Complete Guide: How to Buy a Used Car

If you’re looking to save money when buying a car, consider investing in a used car. This option will not only be cheaper but can also last for years to come.

While some may associate used cars with endless repairs and high mileage, taking time to research and plan a budget can help you find a car that runs like it’s straight from the factory. Purchasing a used car can save you thousands of dollars and can prove to be just as reliable as a brand-new vehicle.

To avoid driving home in a lemon, refer to this guide on how to buy a reliable used car.

Creating a Budget

Before any major purchase, such as buying a home or going on vacation, or investing in a car, you should always create a budget and stick to it. The price of a used car isn’t just what you see on the sticker.

A used car price also entails additional factors that may add to the cost of the car.

These “hidden costs” include:

  • Registration fees and taxes
  • Potentially higher auto insurance premiums
  • Immediate, necessary repairs (if any)
  • Ongoing wear and tear
  • Interest rates and loan fees (if you borrow money)

By setting a reasonable budget, you’ll be able to find a used car with lower mileage, good car history, and save money in the long run.

Tip: I recommend looking for cars you can pay for entirely with cash first. Used cars can still depreciate faster than you can pay back the loan. Plus car payments aren't fun.

Researching and Finding a Used Car

The most important part of your used car buying journey is conducting research. If you want to save the most money while still going home with a reliable vehicle, sitting down and searching the Internet, calling dealerships, and looking at newspaper clippings will ensure you get more bang for your buck.

Whether you’re looking for used VW cars in Columbus, GA or used Honda Civics in Santa Barbara, CA, doing your due diligence and researching the perfect car will save you frustrations down the road.

Begin researching by comparing the prices of a car or cars you’re interested in purchasing. There are numerous price comparison tools on the web for you to use to compare the prices of used cars.

You should also check the car's history using the Vehicle Identification Number (VIN). This can be done with services such as CarFax, AutoCheck, or the National Insurance Crime Bureau. Doing so will provide insight on what the car has gone through, repairs made on the car, recalls, and basic information on the owner(s) of the vehicle. With a history report, you’ll be able to see:

  • Accidents
  • Damage
  • Title Status
  • Ownership
  • Odometer Readings
  • Service History
  • Sales Information
  • Registration and Inspection Information
  • Recalls

Tip: Avoid buying cars with a salvage title (speaking from personal experience). I always do a free VIN check and look at common maintenance problems (in public forums and databases) before I schedule a test drive. 

I also recommend avoiding cars that have a lot of rust, known electrical issues, or were used as a snowplow or construction. If the thing looks worn out, it probably is. Once again, I'm speaking from personal experience.

If you don't feel comfortable after talking with the owner or having a test drive, don't feel pressured to buy. I've owned two lemons in my life. One of them was purchased after driving 5 hours and not wanting to come home empty-handed even though the listing was misleading from the actual vehicle condition. 

Buy a Used Car

Financing a Used Car

I've had one car loan for a next-to-new car and have paid cash for about other used cars in my driving car. There are plenty of good, reliable vehicles if you can spend at least $7,000 to $10,000 upfront. Trust me, having no car payment is nice if you can swing it.

Now that you’ve created a budget, completed your research, and found a car you’d like to purchase, it’s time to figure out how to pay for it. Paying upfront is one route you can take when buying a used car. Paying upfront is a beneficial option because you won’t have to deal with interest rates. Better yet, with cash at hand, you’ll be able to negotiate a better price with the dealer or owner.

However, paying upfront isn’t always an option. Instead, you can use an auto lease calculator to determine the best way to finance a used car and shop for leases in the following ways:

Through Your Bank

Large national banks and smaller community banks both have auto lending services for you to choose from when financing a used car. When searching for an auto loan from a bank, compare interest rates, loan specials, and other policies to make sure you’re not spending extra on hidden fees.

With a Credit Union

A credit union is similar to a bank, except they differ in the fact that banks are for-profit institutions, while credit unions are non-profit institutions. Because credit unions return their profits to their members, they have higher savings rates but lower loan rates, making an auto loan more affordable.

Financing Companies

Financing companies are another financial institution like a bank, however, instead of taking deposits, they only lend money. They do this by borrowing money from other financial institutions in order to make loans for people like you. Automakers like Toyota and Nissan also have their own finance companies, so if you purchase a used car from a dealership, you can work with their own financing team to get a loan.

These companies may offer better deals than a bank or credit union. However, you may need to buy a brand new vehicle to enjoy interest-free rates. Crunch the numbers. If you plan on owning the car for 10 years…buying new can be better because of the special financing, new car warranty, and you “outlive the depreciation.”

Take a Test Drive

Before you sign the paperwork, there are a few more steps you should take when it comes to buying a used car. Once you figured out how to pay for your vehicle, it’s time to bring the car on a test drive.

Always take a test drive. No exceptions.

While a vehicle history report will provide insight into what the car has been through, they can sometimes have misinformation and not appear as good as they seem.

Giving your potential used car a spin around the block will allow you to look for:

  • Weird noises such as clunking, humming, hissing, or buzzing
  • Unpleasant smells or smells of oil or gasoline
  • The brakes—do they stop on command or make any screeching sounds?
  • Comfort—is it a bumpy ride?
  • Jerks, pulling, and slipping—can be a sign of transmission or steering problems

You should also have a mechanic inspect the car. An independent mechanic or freelance mechanic will be able to look at any underlying issues you may not be aware of and will give you their opinion on how much they’d pay for the car. This will let you know whether you’re getting a fair price or not.

Sealing the Deal

Now that you’ve tested the car and it seems A-Okay, it’s time to seal the deal!

Buying a car is a monumental moment in everyone's life, whether it’s their first car or fifth. Cars allow us to be free, roam the land, and create new memories. The last thing you want is to be stuck on the side of the road in a rainstorm waiting for a tow truck to bring you back to safety. Before buying a used car, make sure you refer to this used car buying guide to make sure you get the best deal possible.

What other suggestions do you have for buying a used car? Do you have any used car horror stories? Please share below.

Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.