How to Buy a Used Car: Complete Step-by-Step Guide for Newbies

Table of Contents 

• How to Buy a Used Car: Complete Step-by-Step Guide for Newbies
• Buying Used Car: The Basics
• Why Buy a Used Car?
• How Old Should a Used Car Be?
  • What Is the Best Used Car to Buy?
• Where to Buy a Used Car?
  • How Much Should a Used Car Cost?
• How to Buy a Used Car from a Dealer?
  • How Much Are Dealer Fees on a Used Car?
  • Questions to Ask When Buying a Used Car
  • How to Return a Used Car to the Dealer
• 10 Things to Look When Buying a Used Car
  • Vehicle History Report
  • Mileage
  • Engine
  • Other Engine-Related Components
  • Bodywork
  • Wheels and Tires
  • Locks, Windows, and General Controls
  • Interior
  • Accident Damage
• What to Do After Buying a Used Car?
  • How to Get License Plate after Buying Used Car
  • How to Insure a Used Car
  • How to Insure a Used Car
  • How to Find a Mechanic to Inspect a Used Car
• FAQ: Buying a Used Car
  • How Many Miles Should a Used Car Have?
  • How Many Years Can You Finance a Used Car?
  • How Much Does a Used Car Warranty Cost?
  • How Much Are Taxes and Fees on a Used Car?
  • What Is the Best Used Car Warranty?

How to Buy a Used Car: Complete Step-by-Step Guide for Newbies

If you want to cut a hefty price tag of a new vehicle, buying a used one is a great choice. But for someone who doesn’t have much experience with the second-hand market, this process may be hard to navigate. This guide will cover everything you need to know: including where to buy, costs, and purchase criteria.

Buying Used Car: The Basics

There is no one step-by-step instruction on how to buy a used car as there are many nuances. We’ll gradually cover all the related topics but first, let’s start with a few basic preparations:

1. Take Control Of Your Finances: You need to figure out what you can afford. Gather your financial data for the last year, check your savings, make estimations on your income for the foreseeable future, etc.
2. Research Automakers: You don’t want to have a rare model or a car from manufacturers that aren’t commonly bought where you live. Look for a combination of high-quality production vehicles and manufacturers that won’t give your trouble in case you need repairs.
3. Keep Up With The Used Car Market: Look up average prices, how much time offers stay available, and how many options you have overall. The more you know about the market, the smarter decisions you’ll make.

Below are some pressing questions that you should know answers to early on.

Why Buy a Used Car?  

Contrary to popular belief, buying a new car isn’t a financially sound decision in many cases. While buying new is definitely something to boast about, buying used is often a smarter choice in the long run. Here is why:

• Costs Lower: Cars depreciate significantly within the first year – up to 50% of its value. That said, they don’t lose in quality, especially with modern cars that last longer and longer.
• Minimizes Depreciation: You won’t be getting the same financial hit with further depreciation. For example, if you buy a 3-year-old car, on the fourth year, it won’t be losing as much value.
• Gets You More Car for Your Money: Choosing among the wide variety of used cars can be a lot more fun than budgeting for a new one. Your budget can get you a nicer used car than you would be able to afford otherwise.
• Gives You Room For Negotiation: Prices for new cars are usually set in stone. When it comes to the second-hand market, you can get yourself an even better deal than originally advertised.
• Incurs Lower Fees: Most states base their registration fees on the age of the car and/or the value of the car. The same usually goes for insurance costs as well.
• Provides You With More Data: You will already know how the car performs in real-life conditions. The same can’t be said for new ones as car companies won’t be able to tell you how their new model lasts in the long term.

How Old Should a Used Car Be?

If your goal is to maximize savings, the optimal age is that which maximizes the benefit of buying used. There are even mathematical equations that allow you to calculate specifically how much you will be saving initially and then spending each year. But we won’t bore you with that.

For your information, you can study the table below indicating the exact differences in costs between buying 2019 and 2014 cars of the same model.

Generally, they stay reliably for about 5 years after the purchase. But in the end, it depends on how the car was used and maintained within that period.

