How to Save Money When Buying a Used Car

New cars depreciate in value the second they leave a dealer’s lot. That’s why the best way to save money when buying a car is to purchase a used one.

“Used cars offer a huge price advantage and are great for those who are less picky about having the most current features,” says Mike Ouyang of LendingTree’s auto division. “But used cars often have fewer dealer incentives, such as low-interest financing, to capture buyers.”

Buying used also means that the vehicle will likely require more maintenance. Here’s how to make sure you don’t end up buying a used car that’s more trouble than it’s worth.

1. Get a fair price estimate before shopping

As you begin to narrow down your search, look up the car model in a pricing guide like Kelley Blue Book to check the market value of the car you have your eye on. Your search can be customized based on factors like mileage, condition, make and model, etc. Once you have determined the fair price of a vehicle with the features you want, you’ll have the information you need to negotiate successfully.

These pricing guides can also tell you what a trade-in is worth, which should be taken into consideration when calculating how what you can afford. Make sure to price your current car if you are planning to trade it in at the dealership.

2. Check the car’s history

It’s important to know a vehicle’s history as you shop for used cars. If a dealership doesn’t provide this history upfront, it should be available upon request. Some dealerships also have “certified pre-owned” policies, meaning the car has undergone a rigorous inspection. Protect yourself by checking exactly what their certified pre-owned policy means, as some dealerships may just use the term to make buyers feel better about a purchase.

If you’re buying from an individual, ask for the vehicle identification number or VIN to check for the vehicle history online. Services like CarFax make it easy to find the complete history of a car or truck from the comfort of your home.

In either scenario, here are some questions to ask when buying a used car, that can help you avoid serious mechanical concerns:

• May I see the service records? 
• Do you have the title? Is it clear? (Clear titles show that there are no liens on the car)
• What factors went into deciding the asking price?
• Are there any important details that might not have been mentioned in the ad that I should know about?
• How old is the battery? When was it last replaced?
• Does the bottom of the engine have any sign of fluid leak?
• Does the underbody have any dents or dented metal?
• Are all the tires the same size and brand?

3. Get a used car inspection

Unfortunately, not all dealers and salesmen are honest, and private party sellers may be lax about checking the status of the vehicle. That’s why it’s always recommended to get an inspection from a trusted mechanic, even if you asked the questions above, took the car for a test drive, or saw a clean vehicle service history. Whereas some dealers may push back, insisting that “the car has already been inspected.”

These inspections are not free, typically charging between $100 and $200, but they are a great way to protect investment. An independent mechanic may discover issues that the seller didn’t know about (or that they were actively trying to hide). This has two key benefits.

One is that you may find issues with the vehicle that will require significant repairs. If the cost of these repairs is more than the value of the car, you’ve saved yourself from a potential lemon. These necessary repairs could also be used to negotiate a lower purchase price should you decide to go through with it.

The other benefit of a used car inspection is that you can determine the trustworthiness of the seller. If too many things don’t match up, or were omitted entirely, you might be better off walking away because that type of seller may also be shady when it comes to financing, the validity of the title, or other promises.

4. Test drive the car

You may not be an expert mechanic, but you can still give the car a thorough inspection of your own by taking the car for a test drive. Here are a few things to look for:

• Any unusual noises that may indicate faulty mechanical conditions
• Blind spots
• If the steering and acceleration are to your liking
• Properly functioning brakes
• Working radio/sound system
• Does the transmission feel stiff or jerky when you shift gears?

Test the car in a variety of settings including highways, up and downhill, and making sharp turns.

5. Find affordable used car financing

If you’re not paying cash, there are two financing options to choose from: direct lending or dealership financing.

Direct lending

Direct lending is borrowing money from a bank, financial company, or credit union. With this type of loan, you agree to pay the financed amount along with interest charges that will be paid back over a set time. Moreover, you are able to apply for financing before you begin shopping for a car. Being pre-approved for an auto loan is hugely beneficial to negotiations as you get to know your credit terms in advance, including:

• Annual percentage rate (APR)
• Term (length of the loan)
• The maximum approved amount you can borrow

If you’re buying from a dealership, being pre-approved will allow you to negotiate for better financing options because you have something to compare dealership offers to. If you are buying from an individual owner, direct lending is the only financing option aside from paying cash.

Dealership financing

On the other hand, dealership financing is, as the name implies, an auto loan issued through the dealership. You are entering into an agreement with the dealership to purchase the car and agree to pay the financed amount plus interest charges over a period of time, rather than a bank or other type of financial institution.

Dealers almost always make a profit through their financing; hence, they may not have your best interests at heart. Make sure to get the Truth in Lending Act (TILA) disclosure for any dealership offer you get so you can compare the total costs, interest charges, and payments with a direct lending offer. And if a dealer isn’t willing to work with you, don’t be afraid to walk away.

