Buying a used car is like going on a treasure hunt. There are amazing deals out there, and with the emergence of the Internet as a car shopping tool, you have every chance of finding a good deal on a car that meets your needs and fits your budget.
There are plenty of incentives to buy used instead of new: It will save you money on car insurance, registration, taxes and depreciation, which is the loss in a car’s value due to wear and tear over time. It also makes sense because cars have never been more reliable. It’s not unusual for some vehicles to be trouble-free for well over 100,000 kilometers.
Top 8 simple tips for buying a used car:
1. Set your budget:
There are only two ways for buying a used car: Pay cash or take out a loan. If you’re paying cash, budgeting is pretty simple. But don’t spend all your savings. Remember to set aside money for registration and insurance — and possible future repairs.
Most people take out a car loan so they can protect their savings and buy a more expensive model. It’s smart to get pre-approved for a car loan because it simplifies the buying process and puts you in a stronger position at the car dealership. You’ll see later how pre-approval fits into the process.
Use an auto loan calculator to compute the best loan for you. Plan to put about 10% down and finance the car for three years. Ideally, the total of your monthly auto expenses shouldn’t be more than 20% of your monthly take home pay.
2. Choose the right car:
Now the fun begins — picking your car. Take some time to think about how you plan to use this car. For example, if you have a family, you’ll want enough room for everyone plus ample cargo space.
Narrow the field by making a list of must-have features. Then, search for models with those features using tools such as olx.in. As you move forward, build a list of three target car models to research in more detail.
3. Check reliability and ownership costs:
Every used car is different. Some have been driven more miles and have more wear and tear. But, in general, you want to make sure you’re choosing models known for their dependability. Consumer Reports and J.D. Power collect maintenance reports from owners and rate all used cars.
A closely related issue is the total cost of ownership. Some cars are cheap to buy, but will cost a lot in the long run because of insurance, maintenance, repairs and depreciation. Several automotive websites, such as Kelley Blue Book’s Five-Year Cost to Own or Consumer Reports’ Cost of Vehicle Ownership, show estimates of these expenses.
4. Check the vehicle history report:
Before you drive across town to see the car you’re interested in, run a vehicle history report. It’s a quick way to know if you should seriously consider buying this car.
In some cases, online classifieds will have links to free vehicle history reports. If not, it’s worth it to buy one. Here is some of the important information you’ll learn:
- Does this car have a clean title? If a car’s been in a serious accident, fire or flood, and was “totaled” by the insurance company (declared a total loss) it still might be driveable. However, the insurance company will issue a “salvage title” to alert future buyers. Steer clear of cars with a salvage title because it kills the resale value, and the car might still have hidden problems.
- Serious accidents are reported to the insurance company and will probably be on the vehicle history report.
- Shady car lots might spin the odometer back to increase its selling price. The vehicle history report can alert you to this scam.
- Some reports show if required maintenance was done on time and where the work was performed.
5. Contact the seller:
A quick chat will answer lots of questions and save time. First, verify the information you read in the advertisement. Then, here are some basic questions to ask:
- Are you the first owner?
- Are the service records available?
- Do you have the title and is it clear? (A clear title shows there are no liens on the car.)
- How did you set the asking price?
- Is there any important information that wasn’t in the ad?
- Can I have the car inspected by a mechanic?
6. Test drive the car:
Up to this point you haven’t actually driven the car you’ve chosen. Now, you’ll not only see if you like this model, you’ll also have to decide if this particular car is worth buying.
Unless you’re a mechanic, you can’t be expected to inspect a car thoroughly. However, you can give the car a pretty good initial inspection. If it looks good, then you can pop for a full inspection, which will cost you with very normal amount.
Select a test drive route that has a little bit of everything: hills, rough pavement, curves and even a stretch of highway. Drive the car with the radio off — you can test that later. Pay attention to the following things:
- Visibility: Are there any blind spots?
- Acceleration and cornering: Does the car have enough power? How does the steering feel?