Buying an older vehicle also makes sense in some cases. For example, if you need a car urgently for a lesser price. But, as you can guess, the maintenance work for a 10-year car can make the total costs higher than for a 5-year car.

What Is the Best Used Car to Buy?

Here are recommendations for used cars ranked by price.

Alternatively, we can look into the best cars ranked by type.

Where to Buy a Used Car?

Essentially, the places where you can purchase a used car fall into four categories.

Certified Pre-Owned Dealership

Also known as CPO, these dealerships are the best in terms of providing cars in excellent condition. CPO cars are sold by the same brand, which means they have more recourses (and it’s cheaper for them) to fix the car until it’s almost the same as new. For example, any repairs will be done with factory parts.

Granted, the costs are higher than in other dealerships. But if you’re after the highest quality in used cars, this is it.

Non-Certified Dealership

These are the second-best in terms of reliability. Obviously, the vehicles aren’t put through the same level of repairs. It’s not a significant drawback considering decent inspections in non-certified dealerships. Plus, you can count on the fact that major issues will be fixed.

Independent Dealership

With independent dealerships, the quality of cars and repairs varies from one place to another. You need to shop around and see which exact locations consumers recommend the most. Of course, the best source of information isn’t the dealer’s website but the real reviews online.

What will also help you decide whether the place is legit is visiting it or speaking to staff remotely. If you don’t have the best credit, consider financing from the bank that the dealership works with.

Private Party

Lastly, there is always the option of reaching out to a private-party seller. While this lack of reliability and guarantees, it’s significantly easier to negotiate directly with a seller than with a salesperson. Another perk is that you get a wider selection of makes and models.

A significant drawback is that the risk of being scammed. There are many unfortunate situations where people had bought cars directly from someone else, and then many complications resurfaced later. A thorough inspection should solve the issue.

How Much Should a Used Car Cost?

In 2020, car prices have gone up compared to previous years. We’ll give you approximate estimations on the prices in three categories: subcompact, compact, and crossovers/SUVs.

Subcompact cars

Compact cars

Crossovers/SUVs

How to Buy a Used Car from a Dealer?

Let’s go over the average timeline from planning to buy a car to making the purchase from the dealer:

Step 1. Pick The Right Time

Believe it or not, there is actually the right and wrong time to shop for a car. If you have the luxury of time to no buy the car urgently, start looking with these tips in mind:

• The best times to buy are July through October and December.
• Dealer tends to get more sales at the end of the month, so they’re more inclined to cut you a better deal.
• There are often seasonal or holiday sales. Such as Thanksgiving, Christmas, Memorial Day, etc.

Step 2. Go to a Dealership or Contact Them for Price Quotes

Whether you’re going to choose private financing or not, it makes sense to check the direct quote from the dealership. This will make sure you’re getting the best prices.

You want to ask about the make and model varieties, their features, etc. down below, we will describe what you should ask and look for in more details. The point is that any preliminary questions and concerns should be communicated earlier in the process.

At this stage, you can also request a test drive.

Step 3. If You Have a Trade-In, Ask What the Dealership Can Offer

Just tell the car salesperson that you want to trade your old car in. They’ll take the wheel from there, and they’ll explain how the process should go. It shouldn’t be a labor-intensive process since it’s their job to simplify the purchase.

Step 4. Try the Online Route If You Can Physically Visit the Dealership

There is always an option to shop online instead. Many dealerships have websites where you can complete the process in under 30 minutes. Shopping, financing, paying, and receiving can be done remotely, and the best places even offer no-questions-asked return policies.

This doesn’t mean you should buy the car without inspecting it first. But shopping online does allow you to cut a few steps from the process.

Step 5. Negotiate

It’s a well-known fact that the dealership and its salespeople want to maximize the profit they get from the sale. Don’t fall into the attempts to confuse, persuade, and perhaps even intimidate you into taking a deal. After all, you have the strongest position.

If you’ve done market research as we mentioned above, you should be well-aware of what the current prices are. Exactly how good a deal you can get varies by the automaker, your credit history, and how you’re going to pay for the car.

