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How to Buy a Used Car

Buying a used car from an individual or auto dealer takes some preparation - and some good negotiating skills.
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The U.S. used car market is growing by leaps and bounds, and that's good news for Americans looking to buy a used car.

According to data from, 10.2 million used vehicles were sold in the third quarter of 2018 alone. That's a 5% increase over the third quarter of 2017.

Edmunds' third-quarter numbers also mark the third quarter in a row with sales over 10 million units during 2018.

Prices are breaking in buyers' favor, as well.

According to Edmunds, In the third quarter of 2018, used car prices actually fell, albeit at an incremental amount, at 0.3%. Pulling back the lens, the average used-vehicle price reached $20,085 in Q3 2018, marking a 3.5% increase year over year.

Why a Used Car?

Buying a used vehicle has its advantages and disadvantages. It's up to you weigh both sides of the issue before deciding you want to go forward with your new vehicle purchase.

When you do so, keep these "pros and cons" in mind.

Pros of Buying a Used Car

1. It's Cheaper

When you buy a new car, you're paying significantly less than you would when buying a new vehicle. According to the National Automobile Dealers Association, the average consumer buys 13 vehicles in his or her lifetime, at an average purchase price of $30,000. Yet if that consumer waited three years to buy those same vehicles, the savings would add up to $130,000 over the course of a lifetime.

2. You Can Still Get Financial Help on Repairs

With a used car, truck or SUV purchased at a dealership via a manufacturers pre-owned package, you can get the manufacturer to pay for some (but not all) repairs.

3. Insurance Costs Less

With a used car, you're much more likely to pay less for auto insurance. According to data from , used vehicle insurance can cost $100 or so less than new car insurance, on an annual basis.

4. It's Less Likely to Get Stolen

Car thieves are much more likely to break into a shiny, newer vehicle, than a vehicle that's three or four years old. That's because auto thieves are in the business of making money off stolen vehicles, and there's more value for the risk of stealing a newer car, truck or SUV.

Cons of Buying a Used Car

1. Lemons Can Suck

If you purchase a new vehicle that has some mileage on it, and hasn't been properly cared for, you can rack up serious financial costs getting your used car repaired.

2. No Warranty

When you purchase a used vehicle from an individual owner, you won't get any warranty or service/repair options. That omission can lead to extra costs if your car is in the shop on a regular basis.

3. Financing Charges Can Add Up

Used vehicles that are bought via financing come with higher interest rates that can amount to hundreds of dollars in extra costs.

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What to Consider Before Buying a Used Car

If you're in the market for a new car, truck, SUV, or even a motorcycle, you'll have plenty of items on your "to do" checklist before cutting any checks.

From finding the right vehicle for you to negotiating the best price to buy that vehicle (and lots of pit stops in between), you'll need a road map to maximize your used car buying experience.

Start that journey with the following vehicle purchase action steps:

1. What Can You Afford to Pay?

Job one when buying a used car is to make the purchase fit comfortably with your household budget. After all, you don't want to wind up spending $20,000 for a vehicle when you have a $10,000 budget. A good rule of thumb is to limit your used car purchase amount to 10% to 15% of your monthly income. Anything more and you could wind getting squeezed on auto payments.

2. Know What You Want and Do the Research

Go online to or Kelly Blue Book to investigate used car prices, options, and dealer cost. When buying a used vehicle, there really is no substitute for being well informed and knowing your total purchase numbers cold. With so many ways to research used cars in this digital age, you should be as well informed, if not better informed, than the salesperson.

3. Be Specific

If you know you want to buy a specific vehicle, say an Infiniti Journey with all the trimmings, your odds of getting the price you want increases, as opposed to for shopping for a generic sedan or SUV. This is especially the case when you're on a dealer lot and working with an auto salesperson. With the exact vehicle model on the menu, the salesperson can move directly to negotiate with you on price, instead of trying to upsell you into a more expensive vehicle.

4. Ask About Incentives

If you're buying a used vehicle off a dealer lot, make sure to ask for incentives and discounts. The dealer may not bring them up, otherwise, so it's up to you to do so. Those incentives and discounts can significantly curb the price of your used vehicle.

5. Be a Cash Buyer

This one is simple. Any seller will be glad to talk "discount" if you're a cash buyer. Paying the entire cost of the vehicles simplifies things and, if there's no trade-in involved, can get the deal done more quickly and at a discount, too.

6. Aim for a Franchise Dealer

Franchise dealerships usually have the best used vehicle selections for buyers (including the ability to acquire vehicles not currently in their inventory). Typically, franchise-based dealers have more honest, ethical personnel and practices, and won't try to deceive you into buying a used car that isn't right for your unique needs. Plus, bigger, more seasoned auto dealerships accept so much inventory from trades and wholesale channels that you'll have a larger selection of used vehicles to choose from, and you'll deal with a salesperson who is tasked to move vehicles as quickly as possible - meaning a likely discount for you.

7. Avoid the "Monthly Payment" Gambit

If you're buying a used car from a dealer or online provider like Vroom, don't fall for this favorite trick of auto sales professionals - negotiating the price by monthly payment. Salespeople love to steer negotiations to monthly payment structures, as seemingly incremental price increases - like adding $20 per month to the cost of a used vehicle that you'll finance - can wind up adding $1,000 or more to the total cost of the car. Instead, focus on total price, where the salesperson won't want to add $1,000 to the vehicle cost in any price negotiation.

Make sure there is a return policy. Often, a simple test drive isn't enough to decide if the used vehicle you buy is a good deal. Make sure to ask a dealer or an individual seller to tack on at least a seven-day return policy, no questions asked. Walk away if you can't get that language in the contract - it's vitally important that you're 100% satisfied with your new car, truck or SUV. In some states, dealers are required to give a right to cancel. 

8. Study up on Financing 

Do some due diligence and compared interest rates for used vehicle buyers with your credit score range. By and large, great credit (a FICO score of 700-plus will do the job) should get you a relatively low interest rate in the 2%-4% range. Also know that dealers are apt to jack up interest rates on used vehicle financing, to pad their profit. Consequently, if an auto dealer offers a 5% interest rate, go back to your bank, where there is a good chance of keeping that rate around 3%-4%. That way, you're padding your own profit on a used car deal.

9. Before You Buy, Check the Vehicle History Report

Don't sign any deal on a used vehicle until you've checked the auto's vehicle history report. Go to or AutoCheck and plug in the vehicle identification number (VIN). That will bring up a thorough history of the vehicle and see how many accidents the care has experienced (if any) and will show that the vehicle has a clean title (meaning there are no liens on the vehicle.)

10. Before You Buy, Review the Contract

Okay, you've decided to go ahead and buy the used car. But before signing off on the deal, review the contract thoroughly. Make sure that all the agreed-upon provisions have made their way into the contract, and re-read the pricing portion of the contract to ensure you're getting the vehicle at the agreed-upon price, with no surprises. Also, ensure that you receive the vehicle's title, and that the title has been signed over to you, as the new owner.

Drive It Home

After all that (and after you've purchased insurance for the vehicle) the car is yours to drive home - ideally after getting a great deal on the used car, using the tips listed above.