How To Buy A Used Car: A Step-By-Step Guide
Hanna Kielar6-Minute Read
UPDATED: December 12, 2022
Used cars are usually priced well under what you'd pay for a comparable new car, and that's why many budget-conscious consumers prefer pre-owned vehicles. Technically, a vehicle is considered used once it's been driven off the new car dealer lot, regardless of how many miles are on the odometer.
Our guide will break down the steps to buying a used car from both private sellers and dealerships. Learn what to look for in a car along with tips for buying a used car at a good price.
What To Look For When Buying A Used Car
Start by deciding what you can afford.
Then, narrow down which type of vehicle you're looking for, whether that's a sedan, SUV, minivan or pickup truck. You might opt to focus your car buying search on a specific brand or model, but keep in mind that being flexible on details like the color and trim can boost your negotiating power when buying from a dealership or private seller.
Step 1: Research The Vehicle’s History Online
Once you've decided what type of used vehicle you'd like to buy or take for a test drive, do some online research. A bit of time researching a few things can give you valuable insights into your prospective purchase and help you avoid buyer's regret.
A CARFAX report gives you valuable information about a vehicle's history, including the number of owners, accident data and how the vehicle was used.
Take the time to carefully review the CARFAX for any used vehicle that you're considering, and be sure to investigate further if the vehicle:
- Has been involved in one or more accidents
- Had an airbag, or airbags, deployed
- Was used as a taxi or as a police, commercial or rental vehicle
- Has had more than one prior owner
- Has an unusually low or excessively high odometer reading relative to the age of the vehicle
- Has been registered in more than one state
- Was bought back by a dealership under your state's "lemon laws."
You can also find similar information on AutoCheck, another web-based vehicle history database.
The last thing any car buyer wants is to purchase a stolen vehicle or one that's been written off due to an accident or flooding.
You can check the title status of any used vehicle by entering the Vehicle Identification Number (VIN) in the National Motor Vehicle Title Information System, a nationwide database maintained by the U.S. Department of Justice. Consumers are advised to steer clear of any used vehicle that's been deemed a total loss or has a salvage history because either designation could mean the vehicle is potentially unsafe.
Check For Recalls
The U.S. Department of Transportation notifies the public when there's a safety issue or recall on a vehicle. A VIN search on the NHTSA's website displays any outstanding safety recalls on the vehicle issued during the past 15 years, as well as information on vehicle safety recalls from all major auto companies that sell passenger vehicles in the United States.
Step 2: Be Prepared To Negotiate
Negotiation is part of the car buying process, and that's especially true when it comes to buying a used car. Research the current market value of your chosen vehicle before meeting with the used car salesperson or private seller.
Kelley Blue Book Value
The Kelley Blue Book, or KBB, is a century-old automotive pricing system that's widely used to set fair market value for used vehicles. It's important to know that the typical dealer asking price listed in the KBB assumes that the vehicle is in mint condition with a clear title.
In general, you should never pay the KBB value on a used vehicle, but this value can serve as a starting point when negotiating your purchase price.
The market value is what consumers are actually paying for a particular make and model, and it's always lower than the KBB value. You can research the market value by browsing used car listings in your area and tracking the asking prices.
Quality Of Miles
In general, low-mileage used cars that are still under warranty and are less than 2 years old tend to be priced within 20% – 30% of a comparable new car. That said, mileage is more than just a number.
While the KBB value report will factor in the number of miles on the odometer, only the seller can tell you exactly how the car was used. Highway miles will typically have less wear and tear on the car’s suspension, steering system and fuel economy. If the seller tells you that the car was mostly used in the city, you can leverage that information to bring down the asking price.
Step 3: Research Auto Financing Options
When it comes to buying a used car, paying cash is ideal. Many sellers prefer the ease of dealing with a cash buyer, so you can often negotiate a cash discount on the purchase price. That said, even a used car can be a major purchase that you may need to finance.
If you need to get a car loan to pay for your used vehicle, it's a good idea to get preapproved before meeting with the dealership or seller so you know exactly what your car-buying budget is.
Find a lender. While many automobile dealers work with a network of lenders, you can often secure a lower interest rate and better repayment terms by seeking a car loan through your current financial institution.
Get preapproved. Securing preapproval for your car loan can mean a single credit check and gives the seller confidence that you can afford the car payments.
Compare rates. The car loan with the lowest interest rate isn't always the best option. You might be better off paying a slightly higher interest rate in exchange for flexible repayment terms or a longer loan term that comes with lower monthly payments that won't over-stress your budget. It’s important to look for financing that fits your needs.
How To Buy A Used Car From A Dealer
Once you've researched what your ideal used car is worth and reviewed the vehicle history, it's time to view the car in person. Dealerships are one of the best places to buy a used car.
Test Drive The Car
Book a test drive during daylight hours, outside of rush hour. This gives you a chance to look the vehicle over for damage in natural lighting, and off-peak traffic means you can actually drive the vehicle rather than simply sitting in traffic.
Inspect The Interior And Exterior
Check over the interior and exterior for signs of damage or repairs. Look for any loose, missing or mismatched parts, as this could be a sign of problems.
For added peace of mind, consider buying a certified used car. Also known as certified pre-owned, this designation means that a used vehicle has been thoroughly inspected by the dealership and meets strict manufacturer's quality standards. Certified used vehicles are often sold with a limited warranty that covers major mechanical systems such as the engine and transmission.
Negotiate On A Price
If you've decided to pursue the purchase, negotiate the price with the dealership. Start by offering 10% less than the current market value, and if the salesperson won't budge on price, consider asking for an aftermarket warranty, free oil changes or other perks.
You'll also find a larger selection and lower prices on used cars during October, November and December, which can make this the best time to buy a car.
Make The Deal
Once you've agreed on the price and terms, it's time to finalize the deal. Take a look at your state's consumer protection office website to see what paperwork you need to buy a used car in your area.
How To Buy A Used Car From A Private Party
Buying a used car privately often involves more risk, but pricing is usually lower than what you find at a dealership.
Contact The Seller
Start by contacting the seller via phone, email or text messaging. Be sure to do so during reasonable hours, and don't make an offer without seeing the vehicle.
Discuss Financing Options
If the used car has a lien in place, be sure to discuss financing options upfront. In some cases, you may be able to assume the loan payments, but you'll need to be approved by the lender.
Meet In A Neutral Setting
One of the often-overlooked tips for buying a used car involves personal safety. When you're meeting a private seller for a test drive, aim to:
- Meet in a public place. Arrange to meet the seller in a neutral, public place such as a shopping mall parking lot during daytime hours.
- Bring a friend or family member along. At the very least, tell someone you trust the name of the seller and the meeting location.
- Install and activate a GPS-tracking app on your phone. Share your location with someone you trust.
- Record the seller’s identity. Snap a photo of the seller's driver's license and the plate on the vehicle.
Expect More Room For Negotiations
When buying a used car privately, the seller doesn't have the same overhead costs as a dealership. This means there's more room to negotiate everything from title transfer fees to vehicle accessories.
Sign The Correct Paperwork
As with purchasing from a dealership, be sure to check with your state regulator to find out what paperwork needs to be signed by both the used car buyer and the seller. Always get a copy of the seller's driver's license to protect yourself against fraud.
The Bottom Line
Understanding the steps to buying a used car can help you make the most of your budget. Remember to take your time, do your research and be safe when meeting with sellers. Now that you understand the general car-buying process, make sure you take a look at our comprehensive list of tips for every car buyer.
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