Buying a used car can be a great deal. You can get a car that's almost as good as a brand-new one without paying for the depreciation that hits as soon as you drive a new car off the lot. New car values usually drop 20-30 percent within the first year. That can mean big savings for you. But there are other good reasons to buy a used car:
- Insurance may be cheaper.
- Late model used cars can be as reliable as a new car.
- Some used cars are still covered by the factory warranty.
- Most new carmakers now sell certified pre-owned (CPO) cars, which include warranties.
- You can easily access a vehicle history report with the VIN number.
Although you may have a good idea of what type of car you want, when it comes to used cars, availability may vary. Make a list of three car models in the same class that you would like to shop for. Look beyond the popular car models. If you are shopping for the same car as everyone else, you will pay a premium for it. How much difference in price separates popular cars from their good but overlooked counterparts? More than you think. Popular vehicles like a Honda or Toyota can cost a few thousand dollars more than a comparable Chevrolet or Mazda. It pays to be flexible.
2. Research your prospective car
Check out prices, standard features, reliability and safety, fuel economy, photos, videos, known weak points, typical repair costs and resale values. Make sure you run a vehicle history report on any used car you are considering buying. You can purchase reports from a company such as Carfax.com for about $40. That’s a small price to pay for extra peace of mind.
3. How much can you afford and how will you pay?
Consider how you will pay for your car before you start shopping. You typically have three ways to pay for your used car: cash, bank loan, or dealer financing (if buying through a car dealer). Whatever payment method you choose, make an informed decision that fits your budget. If you decide to finance your purchase, make sure you’re clear on the cost of the monthly payments and be careful not to get in over your head.
4. How much will insurance cost?
You should also consider the price of insurance for your new car. Contact your insurance agent for a quote before you purchase the car. Vehicles with more safety features (ABS, the number of airbags, ESC, TCS, etc) can often lower your premium. While vehicles which are more expensive to repair or more prone to theft will have a higher premium.
5. Where to shop?
The most common places to buy a used car are:
- Private parties - You can usually get the best price if you buy a car directly from its previous owner. But an owner may not be aware of trouble signs that a dealership or service station would recognize.
- The used-car section of new-car dealerships - Nearly all franchised dealers have a used-car department that sells vehicles they have taken as trade-ins, bought at auction or from another dealer, or that have come back at the end of a lease. Many dealerships offer CPO cars that have been thoroughly inspected and are backed by strong warranties.
- Independent used car lots - These dealerships are apt to handle any car make, and the vehicles can run the gamut from the almost-new to several years old. If the dealership has been around for a long time and has a good reputation locally, that’s a good sign.
- Used car auctions - You likely won't be able to do a pre-vehicle inspection with your mechanic, but you will have a good opportunity to save a lot of money. Although the car may require some repairs, you could still come out on top. This option is best for people with more car knowledge.
6. Shop around and compare options
There are lots of resources for finding used cars. Check the Iwanna.com classifieds, which have thousands of vehicles from private parties and local dealerships, including the complete inventories of more than 30 dealerships. Many times you can also search the used car inventory of new car dealerships right on their website. Ask friends and relatives if they are selling any used cars and keep your eyes peeled for “For Sale” signs in car windows.
7. Save time
Once you find a prospective car, call the seller before you go to see the vehicle. Over the phone, you can ask questions about the car to eliminate cars that have problems and verify the asking price in the ad. While talking to the seller, set up an appointment for a test-drive. Also, ask for the VIN so you can run a vehicle history report.
Here is a list of some questions to ask the seller:
“How many miles has it been driven?”
“What are the features?”
“What is the car’s condition?”
“How about the body and interior?”
“Has it been in an accident?”
“Do you have service records?”
“Have you owned it since it was new?”
“Why are you selling the car?”
8. Test drive
By test driving the car, you can determine if it is a good fit for you physically and if it seems in good condition. You should always arrange your test drive during the day, so you can get a good look at the car. Keep the radio off during your test drive so you can hear the engine. Take your time and be sure to simulate the conditions of your normal driving patterns. If you do a lot of highway driving, be sure to go on the highway. If you go into the mountains, test the car on a steep slope. You don't want to find out after you've bought the car that it doesn't perform as needed.
On the test-drive, evaluate these additional points:
- Should start without hesitation
- Acceleration from a stop
- Visibility (Check for blind spots)
- Engine noise
- Transmission shifts smoothly (should not jolt forward, hesitate while shifting, grind, clunk or whine)
- Passing acceleration
- Signs of smoke with hard acceleration (A little bit of white smoke is normal. Blue smoke means you're burning oil. Black smoke means the engine is clogged with carbon)
- Hill-climbing power
- Braking (No squealing or grinding)
- Suspension (How does it ride?)
- Steering (If you point the car straight, does it go straight?)
- Rattles and squeaks
- Test all lights, signals, radio/CD, GPS.
- Cargo space
- Headspace and legroom
After the test-drive, ask the owner if you can see the service records. See if the car has had the scheduled maintenance performed on time. Avoid buying a car that has been in a serious accident or has had major repairs such as transmission rebuilds, valve jobs or engine overhauls. If you like the way the car drives, you should still take it to a mechanic for a thorough inspection. A private party will probably allow you to do this without much resistance. But at a dealership, it might be more difficult.
9. Negotiating the price
It is much easier to negotiate successfully when you have done your homework.
Follow these guidelines when negotiating:
- Only enter into negotiations with a seller with whom you feel comfortable.
- Make an opening offer that is low, but in the ballpark.
- Decide ahead of time how high you will go and be prepared to walk away when your limit is reached. This is your strongest negotiating tool.
- Be patient. Plan to spend an hour negotiating in a dealership, less for private parties.
- Leave the dealership if you get tired or hungry.
Once you have a deal, make sure the transaction is completed according to the agreed upon terms.
10. Close the deal
When you buy a car from a private party, you will probably be asked to pay with a cashier's check or in cash. Before money changes hands, make sure the seller signs over the title to you in front of a notary (most banks have one).
If you are at a dealership, you still have to go through the finance and insurance (F&I) process. If any repair work is required and has been promised by the dealer, get it in writing in a "Due Bill."
In either case, you need to make sure you have insurance for the car you just bought. Contact your insurance agent as soon as possible to make sure the new car is added to your policy.