How to Buy a Used Car
Buying a used car instead of a brand-new car is definitely the smartest option financially (so kudos to you for going that route). But it still comes with a few risks. And if you don’t do your research, you could pay more than you should for your car—or even worse, end up with a used car that’s a total piece of junk.
These eight tips for buying a used car will help steer you in the right direction:
Decide how much to spend.
Find the right used car.
Shop around.
Figure out how much the car is worth.
Inspect the car yourself.
Go for a test-drive.
Get an inspection by a mechanic.
Negotiate the price.
Step 1: Decide how much to spend.
First things first: You need to know how much car you can afford. Just so we’re clear, we’re not talking about car payments here. Your goal should be to pay for a car—in full—with cash. As in, 100% down. And yes, it’s totally possible!
Now, you may have to scale back on price or save up for the car you want. But you’ll avoid having a crazy monthly car payment. Plus, you’ll save yourself thousands of dollars in interest (no joke). For example, let’s say you borrow $10,000 for a car with a 9.34% interest rate (the average) and a term of five years.1 You’ll end up spending an additional $2,554 in interest!
Listen, you don’t need to take out a car loan. You can find reliable used cars in any price range. If you’re real strapped for cash, look for a vehicle to get you from point A to point B for as low as $1,000 to $2,000. It may not be pretty, but you’ll get by.
Or if your current car can last you a while longer, take all that money you would’ve wasted on a car payment each month and save for an upgrade at a later date. Just make it a priority in your budget!
Step 2: Find the right used car.
Once you’ve decided how much you’re going to spend, it’s time to find the right car. Not your dream car. The right car for you right now. It’s the one that best fits your lifestyle and your budget.
Before you declare your loyalty to your favorite car brand, step back and take a look at the kinds of vehicles out there and what each was designed to do.
Trucks, for instance, were designed to carry goods and heavy materials. So unless you’re Bob the Builder hauling heavy cargo on a regular basis (you know—gravel, timber, bricks), you probably don’t need a truck. For a good commuter vehicle, stick with options that are compact and energy efficient, like sedans, hatchbacks or hybrids.
Dave's easiest money-saving tip: See if you're over paying for car insurance.
Here’s a quick checklist to help you narrow down your choices. Pick three things that are the most important to you when buying a used car.
I want a vehicle with plenty of cargo space.
I want a vehicle that can fit more people.
I want a vehicle with better fuel economy.
I want a vehicle that’s easy to get in and out of.
I want a vehicle that’s safe.
I want a vehicle that’s better for the environment.
I want a vehicle that can carry heavy cargo.
I want a vehicle that can go off-road or on rough terrain.
I want vehicle that’s compact and light for city parking.
I want a vehicle that has towing capacities.
Remember, you won’t find a vehicle that checks every box. Be honest with yourself about your wants versus your needs, and think long term about how you’ll use your car.
Also, you can save some money by getting rid of features you don’t need your car to have. Not just technology like GPS, Bluetooth connectivity and backup cameras—but the basics too. Can you survive with a two-cylinder engine over a four cylinder? Do you really need all-wheel drive? Stick-shift transmissions are also cheaper (if you don’t mind the learning curve).
Step 3: Shop around.
Now that you know how much you can spend and what kind of car you need, you’re ready to start shopping. There are plenty of places to buy used cars (each with their own pros and cons).
Just don’t jump on the first offer you see! Take the time to compare different options and see what’s out there.
Here are some places to start your used car search:
CarMax
Edmunds
Cars.com
Carvana
Craigslist
Autotrader
Independent used car dealerships
Showroom lawns
Step 4: Figure out how much the car is worth.
Once you’ve shopped around and narrowed down your options, you need to figure out if the used car you’ve chosen is worth the price. Dig up all the information you can on the car so you can talk the seller down to a better deal.
1. Start with Kelley Blue Book (KBB).
KBB uses data from actual sales and auction prices to give you a realistic price range.
2. Buy a vehicle history report (VHR).
A good VHR costs about $50 and gives you accident history, ownership history and a ton of other records. It takes a lot of guesswork out of buying a used car. All you need is the vehicle identification number (VIN) for a detailed report.
3. Determine the ownership cost.
What will you have to spend to maintain the car (oil changes, new tires, fluid flushes), and what long-term repairs should you expect for the make and model you’re looking at? Also, what’s the average cost for replacement parts and repairs? You can use the Edmunds True Cost to Own tool to get a good estimate for all of that.
4.Read used car forums.
Nearly every car model has an online forum with reviews going back a while. Look for common issues that owners have had with the type of car you want to buy.
5. Check the vehicle’s recall history.
Don’t assume the seller has taken care of a used car’s safety recalls. In fact, over 72 million U.S. vehicles have open recalls on them—that’s 23% of all cars on the road!2 And yep, you guessed it—people still try to sell those cars without getting the recall fixed. So, what can you do? Check the National Highway Traffic Safety Administration for your vehicle’s recall history (if it has one).
