A great way to save money when buying a car is to purchase a used vehicle instead of a new one. The moment you drive a new car off a dealer's lot, it starts to depreciate rapidly. That means it’s worth less than what you paid for it. You can save thousands of dollars by letting someone else absorb the steep depreciation of the first few years of ownership. Buying the right car with good predicted reliability and low ownership costs can also save you money over the years.
Getting a good deal on a pre-owned car takes more work than buying a new vehicle, and there's more long-term risk to your wallet since most used cars aren’t covered by factory warranties. In this article, we'll help you through the steps that you should take to find the right car, get affordable financing, pay a fair amount, and minimize the risk of getting an unreliable vehicle.
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Here are the steps you’ll should take to buy a used car:
- Setting Your Used Car Budget
- Finding the Right Used Car
- The Certified Pre-Owned Car Option
- Used Car Financing
- Deciding Where to Buy a Used Car
- Researching, Test Driving, and Inspecting a Used Car
- Making a Deal and Completing the Paperwork
- Add-Ons, Warranties, and Insurance
Deciding on how much money to spend for a pre-owned car, truck, or SUV is more complicated than just looking for a vehicle with an affordable monthly payment. You need to look at the whole price of the car, including the cost of financing the purchase, plus consider the odds that it will require expensive repairs in the future.
The older a car is, the lower its price will usually be. But, unfortunately, the older the vehicle is, the more likely it is to need costly repairs. The trick is to find the right balance between the two. A great deal won't seem so great when you're waiting for a tow truck instead of heading to work or school.
Fortunately, there are many online resources to learn about a car’s reliability, repair costs, and frequent problems. Our used car reviews show you a vehicle’s predicted reliability rating from J.D. Power, any certified pre-owned warranty coverage available, and approximate costs for common repairs. There are dedicated user websites for many vehicles, such as Odyclub.com for the Honda Odyssey, and they can give you an idea of the issues that other owners are seeing on their aging cars.
You’ll also want to consider the cost of car insurance for used cars and look at the coverage levels that you will need. Our guide to car insurance will help you with those decisions.
Getting behind the wheel of the right used car is more challenging than buying a new car. When you buy new, you just have to find a vehicle that fits your needs and budget. Buying used adds additional steps to the mix, such as finding a car with low mileage, lack of significant crash damage, and a history of regular services. You need to learn much more about a three-year-old, 36,000-mile used car than you do about a brand-new car with 10 miles on the odometer.
Our used car rankings and reviews are a great place to start your search. We look at the consensus opinions of America's top automotive experts and blend them with quantifiable data on safety, reliability, and total cost of ownership to create a score for nearly every vehicle you can buy dating back over a decade. Those scores are used to compare vehicles against competitors in their respective classes.
Choosing a used car to focus your search on can be daunting. Do you prefer an older, more luxurious model or a newer model without as many features for the same price? It's important that you honestly evaluate why you drive, where your drive, and how you drive so that you can find the vehicle that fits both your needs and budget. While that Mazda Miata may be in your dreams, it can’t carry the kids to soccer practice every day. On the flip-side, opting for a Chevy Suburban for your daily commute into the city probably isn’t the best choice either. Be sure to evaluate the fuel economy of your options as well as the level of safety equipment that you’ll be comfortable with.
Buying a used car is a great way to get options that are costly on new vehicles for a fraction of the price. Higher trim levels and option packages don't command nearly the same prices on used cars as they do on new cars. Using our used car rankings, you can compare cars you are considering both on their overall scores and on individual factors that car buyers tell us are critical to their buying decisions, such as performance, reliability, and safety.
When you start to narrow your search, you don't have to start driving to car lots all over town. There are more than a million vehicles in our used car listings for you to browse.
Manufacturer-certified pre-owned cars (CPO cars) blend the affordability of used vehicles with the security of a manufacturer-backed warranty. They're typically low-mileage cars that have been properly serviced for the few years they have been in service. Often, they are vehicles that were returned to the dealer at the end of a lease, used as dealership service loaners, or driven by dealership or manufacturer staffs.
Certified used cars receive a thorough inspection and some refurbishment before they receive certified status. Unlike most used vehicles that are sold as-is with no warranty, CPO cars typically come with extensions to the manufacturer's warranty. Many CPO programs also provide extras, such as roadside assistance and trip interruption coverage. The best CPO programs have a combination of good warranty coverage and nice perks. Automakers regularly offer special used car financing deals with low interest rates on CPO cars.
