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How to buy a used car

Profile picture of Danni White
by Danni White ConsumerAffairs Research Team
buying a used car

Purchasing a previously owned vehicle through an online car buying site or at a local car dealership can be overwhelming, but it’s much easier with some research and planning. Knowing where to begin and what to do next requires patience and asking the right questions. Follow the steps below to make purchasing a used vehicle simple.

9 tips for buying a used car

Here are nine steps to buying a used car. Some of these steps are interchangeable, and not all of them apply to every situation. Read through the list before you begin so you can plan out the right process for you.

Step 1: Set a budget

Start with a range in mind for what you want to spend. Look at your finances and see how much you can afford and how much you’re comfortable putting towards your next vehicle.

Keep in mind that this number needs to cover more than just the cost of the car. It needs to account for any related fees that may arise either upfront or down the road. Also consider your financing rate, insurance premiums, maintenance fees and taxes. It’s tempting to only think about the vehicle’s sticker price, but factoring in these additional costs should keep your budget realistic.

Step 2: Figure out what kind of car you want

Decide what type of vehicle you want by thinking about how you intend to use it. If you have a long commute or want to take long road trips, look for a small car with good gas mileage and not too many miles on the odometer. If you have a family, consider a minivan or large SUV that can fit everyone comfortably. Many car buyers start by thinking about the make of their next vehicle, but this should really be a decision for later in the process.

Next, rank the importance of factors like performance, safety, reliability, aesthetics and luxury features according to your personal preferences. Performance might be important if you’re shopping for a sports car, but it’s less of a priority in a commuter vehicle.

These criteria should also help you compare similar vehicles in your chosen configuration later on. If you need a truck, towing capacity might be an important specification. Likewise, if you want maximum comfort, it’s a good idea to compare the availability of features like Bluetooth connectivity, heated seats and blind-spot detectors.

Once you know what you want out of your vehicle, you can start searching for the makes, models and years that meet your needs. It’s not a bad idea to do some research on brands as a whole, but it’s more efficient to take a survey of what cars different automakers offer that meet your requirements. There are a lot of brands to choose from, and some are more expensive than others solely for their names, so keep an open mind.

As you narrow down your search, make a list of your top three to five vehicle options, combining similar model years if necessary. Then, research and compare these vehicles using the criteria you've established.

Step 3: Research vehicles

In addition to comparing factors like performance, comfort and styling, it pays to research factors unique to used cars, including:

  • Current values
  • Current owners’ experiences
  • Long-term reliability ratings
  • Costs of ownership
  • Projected resale values

One of the benefits of buying a used car is that other people have tested the model for you, which is especially helpful for new design years. You can even get a glimpse into your future by looking at reliability reports for vehicles with higher mileages.

The make, model and age of a car affect its price, but bear in mind that not all cars depreciate evenly. Some vehicles are cheap to purchase but expensive to repair and maintain. Used luxury vehicles depreciate quickly, but don’t be tempted by their low sticker prices. A foreign luxury car that’s just a few years old can quickly exceed its purchase price in repair fees and imported parts.

Things like factory certification can increase the value of a used car, particularly if you question the model’s reliability and want the protection of a factory warranty. Alternatively, you can get an extended auto warranty from third-party providers that mimics factory coverage.

Step 4: Start hunting for a car

This is the fun part of the process. Go out to dealerships or get on your computer and look for a specific vehicle that meets your requirements. The make, model, age, mileage and price range you chose earlier are the most important factors in finding the right vehicle. Don’t get too much more specific with your filters if you’re looking online — not all sellers enter that information correctly.

Remember to stick with the standards and requirements that you established in the last several steps. Do not let the salesperson or seller persuade you away from what you want or your budget.

If you don’t immediately find the right vehicle, don’t feel like you have to compromise. Most online car buying sites let you save your searches and set up alerts for when new vehicles matching your criteria are posted. Likewise, many salespeople will follow up with other vehicles that meet your needs if they know you’re still looking.

If you have a limited timeline, adjust your sense of urgency as necessary. Don’t give up or settle just because your search isn’t immediately successful, though. You can continue your car shopping experience with little effort by letting dealerships and car buying sites do the work for you.

Step 5: Check the vehicle history report

Vehicle history reports
help assess
a car’s actual value.

Remember, you are buying a previously owned car. A casual glance at the vehicle may not be enough to tell you how well the old owners took care of it. The car you're thinking about buying might look almost new, but it does have a history.

Vehicle history reports can provide information on the car’s maintenance record, recall status, registration and accident history. This information is critical for assessing the car’s actual value. You may not want to buy a car that’s been in a major accident, but even if you do, you can use that information to drive the price down in negotiations. Just be aware that whoever you sell the car to might discover the same information.

