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buying Complete Guide: How to Buy a Used Car

00:30  05 december  2020
00:30  05 december  2020 Source:   usnews.com

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Deciding Where to Buy a Used Car . Researching, Test Driving, and Inspecting a Used Car . Making a Deal and Completing the Paperwork. Deciding on how much money to spend for a pre-owned car , truck, or SUV is more complicated than just looking for a vehicle with an affordable monthly payment.

Edmunds experts explain how to locate, price and negotiate to buy the used car you want. If you're looking to buy a used car , you're far from alone. Between private-party and dealership sales, nearly 40 million used vehicles change hands Edmunds reviews have great information to guide your choices.

​The single easiest way to save money when buying a car is to purchase a used model instead of a new vehicle. When you buy a new car, the second you leave the dealer's lot, it starts to rapidly depreciate, losing a significant amount of its value in the first few years of ownership. When you buy a used car, the original owner absorbs the pain of its steep depreciation during its early years. You pay far less than you would have if you had purchased the car new.

There may be more maintenance required on a used car that's out of warranty, and its financing may be a bit more expensive. But, choosing a vehicle with a good predicted reliability rating and low ownership costs can help you saa tremendous amount of money.

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How much should I budget for a new car ? There are a range of suggested budgets for what to spend on a car , so use these as rough guidelines. Generally, financial experts recommend spending between 10 and 20 percent of your monthly income on your vehicle.

Need help with how to buy a used car ? Used - Car Buying Guide for 2019. August 12th, 2019.

Successfully buying a pre-owned car can be more complicated than buying a new car. It’s more financially risky because you don’t have the safety net of a new car factory warranty. Staying safe while purchasing a used car has always been somewhat of a concern. In the age of the coronavirus pandemic, there are even more steps you have to take to protect yourself and your family.

In this guide, we'll take you through the steps you should follow to find the right used car, secure affordable financing, pay a fair price, and minimize the chances that you'll get a vehicle that's unreliable, overpriced, or unsafe.

Following these steps and car-buying tips should help you buy the best used car for a fair price:

  • 1. Set a Car-Buying Budget You Can Afford
  • 2. Find the Right Used Car
  • 3. Consider the Certified Pre-Owned Car Option
  • 4. Find Affordable Used Car Financing
  • 5. Decide Where to Buy a Used Car
  • 6. Find a Used Car
  • 7. Research, Test Drive, and Inspect a Used Car
  • 8. Make a Deal and Complete the Paperwork
  • 9. Consider Add-Ons, Warranties, and Insurance

1. Set a Car-Buying Budget You Can Afford

Setting a used car buying budget isn’t as simple as looking for a pre-owned car, truck, or SUV that gets a monthly payment you think can manage. While the monthly payment does need to be affordable, you need to look beyond it to get a proper idea of the total cost of owning the car. That includes the cost of interest on your car loan, how much you’ll have to pay to insure your new-to-you ride, parking, and maintenance costs. Our car insurance hub provides tips to help you find the right insurance coverage, while our used car rankings and reviews include information on the cost of ownership for different vehicles.

Why car prices keep rising even amid the coronavirus pandemic

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Buying a used car isn't always easy, but the extra effort is almost always worth it. Here's how to do it like an expert. If buying the car from an individual, unless the car still has some of its factory warranty left on it or you buy an after-market warranty, you are more than likely buying the car “as-is.”

How do You Buy a Used Car ? Broadly speaking, you can buy from a private seller or a dealership. How to Finalize a Used Car Sale. Before finalizing your purchase, make sure your insurance policy Typically, the dealer will complete the vehicle registration for you. If you’re buying privately and not

You’ll want to find a balance between cost to buy and cost to own. When you buy an older vehicle, you can expect a lower price. However, the older the car, the more likely it will need costly repairs. That awesome deal you got on a cheap car won’t seem that great when you’re waiting for a tow truck instead of heading to work, school, or that weekend getaway.

Fortunately, used car buyers have more resources today than ever to learn about repair costs, frequent problems, and reliability. Information about certified pre-owned warranty coverage, average costs for common repairs, and predicted reliability ratings can be found in our used car reviews. You can see what issues drivers are dealing with by checking out dedicated owners' websites, such as Odyclub.com for the Honda Odyssey minivan. If owners of a particular car are having problems, they're probably talking about them somewhere on the internet. Just search for the car's name and "problems" in any search engine to get an idea of common issues.

Used car prices jump 10%, thanks to new-car coronavirus crunch

  Used car prices jump 10%, thanks to new-car coronavirus crunch Inventory shortages mean you're paying a lot more for a used car compared to last year, especially if you want a pickup truck.But for those moving to the used car market, it's a tough pill to swallow, too. Data shows used car prices are up a whopping 9.5% from this time last year. In dollars, the percentage increase translates to an average price hike of $2,193. The narrative remains the same, however. As more buyers can't find a new car they want due to inventory constraints, they're looking at a comparable used car. Supply and demand shows as more buyers want a used car, prices increase.

How to Buy a Car . Step 1: How Much Should I Spend? If you’re uncomfortable dealing with the unknowns that come with shopping for a used car , a CPO model can take some of the uncertainty out of the process; CPO models typically come with a limited warranty and have undergone an inspection

Buying a used car could save you a fortune, follow our guide and work through our used car The following advice will cover every step of the car - buying journey from choosing where to buy from to what to check when you view the car to how to handle negotiations and your buyer's rights.

An oft-overlooked factor you should consider when shopping for a used car is the cost of auto insurance. Prices can vary substantially based on the model you choose. Our guide to car insurance is the place to find the cheapest insurance with the right coverage for your new-to-you vehicle.

2. Find the Right Used Car

Shopping for and finding the right used car is more challenging than finding and buying a new car. When you find a new car that meets your needs and budget, you just have to head to the dealership and buy it. When you buy used, you not only have to find the right model – you have to find one that’s for sale, has low enough mileage to be attractive, is in good shape, hasn’t been crashed, and has been serviced properly. Oh, and it has to be close by. Then, you have to evaluate the seller, ensuring that it’s not someone who’s going to rip you off.

In short, there’s a lot more research involved in evaluating a three-year-old pre-owned car with 36,000 miles on the odometer than there is for a brand new car sitting on a dealer’s lot.