You'll want to make sure any certified used car that you are considering is genuinely a manufacturer-certified vehicle. Some dealers will call a portion of their used cars "certified," but unless it has been inspected to manufacturer standards and receives their stamp of approval and warranty, you won't receive the benefits that the automaker offers. You'll only find a brand's certified models on their franchised dealer lots. If you see a Lexus marked certified on a Ford dealer's lot, for example, it's not a factory-certified pre-owned car. With most factory CPO programs, you'll be able to get warranty coverage at any of the carmaker's franchised car lots.
The bad news about CPO cars is they’re more expensive than equivalent non-factory certified pre-owned vehicles. You’ll want to balance the higher price with the chance that you’ll have a higher total cost of ownership with a non-certified model. The predicted reliability rating in our used car reviews can give you some insight as to a car’s future repair needs. You can also compare the additional cost and benefits of a CPO car to those of an extended warranty to see which is the better long-term deal.
Unless you have the cash on hand to buy a used car outright, you’ll need to take out a used-car loan to get the money to make the purchase. While many consumers don’t even think about financing until they are sitting in the finance office at the dealership, it’s critical that you get a pre-approved financing deal in place before you start shopping for a car.
While shopping and applying for used car financing is similar to getting a new-car loan, there are some differences. Lenders see used car loans as riskier than new car loans so you can expect to pay a higher interest rate. The increased risk stems from the fact that you're more likely to have major repair costs as a car ages, which may compromise your ability to pay the monthly payments down the road. The value of the car is also more unpredictable as it ages, making it more difficult for a lender to value their collateral, your used car.
Depending on the used car that you choose, some lenders will price the loan like new-car financing. If you find a car with very low miles or being sold as a certified used car, there’s a good chance that the lender will treat it as a new car.
The following steps will help you get the best deal on your pre-owned vehicle financing:
By getting all of your financing ducks in a row well before you start car shopping, you’ll be prepared with a pre-approved deal in place before you get near a car dealer or start talking with private-party sellers. The first step is to look at your credit score and the credit reports that it is based on.
Your credit score is one of the primary criteria used by lenders to determine whether they will make you a loan and what interest they will charge. If you have a low score, you'll likely have to pay a higher rate, accept a shorter loan term, or put more money down than someone with a high score would. If your score is excellent, you'll qualify for the best interest rates, longest loan terms, and be able to take advantage of automaker-subsidized financing offers on certified pre-owned cars.
By looking at your credit score early, you'll have time to correct any errors and see where your credit is weak so you can start on the path to improving it. The most critical information in your credit report is your history of making on-time payments and the amount of outstanding debt you have.
Where to Shop for a Loan
There are many places to get used-car financing, and you should seek offers from several before deciding on which car loan is right for you. Some lenders have special programs for current customers, first-time car buyers, or buyers with damaged credit. Taking advantage of these special programs can save you money and hassle.
Large National Banks
With thousands of locations across the country, America’s biggest banks offer a vast array of auto lending options and services both in their brick and mortar locations and online. Though you might also find loan occasional loan specials, their interest rates tend to be higher than some other lenders and their rigid lending policies not amenable to customers with bruised credit.
Credit Unions differ from other financial institutions in that they are owned by their members, rather than by shareholders. Because they return their profits to their members with higher savings interest rates and lower loan interest rates, they tend to be less expensive places to get used car financing than other financial institutions.
You have to be a member of a credit union to get a loan from one. Not everyone can join every credit union. The industry's federal regulator, the National Credit Union Administration, has a credit union locator at MyCreditUnion.gov that you can use to find an institution that you can join. You’ll find credit unions ranging in size from tiny, one-person operations to massive operations rivaling the reach of national banks.
With smaller geographic footprints and branch networks than national banks, community banks offer many of the same auto lending services, but are likely to do so with more of a personal touch. If you have special lending needs or bruised credit, a smaller institution such as a community bank or a midsize credit union might be the right place to make a more personal connection to a lender willing to hear your financial story.
