According to one estimate , Americans purchase 39.4 million used cars each year. That’s more than double the number of yearly new car purchases. It’s easy to see why – gone are the days when a used car was synonymous with a money pit. With today’s technology, cars are safer, more fuel efficient, and longer-lasting than they were 20 years ago. Coupled with lower prices and lower insurance rates than brand new models, used cars have become practical alternatives for drivers on a budget.
But all this isn’t to say that buying a used car is a cakewalk. Anyone who’s ever considered buying a used car will quickly find that there are a ton of factors to consider. Between budgeting, background checks, and acceptable mileage, canvassing for used cars can easily become an overwhelming task.
Don’t worry, though, we’ve got you covered. To help make the process easier, here’s an eight-step guide to buying used cars. Follow this guide and you’ll be well on your way to finding the perfect car.
Step 1: Decide on a Budget and Payment Scheme
Budgeting for a used car is a bit more complicated than budgeting for a new one. Aside from the sticker price (which you may be able to negotiate), you should also account for dealership fees and sales tax. Another thing to consider is the upkeep cost – stuff like annual registration fees, maintenance cost, and potential damage repairs. Don’t forget daily expenses like fuel, parking, and toll costs too.
Next, think about your financing options: will you be paying the full price in cash or putting a percentage down and paying the rest in installments via loan? Remember that loan interest rates are usually higher for used cars than they are for new cars. This is because banks and loan-giving entities predict that used cars are more prone to breakdowns and high maintenance fees – things that could cost you money early in the game and affect how well you can keep up with loan payments.
Once you have a ballpark figure, you can then start looking at cars within that range.
Pro Tip: On a budget? Shorter loans are the way to go. While a longer loan will buy you more time to pay off the balance, it also means paying more in interest. With long loans, you could also place yourself in a precarious financial situation where your warranty expires before you’re done paying off your loans. When this happens, you could be paying double for your car – one for your loans and another for repairs.
Step 2: Weigh Your Wants vs Your Needs
Before searching for cars online, ask yourself this: Why am I looking for a car in the first place? What do I want out of a car? What do I really need? While some vehicles may be closer to what you consider your “dream car”, they might not fulfill your daily needs as a commuter. Here are some factors car buyers often weigh:
Make and model: Forbes ranked the Toyota Camry as the most “American-made” car – meaning it’s one of the most frequently bought cars in America. Next to the Camry, the Toyota Sienna, the Chevrolet Traverse, and the Honda Odyssey come close. Why is this important? Because being both highly popular and mostly produced in the US means it’s easy to find cheap parts near you.
Size and seating capacity: This one is pretty simple. Are you looking for a daily commuter? Are you looking for something to drive your kids (and their friends) to and from school, or a car that can transport big outdoor gear in the summer? You may dream of owning a two-seater sports car, but that isn’t going to get all the kids and their gear to soccer practice.
AWD/4WD: For off-roaders and folks who need to transport heavy loads, all-wheel and four-wheel drive are must-haves. AWD/4WD provide better traction on slippery roads, such as those covered in mud, ice, or snow. Four-wheel drive offers greater control and power. This makes it easier to pull trailers even on rocky and slippery terrain.
Transmission: Manual cars are generally cheaper and offer more control, but for those who live in or commute in high-density, high-traffic areas, automatic is the way to go. Driving manual in stop-and-go traffic means having to sit through hours of pressing on the clutch and shifting gears.
Safety features: According to ASIRT , around 38,000 people die from road crashes in the US each year. – so never skimp on safety features. Aside from the safety belt, some of the most commonly sought-after safety features include anti-lock brake system (ABS), electronic stability control (ECS), and head-protecting/frontal airbags.
Age and mileage: Older cars are often much cheaper than newer cars thanks to depreciation, so if you’re on a tight budget, you might want to look into later models. However, you should watch out for high mileage vehicles. While high mileage is not necessarily a dealbreaker, it should keep you on guard for signs of wear and tear that’ll cost you in the long run.
When considering a high mileage car, always check on the gearbox, brake pad, and timing belt, as these are some of the first to go after miles and miles of driving.
Certified Pre-Owned Vehicles: CPOs are cars with relatively low mileage that have been thoroughly inspected and deemed roadworthy. These vehicles are almost as good as new, and are often a buyers’ next choice after brand new vehicles.
Step 3: Find Sellers And Narrow Down Your Options
Thanks to the internet, it’s much easier to canvas for used cars now. Rather than wasting time and money combing through all the used car dealerships in your area, you can screen dozens of car ads online before even meeting sellers. These are some of the most frequently visited websites:
- Kelley Blue Book
- Wii Auto Sales
There are also tons of online classifieds you can look at, including Facebook Marketplace and Craigslist. Be extra vigilant when searching online though, classifieds are littered with scammers looking to make a quick buck out of gullible buyers.