- Brakes: Are they responsive and predictable?
- Ergonomics: Can you easily reach all the gauges and controls?
- Mechanical condition: Listen for any unusual noises or vibrations that could indicate worn suspension parts or tires.
After the test drive, check the back-seat leg room and cargo capacity. Now it’s time to blast the sound system and see if your phone connects via Bluetooth.
If you liked driving the car, and it seems to be in good condition, you should still take it to a mechanic. Private party sellers are pretty relaxed about this. Some dealers might give you push back, claiming they’ve already inspected it. Go ahead and insist if you have any doubt about the car’s condition.
7. Negotiate the best price:
Here’s the part that everyone dreads: Negotiation. But it doesn’t have to be stressful, particularly if you’ve done your research and have a good idea what the car you want is worth. Compare the seller’s asking price to the average market price you determined on the pricing guides. Chances are, the seller is asking more than the market average.
Let’s say the seller is asking $12,000 and your research has told you the car is worth only $10,500. Start by pointing out any concerns you have about the car’s condition. For example, you can say, “I like the way the car drives. But it really needs a new set of tires. And besides that, the book value is only $10,500. So I’d be willing to buy it for $10,000.”
Now, it’s up to the seller to either accept your offer or make a counteroffer. If his counteroffer still seems too high, you can either stick to your guns or invoke the time-honored phrase, “I’ll meet you halfway,” and split the difference. You can go back and forth until you agree.
Here are a few tips to buy a car from a dealer:
- Don’t be a monthly payment buyer. If you have a pre-approved loan, you’re a cash buyer as far as the dealer is concerned and you should negotiate on the price of the car, not the size of the monthly payment. This allows you to dodge a common trap set for buyers by salesmen: convincing a buyer to focus on the monthly payment rather than the overall cost of the car.
- Don’t be trapped in the sales office. Don’t let a salesman leave you alone while he “goes to talk with his boss.” Instead, roam around the showroom or go get a cup of coffee. Uncontrollable buyers keep salespeople off balance, which can help you in negotiations.
- Negotiate slowly and repeat the numbers you hear. It’s easy to get confused, so go slow or even write down the numbers thrown at you. Make sure you know if you’re talking about the “out-the-door” price, which includes all taxes and fees, or just the sale price of the car.
- Ask about fees before saying yes to a deal. Some dealers include bogus fees to take back profit they lose in negotiating. Ask for a breakdown of additional fees before you agree to any deal.
- Always be ready to walk. If you aren’t making progress toward a deal, or you don’t like the way you’re being treated, just walk out. No goodbyes are necessary.
8. Close the deal:
Before taking ownership of the car, you should add it to your insurance policy. Then, you only need to pay for the car — usually with cash or a cashier’s check. Make sure you get a title and have the seller sign it correctly. When in doubt, check the state’s registry website for more information.
If you’re buying from a private party, and there is still a loan on the car, call the lender to find out how to close the deal. If the lender is a bank, offer to meet the seller in a branch office and sign papers there.
If you’re at a dealer, even if you have a pre-approved loan to pay for the car, the dealership’s finance manager will probably offer to beat the terms of the loan. It doesn’t hurt to see if he or she can get a better interest rate. Just make sure all the other terms of the loan are the same.
Before the contract is drawn up, the finance manager will also likely pitch you additional products and services. Buying an extended warranty at the right price can provide peace of mind. But check first to see how much warranty still remains on the car.
Once you sign the sales contract, the car is yours. So take your time reviewing the contract and don’t let yourself be pressured into signing just to get it over with. The contract will include the agreed-on sales price and these additional items:
- State sales tax. This is a percentage of the cost of the car.
- Registration fees. A dealer has the ability to register the car for you, which is convenient.
Some dealerships might include additional fees, some of which are bogus. It’s tricky to know what’s legit and what’s just included to boost their profit. If the finance manager can’t explain a fee in the contract, ask to have it removed.