Best Ways to Buy a Used Car (and Not Get a Lemon)
Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.
When the pandemic hit, new car sales came to near-halt. Automaker manufacturing is still well below industry norms. With shipping delays, component delays, and short staffing contributing to new car shortages, the used car industry is booming. In the first eight months of 2021, used car prices have increased 16% and are expected to continue month over month, contributing to inflation in the U.S.
If you need a car, this does not bode well. You are limited to what's available at dealerships. If you are hoping to save money and purchase a used car? Well, that may take some work.
In this article
How much can you save on a used car?
Used car sales often increase during economic downturns as people look for ways to get to work without buying a new car for a lot more money. Used cars also depreciate less, don’t require a large loan, and are usually cheaper to insure. Prices for used cars can be all over the map, depending on where you’re buying, the type of car you’re looking for, and inventory. Your credit score can also affect the ultimate price you pay. A poor credit score can lead to a higher interest rate on a used-car loan, while a high score may drop it.
The good news is there are almost always plenty of used cars for sale. It’s just a matter of finding one you like and that fits your budget. Certified pre-owned cars, which are typically two to three years old and are reconditioned by dealerships, cost an average of $15,471 less than buying a new one, according to Edmunds. Some cars offer more savings than others when buying used. A 3-year-old Honda Civic has an average savings of $6,670 off a new one, according to Edmunds. The same year Ford Explorer saved $21,098 on average. With that much savings on the table, it’s worth shopping wisely for a used car so that you can get a good used car that will last and hopefully pay less than the average price.
What to consider when buying a used car
Of course, saving money is the primary reason car shoppers buy a used rather than a new vehicle. However, there are extra things to consider when shopping used, especially if you plan on purchasing from a private party. As with any car-buying process, spending is the first factor, so have a budget in mind. Then, follow these steps.
Research the best used cars
Some used cars are better than others and can last 10 years or longer if well maintained. Sites such as Consumer Reports and Dashboard Light rate used cars for reliability and can give you an idea of higher repair costs. If a car has a history of needing engine or transmission repairs, for example, then it’s likely to be more expensive to fix than one with fewer powertrain issues.
To get a vehicle history report on the specific car you want to buy, go to CARFAX or Auto Check, or ask your used-car dealer for one. All you need is the vehicle identification number and you'll find out if the car had any insurance claims for damage due to an accident, flood, or other issues. If you’re buying it in a private sale, then pay the $40 or so it costs to get the report yourself. It’s also worthwhile to take the car to a mechanic you trust to go over it.
Consider older vehicles
A car built 3 or fewer years ago is ideal, but you can save more and possibly avoid needing a car loan by buying a car that’s seven years old or older. It won’t have the latest safety technology, but it should last 5 to 7 more years and the price should be in the four-figure range. Look for an older car that hasn’t been driving many miles and has an excellent maintenance history.
Research prices
Once you’ve determined how well the used car you want runs, it’s wise to check pricing guides to see what a similar used car costs. There are many places to find prices, among the ones to look for pricing for your particular model are:
These platforms can also give you an idea of the price you should pay. It will take depreciation, miles on the odometer, and other factors when car shopping into account so you know the best price when searching for a used vehicle. Whether you are purchasing from a used car salesperson or a private seller on Craigslist, knowing the market value will help you haggle (which you should most certainly do) when agreeing on a price. Some dealerships, including Carmax, claim to offer the lowest asking price so you don't have to haggle if you are not comfortable dealing with used car buying.
Remember, the lower the price, the more likely the car needs more work. Perhaps there is a new set of tires, a new battery, and a host of other "shiny things" to entice you. But the cost of repairs on larger-ticket issues, such as transmission, could cost thousands and make a great price a bad one if you do not do your due diligence.
Trade-in a vehicle
If you currently have a car, even if you consider it a non-working junker, trading it in for your next car can save you money. The parts alone are worth money to a car dealership. Just as you would haggle using platforms like Kelley Blue Book, the dealership becomes the car buyer and will try to get a lower price. Some will allow you to use your trade-in as a down payment, which can come in handy is you haven't had time to budget for a new, used car.
Get your own financing
Financing is a big moneymaker for car sellers. Sometimes it can be worthwhile and can save you more money than if you went to your bank and got a loan on your own. However, it’s worth shopping for the best finance rates. If you don’t have enough money to buy a car outright, be prepared for a little bit of shock when shopping for used car loan rates.
Used cars cost more to finance than new ones. The reason is simple: Used cars don’t hold as much value as new ones, giving a lender less in value if it has to repossess the car if loan payments aren’t made. Get pre-approved for a used-car loan from your bank or credit union before negotiating with a used-car dealer. This will at least give you a financing option if the dealer’s offer doesn’t beat it. Don’t let them talk you into buying more car than you can afford, and don’t negotiate the price based on what monthly payment you can afford.
Dealers may try to lower the monthly loan payment by stretching out the loan over the years, requiring you to pay more in interest than if you had a lower overall car price to pay. When you walk off the lot with your new (to you) used car, you don’t want to be still paying for it after it wears out and loses all of its value.
Find the cheapest car insurance
Here’s the thing: your current car insurance company is probably overcharging you. But, who has the time to look around for around a new company?
A website called CarInsurance.net makes it super easy to see if you’re getting the lowest price. All you have to do is enter your ZIP code and your age, and it’ll show you your options.
Using CarInsurance.net, people have saved up to $610 a year.
It takes just a few minutes to see how much CarInsurance.net could put back in your pocket. And the best part? Because we’re driving less, some insurers are slashing prices this month.
Save $1,604 (or more) per year on car insurance today.
- 2-minute quote
- State minimum coverage
- Full coverage
- Explore top brands
Other things to look for when purchasing a used car
Buying a used car can be intimidating, and there are many scams out there. If a car seems too good to be true, it probably is. Protect yourself buy following these simple steps.
- Understand "lemon laws" in your state. These are instilled to protect car buyers, so know what the definitions are in your state before you shop, so you do not find yourself with a beater and no way to get retribution.
- Take the car to a mechanic before purchasing. Not only should you test drive a used car, but it should be given a once over by a trusted mechanic (never trust the seller's "paperwork" or mechanic). If a seller won't allow you to leave a deposit and have the car inspected, walk away. Most mechanics will not charge to do a used-car inspection, giving you the true low-down on a vehicle and need repairs before you commit.
- Consider an extended warranty. If purchasing from a dealer, they provide a warranty to give you peace of mind. Often it is a 30-day warranty so you can bring the car back if there are any issues (giving you, in essence, a 30-day test drive). However, if there are more extended warranties, you may want to opt-in and pay a little extra to have more coverage.
The bottom line
Any time you make a car purchase, it can be scary. It's a lot of money - your money - to spend. While you can save money when buying an old car, you need to ensure you are getting a fair price and a reliable vehicle. Don't rush into the process, even if you need a new set of wheels fast. When buying a used car, you must be sure it is the right car for your price range and needs.
Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.
Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.
Images appearing across JoyWallet are courtesy of shutterstock.com.
Writer
Lissa Poirot is an award-winning journalist and editor with a focus on finance, travel and health. Her work has appeared online and in print, and she has often been cited as a source on both. She currently resides in Pennsylvania.
Share this article
