Buying a used car is both similar and not similar to buying a new car. While you are ultimately looking for a car that is dependable, safe, comfortable, and stylish, you have a lot more things to worry about. After all, used cars have a history that you aren’t going to ever truly know.
There are actually quite a few benefits to buying a used car, and a lot of them are financial. First and foremost, a used car is always cheaper because you miss that first big hit of depreciation. Depreciation occurs throughout the life of a car, but the biggest hit occurs when you drive off the lot (and then in the first year of ownership). In fact a car loses about 10% of its value the moment it leaves the lot. In the first year, it loses a total of 20% of its value. So by buying a used car, you miss out on that depreciation. This ultimately means that a used car is just flat out cheaper than buying a new car.
Additionally, used cars don’t come with the hidden fees (like shipping fees) that typically occur with new cars. A used car may also come with options that would have driven the price up significantly more had the car been new. Roof racks, all purpose weather mats, and entertainment systems would all drive a new car price up by thousands of dollars, but when a car is used, these features do not cost nearly as much.
You may also find that some used cars have warranties left on them (most leases end after three years while most factory warranties last five years and are transferable to a new owner). Used cars are also cheaper to insure than new cars, so you will not only save when you buy your car, but you will save every month on insurance. In general, buying a used car is just less expensive than buying a new car.
With a lower price tag comes some trade offs however, so you will have to weigh if the disadvantages are worth the savings. First off, your car isn’t made to order for you. That means that it will most likely not have everything you need or want in your new car. But what’s worse than that is the unknown history. A used car has had a life before you, and you will never really know how your car was handled. While you can hope that service records and CarFax will tell you a good story, you will never truly know how the car was driven and maintained.
Additional cons of buying a used car include:
Limited warranty. If your used car does come with a warranty, it will only last a few years.
Lower fuel efficiency. Newer cars are becoming better and better when it comes to fuel efficiency. An older car will inevitably be outpaced by a new car with good fuel economy.
Possibly less safety features. As with fuel efficiency, new cars are becoming safer and safer. Older cars may not have some of the safety features that you want (or need),
Problems will arise sooner. All cars inevitably need some work. After 50,000 or 100,000 miles, there are going to be some issues that will need to be addressed. When you buy a new car, you have a long while before you have to worry about any of this. But with a used car, you are that much closer to hitting higher miles (and thus needing some repairs)
Limited financing options. You may find it significantly harder to finance a used car as opposed to financing a new car. It is not uncommon to find predatorily high interest rates in the used car market.
So while buying a used car is significantly cheaper than buying a new car, there are some important tradeoffs you will need to consider.
If you decide that buying a used car is the right move for you, here are the steps you should take to ensure you get the best used car deal possible.
This is the same whether you are buying a new car or a used car. The first step you need to take is to determine how much you can actually afford to spend on a used car. Here are a few tips to help you figure this out:
Aim to put down AT LEAST 10%, but preferably 20%, as a down payment. This will give you more financing options and ensure that your loan doesn’t end up underwater.
Plan on spending no more than 20% of your monthly income on transportation expenses. This means your car payment, insurance, gas, maintenance, parking, and tolls.
There are loads of used cars out there, so your next step should be narrowing down your options. What type of car do you need? An SUV, a pickup truck, a sedan? Think about how you plan to use your car and prioritize the features you are looking for. Is good gas mileage important/? Do you need a lot of cargo space? There are a lot of things to consider, so be thoughtful when working through this.
After you have a pretty good idea of what you are looking for you can start researching makes and models. What brands are reliable? What models hold their value? Go on Kelley Blue Book or Edmunds to start sizing up which cars may work for your budget. When you get a list of what cars have what you are looking for, read reviews from owners to determine if it’s a good fit. Pay attention to the good and the bad, taking note of the things that might be a dealbreaker for you.
Now is when you can start actually looking for your used car. Keep in mind that you will not have the variety that you would if you were buying a new car, so you should have a few options that you are open to. There are a number of places you can look at when looking for a used car.
Online marketplaces. A great option is to look at an online marketplace such as Autotrader or Autolist. These sellers have listings from across the country and include cars from traditional dealerships, online dealers, and even private sellers.
Online dealer. You can also look directly at online dealers such as Carvana and Vroom. These companies have their own inventories and you can actually purchase your car directly online. In many instances you can even return your car if you are unhappy.
Traditional dealership. You can choose to go old-school and see what your local dealers have to offer. While less convenient than shopping online, this gives you the chance to actually test drive, which is a huge perk.
Other third party platforms. Facebook marketplace, Craigslist, and even Ebay are other places where you may be able to find the perfect car. Since people are often looking to get rid of their car quickly, you may have luck getting a great deal on your used car.
When you find some cars that sound good to you, you want to make sure you are getting a fair price. Kelley Blue Book and Edmunds are again great places where you can check this information. You should look at the make, model, year, mileage, options, and condition of the car when determining a fair price.
Here is where you should also pull the car’s vehicle report to ensure that there is no significant damage to the car that you are unaware of.
If everything seems to be checking out, it’s time to contact the seller. Be sure to ask the following questions:
How many owners has the car had?
Are there liens on the vehicle?
Are there service records?
You should next set up a test drive so that you can make sure the car is a good fit for you. When you drive the car, make sure you don’t hear any weird noises or feel any weird sensations. Be sure there is good visibility, the car handles well, and the brakes are in good working order
If you have landed on the best used car for you, the next step is to negotiate. Use your knowledge of the online prices you saw to guide you to the best price. Once you land on a number, you can either hand over a check or secure private financing. Then the car is officially yours.
If you are overpaying every month on your car loan, then now is the time to refinance. Contact Auto Approve today to see how much you could be saving!