Step 6. Finalize the Deal

When you come to sign the papers or they get mailed to you, read them thoroughly. Avoid needless extras that get sneaked into your contract or buried in your monthly payments. Refuse offers that you don’t need, like extended warranties, fabric protectors, etc.

Verify that everything on the contract is correct, check the math, and sign only when you’re completely satisfied.

How Much Are Dealer Fees on a Used Car?

Let’s use an example of buying a car in California and DMV or state fees in the state.

On top of that, you will most likely have to pay an extra $100-$500 for dealership fees.

Questions to Ask When Buying a Used Car

Those who don’t know how to buy a used car from a dealer tend to ask whatever questions pop into their head. We recommend taking a more thought-out approach and only ask what matters and what will help you get a better assessment of the dealer:

Where did the car come from?

Second-hand cars may come from dealer trade-ins or demos, auctions, rental car fleets, or other new car dealers. Based on this information, you can judge what condition the car will be. This will also tell how accurate its maintenance history is.

Has any service been done to the vehicle?

You don’t know how long the car has been up for sale. While at the dealership, the vehicle might have undergone some repairs or scheduled maintenance. Even when for sale, you want to car to be serviced according to schedule.

Are there features that don’t work?

This is the drawback of buying used – something might be working as well as it used to. It’s best to find out now than later.

Will any new parts, accessories, or equipment be included?

There is no harm in asking where the dealer can throw in some new additions. It can be a set of tires (or winter tires), floor mats, liners, something like that.

Does the dealership offer in-house financing?

The default options are manufacturer-backed financing and bank for a traditional car loan. However, in-house financing in some dealerships may cost you lower.

Can I get a discount if I buy with cash?

A discounted price for a cash purchase isn’t uncommon. If you can skip the financing route, buying in cash is usually far more cost-effective.

Can I take the car for a test drive?

If the car goes more at a low price, you need to verify that it’s actually drivable and reliable. A proper test drive will help you determine whether it suits your needs.

Can I return the car, and under what conditions?

Return policies vary. Customer-forward dealers may be accommodating in that regard and offer vehicles of equal value, or straight-on allow you to get a refund.

How to Return a Used Car to the Dealer

Most contracts have a cancellation clause allowing for a car return within a certain time period or mileage. This depends on your particular agreement you have with the dealer. This is why we recommend not signing any paperwork until you learn all the conditions of the purchase.

If you meet the conditions, all you need to do is reach out to the dealer. They will explain further proceedings and rights you have. Common conditions for a return include:

• The car’s extra mileage must be less than a certain amount (for example, under 250 miles).
• You need to submit the original paperwork.
• The car must be in the same condition.
• No tickets or liens associated with the car.

10 Things to Look When Buying a Used Car

Saving a little cash doesn’t necessarily mean you can buy poor-quality vehicles. How do you tell the difference between a worth-while used car and the one that’s better suited for scraps? Here are 10 things to consider.

Vehicle Identification Number

The first thing on our list of what to look for when buying a used car is the car's vehicle identification number (VIN). This is basically the car’s 17-digit fingerprint because there a car can only have one VIN, and there are no two cars with the same VIN.

Each part of a VIN has its own meaning, such as unique features, specifications, and manufacturer.

A vehicle’s VIN check can tell you all the essentials about the car. Moreover, you can use it to track recalls, registrations, warranty claims, thefts, and insurance coverage. Below is a video on where to find it. [1] 

https://www.youtube.com/watch?v=8vI_qTWAi2c

Vehicle History Report

Checking all the necessary documents will help you avoid unpleasant surprises in the future. A so-called data-check will tell you:

• Whether the car has a clean title: Cars that were declared a total loss (because of a serious accident, fire, or flood) might be drivable. Without the report, you might not be able to see this just based on the car’s appearance.
• Accidents reported to insurance: Insurance companies will leave reports to alert future buyers. Beware of the “salvage title” as it might indicate hidden problems due to past accidents.
• Each time it changed hands: There is a difference between a middle-aged lady driving a car and a reckless teenager with a poor driving history. While we’re not swearing by stereotypes, it’s informative to know who was driving, or, at least, how many times the owner changed.
• When the last maintenance work was conducted: If the previous owner was following a simple maintenance schedule, it would make the car last much longer. For example, oil changes every 3,000 to 5,000 miles, and air filter changes every 12,000 miles.