A newer contender in the car loan marketplace is the online bank. They forgo traditional brick-and-mortar locations and instead offer completely online loan processes. If you don’t need a lot of hand-holding, the streamlined loan processes of online lenders can have you set up with a pre-approved loan faster than most other lenders. Plus, you can do it from your couch while you’re eating pizza.
Financing companies are similar to banks, except that lending money is their only business. They don't take deposits; instead, they borrow money from other financial institutions and use it to make consumer loans. Many finance companies cater to certain types of borrowers, such as those with poor credit.
Many automakers have their own finance companies, such as Ford Motor Credit or Honda Financial Services. They finance loans and leases for customers getting cars at their franchised dealerships and are the lenders that manufacturers use to provide their special new car financing deals and certified used car financing offers.
Most car dealerships don’t make car loans. Though it might seem like they do, they more typically act as brokers for other lenders, including banks, credit unions, and financing companies. They usually make a profit on financing by marking up the interest rate on the loan. In most states, they don’t have to disclose the amount of markup that they are charging on the loan.
While you may choose one of the financing offers that you'll be presented with at a car dealer, it's vital that you have at least one other offer. Without one, the dealer won't have any incentive to offer you a great deal to earn your financing business.
Applying for Used Car Financing
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Apply for financing today, and get up to four offers. Compare your options before visiting the dealership to make sure you get the best rate for you. It's free, quick, and easy.
Auto lenders will have an application, either on paper or online, that will need to be filled out and signed. It will ask for personal information including your social security number, income, monthly obligations, work history, housing expenses, credit card debt, and more. It’s imperative that you answer the questions honestly and completely. Otherwise, you risk being turned down for the loan or having the lender demand immediate repayment of the entire loan if the misinformation is discovered later.
Lenders then use the information you give them plus the data in your credit report to build a complete picture that predicts the chance that you will be able to pay back the loan. The information that lenders can use for a loan decision is limited by law, but you may be asked for some demographic information for regulatory reporting purposes.
Just as you should shop at more than one dealership for a used car, you should apply at multiple lenders to get the best financing deal. You'll need to do so in a relatively short period of time, though, in order to avoid affecting your score too much. When a lender pulls a credit report, it lowers your credit score by a few points. However, the credit bureaus will see multiple requests over a short time as just one inquiry.
If you apply before you chose a vehicle, your approval will likely be conditional and have a cap on the amount that they are willing to lend you. At this point, you can compare loans based on the interest rate you’re being offered, the length of loan that the lender will extend to you, and how much of a down payment is required. It’s OK to have multiple approvals, as you can choose the best option once you know the price of the pre-owned car you’re buying.
While you need to have a monthly payment that fits into your budget, it's important to look at more than just the payment when comparing cars and financing offers. Instead, look at the total cost of the vehicle including financing. You can do that by multiplying the monthly payment by the number of months in the loan term, then adding your down payment and the value of your trade-in, if you have one.
You can find the monthly payment by plugging the vehicle price, the interest rate, and the length of the financing into a car loan calculator.
For example, let’s say you're buying a used SUV with payments of $350 for 60 months, and you're putting down $5,000 and trading in a vehicle with a $3,000 trade-in value. You would multiply $350 by 60, then add $5,000 and $3,000 to that amount. In this case, the total cost of the used SUV would be $29,000.
The Importance of a Down Payment
While you may be able to buy a used car with no down payment, putting some money down is a good idea for several reasons. First, it reduces the amount you need to borrow, which lowers your monthly payments, shortens the length of the loan, or both. Second, it lowers your loan-to-value (LTV) ratio, which makes lenders more likely to offer you great loan rates.
Finally, a substantial down payment makes it less likely that you will ever owe more than the car is worth, which is also called having negative equity or being underwater on your loan. If the car is totaled or stolen when you have negative equity, you’ll have to pay your lender the difference between the loan balance and the amount you get from the insurance company.
Short Loans Are Better Than Long Loans
While you may be offered a six-, seven-, or even eight-year loan for a used car, it’s a bad idea to extend your payments out any longer than five years. Longer loans typically have higher interest rates, since they are considered riskier to lenders. You’ll also face a higher probability that you’ll still be making car payments when your vehicle is out of warranty because of its age or mileage. You don’t want to be making car payments when your vehicle is more likely to need costly maintenance and repairs.
