How to Buy a Used Car
|How this Guide is Organized|
|1. Finding the Right Used Car|
|2. Used Car Budgets|
|3. Certified Pre-Owned Cars vs. Used Cars|
|4. Finding the Right Used Car Seller|
|5. Inspecting a Used Car|
|6. Get Used Car Financing|
|7. Used Car Warranties|
There’s an easy way to save thousands of dollars when you buy a car. By choosing a used vehicle instead of a new one, you’ll let someone else absorb the steep depreciation that new cars suffer the moment they drive off the dealer lot. If the new car smell isn’t something that you need in your life, read on to learn how to buy a used car.
Of course, buying a used car isn’t without risk. You won’t have the new car warranty, and most used cars are sold “as is” with no guarantee of their condition. If you don’t do your homework, your used dream car can become an expensive nightmare. Many new car buyers don’t buy used cars because they say that “you’re just buying someone else’s problems.” But if you do your research, you can minimize the risk of making a costly error and laugh all the way to the bank.
The changing automotive market is providing new opportunities for used car buyers to find gently used vehicles with factory warranty coverage. Increases in the pace of new car leasing have provided a steady stream of relatively young, well-cared-for cars coming into the used market when the leases expire. Many of the off-lease cars receive thorough dealer inspections and a used car warranty as part of manufacturer certified used car programs. You can learn more below.
Unlike new cars that have to be purchased through franchised new car dealers, buyers of used cars have a variety of options. They can buy from new car dealers, independent used car dealers, or private parties.
Fortunately, you don’t have to drive from dealer to dealer, as most used cars are listed online. U.S. News & World Report’s Best Cars site has more than one million used car listings.
With so many choices, making a decision can be daunting. You’ll want to have a good idea of what you want, what you need, and how much you can afford. Think about your lifestyle – how many people do you carry, how do you spend your weekends, where do you park? Do you need all-wheel drive for inclement weather? Does high fuel mileage or safety top your wish list?
Also consider what options you want or need. Buying a used car is a great way to get high-end options, such as navigation systems, as they don’t add nearly as much to the cost of a used car as they do to new cars.
As you might expect, the older the car is and the higher its mileage, the less expensive it will be to buy. But the downside is that the wear and tear that it has suffered through those years and miles will lead to more repairs. You’ll want to find a balance between the initial cost and your appetite for the uncertainty of those maintenance costs. A great deal isn’t a great deal if it leaves you stranded on the side of the road, unable to get to work. You can compare the costs of repairing different used vehicles by using the Repairs tab on each model’s used car review page. Our used car reviews also include reliability scores from J.D. Power.
On the flip side, a younger, lower-mileage model that is highly rated might not save you much money compared to buying a new car. Cars depreciate at different rates, and finding the sweet spot on that depreciation curve involves some research, using resources like our used car inventory pages and the pricing section of our used car reviews.
If you are planning to take a loan out to finance your new car purchase, you’ll want to get pre-approved by a credit union, bank, or finance company before you start shopping. A dealer might be able to beat your pre-approved deal, but unless you can show that you’ve done your research, they’ll have not incentive to do so. Our financing page is a great place to start researching loans.
Certified Pre-Owned cars are typically young, low-mileage used cars that are available from franchised new car dealers. Often they are lease returns, cars that have been used as loaners for service customers, or cars that have been driven by the dealership or manufacturer staff.
The CPO vehicles are inspected by the dealer and are frequently sold with warranty coverage from the manufacturer. Unlike most pre-owned vehicles, there are occasional special used car financing deals available on certified cars.
Buying a certified used car is like blending the new and used car purchase experiences. You’ll pay more for a CPO car than a non-certified car, but you’ll generally get a warranty that can make your total cost of ownership more predictable. Check out our roundup of CPO programs to learn more.
Unlike new cars that have to be sold by franchised new car dealers, just about anyone who has a used car can sell a used car. You can buy from dealers or private party sellers.
If you’re wary of the process, it’s probably best to work with a reputable dealer. You’ll pay more, as you have to pay the salesperson’s commission, plus a portion of the dealership’s overhead, but a dealer will likely take care of all the paperwork and either register the car for you or provide a temporary registration. Dealers are also subject to a range of state and federal consumer protection rules that don’t apply to private party sellers.
Since selling cars is what dealers do all day long, they’re probably more familiar with the taxes you might have to pay, as well as any other requirements, like emissions testing, that you are subject to.
You don’t have to pay for any of the overhead costs when you buy from a private seller, but the transaction has a bit more risk. While the price should be cheaper from a private party, they will often have an emotional attachment and think that the car is worth more than it is. You’ll have to be a good negotiator, or have the courage to just walk away if the deal doesn’t feel right.
