You can learn about car models, options, and prices by reading newspaper ads, both display and classified. There is a wealth of information about used cars on the Internet: enter "used car" as the key words and you'll find additional information on how to buy a used car, detailed instructions for conducting a pre-purchase inspection, and ads for cars available for sale, among other information. Libraries and book stores also have publications that compare car models, options, and costs, and offer information about frequency-of-repair records, safety tests, and mileage. Many of these publications have details on the do's and don'ts of buying a used car.

Once you've narrowed your car choices, research the frequency of repair and maintenance costs on the models in auto-related consumer magazines. The U.S. Department of Transportation's Auto Safety Hotline (1-800-424-9393) gives information on recalls.

Payment Options

You have two choices: pay in full or finance over time. If you finance, the total cost of the car increases. That's because you're also paying for the cost of credit, which includes interest and other loan costs. You'll also have to consider how much you can put down, your monthly payment, the length of the loan, and the annual percentage rate (APR). Keep in mind that annual percentage rates usually are higher and loan periods generally are shorter on used cars than on new ones.

Dealers and lenders offer a variety of loan terms and payment schedules. Shop around, compare offers, and negotiate the best deal you can. Be cautious about advertisements offering financing to first-time buyers or people with bad credit. These offers often require a big down payment and a high APR. If you agree to financing that carries a high APR, you may be taking a big risk. If you decide to sell the car before the loan expires, the amount you receive from the sale may be far less than the amount you need to pay off the loan. If the car is repossessed or declared a total loss because of an accident, you may be obligated to pay a considerable amount to repay the loan even after the proceeds from the sale of the car or the insurance payment have been deducted. If your budget is tight, you may want to consider paying cash for a less expensive car than you first had in mind.

If you decide to finance, make sure you understand the following aspects of the loan agreement before you sign any documents:

• the exact price you're paying for the vehicle;
• the amount you're financing;
• the finance charge (the dollar amount the credit will cost you);
• the APR (a measure of the cost of credit, expressed as a yearly rate);
• the number and amount of payments; and
• the total sales price (the sum of the monthly payments plus the down payment)

Dealer Sales

Used cars are sold through a variety of outlets: franchise and independent dealers, rental car companies, leasing companies, and used car superstores. You can even buy a used car on the Internet. Ask friends, relatives and co-workers for recommendations.

Some dealers are attracting customers with "no-haggle prices," "factory certified" used cars, and better warranties. Consider the dealer's reputation when you evaluate these ads.

Dealers are not required by law to give used car buyers a three-day right to cancel. The right to return the car in a few days for a refund exists only if the dealer grants this privilege to buyers. Dealers may describe the right to cancel as a "cooling-off" period, a money-back guarantee, or a "no questions asked" return policy. Before you purchase from a dealer, ask about the dealer's return policy, get it in writing and read it carefully.

The Federal Trade Commission's (FTC) Used Car Rule requires dealers to post a Buyers Guide in every used car they offer for sale. This includes light-duty vans, light-duty trucks, demonstrators, and program cars. Demonstrators are new cars that have not been owned, leased, or used as rentals, but have been driven by dealer staff. Program cars are low-mileage, current-model-year vehicles returned from short-term leases or rentals. Buyers Guides do not have to be posted on motorcycles and most recreational vehicles. Anyone who sells less than six cars a year doesn't have to post a Buyers Guide.

The Buyers Guide must tell you:

• whether the vehicle is being sold "as is" or with a warranty;
• what percentage of the repair costs a dealer will pay under the warranty;
• that spoken promises are difficult to enforce;
• to get all promises in writing;
• to keep the Buyers Guide for reference after the sale;
• the major mechanical and electrical systems on the car, including some of the major problems you should look out for; and
• to ask to have the car inspected by an independent mechanic before you buy.

When you buy a used car from a dealer, get the original Buyers Guide that was posted in the vehicle, or a copy. The Guide must reflect any negotiated changes in warranty coverage. It also becomes part of your sales contract and overrides any contrary provisions. For example, if the Buyers Guide says the car comes with a warranty and the contract says the car is sold "as is," the dealer must give you the warranty described in the Guide.