An excellent place to start your pre-owned vehicle buying journey is with our used car rankings and reviews. We begin by looking at the consensus opinions of the country’s top automotive journalists. Then we blend them with quantifiable information on safety, reliability, and total cost of ownership to create scores for nearly every vehicle in the marketplace dating back over a decade. We use those scores to compare vehicles against competitors in their segments to determine how they rank.

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With our used car rankings, shoppers can compare pre-owned vehicles by their overall scores and individual factors car buyers tell us are critical to their buying decisions. These factors include predicted reliability, safety, performance, and interior comfort and features.

Selecting a used car to focus your efforts on can be challenging. Should you pick an older car that’s loaded with options, or a newer car that has lower mileage but fewer features for a similar price? It’s critical you look at the places you drive, how many people you need to transport, why you’re driving, and how you drive. Then, match those needs with your budget. Don’t buy that pre-owned Mazda Miata, for example, if you need to carry kids to soccer practice every day. If you’re a solo commuter in an urban area, buying a Chevrolet Silverado full-size pickup probably isn’t the best choice, either.

It’s important to consider not only the size and performance of vehicles you’re considering, but also their fuel economy, safety ratings, and cost to insure.

When you buy a pre-owned car, you can get options and features at a fraction of the price they'll cost you on a new car. Option packages and higher trim levels don't command nearly the same premiums on used vehicles as they do on brand-new cars.

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As you begin to narrow your search, you can browse through more than a million vehicles in our used car listings. There’s no need to start driving to car lots all over town.

3. Consider the Certified Pre-Owned Car Option

Not sure if you want to take the leap into a used car with no warranty coverage? There is a used car option that does have factory warranty coverage. Manufacturer-certified pre-owned cars (CPO cars) offer a blend of used-car affordability with manufacturer-backed warranty coverage. They're usually low-mileage cars that are just a few years old, with service records and no history of accidents. They are often cars returned at the end of leases, dealership service loaner vehicles, or vehicles driven by dealer or automaker staff.

They’re different from non-certified used cars in several ways. When they arrive at the dealership, they undergo a comprehensive inspection and refurbishment process that meets strict guidelines from their original manufacturer. Most used cars are sold as-is, with no warranty. CPO cars, on the other hand, come with manufacturer’s warranties that generally exceed the length of the car’s original coverage. Many CPO programs also provide buyers with extras, such as trip interruption coverage and roadside assistance.

Each year, we evaluate manufacturer CPO warranty programs to find the best CPO programs. The best programs not only provide great coverage for your car, but also include generous perks.

Another benefit of automaker-sanctioned CPO programs is access to special used car financing deals. Used car loans typically cost more than new car financing, but a CPO financing deal with a low interest rate can dramatically cut the cost you have to pay on your auto loan.

Nissan to roll out its Nissan@home online buying experience nationwide

  Nissan to roll out its Nissan@home online buying experience nationwide The program has been a big hit at the seven dealerships involved in its pilot program.Announced Monday, the service is called Nissan@home and lets prospective buyers schedule and complete a test drive, do all the negotiation and paperwork of buying the car, and schedule and take final delivery of their vehicle, from their computer or mobile device. Nissan@home can also be used to schedule service appointments.

You’ll only find a brand’s certified used cars at their own franchised dealerships. If you see a Lexus marked as a certified used car on a Dodge dealer’s lot, you’ll know it’s not truly part of Lexus’ L/Certified CPO program. Some dealers will label cars “certified,” but unless a vehicle is inspected and refurbished to the original manufacturer’s standards by one of their own dealers, it is not manufacturer certified. Only manufacturer-certified pre-owned vehicles will come with warranty coverage that allows for repairs to be performed at any of their dealerships. A dealership can offer a warranty on any used car, but it's likely much more limited than a manufacturer's CPO warranty.

Of course, the warranty coverage and other perks come at a price. CPO cars are typically more expensive than equivalent non-certified used vehicles. However, a CPO car will likely have a lower total cost of ownership – at least during the warranty period. You'll need to balance the higher initial cost with the potential for savings in mechanical repairs. One way to do so is by looking at the predicted reliability marks in our used car reviews. If a car has a stellar score, buying it as a certified used car might not give you the same payoff as a CPO car with a lower predicted reliability score and a future of expensive repairs.

4. Find Affordable Used Car Financing

If you're sitting on a pile of money and plan to pay cash, you can skip this section. If, however, you're like most used car buyers, you'll need a loan to help pay for your used vehicle. It's true that you can have the dealership's finance office arrange your financing. Still, if you want to save money, you need to get a pre-approved financing offer before you get anywhere near a car dealer. A dealer may be able to beat your pre-approved loan, but if you don't have one, they'll have no incentive to do so.

How to Test Drive a Used Car

  How to Test Drive a Used Car One of the most important steps when you buy a used car is taking a test drive. It doesn't matter whether you're buying from a private party, an independent used car dealer, or even a certified used car from a franchised new car dealership; a thorough test drive is where you find out if the vehicle is right for you. To maximize the value of your evaluation, there are some steps you should take before, during, and after your drive. Being prepared can save both you and the seller or salesperson from wasting time on a car that’s not right for your needs and budget. You also don’t want to spend any effort pursuing a pre-owned car that has serious red flags in its history.

If you're buying from a private party, you have no choice but to find your own financing. The process can be different for private-party buyers, so be sure to talk to your lender about what they'll need to move your loan application forward.

Shopping and applying for used car financing is similar to getting a new car loan, but there are some important differences. Because lenders consider used car loans somewhat more risky than new car loans, you should expect to pay a higher interest rate. Lenders typically consider used car loans riskier for several reasons, including the fact that their values are less predictable. It's the car's value that acts as collateral on the loan. Used car buyers also may face higher repair costs, which can compete with making timely car payments.

If the car you choose is relatively new or a certified used car, there’s a good chance you can find a lender who will give you the same loan terms they would a new-car buyer.

Getting a great deal on used car financing can take some preparation and work. Following these steps will help ensure you’re getting the best deal.

Preparation

Getting all of your financing plans in place well before your car shopping starts is the best way to be prepared when the right car comes along. That means before you think about heading to a dealership or meeting with private-party sellers. Step one in the financing process is looking at your credit score and exploring the credit reports behind your credit rating.