6. Be mindful of the length of the auto loan

The most common method of purchasing a car is taking out an auto loan. Typically, consumers put 10% down and finance the car for 36-72 months.

But choosing a longer-term loan on a used car can be risky. Even though a longer term will mean lower monthly payments, you may need to replace the vehicle before the loan is paid off. If so, you would still be on the hook to repay the remaining balance for a vehicle you can no longer use. This would also eat up some of the funds you’d use to purchase your next vehicle car.

Negotiate the best price for a used car

The seller is almost always going to ask for more than the market average so they can turn as much of a profit as possible. Haggling is an essential part of buying any vehicle, whether you like it or not. Before approaching a seller, have a firm number that you are not willing to go above — and be prepared to walk away if a deal can’t be reached. If you’ve already done your research and gotten a pre-approval offer, then you’re in a great position to negotiate.

Here are a few tips to help you get the best deal on a car lot:

Take your time while negotiating. Start with a low offer but stay in a reasonable ballpark. Otherwise, the dealer may see this as lowballing and no longer take you seriously. Instead, try making a low offer that remains enticing. If the deal is not enticing enough for the dealer, improve your offer in $300 increments.

If you are pre-approved for a loan, then you are essentially like a cash buyer. So, negotiate the price of the car and not the size of the monthly payments. Commonly, sellers will try to convince consumers to buy a car by showing them the low-level monthly costs instead of the overall cost of the car. Instead, focus on the big picture. A dealer may agree to lower your monthly payment, but this would stretch out the loan’s payback period and make you ultimately pay more in interest.

Should the salesperson walk away to “speak with their boss,” get up and roam the showroom or get a cookie or coffee. This way you keep the salesperson on their toes, which will aid your negotiations.

Make sure you get a breakdown of all the taxes and fees before you say yes to a deal. Sometimes dealers will include filing fees or other fees in order to make as much of a profit from what they may have lost during negotiations. It’s recommended to negotiate each part of the transaction separately so that dealerships can’t slip hidden fees into the contract.

You are the buyer; therefore, you have the most power. Always be ready to walk if you are not making any progress in negotiating a deal, or simply for the fact you do not like how you are being treated. And even if you think the price is fair, it’s worth seeing how much you can either get reduced from the price or in other concessions such as cashback, low or zero interest, or free tune-ups.

You bought a used car, now what?

Transfer the title and register the car

To transfer the title of the car and the bill of sale, or dealership invoice, you may be required to visit your local county tax office with the seller to transfer ownership. Once you have finalized your registration information, make sure to keep it in your glove box sans the vehicle title. Keep the title locked in a safe place at home that you can easily find later.

Insure the car

If possible, get your insurance figured out before you drive off the lot. If you have the vehicle’s VIN, you can provide it to your insurer so you can have proper coverage. Dealerships will often not allow you to drive off the lot without proof of insurance. Besides, choosing your insurance plan ahead of time will aid in your budgeting plan. Always make sure to include insurance in your budget from the get-go.

Read the owner’s manual

Although tedious, it is important that you read the owner’s manual. Not only will it give you a clear idea of the car’s maintenance schedule, but it will also teach you about the ideal gas grade, tire pressure, and tips and tricks on how to use the various car tools at your disposal.

Consult for any outstanding repairs

It is in best practice to have a pre-purchase inspection done prior to purchasing a car. However, it is also a good idea to have the filters, fluids, brakes, and tires checked again post-purchase. Keep in mind, though, when searching for a mechanic that certain mechanics specialize in maintenance while others specialize in repair.

Red Flags: Sings You’re Dealing with a Used Car Scammer

Buying a used car online offers convenience and a wide selection, but it also comes with the risk of encountering scammers. These individuals try to exploit unsuspecting buyers by using various tactics to deceive them. To protect yourself from falling victim to online used car scams, it’s crucial to be aware of the red flags.

While the internet has made buying used cars more accessible, it has also provided scammers with new opportunities to exploit unsuspecting buyers. By recognizing the red flags associated with online used car scams, you can protect yourself and make informed decisions when purchasing a vehicle.

The Price is Too Good to Be True

One of the most apparent red flags of an online used car scam is an unbelievably low price. Scammers often lure buyers with prices significantly below the market value to attract attention. If a deal seems too good to be true, it’s essential to exercise caution and thoroughly investigate the seller and the vehicle.

Seller’s Unwillingness to Provide Information

Legitimate sellers are usually willing to provide detailed information about the vehicle. If the seller is evasive or reluctant to answer questions about the car’s condition, history, or documentation, it may indicate fraudulent activity. Be wary of sellers who avoid providing essential details or request personal information without a valid reason.

