How to Buy a Used Car: Complete Steps, Plus Tips
Written by
Chief Mechanic and Technical Writer at CarParts.com
Buying a car is always stressful, regardless of whether you’re looking for a used model or one that’s brand-new. If you’re a first-time buyer, or you haven’t purchased a car in a long time, you might not know how to begin looking for a pre-owned vehicle.
All of the hassles that come with purchasing a new car also come with buying a used one. What’s more, buying a used car can be exceptionally tricky because you have to worry about hidden mechanical problems, collision damage, and other issues that wouldn’t be a concern with a new model.
Shopping for a used car can definitely seem overwhelming. But fortunately, the process can be broken down into manageable steps to help you find the right vehicle.
Best Way to Buy a Used Car
Finding a quality used car takes planning, research—and quite a bit of legwork. Below, you’ll find steps that will help you comb through the offerings from private parties and dealerships to locate the right vehicle.
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Step 1: Define Your Budget
It’s important to figure out your budget before you start searching for a used vehicle. If you plan to pay cash up front, you don’t want to drain your savings account in the process. Be realistic about what you can afford.
Similarly, if you intend to finance the car, you don’t want the loan to be so big that the payments become a burden. According to Nerdwallet, your automotive expenses (including the payment, insurance, etc.) should be less than 20% of your monthly take-home pay.
If you plan to take out a loan for the car, you should aim to put down about 10% of the total purchase price and finance the vehicle for just three years.
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Step 2: Determine What Car is Right for You
The next step is to decide what kind of vehicle fits your lifestyle. For example, if you need a family hauler, you may want to focus on SUVs and minivans.
From there, you can do some research to determine which makes and models are safe and reliable. Websites that list owner reviews, such as Edmunds and Kelly Blue Book, can provide insight regarding the most dependable models.
Consumer Reports and J.D. Power can also be useful, as both outlets rate used models based on data from vehicle owners. Another option is to seek advice from a local expert (i.e., mechanic or service advisor) who specializes in the type of vehicle you’re considering.
If safety is a primary concern, consider reviewing the vehicle safety ratings from the Insurance Institute for Highway Safety (IIHS). The ratings, which are listed on the agency’s website, will give you an idea of how crashworthy a particular model is and whether it’s well-equipped to avoid a collision.
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Step 3: Find Used Cars in Your Area
Next, you can start scouring the internet for used cars. There are many different websites to peruse, some of the most popular of which include AutoTrader, Facebook Marketplace, and Craigslist. These websites have listings from both private sellers and dealers.
Speaking of which, it’s a good idea to limit your search to offerings available from franchised dealerships, used car superstores (e.g., CarMax), and private sellers.
In general, you’ll want to avoid so-called “buy-here-pay-here (BHPH)” used car lots, which often have predatory financing practices. BHPH lots also tend to stock cars that a reputable dealer would reject due to mechanical problems and other issues.
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Step 4: Consider Taking the Certified Pre-Owned Route
During your search, you’ll notice that many franchised dealers offer certified pre-owned (CPO) used cars. CPO vehicles undergo a thorough inspection and are backed by an extended factory warranty, making them a safe choice.
You’ll want to be careful, however, as non-franchised dealers sometimes stick “certified” labels on their cars—but those labels are just a ploy. To be a true CPO vehicle, a car must come from a franchised dealer and be backed by the vehicle manufacturer.
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Step 5: Determine How Much the Car You’re Considering is Worth
You want to make sure you’re getting a fair deal on the car of your dreams. So, before you go any further, use a price guide (e.g., Kelly Blue Book) to check the value of the vehicle you’re considering. For an accurate result, you’ll need to enter the car’s year, make, model, trim level, and approximate odometer reading.
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Step 6: Get a Vehicle History Report
It’s important to get a vehicle history report from CarFax or a similar service provider. The reports cost money but are well worth it, as they document accidents, service records, and other data that will help you make an informed decision regarding your potential car.
To run a report, you’ll need to know the car’s vehicle identification number (VIN), which is almost always noted in the online listing.
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Step 7: Contact the Dealer or Seller
The next step is to contact the dealer or seller regarding the vehicle you’re considering. If you’re interested in a car from a dealership, all you need to do is confirm that the vehicle is still available and schedule a test drive.
On the other hand, if you’re looking at buying from a private party, it’s a good idea to ask the seller a few questions before you head over. For example, you’ll want to inquire whether the vehicle has a clean (and clear) title (meaning it has not been totaled) and if there are any known problems. The answers to important questions, such as these, can help you determine if the car is even worth considering.
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Step 8: Take a Test Drive
Taking a test drive allows you to decide whether a car is a good fit for you and your lifestyle. You’ll also get the chance to notice any glaring defects, such as illuminated warning lights and disturbing noises. If you spot any problems, you can rule that particular vehicle out and move on to the next.