With higher interest rates and longer financing, you’ll end up paying significantly more interest over the life of the loan. You will also face a higher probability of being underwater on your financing. If you still owe a significant amount on the car you're driving when it becomes too expensive to maintain, it makes buying your next vehicle much harder.
There are many places you can purchase a used car, and each has its benefits and drawbacks in terms of service and price. Just as you want to know everything about the car that you are trying to buy, you should strive to know as much as possible about the person or business selling the vehicle. Check the company out with your local Better Business Bureau or other consumer protection agency before agreeing to a used car purchase.
Franchised New Car Dealers
Buying a used car at a franchised new-car dealer likely won’t get you the best price, as you have to help pay for the dealer’s overhead, salesperson’s commissions, and other administrative fees. However, it will get you a buying process that’s more seamless, with the experience to handle the most complex paperwork, plus access to multiple lending sources if you don’t have a pre-approved financing deal you want to use.
New-car dealers are also the only place where you will find factory-certified pre-owned cars from their respective brands.
Used Car Superstores
Relatively new on the scene are used car superstores with massive inventories to draw on, a refined sales process, access to lenders, and branded add-ons such as extended warranties that can be used at any of their locations. Like new-car dealers, you probably won’t get the best price at a used car mega-store, but you’ll likely feel a sense of security from dealing with a large, established enterprise.
Independent Used Car Dealers
Locally owned independent used-car dealers are smaller businesses that buy and sell used cars, with much of their inventory typically coming from wholesale auto auctions. They’ll usually have less overhead than new car franchises, and most don’t have service departments.
While many independent used car dealers have been around for a long time and have solid reputations, you should always check with your local consumer advocates to learn more about the business before you buy from them. Though they’re not always 100 percent accurate, reviews on sites such as Yelp.com can illuminate issues with companies.
Buy Here Pay Here Dealers
A subset of smaller used car dealers are called “buy here pay here” dealerships. You get your financing directly from the dealer and have to make your payments at their location. Often the dealerships of last resort for used car buyers with bad credit, buy here pay here dealers frequently charge several times the rate of interest that a buyer with good credit qualifies for.
Some buy here pay here businesses make more money off the financing of the vehicle than the purchase price and have reputations for aggressively pursuing payment or repossession if you are even a day late with your payments.
Most consumer advocates recommend avoiding these types of dealers at all costs. If your credit situation is so weak that you have no other car-buying alternative to this type of dealership, you likely should not be trying to buy a car.
Buying a used car from an individual or business that is not in the business of selling cars is called a private-party sale. Because the transaction is performed without the overhead of a dealership, a private-party sale offers sellers the best chance to get the most money out of their vehicle, while giving the buyer an excellent opportunity to get a better price than they would at a dealership.
The money savings doesn’t come without a bit of work, however. You’ll have to do all of the sales, title, registration, and other DMV paperwork yourself. It is rare that a private-party sale will be anything other than an as-is transaction, with no recourse if the car breaks down even five minutes after you buy it.
Private-party sales are generally unregulated, meaning the consumer protection laws that you enjoy when buying from a licensed car dealer don’t apply to the transaction. Many private-party sellers will have emotional attachments to the cars that they are selling, and they'll price them high. You'll need to be a disciplined negotiator to bring them down to the price you want to pay.
Be cautious of illegally operating, unlicensed dealers trying to act as private-party sellers. These “curbstoners” may have several vehicles available at once, won’t be able to talk about the history of the car with authority, or may seem too knowledgeable about car sales. A quick internet search of the seller’s phone number or email address that shows multiple cars for sale is an easy way to identify an illegal car dealer. If you see several listings with the photos taken in the same place, it’s also a tipoff. Likewise, if the seller answers the phone with “which car are you calling about?” it’s another indication of a curbstoner.
When you have finished doing the research about the kind of vehicle you want and its financing, it’s finally time to start looking at specific cars. You’ll want to find out everything you can about a car’s history, take a thorough test drive, and get an inspection to make sure that it is mechanically sound.
Getting a Vehicle History Report
Before you consider buying a used car, you'll want to obtain and study its vehicle history report from a company like Carfax or AutoCheck. Some dealers will show you the reports for free, but if you order them yourself, pricing starts at about $25 for a single report. Both firms offer discounts for multiple reports, and it’s a good idea to take advantage of that plan if you’re looking at several vehicles.
