How to Buy a Used Car

Finding the perfect used car is a little like a scavenger hunt. You know a great deal is out there but searching for it may seem a little daunting, especially in this car-buying environment. Luckily, you’re not alone. We are here to give you all the clues you need on the path to finding your perfect vehicle.

Keep in mind that purchasing a used car is different than a new car, and there are plenty of incentives to buying used: it can save you money on car insurance, registration, taxes, and depreciation. Additionally, it may make sense to purchase used today because cars have never been more reliable. In fact, it’s not unusual for some vehicles to be trouble-free for well over 100,000 miles. However, it’s essential to do your due diligence before purchasing a used vehicle. This guide will take you through the 8 steps to finding the right used car for you. So, buckle up! 

1. Determine your budget.

As with shopping for a new vehicle, the first step in buying a used car is to determine how much you can afford. There are 2 ways to purchase a used car – cash or loan. If you anticipate that you will take out a loan to purchase your used car, it’s smart to get preapproved for a car loan because it simplifies the buying process.

Once you determine how you’re going to pay for the car, it’s crucial to set a budget. A good rule of thumb is to spend no more than 20% of your monthly household income on a vehicle. Keep in mind, that buying a used car costs more than just the price of the vehicle – you will also be on the hook for gas, insurance, maintenance, taxes & titles, and other items, so it’s important to estimate those costs and include them in your overall budget. 

Finally, you also want to consider if you’re planning to sell or trade in your current car. If you are, it is important to research the trade-in value of your car so that you can negotiate the highest possible price for it. Kelley Blue Book is a great resource for finding the trade-in value of your vehicle. 

2. Research dependable used cars in your budget.

Now that you’ve established how much car you can afford and how you plan to purchase it, it’s time to find the right vehicle for you (or maybe even a narrowed-down list of options). There are hundreds of cars to choose from, so it may be beneficial to first make a list of features that are most important to you, including size, performance, gas mileage, cargo space, and safety ratings. In addition to these features, also keep in mind ownership costs like maintenance and insurance – if keeping these costs low is important to you, research cars that are cheaper to maintain and insure.  

Once you have a list of non-negotiables, it’s time to search for makes and models that have the features you’re looking for. You can do this by using tools like Kelley Blue Book’s comparison tool or the Car Finder on Edmunds.com. 

3. Locate used cars that meet your criteria.

Lucky for you, there are many places, including websites, to find used cars. Below you’ll find a list of some of the top places for researching and locating used cars in your area. Keep in mind that you may need to expand your location search to find something that meets your criteria. 

• Private Sellers. Be on the lookout in your local area for signs posted about vehicles for sale. Additionally, you may know someone who is selling a car. If you know and trust the person selling the vehicle, this may be a good place to start as it takes some of the uncertainty out of the process. 
• Craigslist. This is a good place to search for cheap used cars in your area. Typically, cars for sale on Craigslist have seen more wear and tear than used cars sold by car companies. It’s also important to be on the lookout for scams on Craigslist. 
• Carvana. Carvana is an online-only used car retailer that performs almost all the functions a physical dealer would offer, like buying and selling used cars, accepting trade-ins, and financing purchases. They sell a variety of cars, ranging from around $7,000 to $100,000, and they deliver your car right to your doorstep. If you’re not happy with your purchase, they offer a seven-day, money-back guarantee. 
• CarMax. CarMax is the nation’s largest used car retailer and has physical locations where you can test drive cars, make your purchase, and trade in or sell your current vehicle. One benefit of CarMax is that they have a “no-haggle pricing model”, which means the prices you see listed on the vehicles are the prices for which they sell – no negotiating allowed. They also offer warranties and financing. 
• Autotrader. On Autotrader, sellers pay to list their vehicles. Paid sites are better at keeping out scammers and usually provide mid-to-high-end cars. You can easily filter by year, make, model, price range, and features on their site. 
• Autolist. Autolist aggregates information from many different areas and websites to provide you with seamless access to a variety of used vehicles in your area. 

Another option you have when purchasing a used vehicle is to check out Certified Pre-Owned (CPO) cars from dealerships. A certified pre-owned car is one that has been vetted and deemed to be in better operating condition than its peers. These previously owned vehicles are usually less than 5 years old, have fewer than 60,000 miles, and are hand-picked by the original manufacturer for resell. CPOs are inspected and reconditioned to new-car levels according to the manufacturer’s standards. The CPO designation offers peace of mind — and a warranty backed by the automaker — but you’ll probably pay more for certified pre-owned cars than other used cars. 

4. Check vehicle history reports.

A vehicle history report tells you almost everything you need to know about a car’s past. Keep in mind the report doesn’t tell you the current mechanical condition of the car. However, since it tells you how it’s been treated, you get a pretty good idea of the current condition and the value of the car. All this information can give you a strong indication — without wasting time inspecting the car — whether you should consider test-driving it and ultimately making a purchase

Vehicle history reports include items like:

• Number of owners and usage. The vehicle history report will indicate how many times the car changed hands, if it was leased prior, and what the car was used for.
• Accidents. Most serious accidents are reported to insurance companies and will likely show up on the vehicle history report. Sometimes, minor accidents are also listed.
• Maintenance records. Sometimes vehicle history reports indicate when the car received routine maintenance and repairs, but typically these only show up if the maintenance was done by a car dealership rather than an independent mechanic.
• Recall information. If the manufacturer recalled the vehicle for any reason, this would show up on the vehicle history report. This information can also be checked for free on other sites.
• Salvage title. If a vehicle has been in a serious accident, fire, or flood and was “totaled” by the insurance company (declared a total loss), it still might be drivable. However, the insurance company will issue a “salvage title” to alert future buyers. In most cases, you want to steer clear of cars that have been issued a salvage title.
• Odometer rollbacks. Shady resellers might spin the odometer back (make it look like the vehicle has fewer miles than it does) to increase the vehicle's selling price. History reports alert you to this scam.

