How to Buy a Used Car

by David Ning · 19 comments

We may be experts at eliminating all the little money leaks but unless we spend time to learn how to save on big ticket items, we are handicapped from the beginning. This article is about how to buy a used car.

how to buy a used carLately, we were thinking of buying a used car but how do you actually buy one without regretting down the road? After tons of research and several less than stellar experiences, let me share with you how to buy a used car.

In general, there are two main concerns of every used car buyer and the following steps are aimed at them specifically. They are: (a) price of the vehicle and (b) reliability after purchases.

Narrow Down the Selection

There are two phrases to buying a used car. There’s “I have $X budget to pick a model that I like” and then there’s the “once I know the model, I want to get the best price available”. Most people simply combine these two phrases to save time but this is recipe for paying too much, since sellers will try to give you so many options on the spot in order to confuse you and manipulate you into paying for a higher price than needed. That’s why you need to give yourself enough time. In other words, don’t buy a car, especially a used one, in a rush or on impulse. Once you pick a model and settled on it, move on to find a good deal. Never combine the two phrases.

So how do you narrow down the search? Dealerships.

The best place to find the model you are looking for, assuming you aren’t buying a beater, is to actually go to the dealerships and test drive the different models. In order to save time though, look through the dealership’s website to make sure they have the selection you are looking for. Your goal is to find out about the different options available as well as how cars actually drives, so don’t worry too much about whether the dealership you go to will give you the best bargains.

In case you are, there’s no need to feel bad about dealership hopping because you are legitimately thinking about buying their cars. When you get in, just be prepared to get phone calls when they try to follow up with you. You can always refuse to give them your number, which they are fine with as long as you aren’t being rude.

Finding a Good Price

Now comes the tricky part, finding a good price on the exact model that you like. As a used car buyer, it’s tough to get exactly all the options, color that you like at the lowest price available on the market. If it happens to turn out that way, great but don’t bet on it. That’s why you should figure out the “must-haves”, and then go on the hunt to find the best deal with the car that have those options. Here are several places to aid your search.

  • Edmunds.com – You can find not only the MSRP and invoice prices on new vehicles but old ones as well. For used cars, they also scan the system to see what other people are paying for and give you an estimated market value of the year, make and model of the car you have your eyes set on.
  • Specific Car Forums – A great place to find out about the car and what deals people are able to get is to read car specific forums. If you are looking for a honda accord, just search for “honda accord forum” and there will be tons of bulletin boards with people talking about their beloved car. As you read the forum posts, you can find out about reliability, problems, deals and prices that people are paying (yes, even prices for used cars).
  • Others – craigslist and ebay are great places to get a gauge on how much a car is worth on the open market. No one ever gets their asking price so take craigslist listings with a grain of salt. ebay is good because you can not only see which ones are for sale but also the closing price, giving you a good sense of market value. In addition, the ebay marketplace allows to you to search for parts like no other. Click here to go to ebay, where you can sort the list by discount, year, price and ones that best match your search phrase.

The Importance of a Carfax History Report

With used cars, it is imperative to get a carfax history report that shows the complete history of the vehicle. Sometimes, you find that the last odometer reading on the report is actually higher than the actual reading, indicating something fishing going on. Other times, you see that there was flood or frame damage, a big nono when buying a used car.

Also note that it’s the responsibility of the buyer to order a report. Not the seller, not the mechanic that you ask to look at the vehicle. You. So spend a bit of money on the report and drastically reduce the chances that there will be a major repair soon after you buy the vehicle.

Dealer Experience

It is safer to buy a used car at a dealership (or big name used car retailers like Carmax), assuming that you aren’t paying much more for the experience. This is because most brands now have what’s known as “certified pre-owned” cars. With these, the dealership will inspect the cars, make sure there’s no major damages and will even offer out a multi-year warranty (for example, Lexus pre-own carry a 3-year, 100,000 miles limited warranty as opposed to 4-years for a new one). So if the price is right, buying a certified pre-owned vehicle will give you the piece of mind that there are no major damages that aren’t detectable by the untrained eye (that means us).

It is also a myth that dealerships always carry sell cars at a higher cost. It’s true that their list price is higher, but they are very willing to negotiate (sometimes more than private sellers) because they make most of the money on up sell and maintenance, not selling cars. By being willing, dealers are betting that you will go back to them for services on the car, making money off you for years to come.

Also, think twice before saying yes to “extras” that dealerships will ask you to buy. Extended warranty, safety features etc etc. It’s not that they aren’t useful. It’s just that they are either statistically not in your favor (in the case of warranty) or they are overpriced when purchased from the dealer.

In order to get a good price with dealerships, make sure you do your homework before you sit down and negotiate. Never let the salesperson offer you different cars because all they’re trying to do is lure you into thinking that you are getting a better deal while the point of their tactic is to offer you a lesser car for the same price, maintaining their profit. Have a car in mind, tell them a price that you are willing to pay for and let them do the work.

In your preparation, you need to:

  • Research ahead of time on the inventory that they have so you know exactly which car you’d like to own.
  • Have multiple quotes of similar models as well as the Edmunds estimated value printed out so you can show them when they ask why you are requesting such a low offer (trust me, they will use the word “low” when you know it’s really “fair”).
  • Act uninterested with their suggestions and just tell them what you need them to do.

Don’t Be Lazy

Car shopping can become frustrating as salespeople after salespeople “mug” you with sales pitches and phone calls, all the while you are spending tons of time researching and comparing different options and prices. However, I assure you that once you finish buying the car and start driving it home, all the hard work will be worth it.

Don’t be lazy. You can really save big by knowing how to buy a used car, which starts with research.