You’ll need to get the vehicle identification number (VIN) from the seller so that you can run the report.
What does a vehicle history report tell you? Quite a lot, actually. It can raise red flags that will save you the time and trouble of test driving and further inspecting any vehicles on your shopping list.
Accidents: A vehicle history report will show any major reported accidents that the vehicle has been in, using data from DMVs, insurance companies, police agencies, and others. In many cases, the deployment of airbags and any significant structural damage will be noted. Not every accident will be shown by a vehicle history report, so it does not preclude a later inspection of the vehicle.
Just because a vehicle has been in an accident, you should not strike it from your shopping list. You’ll want to get any repairs thoroughly inspected, though, and use the fact that the car has been in an accident as a way to negotiate a significant price reduction.
Other Damage: A comprehensive report will also list fire or flood damage. Either should disqualify a vehicle from further consideration as they can lead to hidden damage that makes the car unsafe or unreliable.
If the vehicle was stolen and recovered, it should be noted on the report. If a long time passed between the theft and the vehicle recovery, you probably want to take the car off your consideration list.
Title Status: If there are any issues with a vehicle’s title, it will be shown on the Carfax or AutoCheck report. Pay particular attention to titles that have been moved from state to state or are “branded.” Common title brands include salvage, junk, rebuilt, police use, taxi use, hail damage, fire damage, flood damage, and lemon law buyback. Any branded title is a red flag, and you should walk away from the deal, demand huge price concessions, or trigger a comprehensive inspection for damage.
In some cases, moving a car from state to state allows people to “wash” title brands off the document.
Ownership: The report will also show the vehicle's ownership history. If the seller tells you it is priced high because it was a one-owner car, but the report shows that it had several owners, it should give you pause. One-owner vehicles are typically more valuable than those that have had several owners.
The ownership section should also note any auto loan liens on the vehicle. Never buy a car until you see documented proof that the liens have been satisfied.
Odometer Readings: In most states, each registration renewal or vehicle inspection requires that its mileage be recorded. These mileage milestones are shown on the vehicle history report and should coincide with the mileage reading on the car's odometer. If it varies greatly, the seller will need to have a good explanation, or you should walk away from the deal.
Service History: Most vehicle history reports will at least show you some of the vehicle’s maintenance records. You should also request copies of any maintenance documentation from the seller. If you don’t get it, have the mechanic that does your pre-purchase inspection look closely at the car’s wear items to see if any maintenance has been performed.
Sales Information: This section of the vehicle history report will show the car's original in-service date and any changes in ownership through the years. Look out for vehicles that have been moved repeatedly around the country or were located in states that have endured floods, hurricanes, or other natural disasters. Moving a car around is a method of masking title issues. Transporting a car from a state that has endured flooding or other disasters to one that has not is a way to hide flood or other significant damage.
Registration and Inspection Information: Each time a vehicle's registration is renewed, the car is inspected, or is registered in a new state, it should be noted in the report. Again, watch out for vehicles that have bounced all over the country. If you see any gaps in the registration, it could be a sign that the car was stolen, took a long time to rebuild, or was abandoned for some time.
Recalls: Any required recalls should be shown on the report, though a better place to find out about recalls is by entering the car’s VIN into the National Highway Traffic Safety Administration’s Safety Issues and Recalls page. Buying a car with open recalls isn’t a bad thing, as long as you get them addressed as soon as possible after your purchase.
What a Vehicle History Report Doesn’t Show: Vehicle history reports aren't perfect. They may miss very recent information or damage that was repaired at a shop that did not report the incident. A report will not show you who owned the car, as that information usually is protected by state privacy laws. The report does not preclude the need for a detailed pre-purchase inspection.
When you go to check out a used car that you are considering, your first impressions can tell you if it’s worth exploring further or running away. If you’re buying from a private owner, you’ll want to treat it like a blind date and meet with the seller somewhere public and not at your own home.
When you’re evaluating a used car, you’ll use all of your senses – except taste, because that would be gross – plus your sense of intuition if something doesn’t seem right.
Try to arrive early so that you can see the car drive up. Is it making horrible noises or leaving a plume of smoke behind it? Walk around the car, looking for damage, worn or non-matching tires, and broken glass. If you see anything at this point that takes the vehicle out of consideration, it’s a good time to walk away so that you don’t waste your time or the seller’s time.