Poor Communication and Evasive Answers

Scammers often exhibit poor communication skills and provide vague or evasive answers. They may not respond in a timely manner or consistently avoid addressing specific concerns. If the seller’s communication raises doubts or leaves you with unanswered questions, it’s advisable to proceed with caution or consider alternative options.

Requests for Unusual Payment Methods

Be cautious if the seller insists on using unconventional payment methods. Scammers may ask for payments through wire transfers, money orders, or cryptocurrency, as these methods are difficult to trace or reverse. Legitimate sellers are typically open to more secure and traceable payment options, such as bank transfers or escrow services.

Pressure to Make Quick Decisions

Scammers often create a sense of urgency to pressure buyers into making quick decisions. They may claim that other buyers are interested in the same vehicle or use time-sensitive excuses to rush the sale. Legitimate sellers understand the importance of buyer due diligence and are willing to provide ample time for research and decision-making.

Absence of Vehicle History and Documentation

A reputable seller should be able to provide comprehensive vehicle history and documentation. Lack of proper paperwork, including the title, registration, or maintenance records, should raise concerns. Scammers may offer excuses or provide fraudulent documents to mask the vehicle’s true history. Always request and verify the necessary documentation before proceeding with a purchase.

Suspicious or Generic Photos

Photos can be telling indicators of an online used car scam. Be cautious if the listing contains suspicious or generic photos that do not match the vehicle’s description. Scammers may use stock images or photos of similar vehicles found online. Request additional pictures or arrange for a video call to view the car in real time and verify its condition.

The Seller Is Located Overseas

Dealing with a seller located overseas introduces additional risks and complexities. Scammers often pose as overseas sellers to create distance and make it difficult to investigate their legitimacy. Be extra vigilant when considering international transactions, as it can be challenging to verify the vehicle’s condition, documentation, and legitimacy of the seller.

You can’t meet the seller in person or inspect the car

If the seller is local but refuses to allow you to drive the car or have it inspected by your mechanic before buying, that’s a red flag. “Experts agree that you should have an independent mechanic inspect a used car before you buy it, according to the FTC.

The scammer may even seem to have a good excuse, such as being deployed in the military or currently living out of state due to a recent job transfer. Don’t buy into the scam. Wait to purchase a used car that you can take to a mechanic for an independent inspection.

The seller pressures you to buy now

Scammers try to rush the sale with high-pressure tactics like telling you the price is about to go up or that you need to buy the used car today to get the best deal.

“Resist the pressure,” warns the FTC. “Scammers use high-pressure sales tactics to get you to buy without thinking things through.”

The seller has bad online reviews

If the ad is through an online used car website, search online for reviews under the name of the seller or business selling the car. If other car buyers got burned, there’s a good chance you’ll find plenty of poor reviews and rip-off complaints in the search results.

The seller adds on fees after the sale

Once you agree to a price, scammers may try to add on “shipping,” “transportation” or other fees not mentioned earlier, says the FTC. That’s a sure sign you’re not dealing with a legitimate seller who’s honest about the full cost of purchasing the vehicle.

The VIN isn’t a match

Once you obtain the Vehicle Identification Number (VIN) from the seller, check the number against the car’s data at approved vendors listed in the National Motor Vehicle Title Information System. If it doesn’t match the VIN for the car you’re considering, slam the brakes on the potential deal and shop elsewhere.

Where to find used cars for sale

• AutoTrader: AutoTrader is an online vehicle listing service that acts as a portal for sellers and buyers of new and used cars by gathering information from several different car lots in your area.
• AutoList: AutoList is a handy aggregator because it siphons vehicle listings from a wide range of online car-buying websites and presents them to you in one convenient location. Additionally, AutoList offers a “Listimate” feature that informs you whether the price of a car is fair or not.
• Carvana: Carvana cuts dealerships out of the process and operates almost entirely online. Therefore, they do not have traditional dealerships or test-driving options. However, you are given the option of returning your purchase seven days after the sale with no questions asked.
• CarMax: CarMax is a car dealer with a no-haggle policy for buying and selling used vehicles, which is intended to simplify the buying process for individuals who want to make their purchase and get out. And unlike Carvana, CarMax has physical lots spread throughout the country, so you can check out vehicles and test-drive before you buy.
• Craigslist: Craigslist has been around for years and is best used for finding low-end cars in your area from individual sellers. However, be cautious of scammers.

Frequently Asked Questions (FAQs)

Summary

While the online marketplace for used cars offers convenience, it’s important to remain vigilant and recognize the red flags of online used car scams. Be cautious of unbelievably low prices, sellers unwilling to provide information, poor communication, requests for unusual payment methods, and pressure to make quick decisions. Always verify vehicle history and documentation, scrutinize the listing’s photos, and exercise caution when dealing with overseas sellers. By staying alert and informed, you can reduce the risk of falling victim to an online used car scam.