Infographic: Buying a Used Car

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This simple guide to buying a used car shows you what to check for and how to get the best deal.

Benefits of buying used

Lower price: Buying a used car is more cost-effective than buying a brand-new car
Wider selection: As used cars are cheaper than brand-new cars, you widen the number of cars to choose from
Avoid depreciation: In the first two years of ownership, a new car will lose about 30% of its original value
Resale value: If you sell your used car in a few years, you will lose less money on the resale than if you had bought it new

Set a realistic price range:

Figure out what kind of car you need:

Compact: Up to 4 people, good for hauling books and takeout, ideal for lots of highway driving or commuting
Sedan: Up to 4 people, good for hauling groceries and a few boxes, ideal for a mix of around town and highway driving
Van: More than 4 people, good for hauling lots of people and stuff on a regular basis, ideal for around town with the occasional long distance trip
Truck: 2–4 people, good for hauling work tools, equipment or pulling a trailer, if you tow equipment a lot consider a diesel engine

Get pre-approved for financing:

If you don’t have the cash to buy your used vehicle outright, you’ll need to get an auto loan
Being pre-approved for an auto loan from your credit union is a good idea
You’ll know how much you can spend, which will give you some negotiating power with a dealer or used car lot, as they’ll know you are serious

Find your vehicle:

Visit the manufacturers’ websites to find a model you like
Visit websites that research and investigate vehicles for consumers to find out all you can about the vehicle you like—try consumerreports.org, edmunds.com and kbb.com
Visit your local dealer, used car lot or classified ads and start tracking that vehicle down

Advantages of a private seller:

Great deals: When you buy directly from a person, you can often find a really good deal
Less intimidating negotiations: Negotiating can be less intimidating because you’re working with a regular person, not a highly trained sales professional
No unnecessary costs: Dealerships often try to charge for unneeded extras

Advantages of a dealer or used car lot:

Warranty: Most dealers offer a warranty, which will give you the peace of mind that the car that you’re buying is in good working condition
Extras: Dealers will often throw in extra services for free that a private seller can’t, like a free oil change
Trade-ins: Dealers take trade-ins, which can lower the amount you have to pay for the car you are buying

Disadvantages of a private seller:

No consumer protection: If you discover after the sale that the car has a problem (known or unknown by the seller), it immediately becomes your problem
Annoying negotiations: Owners tend to be more attached to their cars than dealerships and can be difficult to work with

Disadvantages of a dealer or used car lot:

Higher prices: List prices at dealerships tend to be more expensive than when buying directly from a private owner
High-pressure negotiation: Negotiation with used car salespeople can be high pressure, as selling is what these folks do for a living

Before you start the car, give it an initial inspection:

Inspect the exterior: Look for offset doors and fenders, cracks and differences in paint color, as this may indicate body damage—if you spot new paint, tap along the repainted areas; a change in the sound can reveal repairs and body work
Look for rust: Check underneath the car for rust—a used car with a rusted frame isn’t structurally sound
Check the interior: Inspect the interior for wear and tear and water damage and check the odometer—if it shows low mileage but the inside of the car is disheveled, the car may not be what it appears to be
Check the tires and wheels: Look for even tire wear—uneven wear could mean that the wheels or suspension are out of alignment
Look at the engine: If you see rounded or stripped nuts and bolt heads, it may indicate shoddy repair work; check for new spark plugs—it is a good sign that the car has undergone regular maintenance; make sure the coolant is clear and the oil, transmission fluid and brake fluid are all the correct colors

Now, take the car for a test drive:

Be sure to drive it cold: A cold engine will tell you a lot more than a warm engine will
Plan your route: Your test drive route should cover different types of roads—try to drive on highways, city streets and rural roads
Vary the terrain: Find a bumpy road to see how the car responds—if you feel like you’re being thrown around, the shocks are likely worn out
Check the controls: Test the wipers, lights, turn indicators, stereo, and the heat and air-conditioning controllers
Check the alignment: While driving, momentarily take your hands off the steering wheel to see if the car pulls to the left or right
Check the gearbox: Gears should shift smoothly—if you hear any grinding noises, there is likely something wrong with the transmission
Check the brakes: Find an empty road, accelerate and hit the brakes hard—if the car pulls to one side, there may be a loose caliper

Vehicle history report:

Get a comprehensive report of the vehicle’s history—these reports often cost money, but they are worth it
For no charge, carfax.com will show you how many records are available for a specific Vehicle Identification Number (VIN); however, if you want to view the records, there is a charge

You’ve found a car you’re happy with and now you want to buy it. Remember, dealers don’t just make their money on the selling price.

Front end: Dealers make money on the front end by selling the car for more than what they paid for it
Back end: Dealers make money on the back end by selling financing, extended warranties and add-ons like rustproofing
Trade-in: If you have a trade-in, dealers make money on the difference between what they pay you for your car and what they get when they sell it

It’s time to negotiate. Dealers build about 20% gross margin into the asking price of the used car.

Research the price: Find out what the going price is in your area for the type of car you want—check out classified ads in the paper or online to get an idea of prices
Make an offer: Offer 15% below the asking price—tell the salesperson that you know there’s about 20% gross margin in the price and that you want him or her to make a profit
Be cautious of add-ons: If you’re buying a used car from a dealer and they try to sell you add-ons, just say no—you can likely find a cheaper source elsewhere

Be prepared to walk away. In any negotiation, be ready to walk away—be flexible in your choice and don’t get too attached to one car.