Look at the paint. Is it in good shape and does the color and gloss match from panel to panel? If not, it could be the sign of repaired collision damage. Examine the lights. Are any broken or full of water? Glance under the car to see if anything is hanging loose or if there are major leaks.
Next, explore the interior of the car, again using all of your senses. A bad smell could mean mold or flood damage. Assess how clean the car is. If the seller didn’t bother to prepare the car for sale, they might have skimped on maintenance through the vehicle’s life as well.
If your kids are still in child seats or you have items such as dog crates that you plan to carry in the car, bring those items along so that you can ensure they fit.
Learning From a Test Drive
Test driving a pre-owned vehicle is one of the essential steps in the car-buying process. If you do it right, it’s far more than simply hopping in and taking a spin around the block. You’ll want to not only assess the used car’s condition, but also how it meets your needs, and (literally) how it fits.
Before You Move
A good test drive starts by getting yourself comfortable in the car and making sure that you can reach the pedals, easily adjust controls, and you don't feel cramped. You also want to be able to see what you need to view from the driver's seat. If the car doesn't fit today, it probably won't fit any better after you've paid for it.
Start the car and try out every system. Evaluate the air conditioning and check out each of the fan’s speeds, even if it’s 20 degrees outside. Turn on the car’s interior lights. If you see them pulsing, that’s often a sign of electrical issues. Check the power door locks, every window, and the audio system. Can you hear the speakers crack if you turn up the volume? Next, turn on the emergency flashers, headlights, fog lights, and high beams. Get out of the car and walk around to ensure that they are all working. Remember, every blemish or defect you see is something that you’ll want to have fixed or bring up to negotiate a reduction in the price. You may also want to budget to repair it yourself if you buy the car.
Don’t test drive the car if you see any major safety issues, such as tires worn to the cords, broken windshield wipers, or burned out headlights if you’re test driving in the evening. Not only might you get a ticket as the driver of the car, but you may be held responsible if you get in an accident caused by one of those issues.
It's important to remember that a test drive is an excellent opportunity to learn valuable information about the vehicle, not a chance to demonstrate your NASCAR wannabe driving skills. Any reputable dealer will immediately stop the test drive and invite you to leave. Do it in an unfamiliar private owner used car, and you’ll probably be held financially responsible for any damage you cause.
Before you start moving, turn off the stereo and turn the HVAC fan to its lowest setting so you can hear what’s going on around you. You’ll want to be able to listen for strange engine and transmission sounds and even wind noises from windows or the sunroof that could indicate a potential water leak.
As you drive, is the ride smooth, composed, and as comfortable as you want it to be? Your expectations should be tempered by the kind of car that you're testing. For example, you shouldn't expect a silky-smooth ride from an off-road SUV or a high-performance sports car. While most dealers will have preset drive routes, you really want to try to drive on the types of roads you typically drive on. If you can, pull into a parking lot so you can evaluate the vehicle's maneuverability and visibility as you pull into and out of a parking space.
Drive the car as you normally would. Test the brakes in stop-and-go traffic, and make sure the steering and acceleration are to your liking. Do the brakes cause the vehicle to shudder or vibrate, does the transmission slip or jerk in and out of gear, or does the steering wail as you turn the wheel? Things that you feel in the driver’s seat frequently are coming from the rear of the vehicle, while things you feel from the steering wheel are usually coming from the front brakes, steering, or suspension. Watch the instrument panel for warning lights that blink on or other indicators that don’t come on when they should.
It’s important to remember that not every flaw should eliminate the vehicle from consideration, but each should be noted for further inspection by a mechanic and used as bargaining chips.
Get an Independent Mechanical Inspection
While you might fall in love with a used vehicle after the test drive, there's one more step to take before you put an offer on the table. It is critical that you get the car checked out by an independent mechanic to ensure that it has no underlying mechanical issues. A pre-purchase inspection will cost you some money (often between $100 and $200), but it can save you the cost and heartache of buying a lemon. Some AAA-affiliated auto clubs offer comprehensive pre-purchase inspections at AAA-approved auto repair facilities for $89.95.
