How to Buy a Used Car

Steps on How to Buy a Used Car

Need help buying a used car? You're in the right place. This page will cover nearly every aspect of buying a used car. Each step will link to a related article for those who wish to delve deeper into their car buying research.

1. How Much Car Can You Afford?

Everyone's financial situation will be different, but a good rule of thumb for a used-car budget is that your monthly payment should be no more than about 10% of your take-home pay. You don't want to go higher than that, because you'll also have to factor in the costs of fuel and insurance, which many people tend to overlook. We estimated those costs at another 7% of your take-home pay. So, all in, you're looking at a total used-car budget that is less than 20% of your monthly take-home pay. Use the Edmunds affordability calculator to see how your target monthly payment affects the price of the vehicle you can buy.

2. Find/Choose the Right Car

As you ponder which model vehicle to buy, think of the primary reasons you'll be using it. Do you have a long commute to work? Consider something fuel-efficient. Do you need to tow a trailer on occasion? Look at trucks and larger SUVs. In general, you'll find that the more popular vehicles tend to hold their value better, which means that the prices will be higher than those they compete with. So if you're looking to save money, shop more than one brand. We suggest making a list of three cars that meet your needs and fall within your budget. Edmunds "best used cars" list is a great place to begin the search.

3. Check the Cost of Owning the Car

If you've narrowed down your used-car search to a few vehicles but are still on the fence, factoring in the numerous ownership costs may help in making the decision. Some vehicles may use costlier premium or diesel fuel, while the prices of parts and labor may be more expensive on luxury-branded vehicles. Even insurance costs should be taken into consideration. Use Edmunds' True Cost to Own tool to see how the numbers play out for your specific vehicle.

4. Certified Pre-Owned (CPO) vs. Used Cars

If you're shopping for a late-model used car or truck, you might want to consider a certified pre-owned (CPO) vehicle. A CPO vehicle is used car that has gone through a thorough inspection and reconditioning and has been given a factory-backed limited warranty. CPO vehicles also come with benefits not found on other used vehicles, such as access to loaner cars, roadside assistance and even maintenance for some brands. CPO cars, take the guesswork out of used-car shopping: The vehicles are inspected, reconditioned and guaranteed to be in working order. You might also see the term "Certified" used at a number of dealerships. More on that here. For more information on CPO cars, read Certified Pre-Owned Cars: A Reality Check and Certified Pre-Owned Cars Vs. Used Cars With Extended Warranties.

5. Find the Price You Should Pay

You'll need to know the market value of the car, in order to determine the right price to pay. Use Edmunds' Used Car Values tool to enter the options your potential vehicle has, then take a look at the dealer retail price or private-party price, depending on who is selling it. When you're browsing used-car inventory on Edmunds, you'll see that most prices are labeled Fair, Good or Great. These labels are based on the percentage from the market value, which makes it easy to spot the better deals at a glance.

6. Where to Buy a Used Car

You should choose where to buy your used car based on your price range and needs. For example, if you're looking for a vehicle with a limited warranty, consider certified pre-owned at a dealership. If you want a wide range of selection and don't want to haggle with pricing, consider a dealership such as CarMax. If you're looking for a lower-priced vehicle, take a look at a non-certified vehicle at a franchise or independent dealership. Finally, if you don't want to bother with a dealership at all, stick to the private-party listings in your area. Each used-car resource has advantages and disadvantages. So, depending on your priority (price? selection? warranty?), several outlets may fit your needs. Read Where's the Best Place to Buy a Used Car? for more information.

7. Check the Vehicle History

Obtaining a vehicle history report is an important step to take before moving forward on a used-car purchase. It contains information on how many owners the vehicle had, where it came from and most importantly, whether it was in an accident. Use these reports to quickly filter out vehicles with salvage titles or odometer inconsistencies. AutoCheck is the most popular report. Either vehicle history report can help give you peace of mind that the car you're about to buy has been maintained properly and wasn't in a horrible accident. Some dealerships will provide a free report on their website. Otherwise, you'll have to pay for them. Read our Which Vehicle History Report Is Right for You article to determine which one is the best option for you.