Private Sellers vs Dealers
There are key differences between buying from a private seller and a licensed dealer. Firstly, private sellers often sell their vehicles for much cheaper than dealers. This is mostly because private parties aren’t required to do much legwork in terms of servicing the vehicle and preparing a Buyer’s Guide.
According to the FTC , a Buyer’s Guide is a “disclosure document that gives consumers important purchasing and warranty information” on the vehicle for sale. By the FTC’s Used Car Rule, all licensed dealers are required to provide a Buyer’s Guide for all used cars that have “a gross vehicle weight rating of less than 8,500 pounds, a curb weight of less than 6,000 pounds; and a frontal area of less than 46 square feet”.
Here’s what dealers should include in the Buyer’s Guide:
- The major mechanical and electrical systems of the vehicle
- Problems consumers should be aware of in the above mentioned systems
- Any warranties issued by the dealer and what percentage of repair costs will be covered
- A statement that says all agreements made between consumer and dealer will be put in writing
- A statement telling consumers they have a right to have the car inspected before purchase
- Information on where buyers can acquire a vehicle history report and how to check for safety recalls
Secondly, unlike most private sellers, dealerships can issue warranties on used vehicles. While private sellers may be easier to negotiate with on the price, you likely won’t be able to convince a private seller to cover your warranty.
Step 4: Research And Inspect
Once you’ve narrowed down your search, it’s time to do some digging.
Research The Value Of The Vehicle
If you’re unfamiliar with used car prices, it’s good to look through sites like the National Automobile Dealers Association’s (NADA) Guides , the Kelley Blue Book , and Consumer Reports for a loose idea on how much your top picks go for. That way, you can tell if your dealer/seller is short-changing you. Be suspicious of cars that are being sold for much lower than their standard prices too – this often indicates that the seller is trying to get rid of it fast due to hidden issues.
Next, look up your options’ upkeep costs. Some cars are more prone to electrical and mechanical failure at a certain age. Make sure you have the budget to cover for the repairs they need in the future.
Call The Seller And Set A Date
Now that you’ve settled on a handful of options, ring the seller or dealer to set a viewing date. Be sure to ask your seller the following information about the car:
Mileage: We covered mileage already, but this bears repeating: be sure to double-check if the mileage reading given by the seller/written on the report is the same as the mileage reading on the odometer. One of the most common types of used car scams is odometer fraud.
Safety issues and recalls: You can research this on your own, but it’s good to ask your dealer/seller too. Plus, you can confirm if a dealer/seller is reliable if they don’t withhold this important information.
Accident history and major repairs: Major accidents should lower the cost of a vehicle, as these can inflict damage to the car’s mechanical or electrical systems. Should your dealer disclose any accident involvement, be sure to inspect parts and areas that were said to have been repaired.
Existing liens: An auto lien is a lender’s right to possess a vehicle until the loan has been paid off. It’s important to know whether a car has any existing liens on it because once the ownership of the vehicle is transferred to your name, you become responsible for paying off another person’s loan. And what happens when you don’t pay off that lien? The bank or lending party may be able to repossess your car.
Ownership history: It’s always best to purchase a vehicle with as few previous owners as possible. A car that moves from one owner to another could have underlying issues that may be too costly to repair.
Service history: Vehicles need regular maintenance even when they aren’t being used. While you can’t expect sellers to have documentation of each and every trip to the shop, you should at least have some information on how often the vehicle was maintained and serviced.
Title history: A vehicle’s title history tells you if it has been in a major accident, flood, or fire. Beware of vehicles with salvage titles – these are cars branded as “total losses” and cannot be driven or insured. Title history also tells you if a vehicle has been rebuilt or reconstructed.
Payment options: Most private sellers will only settle for all-in cash payment. Dealers, on the other hand, may allow you to pay in installment. Otherwise, you can take out a loan from your bank.
Get A Vehicle History Report
When inquiring about a used car, always ask for the Vehicle Identification Number, or the VIN. This is a unique number that corresponds to a vehicle’s history report – a document containing important information on the car, including much of what was covered above.
With a vehicle history report, you can cross-check to see if your dealer/seller sugar-coated any issues or purposely withheld important information that could affect the vehicle’s value and safety. Any discrepancies should be a red flag for a dishonest seller.
Some dealers offer free vehicle history reports. Otherwise, you can obtain a vehicle history report from sites like CARFAX and AutoCheck for about $USD20 to $USD40.
Inspect The Vehicle
Unless you’ve worked with cars before, it is best to hire a mechanic to inspect the car before you purchase it. Ask the dealer or seller if you can bring the vehicle to an inspection facility or hire an independent mechanic to come to the lot. Always do the inspection in broad daylight and on a level surface. The mechanic should be able to pinpoint anything that needs repairing or servicing in the near future.