If a car seller resists your desire to have a car inspected, you should consider it a huge red flag and walk away from the deal. The only time that it is acceptable to skip the pre-purchase inspection is when you are buying a certified pre-owned car that has low mileage, is in good condition, and comes with bumper-to-bumper warranty coverage or a comprehensive service contract.
A qualified mechanic can identify issues that are not apparent to most consumers and give buyers an idea of how much they might cost to repair. Any proper inspection involves putting the car on a lift so the underside can be inspected for collision damage, leaks, and suspension issues. They'll also have access to databases that identify common problems with certain vehicles so they can examine those areas especially closely for any problems. If a car has not received adequate periodic maintenance, it will be apparent to a trained mechanic.
Assuming the mechanical inspection turns out OK, it’s time to negotiate a purchase price for the car and get the purchase paperwork in order.
Deciding on a Fair Price
Negotiating the right price for a used car takes finesse. One of the biggest lessons from this car buying guide is you want to remember that purchasing a car is a business transaction, which means emotions need to be kept in check. Though you may have fallen in love with a car, you’ll want to negotiate based on facts, not feelings.
Part of your research should include looking at what others are paying for similar cars to the one that you’re considering. Our used car reviews provide market price information for pre-owned vehicles dating back over a decade.
Your strategies will differ somewhat depending on whether you’re buying at a dealer or from a private seller. Dealer salespeople are trained professionals, and many of them are skilled at incrementally moving you toward the price that they want. A dealer will normally try to keep you focused on the monthly payment, and package the car’s price, financing, and your trade-in (if any) into one big deal.
As a buyer, you want to focus on the total cost of the car and its financing, not the monthly payment. Bringing your trade-in into the deal can create confusion, allowing the salesperson to mix the numbers up even more. They can, for example, make it look like you’re getting a great price on the car, when in fact they’re just low-balling the value of your trade-in. You can take your trade-in entirely out of the picture and potentially get for it by selling it yourself. Having a pre-approved financing deal can take yet another component out of the negotiation. That way, you can keep the deal focused on price.
Private sales are usually a bit more casual, but more emotion-laden as the seller probably has strong feelings for what the vehicle is worth and a target for what they “need” to get out of the car.
Ask the seller what they want for the car. That locks them into the most they can possibly charge for the vehicle. Of course, a dealer is entitled to a fair profit, and a private party should get a decent market price, so you don’t want to be a jerk and demand a number that’s not realistic for either.
Your counteroffer should be toward the low end of what others are paying and backed up with information about the car's condition and how much money you'll have to put into it for repairs. If the seller doesn't come down very far on price, make performing those repairs before you buy part of the deal. Be firm yet polite and unemotional.
Be prepared to take some time to come to an agreeable price, and don’t succumb to guilt about how much time the seller has put into trying to put an acceptable deal together. If you are pressured to make a quick decision, leave your contact information and walk away. In fact, walking away is the greatest power you have at any point in the car-buying process.
It’s never a good idea to try to bully a seller into the price you want to pay. More often than not, it will result in both parties walking away from the deal. It’s easier for a person to justify giving a horrible deal to a jerk than a buyer who is polite and professional.
Don't ever rely on a salesperson's math when it comes to evaluating an offer. Just bringing up the calculator app on your smartphone and punching in the numbers lets them know that you understand how the figures fit together, giving them less room to try and confuse you.
Signing the Papers
One of the last steps before you can take your new-to-you car home is signing the purchase paperwork. In the case of private sales, one of you will need to create a bill of sale that notes any special terms that are applied to the transaction. Generally, used car sales between individuals are as-is transactions. However, if you were able to negotiate some repairs into the deal, make sure that they are noted in writing on the bill of sale.
The specific registration paperwork that you need to complete for a private-party car sale differs by the state that the transaction is completed in. At the very least, you’ll need to get the vehicle’s title from the seller and transfer it to your name.
When you purchase a used car from a dealer, they’ll take care of all of the state-mandated paperwork – and charge you a documentation fee to do so. They’ll have a stack of documents for you to sign, and you’ll want to read each of them before you put your signature on the bottom line. Check the numbers to ensure that they match the deal you agreed to and never sign a document with errors or blank spaces.
