Buying a used car makes sense for a lot of reasons. For one, used cars are cheaper than new cars because of depreciation. This means that anyone who is cost-conscious or even just looking for great value can find a used car that works within their budget.
You also get more buying options when you buy a used car. Of course, you can go to a dealership, but buying online or from a private seller opens up more opportunities to find your perfect ride.
But because used cars are, well, used, there’s a little extra legwork to be done to make sure you end up with the right car. Understanding your options and doing research ahead of time is key to finding the right used car for you at a good price.
6 Things to Do Before You Buy a Used Car
The car-buying process starts well before you ever start talking to a seller, whether you want to shop at a dealership or find a private seller. To have a good used car buying experience, take a few early steps to find information on your own, and put yourself in a better position when it comes time to make a deal.
1. Set a budget
The first place to start is setting a budget for yourself. Understand how much money you’re willing to spend in total on your car and how much monthly financing will likely cost you. This will help you when you communicate with a seller and as you browse options and makes it easier to narrow down a few options ahead of time.
When you set your budget, you might realize that the right car for you is a little too expensive—and that’s okay. Once you have this information, you can start saving or make another plan to make that car a reality in the future.
2. Pick a car
You want to make sure you find the right used car for your needs. Is there anything about your current vehicle that you wish you could change? Maybe a hatchback will give you better options for a road trip, or your growing family needs a bit more space in the back seat. Gas mileage and repair costs are other important factors to consider as you start your search for the right make and model.
3. Find sellers
The internet is your friend when you start your search for a used car. Local dealerships and private parties post available cars online, so search around to get an idea of where to start your buying process. Looking up your options online first will also give you an idea of whether the car you want and your budget are realistic.
4. Do your research
You’ll also want to make sure you understand what a fair price for the used car in question is. Kelley Blue Book is an excellent tool to figure out how much a used car should cost. Keep this number in mind before you start looking at cars to make sure you’re not being taken advantage of by a seller.
A great thing about buying a used vehicle is that other people have been driving the make and model for some time. This means you have access to more information than you would about a new vehicle. Check out a site like Edmunds to get a sense of how reliable different vehicles are. Some used cars are notorious for their bad reputations, so you can put some on a “never buy” list.
5. Get preapproved for a car loan
Once you know the car for you is out there, it’s a good idea to get preapproved for a loan before you start any negotiations. This is great to have in hand before heading to a dealership because you can avoid negotiating financing on the spot, and you can rest assured that you can cover the cost of owning the vehicle in question with your loan at a rate you’re comfortable with.
6. Purchase car insurance
Most car loans require you to have a car insurance policy in place before you get preapproved. Even if you already have an active policy, buying a new car is a good time to make sure you’re getting the best rate and policy for your needs.
Financing Your New Car
While dealerships can connect you with car financing for a used vehicle, it’s better to get preapproved for a car loan ahead of time. Once you know the price range you want to target, you can reach out to local banks, credit unions, or online lenders to get a preapproval to bring with you to local dealers.
There are also online lenders that offer auto loans and personal loans that can be used for car purchases. Many of these cater to people with poor credit and, as such, may have higher interest rates. However, if you have good credit, getting a good rate on a car loan is a little bit easier, no matter which type of lender you prefer.
The rate you get on a car loan will depend on your credit score. If you’re not sure if you have good credit or not, you should download your credit report to find out.
There are a few things you’ll want to keep in mind when finding the right car financing option.
- Loan term: This is the amount of time you have to pay off your loan.
- Monthly payments: What is the total monthly amount you’ll need to pay your lender? It’s important that this number fits within the budget that you set at the beginning of your car-buying journey.
- Annual percentage rate (APR): APR includes the interest rate as well as any fees broken out over the life of the loan. This is factored into your monthly payments already, but you should use this number to compare loans between lenders.
- Down payment: What’s the minimum down payment required by the lender? Depending on how much you’re able to put down on your car, you may be able to secure a better APR.
- Lender fees: Make sure you understand how much you could be charged in case of a late or failed payment. Some lenders also charge fees for early repayment, so look out for this if you’re someone who likes to get ahead on your loans.
As you prepare to take out a car loan, keep in mind that many require you to have a car insurance policy. After all, lenders want to make sure the car they help purchase is secure.
Buying a Car Out of State
Sometimes, you can find a better deal on a used car out of state, especially if you’re working with a tight budget and have a very specific make and model in mind. Expanding your search to nearby states or even nationwide can make it a little easier to find your perfect match.
There are a few special considerations when you buy out of state. You’ll have to pay extra attention to the sales tax, vehicle inspection requirements, and registration process of your home state. These important processes for car ownership always go by where the car is garaged, not where it’s purchased. So if you live near a state without sales tax, it won’t necessarily make a difference for a used car for you.
If the used car is too far to visit yourself, you’ll want to ensure you have enough information to make a clear decision of whether or not to purchase. This means finding a reputable mechanic to do an inspection ahead of time, as well as someone to test-drive the car for you.
Getting the car to you
When you buy a car from out of state, getting your new car to your driveway might be a challenge. If you live in a neighboring state or don’t mind a long drive, you can pick it up yourself. You should have someone prepared to drive you there and take their car back home.
If picking up the car yourself isn’t an option, you can pay for a service to have it delivered to you. Some dealerships and online sellers offer this type of service, but you can arrange for car shipping yourself.
Whether you go to pick up your car yourself or hire someone else to do it, there’s an added cost for your own time and travel or the service itself. Figure out what option will work for you and how much it will cost before making any final decisions on which car you will purchase. If you’re going out of state to get a better deal on a car, make sure the added costs and coordinating are really worth it.