8. Contact the Seller

If you're planning on buying from a private-party seller, make sure to call them before setting any appointments for a test drive. You'll be able to establish a relationship with the seller and verify the information about the car. Also, be sure to ask why they've decided to sell it, or whether it has any mechanical problems. If you get a weird feeling, like the person not knowing about his car's history, it could be a red flag, and it may be best to move on to another vehicle. And if you're buying from a dealership, a phone call (or text) is the best way to ensure the car is still in stock.

9. Take a Test Drive

Test-driving a used car is the best way to know if it will fit your needs and meet your expectations. You'll also be able to assess this particular car's condition. There are a number of things to consider on a test drive, but overall you'll want to judge how comfortable the vehicle is, how easy it is to see out of, and whether the engine has enough power for your needs.

10. Have the Car Inspected

We highly recommend bringing a mechanic with you to the test drive or making arrangements with the seller for a pre-purchase inspection. Most used cars are sold "as-is," which means the onus is on you to determine its condition level. But even if you are not an expert on cars, there are some basic things you can keep an eye out for when evaluating a vehicle. Does the air conditioning blow cold? Are the tires old? Listen for any strange noises, and check if the wheels track straight on the drive.

11. Negotiating the Best Price

It's a little harder to negotiate for a used car since the condition levels — and pricing — can vary greatly from one car to the next. That said, negotiating doesn't have to be a drawn-out, traumatic experience. If you avoid making unrealistic "lowball" offers and have a plan, chances are you can make a deal pretty quickly and easily.

Decide ahead of time how much you're willing to spend to get the car, but don't reveal this number in your discussion. Make an opening offer that is lower than your maximum price but in the ballpark based on your average price paid research in Step 3. Explain that you've done research on Edmunds or wherever else, so you have facts to support your offer. If you and the seller arrive at a price that sounds good to you and is near the average price paid, you're probably in good shape.

12. Financing a Used Car

Check with your bank or credit union to get approved for a used-car loan. Dealerships offer financing options as well. And in some cases (such as CPO cars), the finance rates can be more favorable than your own bank's. It is worth applying and hearing what options are available to you. Just make sure you do this within a two-week timeframe. Otherwise, it may reflect negatively on your credit for filling out too many loan applications.

This step can be done sooner in the process if you already know which make and model you want and need to determine your price range. Or, it can be done after you've found a specific vehicle and have mutually agreed on a selling price.

13. Factor in Sales Tax, Warranties and Other Add-Ons

If you are buying from a private seller, the sales tax will be handled at the time of registration. If you're at a dealership, it will be included in the "out-the-door" price. The dealer finance and insurance manager will offer a number of additional products such as an extended warranty, prepaid maintenance plans, paint protection and more. If you choose to purchase them, they will be included in the contract. Keep in mind that many of these items are negotiable, and you can call other places to see how the prices compare for the same services.

14. Finalize the Deal and Paperwork

This step will be different whether you are buying from a private seller or are at the dealership. But in general, you'll want to examine the vehicle one last time before driving away with it. If you're signing a contract, make sure to read the places where your signature or initials are required. Take a look at the numbers on the contract to see if they match what you agreed to pay, paying close attention to the sales price, trade-in, interest rate, down payment, and loan term. If it's a private-party transaction, make sure you conclude the deal in a public location. Since you will be making arrangements to pay for the car, a bank's lobby makes an excellent, neutral meeting place. Read How to Close a Used-Car Sale for more details.

Buying a Used Car

Dealerships vs. Private Seller

Both venues are legitimate ways to purchase a used car, but here are a few things to keep in mind. You'll have to make your own finance arrangements with a private-party sale, whereas a dealer can help you apply to different lenders. If you discover something wrong with the car that perhaps was not disclosed, you have a chain of command at the dealer, where you can lobby to get it fixed. Most private-party sales are final, so buyer beware. Some may find it easier to negotiate with a private seller rather than a dealership with trained professionals. While a dealership can run a vehicle history report for you, only a private seller who owned and drove the car can truly tell you what it was like to own it.

Leasing a Used Car

It isn't a common occurrence, but it is possible to lease a used car. It will take a bit more work to find a dealership willing to do so, but the savings can be significant. We detail the pros and cons in our Lease a Used Car article.

