How to Buy a Used Car

1. Decide How Much to Spend

Start by deciding whether you want to buy the car with cash or use an auto loan to finance the purchase. If you're planning to buy it outright, you'll need to determine how much of your savings you can afford to use while leaving some money for other financial goals and emergencies.

If you expect to take out a loan, evaluate your budget to get an idea of how much you can afford to pay each month. You'll also want to consider making a down payment of at least 10% to qualify for a better interest rate and minimize your monthly payments.

2. Choose a Car

Unless you already have a model in mind, think carefully about the features you want in a vehicle. Depending on your needs, some of the features you may consider include:

• Model year
• Mileage
• Seat capacity
• Cargo space
• Towing capacity
• Drivetrain (2WD, 4WD or AWD)
• Safety features
• Smartphone compatibility
• Camera systems
• Keyless entry
• Clearance

Once you've determined which features you want, research and compare options based on what you're looking for. Online automobile resources such as Edmunds and Autotrader can provide specifications, reviews and other resources for the different models you're considering.

You'll also want to consider the vehicle's age and mileage. While older cars with more miles tend to be cheaper, they may also require more maintenance and repairs, increasing your costs of ownership over time.

3. Consider Where to Buy the Car

You can opt to buy a used car from a dealer or a private seller. While neither option is inherently better than the other, both come with advantages and disadvantages to keep in mind.

Dealer Pros

• You'll have a wider selection of vehicles
• Dealers are subject to consumer protection laws (lemon laws)
• Some offer short-term warranties
• Many dealers can handle paperwork and arrange financing for you
• Allows trade-ins

Dealer Cons

• You'll likely pay more
• You may have less leverage in negotiations
• You may experience more pressure

Private Seller Pros

• Typically offer lower prices
• May give you more wiggle room in negotiations
• You may experience less pressure

Private Seller Cons

• Dealing with multiple sellers can be time-consuming
• Fewer consumer protections
• You're on your own to handle paperwork and arrange financing
• Trade-ins aren't an option
• No short-term warranties

4. Research the Price

You can search for dealerships in the area or classified ads for private-party sales to find what you're looking for. Once you find a listing that fits your parameters, you can use an online pricing guide such as Kelley Blue Book, Edmunds or J.D. Power to estimate how much the vehicle is worth.

Some of the details you'll need to provide to get an estimate include:

• Vehicle year
• Make, model and trim
• Mileage
• ZIP code
• Equipment and features
• Color
• Condition

Note that if you have a vehicle identification number (VIN), that should take care of most of the vehicle's basic details.

Depending on how popular the model is, you may also be able to compare prices on similar models from other sellers in your area. Just make sure you're making an apples-to-apples comparison when it comes to age, mileage, condition and other important features.

5. Test-Drive the Car

Once you've found the model you want, visit the dealer or contact the seller and set up a test drive. This will give you a better idea of what it's like to operate the vehicle and can also help you spot potential issues that could impact its performance and value.

If possible, drive on city streets and the highway to evaluate different aspects of how the car performs. Also, consider inviting another person to join you, so you can get another opinion about the experience.

Some factors to watch for include:

• Exterior: Walk around the vehicle and look for cosmetic defects or mechanical damage. Also, look under the hood for anything that may look off, and open each of the vehicle's doors and the trunk to see if they all function smoothly.
• Interior: Sit in each seat and look around the interior for rips, stains and any other damage that could impact the car's value. You'll also want to test the windows, seat controls, lights, heating and air conditioning to make sure everything works as it should.
• Handling: Once you're on the road, do some maneuvering to test out the steering and overall feel of driving the car. If you're used to a smaller vehicle, for instance, you may find the handling on a larger one to be more difficult to maneuver. Also, try to take the vehicle on a highway to see how the handling changes at a higher speed.
• Braking and acceleration: Try out the brakes at different speeds to see how quickly they respond and how much pressure you need to apply to the brake pedal. You can do the same with the accelerator to see how quickly and smoothly the vehicle accelerates from a dead stop and at higher speeds.
• Noise: While driving, pay attention to any noises that could be a sign of trouble, such as rattling, whining or a loud exhaust. You'll also want to pay attention to external noise, such as wind and normal engine sounds, to determine your comfort level.
• Electronics: Play around with the dashboard to make sure all the knobs and functions work properly. If the vehicle you're test-driving has a smartphone connection, bring your phone and a cord so you can test out the connection and media controls.