Vehicle history reports may cost you, but it’s worth it to have peace of mind that the vehicle you’re purchasing is reliable and safe. You can pay for robust reports from both Carfax and AutoCheck. Carfax costs $39.99 for a single report, or you can get an unlimited amount of reports for 60 days for $54.99. AutoCheck is $24.99 for one report, or you can pay $49.99 to view 25 reports for 3 weeks. In addition to these paid options, the National Insurance Crime Bureau offers some basic information about used cars, like salvage title and whether the car has been stolen (or involved in a crime) - but that’s likely not enough information to make your purchase a no-brainer. 

5. Contact the seller.

Once you find a good prospective car (or a few cars) listed for a fair price, contact the seller. This step is an excellent way to establish a relationship with the seller and verify the information about the car. You can ask private-party sellers why they're parting with a car or whether it has any mechanical problems. And if you're buying from a dealer, a phone call or text is the best way to ensure the car is still in stock.

Here are some additional questions to ask the seller prior to test-driving the vehicle:

• How many owners have there been for this vehicle?
• Do you have the service records? If so, can I see them?
• Do you have the title and is it clear? (A clear title shows there are no liens on the car.)
• How did you set the asking price?
• Can I have the car inspected by a mechanic?
• Is there any additional information I need to know about the vehicle that wasn’t listed?

Sometimes the seller will mention something that wasn't in the ad that might affect your decision to buy the car. But, if this discussion meets your expectations, you can set up an appointment to test-drive the car. If possible, make it for daylight hours so it's easier to see the car's condition.

6. Examine and test drive vehicles.

Now it’s time to get behind the wheel and test drive a few of the used cars you’ve found to see if they’re worth buying. If possible, you want to test drive all the cars you’re interested in purchasing back-to-back so the experiences will be fresh in your mind for comparison.

When looking at a used car, unless you're a mechanic, you can’t be expected to inspect the vehicle thoroughly; but you should give the car a pretty good initial inspection, both inside and out. If everything looks good, and the seller agrees, you may wish to splurge for a full inspection, which will cost you around $100.

Once you’re inside the vehicle, start the ignition. All the warning lights should turn on for a few seconds then go out. At the very least check for the four most important warning lights: engine, oil pressure, brakes, and airbags. If you don't see these lights go on, then off, you should get a full inspection. 

Be sure to drive on both city streets and the highway if possible, and never feel you need to rush the process. Also, even though you’re probably tempted to check out the sound system, keep this off while you’re driving to listen for any strange noises. Once the drive is over, blare the radio!

Here are a few things to keep in mind during the test drive:

• Comfort. Is the ride smooth or uncomfortable? How does the seat feel while driving? Are there any unusual bumps or jolts when you run over rough road?
• Noise. Do you hear any strange noises while you’re driving? Any rattles, squeaks, vibrations, or engine noises that could signal a problem?
• Power and Acceleration. How does the vehicle respond when you push the pedal to accelerate? Does it hesitate, lurch forward, or stall? Does the engine feel solid and smooth?
• Braking. Does the car come to a smooth stop when you apply the brakes? Do you feel any strange vibrations through the brake pedal?
• Handling. Does the vehicle seem easy to maneuver? Can you park it? What’s the turn radius like? What about blind spots?

Don’t hesitate to ask for more time behind the wheel. Spend some time with the vehicle while it’s parked to adjust mirrors, seats, and other controls to become well-acquainted with the car. Most importantly, don’t be afraid to ask too many questions and spend time learning about the vehicle. 

7. Negotiate the price.

If you’ve done your research and have a pretty good idea what the car is worth, the negotiation conversation will be a little less stressful. If you are the type of person who likes to barter, do so. But be respectful – no one wants a lowball offer. If you hate negotiating, you might be more comfortable buying from a dealer whose prices are generally set. Also, don’t be afraid to walk away from the deal. If you aren’t making progress toward a deal that you’re comfortable with, or you don’t like the way you’re being treated, just walk out. One more thing to keep in mind: If you are trading in your old car to the dealer, treat it as a separate transaction. This will eliminate any confusion and ensure you’re getting the best price for both vehicles. 

8. Close the deal.

You’ve negotiated the best price for the vehicle and now it’s time to sign on the dotted line! But before you do, make sure everything is in order with the purchase.

Here are a few things to remember when purchasing a used car: 

• Make sure you get a title and have the seller sign it correctly. When in doubt, check the state’s registry website for more information. Most states allow about 10 days to register the car in your name.
• If you're buying from a private seller, and there is still a loan on the car, call the lender to find out how to close the deal.
• If you’re buying from a dealer, even if you have a preapproved loan to pay for the car, the dealership’s finance manager will likely still offer to beat the terms of the loan. It doesn’t hurt to see if you can get a better interest rate – just make sure the loan fees and terms are identical.
• You are still on the hook for taxes, registration fees, and any documentation fees. Make sure to look over these line items on the overall contract. 

Before you sign on the dotted line, make sure to read the fine print. Examine any proposed fees and extended warranties the dealer will try to sell you. It’s not uncommon for the agreement to include hidden fees and unnecessary coverage, so make sure you know what’s in the contract before signing.