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Tips for Buying a Used Car

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Buying a car is one of the biggest investments you’ll make. Despite the outdated notion of a crooked used car salesman, there are many reasons to buy used. With the growth of the internet as a car-buying tool and the increasing reliability of newer cars, the reasons to avoid a used car are shrinking. So if you are considering buying a used car, follow these tips to get the best deal on the best vehicle for you.

Tips for Buying a Used Car [infographic]

The Hidden Costs of Buying a New Car

While it may seem exciting to purchase a shiny, new car, there are plenty of reasons to buy used. The main reasons all have to do with saving money. In addition to the cost of buying a new car, you will have to spend money on registration, tax, and insurance. Buying a used car can save you money on all three. Registration, tax, and insurance are all based on the value of your vehicle. Since used cars are less expensive than new ones, so are these added costs.

One hidden cost of car ownership is depreciation. Depreciation is the amount of value your car loses over time as it racks up miles and wear and tear. Depreciation is why used cars cost less than new ones. But did you know that the moment you drive a new car off the lot it suffers significant depreciation? A car that has been previously owned, even with very low mileage, is not worth as much as a brand new car. That means that just owning the car, before you’ve put on any miles, makes your car worth less than you paid for it. A used car, by definition, has already had at least one owner so the price you pay will be the value of the car after that initial depreciation. There is no additional depreciation until you have really used the car, in which case the loss in value is due to actual use you are getting out of the car.

Why Buying a Used Car Isn’t What it Used to Be

When many people think of buying a used car, they think of the well-worn stereotype of the smooth-talking but crooked used car salesman. There may have been some truth to that stereotype once, with dealerships making cosmetic repairs to worn-out cars and selling them for more than they’re worth. 

Today, however, the internet has made it a lot harder to sell a bad used car. There are lots of resources out there for finding out about a car’s real value, both by make and model and even by individual vehicle.

Plus, today’s cars are much more reliable than they used to be. So even if you purchase a used car with tens of thousands of miles on it, you may get tens of thousands more before you ever have to make a repair.

Start With a Budget

The best way to avoid overspending on a used car is to set a budget. If you plan on paying the full cost of your vehicle at the time of purchase, setting a budget is just a matter of how much you want to spend. But most people choose to take out a loan to pay for a car. Taking out a loan lets you pay for the car over time, so you don’t deplete your savings. It also allows you to purchase a more expensive vehicle than if you were limited to the cash you have on hand. 

If you plan on using an auto loan to pay for your car, it’s a good idea to get preapproved for a loan. Preapproval will put you in a better negotiating position at the dealership because it basically makes you a cash buyer. As far as the dealership is concerned, you have the full amount in hand and will be paying for the car up front. Actually paying off that amount over time is up to you and the lender and has no effect on the dealer.

When you take out a loan to pay for a car, look at the monthly costs. You should aim to spend 20% or less of your take-home pay on an auto loan. Of course, it’s also a good idea to do a little budgeting and look at how any car payment will fit into your overall household budget.

Find the Right Car

Once you know what you can spend, it’s not a bad idea to look around online at a few sites to get an idea of what cars cost. A simple search engine search will bring up some large used car websites. Many of these have simple, no-haggle pricing. Look around at the cars in their inventory to get a realistic idea of what different types of cars cost.

Think about what you need a car for. If you will be carrying around a family, you’ll need a car with room for everyone plus significant cargo room. Many family cars also have lots of cup holders and other family-friendly features. If you plan to carry heavy loads for construction or hauling around a boat or a trailer, look at vehicles with high horsepower and room for cargo. If you just need to get yourself to work and around town, look for something fuel efficient and comfortable to drive.

Look at reviews of cars online. Many reviews will break down the reliability, safety, driveability, features, and other aspects of a car. Another useful resource is the Insurance Institute for Highway Safety, which provides crash test data on almost all vehicles. Read a few different reviews to get a good idea of whether a particular make and model suits your needs and preferences.

Narrow Your Search to Specific Vehicles

Once you find the type of car you want in the general price range you can afford, it’s time to look for specific vehicles. You can do it online, or you can walk around a dealership lot. 