During the mechanic’s inspection, you can also do some inspecting of your own. Check for dents, scratches, and rust on the body, as well as uneven paint jobs. Unevenness in the paint points to a recent coverup of damage. Inspect windows and the windshield for cracks and scratches. Next, take a look at the tires. If tire treads are uneven, this might indicate problems with alignment, suspension, and tire pressure.
As for the interior, use all your senses. Look for wear and tear in the upholstery, the gearshift, and the pedals. This indicates how often a car has been used. Next, crank up the AC at full blast and see how long it takes to cool the cabin. Watch out for a moldy, mildew-y smell coming out of the air conditioner – this could either be a sign of a leak somewhere or that the vehicle was involved in a flood and not cleaned properly.
The advantage of hiring a mechanic is that they can write up a report with a cost estimate of all the repairs needed. You can then use the cost to negotiate the final price of the vehicle with the dealer.
Step 5: Test Drive
Don’t purchase a used car without taking it for a test drive first. If possible, ask your mechanic to accompany you on the test drive. It’s also advisable to bring a trusted friend or relative along to note down any and all issues discovered in the test drive.
Before your test drive, you should plan your route carefully. Plan a route that you’re familiar with, but one that has a mix of highways, small streets, and stop-and-go traffic. Make sure to find a parking lot you can practice parking in too. Additionally, don’t drive with any music on. The goal is to feel and listen for anything strange.
Here’s what to do on the test drive:
Check for comfort: From the moment you step into the vehicle, the experience has to be smooth and comfortable. Get in the driver’s seat and check how comfortable the seat is. Adjust the seat till you can reach the pedals and controls and see if this is a comfortable position for you. Next, head to the backseat and make sure your passengers will be just as comfortable as you are upfront.
Examine the controls: Start the car and test each and every control on the panel. Switch the lights on and off, making sure they don’t pulse or weaken. Turn on the radio and check if the acoustics are okay. Turn on the windshield wipers too to make sure they’re working fine.
Drive carefully: As important as it is to check how well the car accelerates, it’s equally important to be careful with a vehicle that isn’t yours yet. Find a relatively empty road before picking up speed – and don’t forget your seatbelt!
Observe, observe, observe: As you turn corners, observe how easily you can maneuver the steering wheel, as well as how easily you can look through your windows and mirrors for oncoming traffic. Test the brakes early in the drive and make sure the car brakes firmly but not too quickly or too slowly.
Accelerate slowly and get a feel for the transmission. Does the vehicle shift gears with ease, or does it feel like it’s having a hard time doing so? Next, check the alignment by letting go of the steering wheel and observing if the car veers left or right. For the suspension, you can observe whether the car is extra bouncy over speed bumps.
Step 6: Negotiate On A Price
While there are no hard and fast rules about negotiating, it’s important that both parties remain respectful and professional throughout the entire process. Some dealers may be pushy and pressure you into a sale – these are the kinds of deals you should learn to walk away from. A professional dealer respects their clients enough to give them enough time to mull over a big purchase like this.
If you’re trying to negotiate to a lower price, do so by bringing up issues you found during your inspection. If possible, have your mechanic come up with a professional quote on everything that needs to be done to bring your car to tiptop shape.
The best way to come prepared for the negotiation part is exactly that: come prepared. Research, have all the necessary documents ready, and always have a calculator on you. If you can, bring a friend who’s good with numbers.
Step 7: Discuss Warranties
While new cars always come with manufacturer’s warranties, it’s a different story with used cars. Depending on where you live, some dealers may be able to sell a used car “as is”, meaning they aren’t required by law to provide any kind of warranty for repairs and other issues. Check state laws for complete information on “as is” policies in your state.
Manufacturer’s warranties on new cars often last about three years, so if you’re buying a used car that’s under three years old, you may still be able to benefit from this – so long as the warranty is transferable. On the other hand, a dealer may offer you a service warranty or an extended warranty. This is a type of warranty wherein the dealership shoulders a certain percentage of repair costs depending on the terms of the warranty.
Whether or not an extended warranty is a good deal depends on transferability, service coverage, and the cost of the warranty versus the cost of the repairs.
Step 8: Title Transfer And Registration
Title transfer and registration might be covered by your dealer, but this isn’t always a sure thing. If you’re buying from a private seller, you will likely have to do everything yourself. Here’s what you’ll need to do:
- Have the car’s title transferred to your name
- Conduct an emission test
- Get a complete safety inspection
- Provide proof of insurance
- Provide identification (preferably more than one kind)
- Provide proof of address
Remember that requirements, fees, and procedures vary per state, so check with your DMV beforehand.
Although buying a car requires a bit of legwork, the payoff is worth it. These days, car manufacturers are coming up with safer, hardier, and more reliable vehicles – meaning it’s easier to find a used car that’s good as new. And after putting all the work into buying a used car, there’s nothing left to do but to sit back and enjoy the ride.