Vehicle history reports can help you identify:

  • Any accidents the vehicle was in
  • Gaps in a vehicle’s maintenance history
  • Where the vehicle has been registered
  • Whether it was ever a rental or commercial vehicle
  • How often the vehicle was driven
  • How many owners the vehicle had
  • If the vehicle was ever sold at auction

Not all of these are red flags, but it’s better to know. Some vehicle history reports include the extent and area of the damage after an accident, which helps you judge how it affects the vehicle’s value. Also, don’t assume that all gaps in a maintenance record are accurate. Not all shops send info to vehicle history reporting services, and simple jobs like oil changes could’ve been done at home by a previous owner.

Step 6: Take the car for a test drive

Whether you’re buying from a dealer or a private party, it’s incredibly helpful to see the car in person before you buy. Look at the exterior and check for marks and dents. Inspect the interior for stains, tears and smells. Climb inside and get a feel for the ergonomics and driving position. With the seller’s permission, take the vehicle for a test drive so you can evaluate how it runs. Make sure the ride is smooth and quiet and that you feel comfortable behind the wheel.

Additionally, consider getting a pre-purchase inspection from a third-party mechanic. Even if the car seems to be in great condition, a mechanic can examine the engine bay and underside of the vehicle to look for any issues. While some sellers might say they’ve already done so, their interest is in selling the car, not necessarily in making sure you’re happy months down the road.

Pre-purchase inspections are more common when buying from a private seller. An inspection is especially important in these sales because you may have no recourse if the vehicle turns out to be a dud later on. Just be sure to approach the topic politely and choose a reputable inspector that both you and the seller trust.

Step 7: Figure out your plan for financing

When deciding how to finance your vehicle, ask yourself a few questions:

  • How much car can I afford?
  • How’s my credit?
  • Do I have a trade-in or enough cash for a down payment?
  • How long do I want to make payments for?
  • Do I want to get preapproved or go with dealer financing?

Getting preapproved lets you shop around for better rates, while dealer financing often doesn’t give you much wiggle room. Preapproval also helps you negotiate pricing later on, and dealer financing isn’t even an option if you’re buying from a private party.

The downside to preapproval is that if you wait until you’ve found a car to begin shopping for a loan, someone else might get to the car first. If you plan to go this route, make sure to start this process a bit before you’re ready to purchase. Consider getting prequalified early on in the process as you set your budget, too. This doesn’t affect your credit score, and it should make it easier to find the right loan once you’re ready to buy.

If you decide to finance through your dealership, financing is often just part of haggling over the vehicle’s price.

Step 8: Negotiate the price

Focus on the
total price
of the car when negotiating

If you did your research early on, you should have an idea of what the vehicle is worth and what you’re willing to pay. Compare the seller’s price with the average market price to ensure you're getting a good deal. If you’re preapproved for a loan, this is easy since you have a firm limit that the seller has to accommodate if they want to make the sale.

Try to open negotiations with an offer that’s low enough to give you some wiggle room but not so low as to insult the seller. Also, try not to go over your budget, no matter how much you want the car.

If you’re at a dealership, focus your negotiations on the price of the car, not your monthly payment. While establishing your monthly payment is helpful in understanding what you can afford, dealers may just alter your financing to get the right monthly payment. This might seem fine at the time, but it can actually lead to spending far more money in the long run.

Keep in mind that you should also leave roughly 10% of the loan amount in your budget to cover taxes and fees. Trading in your current vehicle should help free up some money.

Step 9: Close the deal

Closing the deal at a dealership is relatively simple since you have a salesperson to guide you through the process. Just read all the fine print before signing to ensure you're getting what you’re paying for and only paying for what you want.

If you’re buying from a private party, make sure you get the title, a bill of sale and whatever other paperwork your state may require. You’ll also have to discuss your method of payment with the seller. This will depend on your financing status and your seller’s preferences. Just be careful to avoid scams.

Finally, make sure you’re square with the Department of Motor Vehicles and the minimum car insurance requirements in your state. Not all states require car insurance, but it’s almost always a good idea. Car insurance helps protect your new investment and shield you from paying for damages you cause while driving.

Pros and cons of buying a used car

A used car is a great option, especially if cash is tight or you don’t have the best of credit. However, you should understand some of the pros and cons involved before diving in.

Pros

  • Generally cheaper
  • Slower depreciation
  • Know what you’re getting into

Cons

  • Higher interest rates if financing
  • Greater maintenance and repair needs
  • Harder to find a vehicle

Bottom line

Purchasing a used car doesn't have to be difficult. Understanding the process, asking the right questions and doing your research should help you get the right vehicle. From there, it’s a matter of maintaining your car to get the most out of it and keep its value high.

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Profile picture of Danni White
by Danni White ConsumerAffairs Research Team

As a member of the ConsumerAffairs research team, Danni White is committed to providing valuable resources designed to help consumers make informed purchase decisions. Danni specializes in content strategy and development, with over a decade of professional writing and research experience.