One Last Note about Buying a Used Car from a Dealership

Many people expressed concern when I voted for buying a used car from a dealership. I still stand by the recommendation because they are able to recondition many small but annoying things that a private seller won’t do. For example, last time I bought a used car, the dealer was able to:

  • Fix many scratches on the driver and passenger side door (when I got the car, the doors looked brand new)
  • Replace basically any non-functional feature (radios, DVD navigation etc)
  • Brand new floor mats
  • Brand new key housings (the ones that the car came with were all scratched up
  • First service free and an additional oil change at no charge
  • Warranty, through its pre-owned certified program (as mentioned earlier)

Many of you may still be skeptical of how the dealership makes money if they advertise a “just as good” deal as private sellers. Don’t worry, because most dealers don’t make much money off selling used cars. What they are betting on is that most people will go back to their dealership to service the car, which is where they really make their money back.

Also, after you agree on a price, you are usually sent to the finance department where someone will try to up sell you on a variety of products. It ranges from extended warranty to lo jack to premium sealant. Each option will have its use. For example, many people like the extended warranty, while others love lo jack that locates the car if someone steals it. However, if you are looking to save money, do not buy them from the dealer because there’s a heavy mark up.

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{ read the comments below or add one }

  • eric williams says:

    I’ve had 8 cars in the past 10 years, and share my experience in one of my posts. I think you guys will enjoy the entry. 15 transactions gives you a lot of experience. 🙂

  • Buideline says:

    Thank you for details. It helped me in my responsibility

  • Free Arcade Games says:

    Craigslist and Certified USED Dealers are the places you would want to go for a used car. Craigslist is good because it’s from a person rather than a business, while certified dealers sell cars with warranties still attached.

    -Mike

  • Nice post. People need to learn to buy cars with their heads, not their emotions . . .

  • face finance says:

    You are experts,for me,buy a used car,I did not think about so much.

  • Elevation Motors says:

    Thanks for sharing your tips. Edmunds, forum sites & classified posting are big help. Buyers can even search quality used cars in other states. If located in Lakewood, Colorado buyers may take a look at our website today. I highly appreciate your great tips. Thank you.

  • Wilson Pon says:

    Ning, besides of the price and reliability of the vehicles, we must also make sure that the used car we’re buying is never involving in any “hit and runaway” car accident by the former owner, or we might be in deep trouble after purchased it.

  • Rob says:

    Thanks for the tips on buying used. Used cars can be a great value, but there’s no such thing as a good price on a bad car. That’s why I wanted to tell you about a certified pre-owned program that is now available at independent dealers and to private parties. The certification inspections are done by an independent inspector (not a dealer employee), so they’re unbiased. They include forensic fluid analysis (they check the oil and trans fluid for wear metals and contaminants, pictures, test drive, physical inspection, and a warranty.

    It’s the best way I’ve seen to be sure you’re getting what you’re paying for, and it’s pretty inexpensive (especially compared to the price of making a mistake.).

  • Richby30RetireBy40Blog says:

    I’ve had 8 cars in the past 10 years, and share my experience in one of my posts. I think you guys will enjoy the entry. 15 transactions gives you a lot of experience. 🙂

    Rgds

    RB

    http://www.richby30retireby40.com/2009/07/7-cars-in-10-years.html

  • I’m known as the car-shopper in my family. I have simple steps I follow that have never led me astray, very similar to your process.

    1.) Find the car you like
    2.) Start offering ridiculous low-ball amounts on pristine examples
    3.) When a seller agrees, take it for an inspection

    I agree that car forums are THE place to go if you are researching a specific model. These guys are enthusiasts who know more than the dealerships and can tell you about upgrades, DIY projects and reliability. You might be able to find your car on sale in a classifieds section as well.

  • Matthew says:

    My dad always taught me not to buy used cars for the very reason that it’s easy to find a dud. However, I found that the information is so readily available these days that it’s very easy to look up everything and do your own research on a vehicle, making used cars a very good deal.

    • Matthew says:

      Oh and those forums are great too. You can even just post a price on a particular model and ask whether it’s a good price or not and people will usually respond quite quickly.

  • marci says:

    Yep – small town is great. When the service dept was done with my truck during it’s routine maintenance, I was just thrilled with the prompt, professional, and POLITE service work, their speedy shuttle service, and their great smiles 🙂 The next week they got a thank you card and a batch of homemade double chocolate brownies… yep, small town is great.

  • marci says:

    Most important I have found (unless you are a great mechanic yourself) is to deal with a reputable dealer – one you can trust. If you don’t deal with a reputable dealer, all you’ll have is a tailgate warranty… meaning once your tailgate leaves the lot, you are done for.

    Luckily we have a great dealer here in town, and he fixed the two little things that popped up afterwards – no charge. 🙂 Of course, I’ll recommend him 🙂

    • MoneyNing says:

      The advantages of living in a small town and knowing everyone 🙂 I bet the salesperson who sold me my car doesn’t even remember me anymore.

  • Jennifer says:

    This is a great resource for people buying used cars. I always thought people were crazy to buy from a private party, thinking that they would get a lower price.

    • MoneyNing says:

      I agree completely. People have a false assumption that buying from a private party is the cheapest. But ever since the invention of the Internet, people are able to search online for what the asking prices are around town so easily that they themselves set a high asking price. Then there’s the potential scam. It’s not that dealers don’t try to do this as well, but it’s much more likely for a private party to do something shady.

      • Jennifer says:

        So true. At least if something goes wrong, there’s a dealership to go back to. Even if they don’t fix it for free, you have huge negotiating power to at least get a big discount.

  • JT @ Redeeming Riches says:

    Edmunds is a GREAT resource. You can also find out things like True Cost to Own and get a good sense of the value for the car. One other resource to add is Consumer Reports. They do a nice job of looking at reliability and value for used cars and always have their rankings on used vehicles as well.

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