rewards is based on the average asset balances held by Bank of America and/or Merrill over the three months prior to your application, with a minimum average balance requirement of $20,000. You can enroll for free to see if you’re eligible.

A closer look at Bank of America auto loans

Advantages of Bank of America auto loans

  • Loan approval offers lock in your terms for 30 days. That gives you time to shop around and find the car you want.
  • No application or origination fees, unlike some other lenders.
  • No prepayment penalty, meaning you can pay off your loan early and potentially save on interest charges without being penalized.

Disadvantages of Bank of America auto loan

  • Other lenders’ rate discounts may be easier to qualify for than the Preferred Rewards’ discount. PenFed Credit Union, for example, offers a discount to customers who use its car buying service, which can mean new car loan rates as low as 1.49%*.
  • Loan preapproval isn’t available. That means you’ll likely have to take a hard inquiry into your credit, and possibly lose a few points from your credit scores, just to see the loan terms you’re being offered. However, it’s always a good idea to compare auto loan rates and applying to multiple lenders doesn’t hurt your credit any more than it does to apply to one, as long as you do so within a 14-day window.

How to apply for a Bank of America auto loan

Completing an application online is a straightforward process, and if you’re already a bank member you can choose to have some of the application prefilled. Whether you apply online, in person or over the phone by calling 844-892-6002, you’ll need to submit the following information to complete an application:

  • Name
  • Address
  • Social Security number
  • Employment information
  • Income
  • U.S. citizenship status
  • Email address

You may be asked to submit some of the following information to complete your application, if applicable:

  • Purchase agreement/bill of sale
  • Registration
  • Title
  • Vehicle make, model and year
  • Mileage
  • VIN number
  • Lease buyout instructions
  • Proof of income
  • Federal tax returns
  • W-2s

To apply in person, you can make an appointment through the website or walk into a bank branch and talk to a representative. Setting an appointment allows you to avoid waiting and helps ensure a specialist will be prepared with the information you need.

Once you’ve submitted your application, loan decisions are quick. Even if further review is needed after you submit your application, you’ll receive an email with your decision by the end of the following business day.

The fine print

  • Loans are only for cars purchased through franchise dealerships or private parties, which does not include independent dealerships except for CarMax, Hertz Car Sales, Enterprise Car Sales and Carvana.
  • If you apply online, you’ll get the details of your approval via email. Make sure to look them over, including interest rates and repayment terms for new versus used car purchases, before you begin car shopping.
  • Loans are available with payment terms lasting up to 60 months. While a longer term can lower your monthly payment, it can cost a lot more in interest charges. Make sure to do the math before agreeing to a long-term repayment.

Who is a Bank of America auto loan best for?

Savvy car shoppers know that using bank or credit union-backed financing for an auto purchase is generally a better option than going through a dealership. But it can be difficult to arrange bank financing and complete a car purchase without putting in the time to contact several different lenders and visit multiple lots.

If you want the security of financing with a large bank with branches around the country, or even from your pre-existing Bank of America account profile, Bank of America auto loans might be the solution for you. They offer some of the same perks as dealership financing, allowing you to apply for a loan and shop for a car, all within the same platform.

But some extra legwork usually pays off: Comparing rates with other banks, plus credit unions and online lenders is the only way to make sure you’re getting the best deal possible.

*Rate and offer current as of June 1, 2019 and are subject to change. Promotional rate is not available to refinance existing PenFed car loans. Terms apply.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sarah Brady
Sarah Brady |

Sarah Brady is a writer at MagnifyMoney. You can email Sarah here