A complete guide to buying a used car

used car, used cars

Buying a used car, when done right, is always a better financial decision than buying new. Not only do used cars cost less up front, they cost less to register, too. Also, they don’t depreciate as quickly as new cars, which will soften the hit you take should you decide to sell. However, buying used also comes with some risks, but these shouldn’t be a problem for anyone willing to do a little extra work. Like most things in life worthwhile, buying used can seem daunting at first, but it’s nothing a little research won’t fix. Keep reading for a step-by-step guide with everything you need to know when buying used.

Table of contents:

  1. Set a budget
  2. Know what you want
  3. Start a systematic search
  4. Know what to pay
  5. Know who you’re buying from
  6. Know the history
  7. When in doubt, as for help

1. Set a budget

Before you even start looking for a car, it’s important to decide two things: how much you want to spend and how you plan to spend it. There are essentially have two choices; pay cash or take out an auto loan. If you decide to pay cash, make sure to set aside enough money for after-sale costs like registration and insurance. These costs vary depending on a range of factors, so make sure you have a handle on them before making any purchases.

Registration fees change from state to state, use this guide to find out what it costs where you live. To find out how much your insurance will cost, use your provider’s auto insurance calculator. Most insurance providers have them on their websites.

If you decide to take out a loan to protect your savings, the rule of thumb is to put around 10% down, and to structure the loan so it can be paid off in three years or less. However, if you can afford to put down a higher percentage, do so. Ideally, the monthly total of your auto-related expenses shouldn’t exceed 20% of your monthly income. 

2. Know what you want

There are LOTS of used cars for sale out there. To avoid feeling overwhelmed, narrow the scope of your search by having a good idea of the kind of car you’re looking for. Ask yourself what you’re going to use the car for. Do you drive mainly on dirt roads or city streets? Do you need to transport large objects? Use your answers to make a list of must-have features to get a more specific idea of what you’re looking for.

3. Start a systematic search

Use your list of must-have features to filter your searches on car websites. As you search, create a shortlist of three to five models to research in more detail. When making your shortlist, pay close attention to two key characteristics: the reliability and total cost of ownership. Some cars are cheap to buy, but cost a lot in vehicle maintenance and insurance. Simply search your model on Consumer Reports to avoid falling for this trap.

Is safety paramount for you? If so, check the Insurance Institute for Highway Safety to get a sense of which models are safest.

Here’s a list of used car websites:

  • AutoTrader.com
  • CarsDirect.com
  • CarGurus.com – great for finding deals
  • AutoTempest.com – great for cross-site comparisons
  • Hemmings.com – great if you’re looking for a classic car

It also can’t hurt to try Ebay and Craigslist because, hey, you never know!

By the end of this search you should have a second shortlist: cars that have what you’re looking for, and that are close enough for you to go inspect them.

4. Know what to pay

Once you find several cars for sale in your area — but before you physically inspect them — look up that car model in pricing guides such as Kelley Blue Book or Edmunds. These services help you gauge the market value of a specific car based on factors like age, mileage and equipment. Use them to determine whether the cars on your list are being offered at fair prices. And always remember: most people are willing to haggle. Never except the first price they propose.

5. Know who you’re buying from

This is where buying a used car gets tricky, and where you start having to make your own judgement calls. At the end of the day, the deciding which sellers to trust must be done on a case-by-base basis. That said, here are some rules of thumb to help guide your decision making process.

Generally speaking, it’s best to buy from a well-known dealer or someone you know personally. Dealerships that represent an automaker (the local Honda dealer, for example), are generally trustworthy. So are most generic dealerships that have been in business for decades. That said, there are exceptions. It’s still never a bad idea to ask around. See what your friends, family or the longtime residents of your area have to say about the dealership you’re looking at.

Although dealerships are generally safer bets than private sellers, it’s still entirely possible to make a great purchase with a private seller, especially if you’re looking to buy and older vehicle. When dealing with someone selling a car privately, there are a set of best practices to help you protect yourself from scammers. Be skeptical, take nothing at face value, ask a lot of questions, always do a detailed inspection yourself and ask for a test drive, and don’t be afraid to walk away. 

As mentioned above, there is no formula for deciding who to buy a used car from. However, as long as you stay patient, do your research keep your guard up, you should be ok.

6. Know what you’re buying

Just like some people, some cars have shady pasts. As a rule, never take the information listed in an ad (or provided by a dealer’s sales staff) as fact. Sellers can employ a range of tricks to hide signs of serious damage. However, it’s easy to avoid being scammed as long as you take the following precautions.

1. Check the title

This is the most important item on this list. Check the title. Always walk away from a car with a branded title, especially if it’s been salvaged.

2. Get a report

Arm yourself with a car history report and compare its contents to the seller’s claims. This is the best way to know if you’re being ripped off, if the car is safe to drive, and if the person you’re buying from is trustworthy.

There are various services you can use to get a car’s history report, but the Gapless car app is by far the cheapest and most effective. A Gapless car history report can be viewed and added to it inside the app, and it can be downloaded as an easily printable PDF. For less than a third of industry leaders charge, Gapless car history reports are the easiest to understand and the easiest to use. The app is free to download, and generating reports is just one of its many features.

3. Get the history

Ask for a full service history. If the car is relatively young (up to 15 years old) it should have one, there’s no reason for it not to. Looking through the service history — assuming it’s there — will tell you about the life the car has led. Make sure the mileage stays consistent from invoice to invoice. Inconsistencies here can tip you off to odometer tampering. For example, if the car had 50,000 miles on an invoice from two years ago, and 20,000 on an invoice from three months ago, there’s probably something fishy going on.

4. Thoroughly inspect the car

Do your own inspection. This may sound a little daunting, but it’s actually a lot easier than it sounds. Plus, there are loads of fantastic guides online. Check out this set of five videos by ChrisFix, it’s our personal favourite.

5. Get an OBD2 scanner

Experience has taught us to never go car-shopping without an OBD2 scanner. This device plugs into a car’s computer system and analyses it for red flags. Error codes found in the on-board computer will reveal issues you might not see, hear, or feel when you drive the car. Sellers with nothing to hide shouldn’t have a problem letting you plug in the scanner, which you can buy online for less than $20. It’s a great tool to have in your garage, too.

7. When in doubt, ask for help

Last but not least, don’t be ashamed to admit when you’re out of your depth. If you feel the need for support, find a knowledgeable friend, relative, or neighbour to accompany you to inspect a car. It might cost you a meal, or a round at the local bar, but it will keep you out of a lemon. Alternatively, you can pay a competent shop to perform a pre-purchase inspection (PPI) that, if done right, will identify any issues and give you an idea of how much it will cost to fix them.

That’s it, you’re now ready to buy a used car. Thanks for reading all the way to the end. Don’t forget to check out Gapless, the all-in-one app for your car. Here’s another download link in case you missed the last one.

Good luck!

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