While checking the VIN does provide a good deal of information, requesting a private history check provides 100% accurate information. Besides, reports provided by the dealer may not be recent or, in some cases, have missing info. A second report from a different reporting company eliminates the chance of being scammed.

Mileage

When you turn on the ignition, you can confirm that the mileage is the same as advertised as well, as see whether there are any warning lights. Beware of potential “clocked” motors – if the car looks much older, the mileage might’ve been tampered with. Or it might have been used roughly, which is also something you don’t want.

Other things to note here:

• Worn screws might also mean that some work has been done to the odometers.
• Service records, MOT “certificates” and other documents should state the same mileage.
• Online checkers show the same.
• Mileage seems consistent with how old the car is and how the dealer describes the previous owner.

Engine

Engine problems are the most expensive to repair, so you want the engine to be decent. The mechanical condition can be checked during a test drive, but there are also some visual cues to pay attention to. Below is a video on the visual inspection.

https://www.youtube.com/watch?v=HDv5bUR_Plo

As with many aspects of buying a used car, there is an entire checklist to go through (but it’s worth it):

• Do you hear something unusual during a cold start?
• Is the dashboard oil light on?
• Does the vehicle send out visible smoke for more than 10 seconds?
• Does the clutch work well? Is there any noise or clicking sound when you press on the pedal?
• Is the catalytic converter in good shape? See the results of a recent emissions test.
• If you look under the engine oil cap, do you see a sludgy mess? It might appear because of poor maintenance.
• Was there a cambelt replacement as per the standard service schedule intervals?

Other Engine-Related Components

When you complete the basic engine checks, proceed to the general condition of the engine bay. This is what additional engine-related expertise should entail:

• Hoses and Belts: When the engine is cool, squeeze the hoses with your thumb and forefinger near the clamps. It should be firm but not rock-hard and with no mushy spots. Also, inspect for cracks, nicks, bulges near the connection points.
• Fluids: Ideally, a recently changed oil should be honey-colored. It’s okay even if the oil is a darker coffee color or black, most importantly, it shouldn’t be gritty. As for transmission fluids, it should have any visible metal particles.
• Radiator: Closely check the radiator core for signs of leakage, such as green stains. The color of a healthy engine coolant inside the reservoir should be green or orange.
• Battery: If you don't have a multimeter to check the voltage, do a test of your electrical system by starting the car and turning on the headlights. What you don’t want is either dim lights or lights that get brighter as you rev the engine.

Bodywork

Each body panel should be examined for rust spots, dents, and scratches. Additionally, check how the hood, trunk lid, and all the doors close. In older cars, the door hinges wear out, causing the door to hang lower. But it might also be caused accidents, so it’s better to be sure which one you’re dealing with.

Other advice includes:

• Look for rusting and corrosion damage using a flashlight. Be sure to get into all the nooks and crannies as this is exactly where problems can be hidden.
• Around the glass, you shouldn’t find cracks or large, cratered areas. If you do find any flaws, these can be fixed but remember to leverage it when negotiating the final price.
• On even ground, does the car slump or sag? If it does, it might mean a suspension problem. Next, push down on each corner of the car. Any clicking sounds or excessive bouncing aren’t good signs.
• Check the front headlight assemblies (parking, low beam, high beam, turn indicators), tail light assemblies (tail light, brake lights, turn indicators, reverse lights and license plate lights), and fog lights. All of them should be in working conditions and not fog with moisture.

Wheels and Tires

When you’re buying a car with less than 20,000 mileage, it should have its original tires. Closely inspect each tire for differences to see if they are the same. If they have been replaced, it might mean that the odometer has been rolled back.

Inspect the tires for fractures, cracks, or feathering. If they are in poor condition, most likely, the whole car has been poorly maintained.

Another key point is to measure the depth of the tread. In the US, tires must legally have at least 1/16 inch of tread. If you don’t have a measuring device, you can simply use a coin. While it doesn’t necessarily affect the condition of the car, you don’t want to have legal troubles and be forced to spend more money replacing the tires.

