When it comes to procuring a safe and reliable vehicle for daily use, new cars present the fewest risks. That being said, most Americans opt for used vehicles, as the bulk of car shoppers simply cannot afford to buy new.
Luckily for used car buyers, pre-owned vehicles are cheaper to purchase and usually cheaper to insure. They also lose value at a much slower rate than new vehicles, which depreciate by around 9% the moment they are driven off the lot and by an additional 33% after three years, according to Edmunds.
Despite their advantages, however, used cars are inherently riskier than new vehicles. Unexpected issues can begin to arise quickly, leading to costly repairs that essentially add to your purchase price, as most used vehicles are no longer covered by manufacturer warranties. That’s why it’s so important to go about buying a used car the right way, whether you’re purchasing from a private seller, a dealer, or an online marketplace.
Here’s everything you need to know about purchasing a used vehicle — start to finish — with tips and considerations for each step of the buying process.
Quick fact: Most Americans opt to purchase used vehicles over new ones. In 2022, used cars accounted for around 74% of all car sales in the U.S., according to Consumer Affairs.
The dos and don’ts of buying a used car
- Don’t rush: The bigger the purchase, the higher the stakes. Take your time with each step of your search so that you end up with a good deal on a safe and reliable vehicle that meets your needs.
- Do be thorough: Whether you’re researching models, conducting a test drive, or inspecting a vehicle for signs of wear, take your time and be vigilant. Make sure you get all of the information you need so you don’t miss something that could come back to haunt you later.
- Don’t get pressured: Whether you’re shopping at dealerships or meeting private parties for test drives, don’t succumb to high-pressure sales tactics or the idea that another buyer might swoop in while you consider your options to affect your due diligence process.
- Do spend money to save money: Carfax reports and mechanic inspections cost money, but so do repairs and maintenance. The more you know about a vehicle before you decide to buy it, the less likely you are to run into unexpected expenses later on.
With these dos and don’ts in mind, let’s break the used car buying process down into 6 manageable steps.
Related: The best used cars under $20k according to Consumer Reports
Step 1: Determine what features you need in a car & identify models that meet your specs
The first step in the car-buying process is to figure out what sort of vehicle you need. Think about what you plan to use your car for, and make a list of must-have features.
For example, if you’re single and only plan to use your car to commute to and from work and run local errands, a compact, two-wheel-drive sedan might be all you need. If you plan to use your car for camping and overlanding, 4WD or AWD and some decent clearance could be essential. If you have a large family and travel frequently, a minivan or mid-sized SUV with cargo space might be ideal.
Make a list of models that meet your specifications
Once you know what you want in a car, you can use vehicle-specific search engines like Kelley Blue Book’s Car Finder to discover makes and models that meet your needs. You can filter your search for things like transmission type (automatic vs. manual), engine type (gas vs. electric vs. hybrid), number of seats, gas mileage, 4WD capability, and just about anything else you can think of. Autotempest offers a similar search engine.
Remember — you’re not shopping at this point. You’re simply compiling a list of vehicle models that have the features you need so you know what makes and models to search for when you start shopping.
Eliminate potentially problematic models from your list
Once you’ve got a list of potential models to consider, you’ll want to eliminate any that have a reputation for being unreliable, costly, or problematic. Consumer Reports, a nearly century-old nonprofit product testing outfit, can be a great resource here.
CR has been testing vehicles and surveying its members about their own cars for decades and has compiled a wealth of data about which vehicles tend to have the most issues.
Pro tip: For starters, you could eliminate the 10 cars Consumer Reports has deemed least dependable. You can also check out their list of used cars to avoid buying.
Once you’ve eliminated any potentially problematic vehicles from your list, pick three to five of your favorite models from what remains. These will be what you search for when you start shopping.
Step 2: Set your car-buying budget
Now that you’ve created your shortlist of potential car models, it’s time to figure out how much you’re willing and able to spend.
How much should I spend on a used car?
If you plan to buy a used car outright, most financial advisors recommend spending no more than 10% to 15% of your annual income. In the U.S., the average annual income is about $63,795.13 according to the Social Security Administration, which means that the typical earner should plan to spend between $6,379.50 and $9,569.25 on their next vehicle.
As of this article’s last update, the average price of a used vehicle in the United States was around $27,000 — down almost 20% from a 10-year peak in early 2022, but still well above 10%–15% of the average earner’s annual income.
Should I take out a loan to buy a used car?
For many used car shoppers, 10–15% of their annual income simply isn’t sufficient to purchase a vehicle that meets their required specifications. This usually means looking for financing, either from a bank or a dealer (in most cases, it pays to get offers from both).
If you do decide to finance your used car purchase, it’s usually a good idea to get pre-approved for an auto loan from your bank. Remember, though, that just because your bank offers you a large loan doesn’t mean you need to spend that much.
Autotrader offers a calculator that can help you estimate how much you can afford to spend on a used car over the term of your loan based on your down payment, preferred monthly payment, and interest rate.