Buying a Car from a Private Seller
Buying a used car from a private seller comes with some perks. There’s no pushy salesperson, and you won’t get caught in the markup that comes with cars on a dealership lot.
But making a sound purchase from a private seller takes a little extra prep work on your end to protect your purchase. This is because private sellers aren’t held to the same standards that dealerships are, which can put you at risk for a bad purchase.
It’s important to make sure any potential good fits you find are legit. For one, you’ll want to make sure the pricing makes sense. Sure, you want a good deal—but an asking price that’s too low can be a red flag. Other things to look out for are ads that lack detailed information and seller that are hesitant to answer questions about the vehicle’s history. A “lost” title, or a title that’s not in the seller’s name, is also a sign to move on with your search.
Go a step further than just asking questions and look for a vehicle history report online to verify any information you learn using a site like Carfax, which is free. Specifically, be on the lookout for hidden vehicle damage, major repairs, and salvage titles, which can all signal problems with the vehicle. It’s a good idea to back up your research with a mechanic’s inspection for good measure.
Remember, if your gut is telling you something is wrong with the vehicle or the seller seems fishy, it’s best to follow your intuition and keep looking. If the idea of dealing with a stranger is too overwhelming, try asking friends and family if they know anyone who is selling.
Buying a Used Car from a Dealership
Once you know what kind of car you want to buy and what your budget is, you can head over to a local dealership to see your options. These days, many offer online listings, so you can get a sense of what’s available before you even get there. Make sure you check ahead so you don’t waste your time.
Buying a used car at a car dealership is a great option for those who are wary of buying a car sight unseen or from a private seller. However, buying your next car from a dealer can be a bit intimidating since you have to deal with salespeople. There are some things you can do to prepare to make the process a little more bearable, though.
There are standard parts of the car-buying process at a dealership. You’ll meet a salesperson, check out the available cars on the lot, and take any cars you’re interested in for a test-drive. It’s when it comes time to start negotiating that pressure piles up.
Car dealers will encourage you to upgrade your purchase with add-ons like extra car features and extended warranties. Some add-ons might be appealing to you, like a remote start option, but others may not be necessary. To keep yourself from splurging in the heat of the moment, come to the dealership prepared with a list of add-ons you’re open to. As for extended warranties, these usually aren’t worth the cost, but reliability ratings can help you make your decision.
You’ll likely need to make some kind of down payment in person unless there are some active financing offers for $0 down. If you need to put money down, you can usually make your payment however you like. Most dealers accept cash, check, or credit cards, but it’s a good idea to call ahead to confirm before you go.
Buying a Used Car Online
You can purchase a used car through both private sellers and dealers online. When you turn to the internet to make your purchase, it’s important to do your research on the car in question ahead of time. Unfortunately, Craigslist and eBay are known to have used car offers that turn out to be scams.
Investigate the vehicle history on your own and speak to the seller over the phone or in person if possible. It’s important to make sure the information they’ve provided is accurate, too. Check the odometer reading and VIN to make sure they match the specifications you’ve been given.
A vehicle history report and mechanic’s inspection will help make sure your online vehicle purchase is a good idea. Taking these steps can help you avoid stolen vehicles, salvage titles, and any undisclosed repairs.
Negotiating a Good Price
The purchase price of your used car should never be the price you see on the sticker. Getting the best price on a used car all comes down to negotiations, no matter where you decide to purchase your vehicle. But before you start talking, do a little research to see what the best price on the vehicle could be.
Kelley Blue Book is a good resource before you start negotiating (or hit the dealer’s lot). You can find the exact car model and make that you’re interested in and determine the fair market value. This way, you’ll know exactly what you should be paying.
It’s also a good idea to compare offers between dealerships and even private sellers before getting too deep in negotiations. By keeping your options open, you give yourself a good shot at getting the best price possible. Know how much you’re willing to pay, and be willing to walk away if you can’t get the deal you need.
If the price tag is stuck in place and it’s within your price range, you can try to get more bang for your buck by asking for extras. Dealerships have the power to offer freebies like new tires or complimentary oil changes and car washes. Whether these make sense in your situation is up to you, but don’t be afraid to ask for a little extra if you’re settled on a car.
Don’t forget that if you have a current car that you can use as a trade-in, that will lower your out-of-pocket cost as well. This means you have a little more wiggle room even if the negotiation doesn’t go as well as you’d hoped.
Tips for Buying a Car When You Have Bad Credit
A bad credit score can make buying a car a little tricky. This is because car loans come with high APRs if your credit is considered poor. And with an interest rate that’s too high, a car loan may not be the best idea.
There are a few other things you can do if your credit score leads to a bad interest rate offer.
If you can wait, you might consider holding out 6 or 12 months so you can raise your credit score to secure a better rate on a car loan. Bringing old accounts current and avoiding new lines of credit can help improve your credit score over time.
Putting more money down on your car is a good way to combat a low credit score. While you may still face higher-than-average interest rates, a lower loan amount means you’ll end up with a lower monthly car payment overall.
Some online lenders specialize in auto loans for people with bad credit, but it’s important to understand all the loan terms before agreeing to anything. Just because you can get approved doesn’t mean it’ll be the best choice for you. If you can’t make your monthly payments, you won’t be doing your credit any favors.
If you don’t have the time or ability to save up more for a down payment, opting for a cheaper car could help you get back on the road with a smaller down payment loan amount.
You may have heard that bad credit can make it harder to get car insurance, but there are options out there for everyone.