A Complete Guide on How to Buy a Used Car
- by: Patrick Peterson
- August 27, 2019
If you are in the market for a new car, consider buying used. Used cars are generally less expensive than new vehicles, and if you buy used, you afford a nicer, more luxurious vehicle with better features for less money than if you purchased a new car. Buying a used car can be fun or stressful. With careful planning, it can be a great experience where you walk away feeling good about your purchase and confident that you got a great deal. We have created this guide with you in mind to help you buy your next used car quickly and efficiently while covering all the bases.
Set Your Financial Limits
Before you even start looking at vehicles, you should decide on your price point. Regardless if you are financing the car or paying cash, set your financial limits now so there won’t be any surprises or upset later. Knowing exactly how much you can afford will help limit the choices and make the process easier.
Although a used car may be cheaper to purchase, there are other costs like insurance, registration, and maintenance that you also need to consider before buying.
When financing a car, make sure to use the rule of thumb in that your car payment won’t exceed 20% of your net earnings for the month.
Build a Target List of Used Cars
If you haven’t already, go online and check out AutoDetective’s vehicle directory to check for recalls, get the specifications on models that you are interested in, look at the photos, and see additional information. You can start by making a complete list of the vehicles you might like to target then do more research from there. Another excellent resource is AutoDetective’s “Compare Cars” tool that you can use to shortlist vehicles by comparing the price, specs, features, gas mileage, and look for any recalls or inherent flaws. You might also consider checking into Certified Pre-Owned (CPO) vehicles where the dealer or manufacturer restores a used car to fix it up like new. It’s always a good idea to check the reviews on CPO cars before putting them on the list.
What’s the Right Used Car for You?
When thinking about the right car for you, examine your lifestyle. Although that sexy red convertible might be tempting, if you are a mother with kids always driving them back and forth between school and activities, the convertible might not be the best choice. Other things to think about are gas mileage, hauling capacity, and two-door, or four-door models.
The best way to determine the right car for you is to make a list of the features most important to you. Is your number one priority safety, or gas mileage? If you want a car that saves on emissions and is better for the environment, put that down on your list. This list of necessary features will help you narrow down the choices.
What's the Best Place to Buy Used Cars?
Websites like Edmunds and Craigslist can help you find used cars in your local area.
By now, you have made a list of the cars you are interested in and done your homework to find out which ones have the features you want. You know which makes and models are in your price range and hold good resale value along with offering low annual maintenance costs, now it’s time to start shopping!
Where to Look for Used Cars
When buying a used car there are two options, you can buy from a dealer, or you can purchase the vehicle from a private individual. There are pros and cons to each, so evaluate your specific situation and match it up with what works best for you.
Dealer or Private?
The choice to buy from a dealership or a private seller is a personal one. When purchasing from a dealer the price might be higher, but they sometimes offer limited warranties or throw in some extras like free floor mats or other incentives to get you to buy. A private sale might be cheaper but a little riskier. You may not have as much recourse if something goes wrong with the deal after you have handed over your hard-earned cash for a lemon car.
Dealers are subject to strict laws even with used cars, but private sellers are less liable with the sale of personal items. These are things to consider when making your choice of where to buy.
Buying a Used Car from a Dealer
When buying from a used car dealer, it’s always a good idea to check them out first using the Better Business Bureau and online reviews. Know exactly who you are dealing with before you step on the lot.
You may not pay the lowest price with a dealer because they have overhead costs like sales commissions, paperwork fees, and other dues. However, if you don’t have the best credit and you don’t have any cash to buy a car, sometimes dealers offer to finance high-risk buyers. Understand that your interest rate may be very high, but you also may drive away in a used car. Consumer protection laws also protect you if something goes wrong.
Buying a Used Car from a Private Seller
Generally, you’ll get the best deal buying from a private seller. However, you won’t have the BBB or online reviews to rely on when considering their reliability and honesty. You and the seller will have to handle all the paperwork yourselves, so a bit more work is involved, but in the end, it might benefit you both.
Unfortunately, private sales are unregulated, so if anything goes wrong, your options will be limited. Always watch out for scams when dealing with private sellers and don’t be afraid to negotiate the best deal possible. You have nothing to lose.
When you sit down to determine the exact cost of the car, you should think about these questions:
● What is the bottom-line purchase price?
● Will the car need any immediate maintenance items like tires or new breaks?
● How much will it cost to register and insure?
These are some immediate out-of-pocket expenses you need to cover when buying the vehicle. There will also be ongoing, regular costs that you need to factor in.
If you live in a state that has a sales tax, when you go to register the vehicle, you will also need to pay that amount. It’s a good idea to call your DMV and find out exactly how much you need to bring.
Now is a good time to call your insurance agent and ask how much it will cost to insure your used vehicle. Your agent should be able to give you a quote right over the phone and set it all up quickly before you pick up the car.
You can check the fuel efficiency of your chosen model online, but this will factor in as a regular expense. If you are stopping at the gas pumps all the time, then the cost of owning this car just went up.
The older the car is, the more maintenance it will need. You should always set aside a few hundred dollars of emergency money in case your car fails the inspection, and you need to replace the tires or some other safety feature.
Check the Vehicle History Report
Checking the vehicle’s history report will give you a much better sense of security when buying a used car regardless of whether you purchase from a dealer or a private citizen. There are dozens of great websites where you can enter in a VIN and get the whole story before putting down your cold, hard cash.
What is a VIN Check and How do I Get One?
A VIN is like a car’s social security number. Every vehicle has a unique identifier, which is its serial number called a VIN. Using this VIN, you can request a complete VIN Check that will show you if the car has been in any accidents, has any damage due to flood or fire, list all the owners and maintenance records.