Locks, Windows, and General Controls

Ask yourself the following questions when you’re checking the vehicle:

• Do the lock button on the remote control and the front doors’ central locking button work properly?
• Can you open and close the windows easily (sunroof included)?
• Can you spot the damaged or different locks?
• Are all the nuts fitted tightly?
• Do the key match the ones depicted on the manufacturer handbook? If not, it can be a headache to program modern car keys.
• Do the other controls, such as heating, ventilation, air-conditioning, navigation, etc., work well?

Interior

Since you will be spending the most time inside, it’s one of the things that matter the most. When you get into the car, check the following:

• Odor – If you notice a pungent moldy smell, it might be an indication of water leaks. An acrid smell usually means that the car has been used by a smoker. Both of these smells are hard to get rid of, so you may want to look for another car.
• Seats – Adjust the seat until you find a comfortable driving position. When you change the position forward and backward, everything should work properly. Make sure to check back seats as well.
• Roof – There shouldn’t be stains or sags on the headliner and roof trim. If you’re buying a convertible, shine a flashlight up into it to check the seals.
• Pedals – See if the car’s mileage matches the wear on the pedals.
• Sound system – If it’s something that is important to you, check the radio, Bluetooth connection, and any other elements of the sound system.
• Trunk – Apply the same recommendations as for other inspections: test the moving parts, see how the carpet looks, and beware of any smells.

Here is a video on inspecting the car’s interior from the same channels as the one above.

https://www.youtube.com/watch?v=sSi8xuRm5eE

Accident Damage

Finally, on our list of what to check when buying a used car, we have visible signs of accident damage. The previous points might also indicate that the car has been majorly repaired. But to reiterate and add to some points, here are the signs:

• Misaligned panels (front and rear bumper, doors)
• Dodgy, inconsistent paint job, unpainted surfaces

• Replaced lights
• Uneven tire wear
• Welding marks
• Mismatching or missing screws and fasteners

What to Do After Buying a Used Car?

Most likely, you’ve done all the inspection pre-purchase, and you’re sure that the car is good to go. However, it doesn’t mean your job ends there. For your own benefit, you should do the following:

• Work on the tires: It doesn’t necessarily mean you have to change them. But beware of the safety issues coming from overinflated or underinflated tires and prevent them.
• Change the fluids: This task is usually quite affordable, and we warn you not to skip it. If the fluids need flushing, bleeding, or topping off, you can do it on your own.
• Change the filters: These might look decent but replacing all of them, including the transmission, fuel, oil, and air filters, will pay off.
• Schedule maintenance: Check with the dealership for a maintenance schedule and consult with your mechanic. We’ve highlighted several times how important consistent servicing is. Even if you don’t need repairs right now, maintenance will be immensely beneficial.
• Do professional cleaning: Like most people, you don’t want to sit in someone else’s dirt, filth, and sweat. Especially if you’re iffy about using a pre-owned car, getting it cleaned will ease the feeling.
• Add personal touches: This isn’t urgent yet vastly pleasant. New floor mats, a phone charger, a cup holder, or something else will make the car feel like your own.

If you’ve been aware of the car issues pre-purchase, target them first. It may have saved you some money initially, but now you should re-invest it to keep your car running for longer. Just like you expected the previous owner to treat the car well, now it’s your job to maintain it.

How to Get License Plate after Buying Used Car

If you bought a pre-owned car from a dealership, the team should handle this issue. If you didn’t receive a license plate at the place of purchase, the dealer should send you one by mail within two or three weeks. If they are taking longer, bear in mind that the temporary tag expires after 30 days.

If you bought the car from an individual or you want to take care of everything yourself, you can easily register the car. Right after the sale, go to your local DMV office to finalize the process. To receive a new license plate, you will need to provide:

• Photo ID
• Title
• Loan documents
• Proof of insurance
• Inspection test
• Proof of address

Alternatively, you can transfer the existing plates to your name instead of buying custom ones. The process in the DMV is similar but cheaper, and you’ll need to bring the same list of documents.