When you find a vehicle you like, you can use Kelley Blue Book to get a more accurate price on an individual vehicle. To use Kelley Blue Book, you will need to know the year, make, and model plus the mileage, plus any options (like built-in navigation system), the mileage, and the condition. In general, it’s usually best to only buy a used car that is at least in “good” condition, but the difference between “good” and “outstanding” can be a thousand dollars or more, so look carefully. Kelley Blue Book will provide prices for buying from a dealership and from a private seller. The dealership will cost more (they have overhead, after all). You can also get the trade-in value of your own car, in case you plan on trading it in when you get a new one.

In addition to checking Kelley Blue Book, get the vehicle identification number (VIN) and run a vehicle history report. You can purchase a report from AutoCheck or Carfax. It’s a small investment and not one you should skip. The vehicle history report will tell you if the car has a clean title, whether it has been in any serious accidents, the exact mileage (in case someone has tried to change it), and how owners the car has had. Some reports also have information about the car’s maintenance history. This is all useful information to decide if a car is worth purchasing and how much you should be paying for it.

Purchasing from an Individual

If you are buying the car from an individual, it is important to make sure that the title is clean (there is no lien on the vehicle). You should also ask questions about the car’s history, whether the seller is the first owner, and if there is anything else to know about the car. 

Take the vehicle for a test drive and pay attention to handling, acceleration, brakes, and mechanical condition (noises, vibrations, etc.). Try to drive the car on a variety of roads, such as hills, curves, rough pavement, and the highway. Check for blind spots, general comfort, and then climb in the back to check out legroom. Blast the sound system and make sure that any electronics (like Bluetooth) are fully functional. Walk around the car to inspect for any signs of damage. Check the wear on the tires, too.

Finally, ask to take the car to a mechanic for a full inspection. This is important since there are plenty of issues that wouldn’t be apparent in the test drive.

If the car checks out, it’s time to talk price. A good place to start is by listing any damage or other issues that might make the car worth less. You can then show the seller the Kelley Blue Book price and explain why you are making a lower offer. You can negotiate a little, but be prepared to walk away if the price is unreasonable.

Purchasing from a Dealership

If you are purchasing from an independent used car dealership, you should treat it the same as a private seller. But many large dealerships that sell new cars also sell used cars. These dealerships are a little more reliable and often offer “certified pre-owned” cars that have been inspected by a mechanic and may even carry an extended factory warranty. These vehicles require a lot less inspection. However, you should still test drive the car, just as you would with a new car.

When you buy from a dealership, you will probably be negotiating on price. Remember, the salespeople at the dealership are expert negotiators who do this day in and day out. To get the best deal, here are a few tips:

  • Ignore monthly payments. If you have a pre-approved loan, you are a cash buyer and should only be negotiating on the total cost of the car. Many dealers will try to sell you on the low monthly payments. Don’t fall for that.
  • Keep your first offer low, but reasonable. If you start too low, dealers won’t take you seriously. Once you have an initial offer, raise is slowly, maybe $250 at a time.
  • Don’t get stuck in the salesperson’s office. Often, a salesperson will leave you alone while they “go talk to their boss”. This is one way to throw you off. But you don’t have to wait there. Go look around the showroom or just meander about the place. Make them come to you. This throws off the dealer, tells them they can’t control you, and can help your negotiation.
  • Ask about fees. Often, you will settle on a price, but then the dealer will tack on fees to make up the profit they gave back in the negotiation. Make sure the dealer can explain each fee. Negotiate on the “out-the-door” price, which includes all fees. Don’t accept a price and then let the dealer add fees afterward.
  • Be ready to walk. If a dealer won’t work with you, you can leave at any time. Don’t be afraid to be rude and don’t fall in love with a car to the point of losing your negotiating skills. There are plenty of other fish in the sea.

TrustDALE Has Some Advice

If you are looking for a used car dealership you can trust, try Graham Automotive. They are a TrustDALE certified business and have undergone Dale’s full seven-point investigative review. Dale can recommend them on price, quality, and service. You can find all types of TrustDALE certified auto services, including auto loans, service, and repairs here.