Be sure that the VIN given to you matches up with the vehicle it is supposed to. You can check that by visiting the National Highway Traffic Safety Administration (NHTSA) website and using their VIN decoder feature. If the car make and model do not match what the NHTSA says, walk away from the deal.
Contact the Seller
Before rushing off to see the car, first take a few minutes to contact the seller and ask a few questions. If you are calling a dealership, they can tell you if the car is still available. Plus, when dealing with a private seller, you can get a feel for them over the phone before taking things further.
Some important questions to ask the seller before proceeding are:
● Are you the first owner of the car?
● Can I see your maintenance records, do you have them all?
● Do you have the title and is the car paid off?
● How did you come up with the selling price?
● What else can you tell me about the vehicle?
● May I have the car inspected by my mechanic?
The impression of the Seller
First impressions are often a good indicator of how things will go. If you get a good feeling right off, then go with your gut. If the person acts nervous or answers to your questions are vague or seem inconsistent, perhaps do a bit more research or find another seller.
Test-Drive the Car
Once you get through the initial questions and feel comfortable enough to proceed, it’s time to test drive the car. A test drive allows you to get a sense for how the car feels and operates.
How Do You Perform a Proper Test Drive?
To perform a proper test, you will want to test the car thoroughly. To be sure your test is efficient, turn off the radio and any other distractions so you can focus.
Here are some things to check:
● Visibility: Does the car have good visibility, and are there any blind spots? Some vehicles have narrow windshields making it harder to see specific areas.
● Breaks: How do the brakes respond? Are they stiff and solid or mushy?
● Comfort: How comfortable is the interior? Can you reach everything sufficiently?
● Mechanics: Do you hear any strange sounds, any rattling or scraping sounds? Is anything inside that is visibly broken?
● Steering and Acceleration: Does the car have good pick-up when you step on the gas? Is the steering stiff or smooth? Does the car corner well?
These are just a few of the things to look for. Have your mechanic do a thorough inspection and bring along a friend for a second pair of eyes.
Vehicle scams may be perpetrated by both fraudulent dealers and also private sellers. Always be on the lookout for anything that sounds “too good to be true.”
Some of the Most Common Scams
Below are some of the most common used car scams and how to be aware of them before you are duped.
Often scammers will lure buyers in with fake pictures and descriptions of a used car that is priced well below fair market and then ask you to deposit your funds into an escrow account or wire transfer it to them. Never fall for this money transfer scam. Only pay in person with traceable funds (like a bank check) that you control.
Payment to Someone That You Know
In some cases, scammers may be working with someone you know; albeit not well. They will request that you pay the deposit to this person. Then you will never hear from them or the seller again. Always control the money in a used car sale. Be sure to use traceable funds which you can fall back on if anything goes wrong. Also, get a receipt showing you paid on an exact date and how much.
When buying a car if the seller wants all kinds of personal information like your name, address, social security number, mother’s maiden name or anything else like that, this is a tip-off that it is a scam. They may falsely claim that they are confirming your identity when, in fact, they are stealing it. Chances are there isn’t even a car to sell; it’s only a ploy to get your personal details.
Often people get deals in the mail about used cars or notices that a warranty is about to expire on your vehicle, and you must pay a certain amount quickly. Anything unsolicited is probably not a legitimate transaction.
If you receive a call from a car selling hotline or any person wanting to “offer you a good deal” or saying that “you have been selected” for this great deal, these are scams. Just hang up the phone. It’s always better to deal with local dealers or private sellers that you can check out thoroughly.
Have the Car Inspected
If you can, always have a licensed mechanic check the vehicle thoroughly before you buy it. They might charge you a small fee, but it will be worth it and can save you thousands of dollars and the headache of buying a lemon.
Have your mechanic check for any rust, damage, or other external flaws that may affect your buying decision. They should also spend some time looking under the hood for any hidden electrical or mechanical issues.
A mechanic is well trained to spot issues with a car and may see something about the internal condition of the car that you missed.
Get a Smog Test from the Seller (if required by your state)
If your state requires a smog test, be sure to ask to see the seller’s emissions test paperwork to make sure it will pass inspection, and you will be able to register it successfully.
Negotiate a Good Deal
All the hard stuff is done; you are ready to buy. Now is the time to negotiate a good deal. If you have done your homework, you know what the car is worth, and you can offer a fair price.
Get the Paperwork Done
If you are dealing with a private sale, you can print the necessary forms online to use for the purchase. The more paperwork you get filled out ahead of time will make the final transaction smoother.
Finalize the Used Car Sale
Meet with the seller to go over any last-minute items. If a dealer promised some extras, make sure they are included. Both of you will need to sign all the completed paperwork and exchange information.
Make sure the Registration is Current
Dealers will provide you with a temporary registration to give you time to get the car registered in your town. If dealing with a private seller, make sure the registration is current, so you don’t get pulled over by police driving the car home.
Ask for a Bill of Sale (if required in your state)
Even if your state doesn’t require one for registering, it is a good idea to use a boilerplate bill of sale. A bill of sale covers everything in case something happens later. The BOS documents both parties, the amount, and the goods being transferred.
Pay State Sales tax When the Car is Registered
If you live in a state where you pay sales tax, when you go to register the car, you will also need to pay that fee. The rate can vary by state, but you can contact your town hall for a quote before buying.
Activate or Update Your Insurance Policy
The last thing on your list is to contact your insurance agent and have your used car added to your insurance policy. In many states, this is the law; in others, it is optional but it’s always a good idea.