Pro tip: In general, it’s best to aim for as large a down payment as you can afford, as this will save you money on interest in the long term.
Once you’ve got a quote from your primary bank, you can show it to dealerships and other financial institutions to see if they can offer you a lower interest rate, lower monthly payments, or both.
Related: The longest-lasting car models (200k+ miles) according to Consumer Reports
Step 3: Determine what model years & mileage you can afford
Now that you’ve got a list of potential car models and a general budget, you’re almost ready to start shopping for vehicles. You just need a little more information.
Use online vehicle price guides like J.D. Power to research the models you’re interested in and get a general idea of how much they cost by year and mileage. You may find that more recent model years and vehicles with low miles are outside of your budget.
For instance, if you like the Toyota RAV4 and your budget is $11,000, you can probably afford a 2012 model with around 130,000 miles, according to J.D. Power’s car value guide.
Some online price guides offer two valuation estimates — one for buying from a used-car dealership (usually more expensive) and one for buying from a private seller (usually cheaper).
Step 4: Decide whether you want to buy from a dealer or a private seller
You can search for cars for sale from private parties only, dealerships only, or both. Each has its own advantages and disadvantages:
Dealerships vs. private sellers at a glance
| Private seller | Dealership | |
|---|---|---|
Price |
Lower |
Higher |
Bargaining power |
Higher |
Lower |
Risk |
Higher |
Lower |
Speed of process |
Slower |
Quicker |
Warranty available |
Usually not |
Often |
Registration/title transfer |
Not done for you |
Done for you |
Price
Dealerships typically charge more for cars than private sellers and are less flexible on price. That being said, they usually inspect cars thoroughly before listing them for sale and are bound by law to disclose any major mechanical issues they are aware of, while private sellers are not.
Risk
A car you buy from a private seller is yours once the money and title have changed hands, and if a costly mechanical issue arises quickly, that’s your problem. That being said, private sellers are often motivated to sell quickly, so buyers with cash in hand can sometimes negotiate an excellent price well below online estimates, saving money that can later be used for maintenance and repairs.
Paperwork
Dealerships handle the title-transfer and registration processes for you, so you are road-ready the moment you leave. When buying from a private seller, you must handle these processes yourself, which usually means one or more trips to the DMV.
Where to look
Craigslist and Facebook Marketplace are among the best platforms to look for cars from private sellers. In most cases, you can contact private sellers via email, direct message, or phone.
Local dealerships usually list their inventories on their websites, but you can also drop by in person or call to make an appointment with a salesperson.
Related: The least expensive car brands to repair & maintain according to Consumer Reports
Step 5: Start shopping
Once you’ve identified some vehicles for sale that seem to meet your specifications and are within your price range, you can go see them in person, whether that means meeting a private seller near their home or visiting a dealership.
This is where it really pays to be thorough. For each vehicle you’re seriously interested in, you’ll want to conduct a visual inspection, take a test drive, see a vehicle history report, and have the car inspected by a mechanic for potential problems.
Conduct a visual inspection
Once you’re face-to-face with what could potentially become your next car, you’ll want to thoroughly examine it before you take it for a drive. Inspect the body and interior for damage and wear, make sure all the lights and signals work, test all of the electronic features (like the door locks, windows, and stereo), make sure the seatbelts function properly, and take a peek under the hood to check for excessive rust, shoddy repair work, and damaged hoses.
Cars have so many different parts and systems that it can be easy to forget something important. It helps to bring along a detailed checklist like this one so you can inspect the car methodically and check things off as you go. It can also help to bring a friend or relative and get their take on the vehicle, especially if they are more auto-savvy than you are
Test drive the car
Once you’ve finished looking the vehicle over, you can take it for a test drive. Drive the car at various speeds, and try to take it on a highway for at least a couple of miles. Test the brakes’ sensitivity, and make sure the vehicle accelerates and decelerates smoothly. Listen for any noises that seem out of the ordinary, and test the car’s handling by making turns at various speeds. Be sure to test the car’s reverse gear as well.
The “During Your Test Drive” section of Autopom’s test drive checklist page provides a thorough list of what to look for, feel for, and listen for once you actually start driving the vehicle.
Get a vehicle history report
A vehicle history report, which can be obtained using a car’s VIN number, is a detailed record of certain types of major events and information in a car’s history. It usually shows things like transfers of ownership, accidents, major repairs, mileage, flood or fire damage, and other important information.
Used car dealerships almost always provide a vehicle history report at no cost to you, while private sellers typically do not. If you’re shopping from private sellers, it can be worth it to pay for a vehicle history report each time you identify a car you’re seriously interested in.
Most vehicle history report services, like Carfax, offer bundles through which you can pay for 5 or 10 vehicle history reports up front for a discounted rate and then use them one at a time to look up the VIN numbers of any vehicle you’re seriously interested in.
Major collisions, odometer rollbacks, and flood and fire damage are often cited as deal breakers, but if a car looks and feels good to you, it can still be worth taking to a mechanic even if it has some red flags on its vehicle history report.