With a private party sale, you will be responsible for doing the proper DMV paperwork to complete the deal. Some consumer advocates suggest meeting the seller at the DMV and completing the paperwork with the guidance of their staff.
Unlike most dealers, private sellers aren’t rated by the Better Business Bureau, so you can’t evaluate their honesty before you hand over your money, and you’ll likely have little recourse if something goes wrong with the transaction. While the majority are just folks trying to sell their cars, you’ll want to protect yourself from used car scams by arming yourself with information.
Naturally, sellers of used cars want to get the most money they can, just as you want to pay as little as you can. You’ll want to look at the used values available from our site or other online resources, and be prepared to hold your ground if you don’t think the price is right. Don’t agree to any proposal until you see it in writing.
Be especially careful of buy here, pay here used car dealers. They make most of their money financing used car purchases, and the loans they make generally don’t have consumer-friendly terms.
Used cars come with histories. Some have been driven by the proverbial grandma to church on Sundays, but others may have lived a harder life. It’s up to you to find out as much as you can about any used car you are considering, otherwise you might be buying someone else’s problems.
You should request all of the documents that the seller has to prove that the car was maintained properly, and then you should enter the vehicle identification number into the National Highway Traffic Safety Administration’s Safercar.gov website to find out if there are any safety-related recalls on the vehicle. If there are, you’ll want proof from the seller that the recall issues were taken care of.
To get an idea if the car has ever been involved in a serious accident, buyers can use services such as Carfax. The reports cost about $40, but that is cheap insurance to help you avoid a major financial mistake. A Carfax report can also let you know if the car has a clear title, if the mileage on the odometer is accurate, what repairs and maintenance have been done, and how many owners the car has had.
Even after you’ve done all this research, it is still necessary to take the car on a test drive and have it thoroughly inspected by a qualified, independent mechanic. Not all problems show up on a vehicle history report, and damage may be so recent that it hasn’t yet made it onto the report. Sellers might try to convince you that you don’t need to take it to be inspected, but you should do so even with a certified used car. If a seller refuses to allow you to get an inspection, run, don’t walk away from the deal.
There are lots of ways to avoid buying a lemon, but common sense is a good guide. You don’t have to be an expert to see paint that doesn’t match, or get a whiff of mold in a flood-damaged car. Bottom line: If it doesn’t sound, look, or feel right, it is time to look for another deal.
Most buyers put off finding financing until the end of the process, and it is simply not as much fun as searching for car. However, finding financing should be one of your first car-buying steps, so you don’t waste time checking out cars that you can’t afford.
It is a good idea to learn the terminology that the lender will be using before you apply for a loan.
Go online and apply for a used car loan at several banks, credit unions, and other lenders to see who will give you the best deal. The car dealer may end up beating your pre-approved financing, but without the competition, there would be no reason for a dealer to offer you a better financing deal. Our car financing page is a great place to start researching and applying for loans.
Expect to pay a higher interest rate for a shorter period of time on a used car loan compared to a new car loan. Used car lending is inherently more risky for the lender – the value of the collateral (your used car) is harder to predict, especially as cars get older. While you can get used car financing deals on certified used cars, you generally won’t find them on others.
One of the benefits of buying a certified used car is that you will usually get a warranty that is either the balance of the one that was included with the car when it was new, or an extension in terms of miles or months.
If you’re buying at a dealer, you will almost always be offered an extended warranty. Even if you buy from a private party, you can still buy an extended warranty.
Should you? Most consumer advocates will tell you no. First, extended warranties, especially those sold by dealers, are very expensive, with prices ranging to several thousand dollars. It’s better to stash that money away in the bank where it can be used for a variety of financial emergencies. Some third-party extended warranty companies are very restrictive as to what they cover, some have a reputation for battling with consumers to not pay what seem to be legitimate claims, and many have gone out of business after taking consumers’ money.
If you choose to buy an extended warranty after all, check with your lender or auto insurance company. They will almost certainly offer a better price than a car dealer. Read through the documentation thoroughly to make sure you know what the agreement does and does not cover.
You’re almost done. The last steps that you’ll need to finish before you hit the road are ensuring that the vehicle is properly registered and insured. In some states, you’ll need to get the vehicle inspected, get its emissions checked, and/or get its mileage verified before you can register it. Take your bill of sale, loan documents, the car’s title, proof of address (such as a utility bill), and at least one form of government-issued ID with you when you go to the DMV.
Now you get to show off to your friends. Be kind to the ones who bought new cars; they have no idea how much money you saved by buying the right used car.