Buying Used vs. Leasing New

In general, buying a used car and keeping it for years will always be the most financially sound option. However, if you're someone who changes cars every few years, prefers to drive something newer or just wants to focus on a lower monthly payment, leasing can be a viable alternative to buying a used car. We compare the costs of lease vs. buying new vs. buying used to help you decide which is best for you.

Tips for Buying a Used Car

Can't get enough tips on how to buy a used car? Here are a few to start off with:

• Get preapproved for your used-car loan. Doing so lets you know what you can afford and the interest rate for which you qualify.
• It's a good idea to get a free credit report and to know your credit score before you begin shopping. (Some credit card issuers now provide this information at no charge.) Correct any outstanding credit issues before you go car shopping.
• Make a list of your wants and needs in a used car. Plan on buying the car that meets 80% of your needs.
• Jot down your likes and dislikes on the cars that interest you. Doing so will help when it's time to narrow down the search.
• Build a target list of cars you might want to buy. As you complete your research, narrow the list to three used vehicles so the shopping process won't be overwhelming.
• To save money, consider buying a second-tier car from the less popular but still reliable manufacturers. Well-known vehicles such as the Honda CR-V and Toyota RAV4 can cost thousands more than a comparable Chevrolet Equinox or Nissan Rogue, even though these are also good cars.
• Read Edmunds editors' and consumers' reviews of used cars to get recommendations and see the pros and cons for the car you are considering. Just type the year, make and model of the car you're considering into the Edmunds site search box to get started.
• Figure out your "must-have" options or packages and your preferred colors. Be prepared to be flexible, though. Because you're looking at used cars, you might have to budge on color to get the features you want, or vice versa.
• If your color and option choices in a used car are not common ones, you may not be able to negotiate as aggressively on price. Also, be prepared in this case to search a little longer and even travel a bit farther to get the car you really want.
• Read dealer reviews to discover the more popular car dealers in your area. Zero in on reviews that talk about used-car purchases. These accounts might also tell you which salesperson to ask for.
• Consider buying a certified pre-owned (CPO) car. It greatly simplifies the buying process because the car has already been thoroughly inspected, so evaluating its condition is less of an issue. Just keep in mind that the vehicle will be priced higher because of the perceived quality, as well as the extra warranty coverage that's included with a CPO car.
• Look at the used-car inventory on Edmunds to see the dealership availability of the car in which you're interested. Remember to specify the trim level, features and mileage that you want.
• For cars at dealerships, confirm the "dealer retail" price of the cars in which you're interested by using the Appraise a Used Car tool.
• The "Appraise a Used Car" tool is a gateway not only to the vehicle's pricing but also to reviews, specs, fuel economy, and lists of standard features.
• Use the Edmunds True Cost to Own^® tool to see the ownership expenses you are likely to incur for a used car under consideration.

If you need more, read our 100+ Tips for Used-Car Shoppers article.

The Best Time to Buy a Used Car

Edmunds' advice has long held that the best time to buy a used car is when you truly need it and feel ready to buy, regardless of the time of year. Car buying can be stressful, and it can take over a month from the time you start thinking about potential models to actually closing the deal. Why add to that pressure by trying to squeeze your shopping into the last day of the month or a holiday weekend when everyone has the same idea? That said, there are a few seasonal trends to be aware of.

The fall typically kicks off the new model year, so dealers will be motivated to clear out their older inventory to make room for the new vehicles. October through December are typically the most popular new-car buying months, which means more trade-ins are entering the used-car inventory. More trade-ins translates to a better selection of used cars — and potentially a better price if the dealership is trying to hit its end-of-year sales numbers.

Used-Car Buying Checklist

Step 1: Set Your Budget
Step 2: Build a Target List of Used Cars
Step 3: Check Prices
Step 4: Locate Used Cars for Sale in Your Area
Step 5: Check the Vehicle History Report
Step 6: Contact the Seller
Step 7: Test-Drive the Car
Step 8: Have the Car Inspected
Step 9: Negotiate a Good Deal
Step 10: Get the Paperwork Done

Read 10 Steps to Buying a Used Car for more detail on each step.