Beware of Yo-Yo Financing
Sometimes a car dealer will let you take a used vehicle home before the financing deal is complete. What sometimes happens is called yo-yo or spot financing. After you have been enjoying your new-to-you car for a week or so, you'll get a call from the dealership saying that you did not qualify for the financing deal that the dealer thought you would. They'll request that you come back in to sign new papers for a different financing deal, often at much higher cost than the offer that you initially agreed to.
While sometimes it is true that they thought you would qualify for the original deal, other times an unscrupulous finance manager knows that you have no chance of getting that deal. Yo-yo financing is a way of getting you to fall in love with the car and think that you have no choice other than to take the new deal, even if you can’t afford it. Your best strategy in this situation is to contact your local bank or credit union to seek financing before you go back to the dealer. If you cannot get financing that you can afford, return the car to the dealer and walk away.
If you follow the steps in this used car buying guide, you should not be a position to get trapped in a yo-yo deal. You can avoid any chance of it happening to you by having your own financing in place before heading to the dealer and paying close attention to the final paperwork to ensure that the financing is complete before you drive home. Watch for phrases in the paperwork such as “conditional," "conditional approval," or "conditional delivery," and never sign those documents.
You're almost ready to go, but there are a few more things to take care of with your used car purchase.
While you are still in the dealer’s finance office, you will almost certainly be offered an array of add-on products. These items range from extended warranties to insurance and different types of third-party protection packages. Before you purchase any of these items, it's essential that you look outside of the dealer to find out if you can get a better deal elsewhere.
While you can purchase an extended warranty from a car dealer, you can also buy one elsewhere. Check with your car insurance company, bank, credit union, or auto club to see if they offer third-party products with comparable coverage for a better price. Gap insurance can likewise be purchased from most car insurance companies or auto lenders.
The financing office at the dealership will likely tell you that add-ons will only add a few dollars to each monthly payment, and you have to accept them today so that they can be included with your car loan. First, do the math to find out the real cost of the product by multiplying the monthly add-on cost by the number of months in your loan. Second, avoid making any decision based on the idea that you have to make a choice immediately.
When you purchase a manufacturer-certified used car, it generally comes with additional warranty coverage beyond the vehicle's original coverage. Most other used cars are sold without warranties, so once the manufacturer’s original coverage ends, you’ll be on your own. While most consumer advocates urge caution when thinking about an extended warranty, if you do decide you need a service contract, it is critical that you shop around before buying one.
Getting the Right Car Insurance
You will need to purchase car insurance to protect your vehicle and your finances in case you get in an accident or the car is stolen. Some of the insurance coverage you will need is mandated by state law, while other coverages will likely be required by your auto lender.
Our guide to car insurance will help you navigate the world of auto coverage, from understanding how auto insurance works, to determining how much coverage you need, and finding out how to get discounts on coverage.
Owning a Used Car
Now that you have navigated this used car buying guide and put a new-to-you used car in your garage, you’ll want to properly maintain it and treat in a way that protects its value. The better you take care of it, the less depreciation it will endure and the higher its value will be when it’s time to get your next great used car deal.
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More Shopping Tools From U.S. News & World Report
Getting into a new or new-to-you used car can be a lot of fun, but it can also be a lot of work. The experts at U.S. News Best Cars are here to guide you through the process of finding, buying, and caring for your dream car.
Our new car rankings and used car rankings are based on the consensus opinions of the country's premier automotive journalists blended with quantifiable data on safety and predicted reliability. Our used car rankings add information about cost of ownership to ensure you get a car, truck, minivan, or SUV that's affordable for the long haul. We don't accept expensive gifts or travel from automakers, so you can be assured of our impartiality.
Not only will we help you find the right car, but we'll also help you find a great price. We track the most affordable automaker incentives on our new car deals page, our used car deals article, and lease offers page. The U.S. News Best Price Program connects purchase and lease customers with local dealers offering guaranteed savings. New car buyers save an average of more than $3,000 when they take advantage of the program.
In addition to savings off MSRP, getting the best interest rate on your car loan can save you thousands as well. Compare rates from up to four lenders with MyAutoloan to get the best deal.
Our consumer advice helps take the mystery out of car buying and leasing. We’ll help you decide whether to buy or lease, walk you through the ins and out of how to buy a car, teach you how leasing works, and explain the car financing process. Our car insurance advice shows you the coverages you need and how to find insurance discounts when it comes time to buy it.