6. Get an insurance quote.
Don’t forget to factor in car insurance! Good news for you: Used cars are normally cheaper to insure than new ones. In fact, a 5-year-old car is about 27% less expensive to insure than its brand-new counterpart.3 But ask if your premium will change based on a different make or model.
Step 5: Inspect the car yourself.
Even if you’re not a mechanic, you can still find some of the more obvious car issues yourself by giving it a good once-over and asking the right questions. Not every problem has to stop you from buying the car—unless it’s something major like a blown head gasket (yeah, that just sounds expensive). But you also don’t want to buy somebody else’s car problems.
Here are some things to check when inspecting a used car yourself. (You can also use this full inspection list from the Department of Motor Vehicles.)
Under the Hood
Check the oil level and color.
Check the color of the oil under the oil cap.
Check the belts.
Check the transmission fluid dipstick.
Check the level of the coolant.
Check the brake fluid.
Outside
Look at the car’s paint job.
Check the tires.
Check the tail pipe.
Open and close the doors, trunk, fuel door and fuel cap.
Check the lights.
Inside
Check the wear on the steering wheel, seats and pedals.
Lock and unlock all the doors.
Check AC and heating.
Idle the car and watch the temperature gauge.
Step 6: Go for a test-drive.
It’s one thing to look over a car, but you also need to get a good feel for how it drives before you buy.
When you’re taking the car for a spin, turn off the stereo so you can hear any weird noises. Pick a route with hills, bumps and, yep, even potholes. (Just don’t go all Fast and Furious and return the car in worse shape.)
Use your test-drive to answer these questions:
Feel
How does the car feel on flat roads?
How does it feel when it hits a bump or pothole?
Does it struggle to pick up speed?
Do the gears change smoothly?
Are the brakes squishy or too sensitive?
How does your body feel after the test-drive?
Noise
Does the engine sound smooth when you accelerate?
Does the engine rattle, knock or grind when you idle?
Are there vibrations or odd sounds under the hood when you accelerate above 60 mph?
Do the brakes squeak?
Sight
Can you see out of the car easily?
Does black smoke come out of the exhaust when you start the car or accelerate?
Is the RPM gauge consistent when you idle?
Smell
Does the inside of the car smell like smoke?
Dial down the air conditioning—do you smell burning oil?
Step 7: Get an inspection by a mechanic.
If the car has passed your personal inspection, good. But always have a mechanic inspect a used car, no matter the condition. A good mechanic will tell if you’re about to buy a reliable used car or a hunk of junk. And if the seller doesn’t want a mechanic to inspect the car, that’s probably a red flag the car has a major problem you should avoid.
When it comes to inspections, you have two options:
Take the car to a trustworthy garage. Most car garages charge a flat fee for inspecting used cars. They’ll check the car out and tell you what’s going on.
Set up a mobile inspection. A mechanic will come to the car, do the inspection, and print out the results.
If a mechanic tells you the car has damages that outweigh its value, let the seller know you’re no longer interested. Or use that knowledge to lower the asking price—just know you’ll have to spend money fixing those issues at some point.
Step 8: Negotiate the price.
For a lot of people, this is their least favorite part of the used-car buying process. Hey, we get it. Maybe you’re just not the haggling type. But you don’t have to be Mark Cuban to talk a used car salesman into giving you a good deal.
When negotiating the best price on a car, just remember to bring your research to the table, pay in cash (no matter what offers get thrown your way), take your time, and don’t be afraid to walk away!
Don’t Forget: Get the Right Car Insurance
Hey! Congrats on the new-to-you car you just bought. URRRRRRRT! SMASH!
Nobody expects an accident—which is why you need to be insured the moment you drive off in that new ride. But with so many types of car insurance available, it’s easy to spend more money than your coverage is worth.
You need an expert in your corner who can answer your questions, run the numbers, and compare different rates. That’s why you should connect with a RamseyTrusted insurance pro!
RamseyTrusted pros work with multiple insurance companies to find you the right coverage at the right price. We’ve vetted them, and you can trust that they’ll walk you through the whole process step by step—so you can feel more at peace behind the wheel.
Make sure you and your family have the coverage you need to protect yourself and your (paid-for) used car. Find an insurance pro today!
What to look for when buying a used car
What are the advantages and disadvantages of buying a used car?
One of the biggest perks of buying a used car is the lower sticker price compared to a brand-new car. And since used vehicles have a lower value, they typically cost less to insure against physical damage. On the other hand, a used car may have less features or older safety equipment. When deciding between a new or used car, you should consider your budget and what you need out of your next ride.
Learn more about buying a new versus used vehicle.