One of the primary criteria that lenders consider, your credit score will determine whether you get approved for a loan and what interest rate you’re offered. Shoppers with a low credit score can expect to pay a higher interest rate on their auto loan than buyers with higher credit scores. Buyers with bruised credit may also be asked to make a larger down payment or accept a shorter loan term than someone with a great credit score. If you have excellent credit, you can expect a lower-than-average interest rate, access to longer-term auto loans, and lower down-payment requirements. Most used car deals with special financing are reserved for buyers with top-notch credit.

When you are proactive and look at your credit score early, you’ll have the opportunity to correct any errors. You can also take time to improve on any weak areas in your credit history. Your credit score's most important elements are your history of making on-time payments and the amount of debt you have outstanding.

Where to Shop for a Loan

You might think you have to go to a brick-and-mortar bank branch to get a car loan, but there are many places you can finance a used car. Some work better with different types of borrowers than others, so you should talk to several before you decide which financing deal is best for you. Some lenders have programs that provide lower rates or other benefits to existing customers, while others cater to borrowers with damaged credit. You can save money and hassle by taking advantage of these programs.

Large National Banks

America’s biggest banks have thousands of brick-and-mortar branches, plus sophisticated online portals to serve loan applicants and borrowers. They occasionally offer loan specials, though overall the interest rates they offer tend to be higher than other lenders. Because of their size, they tend to be ruled by strict policies and procedures, which may not serve customers with bruised credit or other borrowing challenges well.

If you’re looking for convenience and you’re willing to pay a higher price to get it, large banks are a good option.

Credit Unions

Credit unions are member-owned cooperatives rather than shareholder-owned companies like most other lenders. Instead of paying shareholder dividends, they return any profits to their members through higher savings-interest rates and lower loan-interest rates. They tend to be more affordable places to get an auto loan than most other financial institutions.

Before you can get a loan at a credit union, you have to become a member. Because credit unions have fields of membership that are limited to geographic areas, affinity groups, or specific employers, not everyone can join any credit union. Still, most Americans have access to at least one credit union. The industry’s federal regulator, the National Credit Union Administration, can match you up with one you’re eligible to join. Simply use their credit union locator at MyCreditUnion.gov.

The institutions range in size from tiny, one-person operations to massive operations with dozens of branches and services that rival large national banks. If you need a bit of hand-holding to get through the loan process or have a poor credit score, a smaller credit union is a good option. They’ll likely have a more personal touch than a larger lender.

Community Banks

Community banks offer many of the same auto-lending services as large banks, but they do so with a smaller geographic footprint, fewer branches, and often a more personal touch. Like credit unions, community banks are great places for borrowers who need a bit more help to finance their used car purchase successfully. With their roots in the communities they serve, many will be able to offer tips about other businesses in the area that can help you through the car-buying process.

Online Banks

In the age of the COVID-19 pandemic, getting a loan from an online lender is an attractive option. While most banks and credit unions have online lending operations, online banks lend exclusively through their websites, with few – if any – branches. If your loan needs are straightforward, and you don't need any extra help, the streamlined processes of online banks can make borrowing easy and remarkably quick.

Because they don’t have to pay for expensive brick-and-mortar branches, many online banks offer excellent loan rates. Of course, you shouldn’t assume any rate they offer is the best you can get. You should always comparison shop.

Loan Comparison Websites

One of the easiest ways to get a great deal on a car loan with a minimum of effort is to use a car loan comparison website. After you fill out just one application, the site will contact multiple lenders and return various financing offers. The lender might be a credit union or bank across town, or a financing company across the country. It doesn't matter where the lender is, as loan funding and collection of car payments can be done entirely electronically.

Finance Companies

A finance company is similar to a bank, except that their only business is lending. Instead of accepting deposits and then lending that money back out, finance companies borrow from other financial institutions, then make loans to consumers using that borrowed cash. Many finance companies specialize in making loans to certain types of borrowers, such as those with poor credit.

Most automakers own finance companies, such as Ford Motor Credit or Honda Financial Services, or work with specific lenders, such as Mitsubishi and lending partner Ally Financial. Called captive finance companies, these lenders work through their brand's franchised dealership network. They also provide the lending for automakers’ new car financing deals, lease deals, and certified used car financing offers.

Car Dealerships

While you can arrange for a car loan through a car dealership, most dealers aren't actually doing the lending. They're acting as a broker, arranging loans with outside lenders, such as their captive financing companies, local banks, or credit unions. In most cases, they make a significant profit by marking up the interest rate they charge or being otherwise compensated by the lender. In most states, there is no requirement to disclose the amount of markup they’re charging on a loan.

While a loan offer you receive at a car dealership may be the best one you get, it is critical you never visit one without at least one offer already approved by an outside lender. Without another offer, a dealer’s finance officer will have no incentive to offer you a better deal and earn your business.

There’s a class of car dealerships called Buy Here, Pay Here dealerships. We’ll talk about them more later in this guide, but they differ from traditional dealerships in that they do loan their own money and directly collect payments on the loans they make. Consumer advocates advise against getting loans from this type of dealership due to the predatory lending practices of some buy here, pay here dealers.

Applying for Used Car Financing

The next step in getting an auto loan is applying for financing. Auto lenders will ask you to fill out and sign either an online or paper application. You'll need to provide personal information about your income, monthly obligations, housing expenses, work history, credit card debt, and more. You'll also be asked to provide your social security number, so the lender can pull credit reports. You must answer the questions completely and honestly. Failure to do so risks your loan being turned down. If it's discovered after you take out the loan, the lender may declare the loan in default and demand immediate repayment.

The information on the application is evaluated alongside the data in your credit report. The lender is trying to build a complete picture of your finances, so they can predict whether you'll be able to pay back the loan. The law limits what information they can use to make a loan decision. However, they may ask for some demographic information for government reporting purposes.

Just as smart buyers should talk to multiple car dealerships and other sellers before buying a used car, you should apply at multiple lenders to find the best financing deal. It's critical to do so during a short span of time, so the credit reporting agencies don't think you're taking out multiple loans and ding your credit score over and over. Do your shopping over a week or so, and they'll just see it as one transaction. That's important, because each transaction that pulls a credit report lowers your credit score by a few points.