Get a pre-purchase inspection from a mechanic
If your visual inspection and test drive went well, and the vehicle history report didn’t turn up any major dealbreakers (or if it did, but you’re still interested), you’ll want to bring the car to a mechanic for a pre-purchase inspection. Depending on whether you’re buying from a dealer or a private seller, you may need to leave some form of collateral or provide a refundable deposit in order to temporarily take possession of the car.
Pre-purchase inspections typically cost between $100 and $300. Provide the mechanic with the vehicle history report, and tell them about anything you’re particularly concerned about or that seemed out of the ordinary during your inspection or test drive.
In most cases, the mechanic will provide a detailed printout that lists every system they inspected and anything noteworthy they found. Ask them to go over the list with you briefly, and get their opinion about the vehicle’s condition and the asking price. The more you know, the better prepared you’ll be to negotiate on price if necessary.
If your mechanic warns you against purchasing a car, it’s usually best to heed their advice and move on to other candidates.
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Step 6: Decide which car you want and make the deal
Once you and your mechanic have identified a vehicle that seems safe, fairly priced, and relatively problem-free for its age and mileage, it may be time to sit down with the seller and make a deal.
If you or your mechanic have identified any issues with the car, bring them up with the seller and ask if they’d be willing to accept a lower price in light of the time and money you’ll need to spend to remedy the problems.
Once you’ve reached a price that feels fair to both parties, you’re just about ready to take ownership.
Make sure the paperwork is correct so that registration goes smoothly
If you’re buying from a dealership, they’ll walk you through the paperwork, you’ll drive away with a registered vehicle, and a title in your name will be in the mail to you shortly.
If you’re buying from a private seller, though, you’ll want to make sure the title is ready to be transferred before any money changes hands.
Laws vary between states, so visit your state’s Department of Motor Vehicles website to get a full list of everything you’ll need to transfer a vehicle’s title into your name. In general, however, check for the following:
Vehicle title
- The seller should be the only listed name on the title. If multiple owners are listed, you’ll need signatures from each.
- If a vehicle has been salvaged, rebuilt, or considered a “lemon” (which you should already be aware of from the vehicle history report), this should be listed on the title. Additional procedures may apply in these cases, so check with your state’s DMV.
- Make sure there are no liens on the vehicle. If a lien is listed on the title, but the owner claims to have paid it off, contact the financing company directly to confirm this before buying the car.
Bill of sale
You and the seller will both need to sign a bill of sale to document the car’s change in ownership. Usually, an official vehicle bill of sale can be downloaded from your state’s DMV website and then printed and filled out. It should include the following:
- The names and addresses of both buyer and seller
- The car’s year, make, model, and vehicle identification number (VIN)
- The sale price
- The date of the sale
Emissions documents
In some states, cars must pass emissions tests. Sometimes, sellers will do this before the sale. If the seller has not provided proof that the vehicle has passed emissions, you will need to bring it to a testing center and obtain passing documentation before you can register the vehicle.
Getting the car registered
If all of the above documents are in order, you should have minimal trouble registering your new car. Make a registration appointment with your local DMV, and read their instructions carefully. Bring your driver's license and all of the requested documents, and you should have a relatively hassle-free experience.
Used car aftercare: How to get the most out of your pre-owned vehicle
So, you put in the work, did your due diligence, spent your hard-earned money on multiple vehicle history reports and mechanic inspections, and you finally found and purchased the perfect used car for you. Now, you’ll want to get the most out of your purchase by keeping your car in good shape and preparing for unexpected issues.
Here’s what you can do next:
Take theft-prevention measures
- Purchase a steering wheel club to make it more difficult for someone who breaks into your car to operate it and drive it away.
- Hide an AirTag or similar tracking device in your vehicle so that if it does get stolen, you can find it. People who steal cars know about this trick and often find and discard tracking devices, so try to put it somewhere that would be difficult to access (e.g., temporarily remove a door panel and tape the tracking device inside the door before reinstalling the panel).
- Consider paying extra to add theft insurance to your car insurance plan.
Be prepared for the unexpected
Many car owners are able to pay for roadside assistance services through their insurance provider, but the Automobile Association of America’s membership options can also provide peace of mind at a great value.
AAA members get four free tows per year, so any time you break down unexpectedly, you’re just a call or tap away from professional help. How far these free tows can get you varies from just a few miles with AAA’s basic membership to up to 200 miles with a premium membership.
Membership costs vary slightly by location, but in general, they range from around $60 to $150 per year, depending on the membership tier you choose.
Other benefits that can come with AAA membership include:
- Fuel delivery
- Flat tire service
- Locksmith service
- Battery jump starting and replacement
- Emergency extraction/winching
Maintain your vehicle
This should come as a no-brainer to most drivers, but regularly checking your fluids, changing your oil, and driving your car regularly can keep your vehicle healthy and prevent more severe problems from developing.
Using higher-quality gas helps some vehicles last longer, and taking your car in for a mechanical inspection every year or two can be a great way to identify and address any developing problems before they grow in scope and cost.
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