6. Obtain a Vehicle History Report

A vehicle history report is a record of important details about a car's past that can help you evaluate its reliability. Some of the information you'll find in a vehicle history report includes:

• Accident history: You'll be able to review any major reported accidents involving the car. If the airbag has deployed or the car suffered structural damage, it's probably best to steer clear of the vehicle.
• Title status: Look for a car with a clean title. More specifically, avoid cars with titles such as "junk," "fire damage," "flood damage," "rebuilt" or "lemon law buyback," all of which are self-explanatory. A salvage title indicates that an insurer deemed the car a total loss, but someone fixed it up and put it back on the road. Also, avoid "police use" or "taxi use" titles, which indicate heavy usage.
• Inspection and registration history: These indicate that the car has been registered with state departments of motor vehicles (DMVs) and gone through state-required inspections, such as smog checks.
• Odometer reading: Sometimes, unscrupulous sellers turn back a car's odometer to make it look newer; the vehicle history report shows the true odometer reading.
• Ownership and sales information: You'll be able to see how many times the vehicle has changed hands. In particular, vehicles with just one owner tend to be better maintained than vehicles that have had several different owners. Be wary of cars with multiple owners in different states, which could be an indicator of title washing. Also, vehicles that were owned by a rental car company may have heavier wear and tear.
• Recalls: This indicates any recalls of the vehicle and whether the required repairs were made. An open recall isn't a deal-breaker; just make sure to get it taken care of.
• Liens: Outstanding liens on the vehicle will be listed. Look for a vehicle clear of liens.
• Maintenance: Vehicle history reports may also include a service history, though you can also ask if the seller has a maintenance record to show you.

Here's a sample vehicle history report to give you an idea of what else you may find. Some dealers and private sellers purchase a copy of a vehicle history report, so you don't have to. If that's not the case, you can purchase one through AutoCheck with the vehicle's VIN or license plate number and state of registration.

A single report costs $24.99, but if you're considering multiple vehicles, you can get up to five reports within a 21-day period for $49.99.

7. Get an Inspection

Dealers usually inspect and repair traded-in vehicles before turning around and reselling them, but that may not be the case with a private seller. In either case, though, it's a good idea to order an additional inspection from an experienced mechanic who might spot things you and the seller missed.

If you don't already have a mechanic you know and trust, search for mechanics in your area with good customer reviews. Options may include auto body shops, mobile inspection services and tire and oil change service providers.

A pre-purchase inspection typically costs between $100 and $200, depending on where you live and the mechanic. However, you may pay more if you want a more comprehensive evaluation of the vehicle's condition and performance.

If a seller won't allow you to get an inspection or makes the process difficult, it may be a sign that there's something wrong with the vehicle.

8. Negotiate With the Seller

With no fixed manufacturer suggested retail price, it's usually easier to negotiate a used car price compared to a new one.

But as previously mentioned, you may have a harder time negotiating with a dealer than a private seller. With that said, here are some tips to help you get a fair deal:

• Be prepared. At this point, you should already have the relevant information to justify your offer, including the vehicle's estimated value, comparable offers from other sellers, a test drive, the vehicle history report and a pre-purchase inspection report.
• Decide on your range. It's unlikely that the seller will accept your first offer, so you should have a range based on your ideal sales price and the most you're willing to pay. Note that the seller will likely have their own range, so it's crucial that you back up your offer with your research.
• Leverage a trade-in. If you're buying from a dealer, you may also be able to leverage your vehicle's trade-in value to bring down the sales price of the vehicle. Start by getting an estimate of the car's trade-in value and consider making minor repairs to minimize the potential issues the dealer may use to justify a lower offer.
• Don't be afraid to walk away. No matter how much research you've done and how reasonable your offer is, there's no guarantee that you and the seller will come to an agreement. If things aren't working out or you're feeling undue pressure to pay more than you want to, it might not be worth it.

9. Finalize the Purchase

If you're buying a used car from a dealer, they'll typically handle the license and registration paperwork for you. Additionally, they may be able to arrange financing by shopping your credit application to multiple lenders.

If you're buying from a private seller, however, you'll likely need to handle the paperwork and financing on your own. Start by contacting your local DMV to find out what you need to complete the deal. Requirements may include:

• A bill of sale
• An odometer disclosure
• The vehicle's title (signed over to you by the owner-seller)

It's best to have your financing ready at this point in the process. But if not, take some time to shop around for an auto loan to ensure you get the best deal.

Once the deal is finalized, you'll need to visit your local DMV to register the vehicle and pay sales tax.

The Bottom Line

Buying a used car can be a lengthy process, but it's important to be thorough with your research and negotiations to make sure you get a good deal on a reliable vehicle.

Buying a car can also be a good time to make sure you have affordable car insurance. With Experian's free car insurance comparison tool, you can get quotes from multiple insurance providers, making it easier to compare your options in one place.