Do your homework when shopping for a used car
Before you head out to the dealership or start shopping for a car online, narrow your focus by writing down your necessities, like room for kids or cargo. Then make a list of nice-to-have features important to you, like heated seats or all-wheel drive. If safety is of utmost importance to you, check sites like Consumer Reports or IIHS-HLDI for safety ratings and go from there.
If you've got your heart set on a particular make and model, check your local dealerships for certified used cars, which are usually inspected and come with warranties. You could also consider buying a used car online. Check online car-buying services to see if they have the make and model you're looking for, some of which may offer warranties too. Private sellers can be a good option too; just make sure you have the vehicle inspected by a mechanic before buying.
What to check when buying a used car
Run the VIN to review the vehicle's history
One way to check a used car before buying it is to run its vehicle identification number (VIN) through a service like CARFAX or Kelley Blue Book. The VIN unlocks a vehicle history report that tells you the car's ownership history, whether it's been damaged in an accident or flood, or if it's been auctioned or stolen. Cars with multiple accidents or flood damage on their report might have ongoing problems despite having been repaired.
Checking the VIN with the National Highway Traffic Safety Administration will tell you whether the car has had a safety recall by the manufacturer. If a recall pops up, you'll want to ensure the issue has been taken care of before you purchase the car.
The VIN can also confirm other valuable details like the country of manufacture, the engine size, body style, and model series.
Research used car ratings and rankings
You should also research the make and model's general history. One of the benefits of buying a used car is having historical data at your fingertips that can help you understand how a vehicle has fared over time. Sites like Consumer Reports and US News and World Report have extensive rankings and reviews that give you an accurate picture of a used car's potential issues. Has it held its value over time? Has the year, make, and model of the car you're considering had specific issues that have cropped up continually? This information can let you know what to look out for when test driving a specific car.
Give the car a quick look for issues
Before buying a used car, give it a quick hands-on visual inspection. This is a big purchase, so don't rush yourself. Be ready to get your hands — and clothes — a little dirty. It could help in the long run. Here's what you should look for:
Check the body for imperfections like gaps, dents, or discolored paint. These could be signs of reconstruction after an accident.
Inspect the windows for chips and cracks, the tires for uneven wear, and the tailpipe for black grease.
Get under the vehicle and check the wheel wells and underbody for rust, which could lead to future problems.
Make sure the doors are working well and don't show signs of heavy use.
Look under the hood for obvious signs of wear. First, make sure the engine doesn't appear to have fluid leaks dirtying the block. Do a quick oil check to see that it isn't murky, and also inspect transmission fluid levels. Feel any rubber hoses and belts to make sure they aren't cracking or super stiff.
Take the car on the road for a test drive
It's important to take a used car on a test drive — and to know what to look for before buying a used car. Here are some of the things you should check during your test drive:
Listen for odd sounds: Any unusual noises coming from the engine, brakes, or transmission should be checked out by a mechanic. Rough transmission shifts are also a red flag.
Check for water damage: If the interior has a musty smell, it could be a sign the car has flood damage or leaky windows.
Test the A/C: Ensure the air conditioning cools quickly, and the heater warms you up.
Test other electronics: The windows should go all the way up and down with no gaps. The headlights and brake lights should all work properly. Ensure the dashboard instruments light up when you start the car as well.
Paying attention to all of these details can help you make an informed decision on whether to buy the car or look for a better option.
Inspecting a used car with a trusted mechanic
Now, don't fall in love with the car just yet. It's a prudent next step to get an evaluation from a trusted mechanic. The cost of a pre-purchase car inspection can vary, but it can be well worth the expense. A mechanic can get deeper into the quality of the vehicle, covering everything from brake pad wear to trouble codes and spark plug deterioration to any number of issues you can't see from an on-the-lot inspection.
Have a plan before buying a used car
Do you plan to find potential cars online before inspecting them in person? Or will you visit dealers first and research the vehicles later? To make a practical used car purchase decision, have a plan for researching and assessing the vehicle before you finalize the deal.
Avoid falling in love with a car's looks and features before you've done your homework. A little bit of patience and perseverance can help ensure you love your car inside and out for years to come.
Used car market trends
A "hot" used car market is one where the demand for used cars is high, driving prices up. Demand for used cars can increase due to factors like an increase in buyers, a shortage of vehicles in general, price increases for new cars, and more.
Pay attention to used car price trends on sites such as CarGurus to help you decide when to buy (and the best time to sell your car). It's better to go in with a plan for your purchase ahead of time. Learn more about negotiating the best deal on a used car.
What to do after buying a used car
After you've bought your car, you'll need to add it to your car insurance policy. Most insurers offer a 7-to-30-day grace period where your new car is covered the same way as your old one. Typically, you just need the VIN, license plate number, and make and model in order to add a car to your insurance. Learn more about adding a car to an insurance policy.