Also, if you’re test-driving a vehicle from a private party, you’ll want to ask to view the title and any maintenance records at the same time. Make sure the title is clean, in the seller’s name (not a lienholder), and that the VIN on the title matches the VIN on the vehicle.
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Step 9: Get a Pre-purchase Inspection
Once you confirm the car is what you’re looking for, you can move forward with getting a pre-purchase inspection. While most private sellers are open to you requesting a third-party inspection, some dealerships may object since their mechanics have already looked the vehicle over.
Still, if you have any doubts about the condition of the car, you might want to demand a third-party inspection, regardless of the dealer’s stance. You can choose one of two options—you can either rely on a local repair shop (almost any shop will be willing to perform a pre-purchase inspection) or a mobile inspection agency. Both options have their advantages.
You can learn more about finding a pre-purchase inspection provider by reading our article on the subject.
Tips for Buying a Used Car
The process of buying a used car from a dealer is different from buying from a private seller. But in either scenario, you’ll likely need to start by getting financing for the vehicle (unless you’ve got a lot of money on hand and plan on paying cash).
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Get Financing
When it comes to financing, you’ll want to get pre-approved before you go to purchase a vehicle. That way, you know exactly how much you can spend.
If you’re buying from a private party, you’ll have no choice but to find your own financing. Meanwhile, a dealer might be able to arrange your loan, but you’ll likely get a better deal if you get pre-approved elsewhere beforehand. When you walk in with a pre-approved loan, the dealer will have more incentive to find you a better rate.
In general, you can expect to pay a higher interest rate on a used car loan than you would a new car loan. The reason being, used car loans are riskier for the lender, primarily because used car values tend to be unpredictable. Also, used cars may require repairs that prevent the buyer from making their payment on time.
It’s a good idea to look at your credit score before you start searching for a loan. Compared to shoppers with good credit, buyers with poor credit can expect to face higher interest rates and possibly be asked for a greater down payment.
Once you know your credit score, you can start shopping for a loan. You can look for financing through any of the following outlets:
- Large national banks
- Credit unions
- Community banks
- Online banks
- Loan comparison websites
- Finance companies
- Car dealerships (if you’re buying from a dealer)
It’s a good idea to talk to several lenders to find the best deal for you. According to U.S. News, you should apply to a variety of lenders within a short time span (a week or so). Applying to all of the lenders within a limited period prevents the credit reporting agencies from thinking you’re taking out multiple loans—a misconception that can ding your credit score.
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Negotiate a Price
Nobody likes to haggle, but doing so is necessary if you want to get the best price on a used car. Here are some tips for making the unpleasant experience a bit easier:
- Decide how much you’re willing to pay beforehand and stick to that amount.
- If you’re buying from a dealer and you have a pre-approved loan, don’t worry about negotiating a monthly payment. To the dealer, your loan is the same thing as cash.
- Make an initial offer that’s lower than what you’re willing to spend but within reason. Use the information you found during your research into how much the car is worth as a reference point.
- If you’re buying from a dealer, make sure you know whether the salesperson is talking about the “out-the-door” price, which includes taxes and fees, or only the price of the car. Also, ask about any hidden fees before agreeing to a deal.
- Don’t be rude, and don’t let the person on the other side of the deal be rude to you! If the salesperson or seller gets pushy, be ready to walk at any time.
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Seal the Deal
The exact steps you need to take to seal the deal will depend on whether you’re buying the car from a dealership or a private seller.
If you’re buying from a dealership, the finance department will have all the necessary paperwork ready for you. However, it will be up to you to read each document carefully. You will also need to decide whether you want the additional items, such as the extended warranty (aka mechanical insurance), that the dealer offers you.
Should you decide to purchase an extended warranty, be sure to read the contract thoroughly, as some plans are better than others. Also, keep in mind that you can usually purchase an extended warranty through your lender, possibly for a better price than through the dealer.
Another thing you’ll want to be prepared for is that, when you buy from a dealer, there will be additional fees you need to pay on the spot. These fees include a documentation fee, sales and license fees, and possibly a fee for state inspection.
Buying from a private party can be a bit trickier than buying from a dealer. If the seller still has a loan out on the car, you’ll need to call the lender to determine how to transfer ownership. In instances where the lender is a bank, opt to meet the seller at a local branch to close the deal.
If the seller owns the car free and clear, you’ll want to be extra careful about transferring ownership. Problems, such as a title that’s not filled out properly or past-due registration, can be a nightmare. Consult with your local Department of Motor Vehicles (you can usually just visit the agency’s website) for information on how to transfer vehicle ownership without running into complications.
One more thing: Before you drive away, you’ll need to add your new car to your insurance policy so that you have coverage. You never know what might happen as soon as you drive off of the dealer’s lot or out of the seller’s driveway.
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Enjoy Your Purchase!
Once all the documents are signed, and the keys are in your hands, you’re ready to hit the open road and enjoy your new purchase. There’s nothing quite like getting behind the wheel of a new-to-you car!
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