When you apply for a car loan before choosing a specific vehicle, the approval will likely be conditional, with a limit on the amount they will loan to you. With multiple offers, you can compare the interest rate they're willing to give you, how long of a loan they're extending, and the size of the down payment they require you to make. You can then choose the best offer once you've negotiated the price of the pre-owned car you want.

Comparing Loan Offers

It is vital to have a monthly payment that fits into your household budget. Still, you need to look beyond the payment when comparing loan offers. You want to look at the total cost of the car, including its financing. Fortunately, it's easy to do. Just multiply the monthly payment by the number of months in the loan term, then add the amount of any down payment you're making and the value of your trade-in, if you have one.

The monthly payment should be included with the financing offer. If it’s not, head over to the U.S. News car loan calculator. Enter the interest rate, loan amount, and length of the loan into the form, and it will show you the size of each monthly payment.

Here’s an example. We’ll say you’re buying a used midsize SUV and have received a pre-approval for a five-year (60-month) loan with monthly payments of $350. You've saved up $5,000 for your down payment and your trade-in is worth $3,000. To find the SUV's total cost, you multiply $350 by 60 months, then add $5,000 and $3,000 to that amount. The total cost of buying the used SUV would be $29,000.

It's important to run the numbers yourself and not to rely on the math of a salesperson. They're trained to keep you focused on the payment, because they know that's the easiest way to get you to overpay for your used car.

The Importance of a Down Payment

Many lenders will allow you to buy a used car without making a down payment, but that’s seldom a great idea. Making a down payment will help you in several ways, all while helping to protect your finances. The benefits include lowering your monthly payments, allowing you to get a shorter loan, or both. It will also reduce your loan-to-value (LTV) ratio, making your loan more attractive to lenders, who may offer you a lower interest rate.

Making a substantial down payment also makes it less likely that you’ll owe more on the car than its value, which is known as being “underwater” on the loan or having negative equity. Being underwater is hazardous to your financial health. If the vehicle is declared a total loss after a crash, theft, or flood, the amount you get from your auto insurance company won't be enough to cover the loan. You will still owe the difference to your lender. They can demand immediate repayment since the loan's collateral (your car) no longer has any value.

Short Loans Are Better Than Long Loans

A lender may offer you a six-, seven-, or even eight-year auto loan. It's a horrible idea to take out such an extended loan on a used car – or any car, for that matter. You should consider five years to be the maximum length of any auto loan you take. Consumer advocates recommend that if you can’t afford a car with a five-year or shorter car loan, you can’t afford the car.

Here’s why: longer-term loans are considered riskier to lenders than short loans. Lenders will price that additional risk into the financing with higher interest rates. Not only will you have to pay a higher interest rate, but you'll have to pay it for a longer time. That makes the total cost of the car significantly more expensive. The longer your loan, the higher chance you'll still be making car payments at the same time as your vehicle begins to need more and more costly maintenance and repairs.

The rate at which your car will depreciate doesn’t change based on the length of your loan. The longer your auto loan, the higher the chance of owing more on the car than it is worth. As we discussed in the previous section, being underwater on your financing puts you in financial peril.

Finally, suppose you still owe money on your car when it needs replacement, or you want a new vehicle. In that case, you'll either have to pay it off with cash out of your own pocket, or roll the remaining balance onto your new car loan. While lenders add the balance of existing car loans to new loans all the time, it’s one of the worst car-buying mistakes you can make. It puts you instantly underwater on your car’s financing.

5. Decide Where to Buy a Used Car

Just as there are many places to get used car financing, there are various places where you can purchase a used car. Each has its strengths and weaknesses in terms of service, ease, and price. Like the car you want to buy, you should strive to learn as much as you can about the dealership or private seller trying to sell it to you. Checking the company out with your local Better Business Bureau or consumer protection agency is an easy way to find out about their track record. You don't just want to look at the number of complaints, but how they responded to correct the problems.

Franchised New Car Dealers

You’ll generally pay more for a used car at a franchised new car dealer, but it may be worth it for the seamless buying process. While you’ll be contributing to the dealer’s overhead, the salesperson’s commission, and other administrative costs, they'll take care of all of the paperwork for the deal. That's especially helpful if the transaction is complex or you're buying in a different state than the car will be registered.

Dealers have access to a wide variety of lenders, so there’s a chance they can get you a better loan offer than the one you have pre-approved. They are also the only place where you will find factory-certified pre-owned vehicles.

Most new car franchises have adopted strict COVID-19 protocols, mandated by their manufacturers, to protect both customers and dealership staff. Some have robust online buying processes and home delivery options.

Used Car Superstores

When it comes to used car dealerships, national or regional used car superstores are the new kids on the block. They offer many of the same advantages of franchised new car dealerships, such as expertise in handling paperwork, step-by-step buying processes, and access to an array of lenders. Many sell their own line of add-on products, such as extended warranties valid at any of their locations.

They also have access to a vast selection of used cars. With most dealerships, you're limited to the pre-owned vehicles they have on their lots. That's not the case with used car superstores such as CarMax, which can draw on inventories from across the country and bring those vehicles to your local outlet.

Some used car superstores have been at the forefront of providing online and socially distanced car buying experiences during the coronavirus pandemic. Carvana’s sales process, for example, brings cars right to your door. You have seven days to decide if you like the car. If not, they’ll take it back.

While you may not get the best price at a used car superstore, you’ll have the sense of security that comes from dealing with a large, established business.

Independent Used Car Dealers

Independent used car dealerships are typically small, locally owned businesses. They buy and sell used vehicles, arrange financing, and take care of the purchase paperwork. Their inventory typically comes from wholesale auto auctions. Most don't have service departments and have less total overhead than a typical new car dealer.

While we’ve all seen the stereotypes of used car dealers, most have been around for a long time earning good reputations with customers. Still, it’s a good idea to check with your local Better Business Bureau or other consumer advocacy group to learn more about the business. Sites like Yelp.com tend to be where customers just complain, but they can illuminate consistent issues with companies.

‘Buy Here, Pay Here’ Dealers

There’s one type of used car dealers that buyers should approach with caution. “Buy here, pay here” used car dealers act as both the car seller and lender. The name comes from the fact that many require buyers to bring their car payments directly to the dealers – sometimes every week.