How to Insure a Used Car

There isn’t much difference in the process itself when insuring a new or used car. You will likely pay much lower insurance payments, but this is as far as the differences go.

Here is what you will need to do:

1. Choose Your Liability Coverage: This covers any damage you cause to other people or their cars when driving. Minimum liability insurance coverage must be at least $15,000. So, even if your car costs lower, keep that in mind.
2. Choose Whether To Buy The Other Policies: It’s up to you to decide whether you want coverage for damages not caused by automotive accidents, such as natural events and animals. You are not required by law to do that.
3. Compare Car Insurance Companies: There are many options available on the market. Check their fees, policies, reviews, etc. Keep looking until you find a reputable company with a high rating.
4. Explore Different Ways To Save Money: Check with your chosen insurance company how you can lower the costs. It might be raising your deductible, having other cars insured, having other types of insurance with the same provider, etc.
5. Purchase the Insurance as Instructed by Your Provider: Now it is the easiest part – applying for insurance. You will be told what to do, what documents to provide, and what papers to sign.

How to Insure a Used Car

There isn’t much difference in the process itself when insuring a new or used car. You will likely pay much lower insurance payments, but this is as far as the differences go.

Here is what you will need to do:

1. Choose Your Liability Coverage: This covers any damage you cause to other people or their cars when driving. Minimum liability insurance coverage must be at least $15,000. So, even if your car costs lower, keep that in mind.
2. Choose Whether To Buy The Other Policies: It’s up to you to decide whether you want coverage for damages not caused by automotive accidents, such as natural events and animals. You are not required by law to do that.
3. Compare Car Insurance Companies: There are many options available on the market. Check their fees, policies, reviews, etc. Keep looking until you find a reputable company with a high rating.
4. Explore Different Ways To Save Money: Check with your chosen insurance company how you can lower the costs. It might be raising your deductible, having other cars insured, having other types of insurance with the same provider, etc.
5. Purchase the Insurance as Instructed by Your Provider: Now it is the easiest part – applying for insurance. You will be told what to do, what documents to provide, and what papers to sign.

How to Find a Mechanic to Inspect a Used Car

Before you take the car to a mechanic, you need to make sure it’s worth it. Inspection can take up to several hours, and costs start at $100. If you already know that the car isn’t in the advertised condition or you’re simply not interested in buying it, don’t bother.

But let’s say you want to have it inspected by a third party. Here is what you should do:

1. Ask around if anybody can recommend a local mechanic unless you don’t have an established relationship with one.
2. If you don’t find a mechanic through recommendations, find a certified automotive repair shop.
3. Look for overwhelmingly positive online reviews, particularly for comprehensive examinations.
4. If you have a rare make and model, contact them in advance to verify they can take on the task.
5. Figure out the dates and times with the shop and the seller.
6. Be ready to provide the car’s make, model, and registration number to generate a quote.

FAQ: Buying a Used Car

Finally, let’s round up this article by answering the most common questions about buying used cars.

How Many Miles Should a Used Car Have?

The average mileage is 12,000 per year, after which the car is considered less reliable. While some models are more durable, most factory warranties expire at around 36,000 miles. At this point, the possibility of a mechanical failure is starting to increase.

How Many Years Can You Finance a Used Car?

In some cases, finance a vehicle for six or seven years – 72 to 84 months (or more). The loan term depends on how your financial situation stacks up and your future goals for the car.

How Much Does a Used Car Warranty Cost?

A fair warranty for used cars ranges from $200 to $500 over their cost. But bear in mind that policies differ on a case-by-case basis. The true cost depends on the driver and the vehicle.

How Much Are Taxes and Fees on a Used Car?

The tax is calculated by multiply the sales tax rate by your taxable purchase price. For example, if the state sales tax rate is 7 percent, you will pay $700 for a $10,000 car. If you buy a car for $10,000 in a location with a 2 percent local sales tax rate, your sales tax would be an additional $720 tax.

What Is the Best Used Car Warranty?

Some of the largest third-party car warranty providers on the market are Endurance, Carchex, CarShield, Protect My Car, and Autopom. Each of them is the best in its own right, so research their plans to see which one is more suitable for your vehicle.