Buying Cars: New vs. Used

Since a car loses much of its value in its first few years, it can make a lot of sense to stick to buying just used cars. In an ideal world, buying used cars will save you a lot of money. But if you're not too savvy about cars and their inner workings, you might get taken for the wrong sort of ride. Used cars are riskier than new ones. You never know the car's full history -- it might be a lemon disguised as a peach.

Still, for some people, buying used cars is the way to go. Want to know if it's right for you? Ask yourself these questions:

• Am I a skilled negotiator?
• Am I good at determining the real value of things?
• Do I enjoy shopping for vehicles and scouring car lots?
• Am I mechanically inclined, or do I have access to someone handy with cars?
• Am I patient?

The more "yes" answers you have, the more suited you are to used vehicles. Even if your answers were mostly "no," you might still tap the used vehicle market, via the many dealers now offering "re-warranted" off-lease vehicles.

If you plan to explore the used vehicle market, check out the highly helpful Carfax.com website, especially before you finalize a purchase. Private sellers -- and even car dealerships, sadly -- have been found guilty of repairing "salvage" (seriously damaged) vehicles, taking them across state lines, registering them with a "clean" title in the new state, then putting them up for sale without revealing their true history to prospective buyers. The car you think is one heck of a great deal might have been pulled from a swamp a couple of months ago in another state. Jot down the vehicle identification number (VIN) of any car you're seriously interested in buying, and run it through Carfax's free "Instant Lemon Check" service. It could keep you from being swindled by unscrupulous car sellers trying to unload some sour citrus.

For much more on the ins and outs of the car-buying process, check out the Fool's How to Buy a Car area, and ask any questions on our Buying and Maintaining a Car discussion board.

If you're in the market for a used car -- or a possible investment -- you may want to consider CarMax (NYSE: KMX), which Seth Jayson mentioned in his article, "What's Killing the Car Salesmen?" Its competitors include AutoNation (NYSE: AN) and the new and used car dealerships in your neighborhood.

Longtime Fool contributor Selena Maranjian owns shares of CarMax, a Motley Fool Inside Value pick. The Fool has a disclosure policy.