Buy here, pay here used car dealers typically are the lender of last resort for buyers with terrible credit. Unfortunately, they charge extremely high interest rates and can do more damage to your credit than help it. Many make more money off financing the car than selling it. Some have aggressive collection practices and will repossess your vehicle if you're even a day late. It's not uncommon for “buy here, pay here” dealers to install tracking devices and systems that disable the car to make repossession easier.

Because of their reputation for taking advantage of the most vulnerable buyers, most consumer advocates advise against buying a car or financing at a buy here, pay here dealer. If your credit is so poor that this type of dealer is your only option, you should not be buying a car. Doing so only invites further financial troubles.

Private-Party Sellers

When you buy a car from a person or business that's not in the business of selling cars is known as a private-party purchase. It can be the cheapest way to buy a used car because you don't have to pay for a dealership's overhead or profit. A private-party sale generally provides the seller with the best return, and the buyer with a lower price than they would find at a dealership.

The trade-off is additional work for both the buyer and the seller. Between the two, all of the sales, title, registration, and other DMV paperwork needs to be completed. In nearly every case, a private-party car sale will be an as-is transaction. The buyer has no recourse if something goes wrong with the car, even a moment after they hand over payment.

Because private-party sales are mostly unregulated, you don't enjoy the same consumer protection laws you have at licensed car dealerships. You'll need to be a skilled negotiator to overcome the emotional attachment a private seller will have for their old car.

Buyers need to be wary of unlicensed car dealers disguised as private-party sellers. They’re called “curbstoners." They may have several vehicles available at once, won't know the real history of the cars they're selling, and may be just a little too familiar with the car sales process. One easy way to identify an illegal car dealer is to search for their phone number or email address using Google or another search engine. If the search results show multiple vehicles for sale, you may have found an illegal dealer. Other tips are to look at the backgrounds of the photos. If they’re all the same, the seller may be a curbstoner. If the seller answers the phone and asks “which car are you calling about?” there’s a good chance you’ve found an illegal dealer.

6. Finding a Used Car

Searching for a pre-owned vehicle used to mean scouring tiny newspaper classified ads, cruising shopping center parking lots searching for cars with “For Sale” signs in their windows, and visiting car lot after car lot. Fortunately, things have changed.

Today, you can find nearly every used car that's for sale somewhere on the internet. Our used car listings, for example, show almost a million vehicles available at dealerships across America. You can narrow the search to your area and the specific model of car you’re looking for.

Craigslist is the most common place to find vehicles for sale by private sellers, but it's not the only place. eBay Motors, Facebook Marketplace, and even Nextdoor.com can show you private-party cars for sale in your area. If you’re looking for something a bit more exotic, head over to BringATrailer.com.

7. Research, Test Drive, and Inspect a Used Car

OK, now the real fun starts. When you've identified a vehicle you might want to buy and secured a pre-approved financing offer, it's time to delve deeper into the car's history. You want to find out as much as you can about any vehicle you're considering. That means getting a vehicle history report, taking a test drive, and having it inspected by an independent mechanic to ensure that it's mechanically sound.

Get a Vehicle History Report

The first step in evaluating a used car is getting a vehicle history report. You don’t want to travel all over town – especially in this time of the coronavirus pandemic – looking at cars that aren’t worthy of your attention. A vehicle history report from a company such as Carfax or Autocheck can tell you if a car is worth pursuing, or if there are too many red flags to keep it on your list.

You will need to get the car’s vehicle identification number (VIN) or license plate number from the seller before you can run the report. You can often get the license plate number from ad photos.

Many dealers will provide the reports for free. If you order them yourself, you can expect to pay about $25 for one report, or less if you buy a multi-report package. If you’re looking at multiple cars, the multi-report packages can save you money.

What’s in a vehicle history report? Though they’re not perfect, a vehicle history report can tell you whether a car is worth spending your time looking at, or whether it’s time to move on to your next candidate.

Accidents: While it may not show very recent collisions, a vehicle history will include information about major reported accidents a car has been in. It uses data from state DMVs, insurance companies, police agencies, and other sources. In some cases, information as detailed as airbag deployment and structural damage will be noted.

Seeing an accident on a vehicle history report should not instantly knock the vehicle off your shopping list. When you do see an accident in a car's history, it's something that you'll want the mechanic who does your pre-purchase inspection to know about. That way, they can evaluate the quality of repairs. Knowing that a car has been in an accident gives you leverage for a significant price concession on the seller's part during price negotiation.

Flood, Fire, or Other Damage: A vehicle history report will also indicate other damage, such as water damage from a flood, fire damage, or damage from a hailstorm. The first two should disqualify a vehicle from your consideration, due to the high potential of hidden damage.

The report should note if a car has been stolen and recovered. If it has, you'll want to see when it was stolen and when it was recovered. If a long time has passed between the two dates, you'll want to take the car off your consideration. It's a red flag that indicates the vehicle was abandoned and later found.

Title Status: Information about a car’s title can give you more insight into its history than any other single item on a Carfax or Autocheck vehicle history report. If you see a "branded" title or one that has been moved from state to state to state, it's a huge red flag and you should probably wipe the car off your shopping list. Common title brands include salvage, junk, or rebuilt for vehicles declared a total loss by an insurance company. Others include police use, taxi use, hail damage, flood damage, and lemon law buyback. If you decide to purchase a vehicle with a branded title, you should demand a massive price reduction and let your pre-purchase inspection mechanic know about its history.

You should be wary of cars that have been moved around the country, because unscrupulous sellers use that as a method of "washing" negative information off the title. Various states title vehicles differently than others, and some sellers take advantage of the variations.

Ownership: Sellers love to advertise cars as “one-owner,” because they’re more valuable than those owned by multiple owners. The vehicle history report will show you whether that’s true in its ownership history section.

Also in the ownership section, you’ll be able to see if there are any liens on the vehicle. You don’t want to buy a car until you have documented proof that the liens have been satisfied and removed.

Odometer Readings: When you renew your car’s registration or get a state-mandated inspection, most states require the car's mileage to be recorded. Those numbers are shown in a vehicle history report and should match what you see on the car's odometer. If the car's odometer shows a lower mileage than in the report, you should ask the seller for a documented explanation or walk away from the deal.

Maintenance and Service History: A car that a seller can show was properly maintained is worth more than one without any service records. You can get a sense of its maintenance history with the information included in a vehicle history report. You'll also want to get copies of the vehicle's service history from the seller, and have the mechanic who does your pre-purchase inspection assess the quality of the work.

Sales Information: The sales information section of a vehicle history report will show when the vehicle first entered service and how many times its ownership has been transferred. Watch for vehicles that have been moved repeatedly from state to state, or from an area that has recently endured floods, fires, hurricanes, or other natural disasters. Not only is moving a car one way to mask title issues, but it can also be used to hide flood damage.

Registration and Inspection Information: The report should show every time a vehicle is inspected or registered in a new state. Again, be wary of cars that are moved around a lot. Gaps in a car's registration history can indicate vehicles that were stolen and took a long time to recover, took a long time to rebuild following an accident, or were abandoned and later put back into service.

Recalls: While a vehicle history report should show any open government-mandated recalls, there’s a better place to find the information. Just enter the car’s VIN into the National Highway Traffic Safety Administration’s Safety Issues and Recalls page. It’s OK to buy a car with open recalls, as long as either the seller gets them taken care of before you take delivery, or you do as soon as you get the car.

What Won’t You Find in a Vehicle History Report? While vehicle history reports are valuable, there’s information that they don’t include. Recent crashes and repairs performed at shops that don’t report them may be absent from the report. The reports also don't usually show the names of a vehicle’s previous owners, as state privacy laws typically protect that information. A vehicle history report is not a replacement for a detailed pre-purchase inspection by an independent mechanic.

First Impressions

When the time comes to start looking at used cars in person, your first impression of both the vehicle and the seller should tell you if you should move the process forward or walk away. If you're looking at a car from a private seller, it's a good idea to treat it like a blind date and meet somewhere public away from your home and theirs. You want to look at cars in the daylight, as the dim light of evenings can prevent you from spotting damage.

Evaluating a used car means using all of your senses (except maybe taste, because that would be gross). It should also include your sense of intuition, which will help you determine if something doesn't seem right.

It’s a good idea to show up a little early, so you can see the car pull up. Do you hear strange noises or smoke behind it? Do a walk-around, looking for damage, worn or non-matching tires, and broken glass or lights. If there’s something that stands out and would make you pass on the car, it’s a good time to tell the seller and leave. This way, you don’t waste any more of your time or your or theirs.

Next, look at the car’s body and paint. Is it in good shape? Does the color and gloss match from panel to panel? Mismatched panels are an obvious sign of repaired collision damage. Ask the owner to turn on all of the lights and look to see if they’re burned out, cracked, or full of water. A light that’s not working can be as simple as a burned-out bulb, or as costly as a bad wiring harness. Keep track of anything that gets your attention, so you can tell your pre-purchase inspection mechanic to check it out.

Start exploring the car's interior, looking at the upholstery's condition, and noting any bad smells. A moldy smell can indicate flood damage, while the smell of cigarette smoke can be tough to remove. How clean is the car? If it's filthy, how sure will you be that they've adequately maintained the rest of the car?

While it's not a good idea to bring your kids along when looking at cars, it is a great idea to bring along their car seats. Not all child seats fit well in every car, and you'll want to know if yours do. The same goes for dog crates and other items you frequently carry.

Learning From a Test Drive

Taking a test drive is one of the most critical tasks in buying a used car. However, the rules have changed due to the coronavirus pandemic. You need to place your personal safety above all else. You should insist on taking your test drive solo. If the seller refuses, either walk away, or set strict ground rules about mask-wearing, drive with the windows down, and ask them to sit as far away as possible.

A thorough test drive takes more effort than simply driving around the block. It's more than just a way to check the car's condition; it's also a chance to see how it meets your needs and see whether you fit and can get comfortable.

Before You Move

A proper test drive starts well before you start moving. You want to get comfortable in the vehicle by adjusting the seats, steering wheel, and mirrors. Ensure you can reach all of the controls and see what you need to see from the driver's seat. If you can't get comfortable on your test drive, the car isn't going to magically become more accommodating after you buy it.

Next, start the car and try out every system. Did the car start quickly, or did it crank for a long time? Even if it's freezing outside, try out the air conditioning and check every fan speed. The same goes for the heater, even if it's the hottest day of the year. Switch on the vehicle's interior lights. If they're pulsing, it can indicate an issue with the car's electrical system. Check every door lock and window, listening for odd noises as they raise and lower.

Turn on the stereo and move the fader and balance so you can hear each speaker, making sure none of them crackle.

If you see anything that leads you to think that the car is unsafe to drive, do not take a test drive. That includes burned-out brake lights, a broken windshield, an airbag warning light, or tires worn to the cords. As the driver of the car, you're ultimately responsible for any damage, injuries, or traffic citations.

Make note of any issues you find. The seller will either need to get them fixed, or offer price concessions so you can make the repairs after you buy the vehicle. Of course, if you’re buying a very old car or one with high mileage, you can’t expect perfection. You should always expect safety, or be prepared to spend the money to make it safe.

The Drive

A test drive is an opportunity to learn about a vehicle you may buy, assess its condition, and get a sense of its performance. It is not a chance to allow your inner Formula One driver to run free. Most car dealers will immediately stop the test drive when this happens and ask you to take your business elsewhere. Do it in a private seller’s car, and you’ll likely be held financially responsible for the damage you cause.

When you start moving, you’ll want to turn off the car’s radio so you can hear any strange engine, transmission, or suspension sounds. You’ll also want to listen for wind noises around the windows, doors, and sunroof that may indicate leaks.

Is the ride as you expect it to be, without strange jolts or noises? Be sure to adjust your expectations to the type of car you’re driving. An off-road-oriented pickup can’t be expected to provide the composed ride of a midsize sedan, for example. If you’re buying from a dealer, they will likely have preset test drive routes. If possible, however, you’ll want to test drive the car on the types of roads more typical to your commute. That’s another reason to push for a solo test drive.

You should pull into a parking lot, so you can assess the car’s maneuverability and how easy it is to see outside or use the vehicle’s cameras when in tight spaces.

While it’s natural to be nervous when driving someone else’s car, do your best to drive it as you would drive your own. Test the brakes, making sure they don’t pulse or grab. Does the car accelerate smoothly, or does the transmission slip or cause the vehicle to lurch? Does the car drift left or right when you hold the steering wheel straight? A very slight drift to the right is acceptable, but it should never pull to the left, into oncoming traffic. Vibrations you feel in the steering wheel typically come from the front tires, suspension, or brakes. Those you feel in the seat of your pants likely come from the rear of the car.

Pay attention to the instrument panel. Are warning lights coming on? Or are lights not coming on when they should?

While you should note every flaw during the drive, not all should eliminate the car from consideration. Some issues can be used as bargaining chips when negotiating a price. All issues should be brought to the attention of your pre-purchase inspection mechanic.

We have a whole feature article dedicated to the topic of How to Test Drive a Car.

Get an Independent Mechanical Inspection

A great test drive may have you ready to write a check and drive the car home right away. However, there's another critical step you have to complete before you decide to buy. With just one exception, you should not buy a used car without a comprehensive pre-purchase inspection by an independent mechanic. The only exception would be if you're buying a relatively new certified used car with factory warranty coverage from a franchised new-car dealership.

When we say independent mechanic, we mean one that works for you, not the seller. Taking it back into a dealership’s shop, putting it up on a lift, and declaring it in good order simply isn’t good enough.

Yes, a pre-purchase mechanical inspection will cost you some money – probably $100-$200. However, if it saves you from a major mechanical repair soon after your purchase, it will have been worth it. Plus, it may highlight issues that give you additional bargaining power in your price negotiations. In some states, AAA-affiliated auto clubs offer comprehensive pre-purchase inspections from AAA-approved auto shops or mobile inspection companies.

Sometimes a seller will resist your need to have the vehicle inspected. Sometimes they don’t think it’s worth the hassle, while other times they’re trying to conceal known problems with the vehicle. No matter what the excuse, you want to be firm: no inspection, no sale.

Good mechanics will not only find issues that aren't apparent to most car shoppers; they'll also be able to estimate how much the repairs would cost. Their experience should tell them what problems are common to specific models and identify when collision repairs and periodic maintenance have been performed correctly. They will have access to databases that identify common issues so that they can focus their attention on those areas.

If a mechanic finds issues, it doesn’t necessarily kill the deal. Any problems they find just become another point to address in your price negotiations.

8. Make a Deal and Complete the Paperwork

If the test drive and independent mechanical inspection don't raise any concerns, it's time to negotiate a deal, set the purchase price, and finalize the sale and paperwork.

Negotiating a Fair Price

Price negotiation is part art, part science. It is critical to remember that it’s not personal. Buying a car is a business transaction – nothing more, nothing less. The more you show your emotions, the less powerful your bargaining position. Negotiation needs to be based on facts, not your feelings.

In the past, most price negotiation would have been done face-to-face. Today, it’s just as likely to be done by chat, text, or email. That’s great for buyers, who have a written record of the offers that a seller can't conveniently forget happened. You can take those messages and use them as leverage with another seller.

You’ll want to research what others are paying for similar cars in the marketplace. Our used car reviews show market price information for used vehicles going back more than a decade. Look at what price private sellers are seeking on Craigslist, but remember those are asking prices and not what the vehicles are actually selling for.

What strategies you use depends on where you're buying the car. If you're buying from a dealership, you'll be negotiating with a salesperson who is trained to move you incrementally to the deal they want to give you. Dealer salespeople will generally want your focus to remain on the monthly payment, while you'll want to keep them focused on the total cost of the car. If you have a trade-in or need financing, they’ll want to package everything into one deal, while you want to keep them as separate as possible.

By merging all of the numbers into one deal, a trained salesperson can manipulate each of the components to make it look like you’re getting a deal when you really aren’t. It also breeds confusion, which is advantageous to the seller. You can take the trade-in completely out of the deal by selling it yourself. Having a pre-approved financing deal in place limits their ability to manipulate a loan’s terms.

Setting a price with a private seller is usually much more casual. In fact, if a seller starts acting too much like a salesperson, it's a red flag that you might be talking to an unlicensed dealer. Private-party car sellers often have an inflated opinion of their car's worth and are emotionally attached. Sometimes they have an unrealistic price they "need" to get out of the vehicle.

Negotiation experts will tell you that the person who talks first about price, or talks the most, will usually not get what they want out of the back and forth. Ask the seller what price they want for the vehicle. Doing so locks them into a price that they can’t ever take higher.

Be sure you’re talking about the out-the-door price, including all fees. Many dealers are notorious for adding a plethora of fees to the negotiated price. Some are real and non-negotiable, such as registration and title fees. Others are more nefarious, such as documentation, advertising, and vehicle preparation fees. Those last few should be part of the negotiation and considered part of the price of the car.

Some used car sellers, such as Carvana, are simplifying the car-buying experience by eliminating last-minute fees and pivoting to a no-haggle sales process. The car's advertised price is not negotiable, and no dealer or documentation fees are added to the purchase price.

Your counteroffer should be at the low end of what similar vehicles are selling for, and you should be ready to back up your offer with reasons why. Be sure to consider the cost of any repairs the car needs in the amount you offer.

Remember: once you throw out a price, you can never go lower. If your counteroffer is so low that it's insulting, remember it's the seller's right to send you on your way. It's important to consider that a dealer is entitled to a fair price. A private-party seller will expect a price in the range of what other sellers of the same car are getting.

Bottom line: Don’t be a jerk, and don’t let the seller be a jerk to you. Be firm, yet polite and professional.

Negotiation can take some time. Each time the seller comes back with an offer, make them back it up with reasons why they think it’s worth that price. Counter their offer, and back it up with reasons why you won’t pay their asking price.

If a seller tries to bully or intimidate you into making a deal, you should run – not walk – away. In fact, walking away is the most powerful negotiating tool you have, as long as you use it the right way. If you walk away, be sure to leave your contact information, letting them know to contact you if they can come closer to your price.

Never trust a seller’s math when it comes to evaluating an offer. Have a notepad at the ready, and pull up the calculator app on your phone to run the numbers. Once they realize that you understand how all of the numbers fit together, they’re less likely to play games with the figures.

Signing the Papers

If you’re buying a car from a dealership, this last step is easy. The salesperson will have the purchase documents prepared. You just have to read and sign them. Be sure to check all of the numbers and make sure no costly extras have worked their way into the deal. Never sign documents that are incomplete or incorrect. It's harder to demand the correction of paperwork that already has your signature on the dotted line.

It's more complicated when you buy a car in a private-party sale. One of you will have to create a bill of sale. It should note the date, mileage, price, and any special terms. Your lender may have a specific form they need you to use or require additional information to be included. In most cases, car sales between individuals are as-is transactions with no warranty coverage. If you negotiated repairs into the deal, they must be specified on the bill of sale.

Different states require different documents for a private-party sale. At the very least, you'll have to reassign the title from the seller to you and register the car in your name. In some states, you'll also have to file an odometer disclosure or have the odometer reading verified. If you're moving the car to an area with safety or emissions testing, you'll need to have that done before registering the vehicle. Some states will require you to have proof of auto insurance coverage and require payment of any taxes when applying for registration.

Beware of ‘Yo-Yo’ Financing

Some car dealers will let you drive a pre-owned car home before the financing is complete. You never want to do this. When you accept what is called “spot financing,” you open yourself up to be a victim of the “yo-yo” financing scam.

Here's what happens: it appears the paperwork is all complete, but the financing component isn't quite done. The dealer's finance officer or salesperson will tell you that they just have to file paperwork with the lender in the morning. There may be a line in the fine print that says the financing is pending approval.

After you’ve been enjoying your new-to-you used car for a week or so, you’ll get a call from the dealership saying that you didn’t qualify for the financing in the original paperwork. They’ll demand you return to sign new paperwork. When you arrive, you're faced with a financing deal that's far more expensive than the one you originally agreed to. They'll often apply significant pressure to get you to sign, implying that you have no other choice. Fortunately, in most cases, you do.

It is sometimes true that the dealer believed you would qualify for the financing. In other cases, unethical dealers know that you never had a chance to get the financing deal. Instead, they want you to take the car home, fall in love with it, and then be coerced into signing for a new, more expensive loan.

If that happens to you, the first call you want to make is to a local bank or credit union to determine what kind of a deal you qualify for and get approved for a new deal. Take that pre-approved loan back to the dealer and use it to buy the car. If you can't qualify for financing from an outside lender, take the vehicle back to the dealer and demand they undo the deal. In some states, the laws regarding spot financing are in the buyer's favor. In some states, however, they favor the dealership and leave you with few options.

You can avoid falling for this unethical practice by financing your used car purchase outside of the dealership and ensuring all of the documents are finalized before you sign. Watch out for phrases such as "conditional approval" or "conditional delivery." Don't sign any papers with those terms.

9. Consider Add-Ons, Warranties, and Insurance

We’re almost at the finish line, but there are a couple of final tasks that need to be taken care of.

Add-ons

When you are signing the final paperwork, you’ll likely be barraged with offers for add-on products. They’ll range from various vehicle protection products, such as paint and upholstery sealants, to gap insurance and extended warranties (sometimes called service contracts). The offers will generally come with slick sales pitches and pressure to buy right now.

Before you do, you want to do your research. In many cases, the products can be purchased outside of the dealership at better prices. Products such as extended warranties can be purchased from many lenders and insurance companies. The same goes for gap insurance coverage, which can usually be packaged with the rest of the car insurance coverage you buy from an auto insurance company.

The time pressure will come from the dealer's desire to include the products in your car's financing. "It will only add a few dollars per month to your payment," you'll be told. The truth is, you rarely want to finance these add-ons. They add no little value to your vehicle but raise your financing's loan-to-value (LTV) ratio, potentially putting you underwater. The "just a few dollars per month" argument also hides the real cost of the products.

Buying a manufacturer-certified used car typically gets you factory warranty coverage, eliminating the need to immediately purchase an extended warranty. Other used vehicles are usually sold as-is, with no warranty past the car's original factory warranty. Once that warranty ends, or if it is already finished, you'll be on your own for repair costs. Consumer advocates almost universally advise against purchasing extended warranties. If you decide to anyway, be sure to compare the products available in the marketplace, their prices, and the companies behind them.

Purchase the Right Car Insurance

It's often overlooked, but buying car insurance to protect your new car isn't just a good idea; it's the law in nearly every state. Even if it's not, most lenders will require you to have insurance on any car they finance. The coverage that's needed will vary by your state and lender.

The U.S. News guide to car insurance is the place to go when you want to learn how to navigate the world of auto insurance. We’ll help you understand how car insurance works, how much coverage you need, and how to find car insurance discounts.

Owning a Used Car

It has been a long journey, but now you're a car owner. You'll want to ensure that it is properly maintained, and that you take steps to protect its value. By taking care of your car, you’ll limit its depreciation. When it's time for your next vehicle, you want its trade-in value to be as high as possible.

You worked hard to get your car and its financing. Not making your car payments can see all of that hard work go to waste, taking your credit score along with it. Our guides explaining what to do if you’re underwater on your car loan and what to do if you can’t make your car payment can take you through the process of dealing with financial calamities without needless damage to your credit.

More Shopping Tools From U.S. News & World Report

A guiding principle we follow at U.S. News & World Report is that you can't get a good deal unless you're getting a good car. That's why we've designed our new car reviews to answer the questions shoppers have when they're in the car-buying market. Our new car rankings and reviews are based on the country's top automotive journalists' consensus opinion, blended with quantifiable information about safety, predicted reliability, and other factors. Our used cars rankings add the cost of ownership to the list of factors we include. We don't accept expensive gifts or travel from automakers so that you can be assured of our impartiality.

We scour the marketplace to bring you information about the best new car financing and cash back deals. You’ll find them on our new car deals page. Our lease deals page shows special offers with low monthly payments and little due at signing. Shoppers in the market for a certified used car should explore our used car deals page to find special financing offers.

The U.S. News Best Price Program connects new car buyers and lease customers with local dealers offering pre-negotiated pricing, online sales processes, and home delivery options. Shoppers save an average of more than $3,000 when they use the program.

How to Test Drive a Used Car .
One of the most important steps when you buy a used car is taking a test drive. It doesn't matter whether you're buying from a private party, an independent used car dealer, or even a certified used car from a franchised new car dealership; a thorough test drive is where you find out if the vehicle is right for you. To maximize the value of your evaluation, there are some steps you should take before, during, and after your drive. Being prepared can save both you and the seller or salesperson from wasting time on a car that’s not right for your needs and budget. You also don’t want to spend any effort pursuing a pre-owned car that has serious red flags in its history.

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