12 Tips for Buying a Used Car

12 Tips for Buying a Used Car
Photo from TheCarConnection.com

4/24/14 NOTE: This post has been updated to reflect a 13th tip that I inadvertently forgot to include. It's a very important step, so please check it out.

Two weeks ago, I unexpectedly put myself in the market for a new car when I totaled my car. The good news is that no one was hurt in the car accident and I have wonderful insurance. Seriously, State Farm was definitely a good neighbor and took car of everything in record time.

I'm now the proud new owner of the 2002 Toyota Rav4 pictured above. It's the first CUV I've owned and I'm very excited about it.

I don't know about you, but have found negotiating to be one of life's most uncomfortable situations. It's taken me years of practice to feel sort of comfortable with it, and even now, I have to put on my big girl panties, psych myself up with confidence, and take a deep breath before I walk into any negotiation.

Whether it's negotiating a job salary, a house sale, a car purchase, or anything else, I think the greatest key to success in negotiating yourself is knowing your worth. When I didn't fully believe in my worth, I would take other people at face value in negotiation situations and believe they were always giving me the best deal for both of us. It turns out, though, that's the biggest fallacy there is. Yes, it's important for both parties to end up feeling they've both "won," but only I can count on making sure I get what's best for me.

In addition to knowing your worth, there are 10 other essential tips for buying a used car.

BONUS TIP: Before setting a budget or taking any other steps, if you plan on trading in a car, you must know its value. Take your car to Carmax where they will appraise your car and make you a no-obligation written offer. You'll have 7 days to accept the offer and sell it to them for cash or a trade-in OR you can use that written offer as a negotiating tool with other car dealers. At a minimum, you this will give you an idea of what sort of downpayment you might have or, if your car is in great condition, you may be able to get enough for it to ultimately pay cash for your new to you car. Make sure to read all of the Carmax tips on what to bring, the FAQs, and watch their videos on the appraisal process.

  1. Before you even begin to look at cars, set a budget. Once you know the value of your trade-in, you're ready to create a budget. Whether you're paying cash, trading in a car, and/or financing, figure out exactly how much money you can spend. If you're financing, know what you can afford in monthly payments. This is the most you can spend. Period. Use this Car Finance Calculator to figure out your monthly payments.
  2. Decide what deal breakers are for you. My deal breakers were ABS brakes, less than 100,000 miles, a Toyota or Honda. I had a strong preference for a crossover utility vehicle (CUV), but it wasn't a make-it-or-break-it. Anything but a Toyota or Honda and without ABS and more than 100,000 miles were unacceptable though.
  3. Start with researching online and within your budget and deal breakers. This will give you an idea of the inventory in your geographic vicinity. Initially, I cast a pretty wide geographic net in order to compare prices, options, etc., but once I had some information, I narrowed down my vicinity to within 30 miles. Of course, unless you live in a major metropolitan area overflowing with car dealerships, you might not have this option.
  4. Always stay within your budget and deal breakers. Looking outside your budget it a dangerous game because you will find your dream car and start justifying why it'll be okay if you bust your budget or toss some of your deal breakers aside. I almost fell for this. I found the exact car that I wanted. It was $10,000 more than my budget, but it checked all the boxes for all the non-essential features I would love (heated seats, 6-disc CD player, 5 years old, less than 50,000 miles and much much more). It may have even had a cloud that sat between it and the road, I'm not sure now. After I saw that car, nothing else measured up and I declared my search over. Fortunately, my friend Christopher talked some wisdom into me and reminded me how fiscally irresponsible this move would be at this point. He was right and saved me from making a horrible mistake. Never looking outside of your budget or deal breakers guarantees you'll avoid this potentially costly mistake.
  5. While still searching online, narrow your search down to a few types and then do your due diligence. Were there any safety recalls? What does Consumer Reports have to say about the specific models you're looking at? Do any of your friends drive the cars you're considering? Ask them what they think. Talk to your trusted mechanic to find out what typical repair costs are for the car.
  6. Check car prices Kelley Blue Book. This is important because KBB.com is impartial and will give you a price range based on the condition of the car(s) you're considering. It tells you whether the seller is out of their gourd with the price they want and gives you assurance for negotiations.
  7. Walk around a couple of car lots on a Sunday or when the dealership is closed. In Illinois, car dealerships are required by law to be closed on Sundays, so this is the perfect day to go do some window shopping without being harassed by sales people.
  8. Once you've settled on a car that you possibly want to buy, call the dealership to make an appointment for a test drive. Listen to how the car drives. Drive at different speeds. Test the brakes. Are there any noises that shouldn't be present? Test out the stereo, the windows, the locks, the car fob, the heat, defroster, and air conditioning. Look at the spare tire. Test the windshield wipers and fluid. Open the hood and look around. Check the tires.
  9. Ask the dealership for the complete Carfax report. There is no reason they shouldn't give it to you for free. If they refuse, leave. Read it over thoroughly. Look at the number of owners and confirm the age and mileage of the car. Are there any problems with the title? Have there been any reported accidents? Read through the full detailed history. The Carfax won't tell you everything about the current condition of the car, but it will give you any red flags you should know about.
  10. Sit down to negotiate armed with the knowledge of steps 1 - 9. The dealer is going to tell you he's got to make money on the deal, which is fair. You know your budget and you know what Kelley Blue Book tells you is a fair sales price range. If the dealer has to fix anything on the car, factor that into the cost you'll pay. Remember that in addition to the price of the car, you'll have taxes, title, and possibly other fees. All together, that's the "out the door" price and that's the number that needs to be within your budget. It's typical for the sales person to say he's got to go talk to his manager about whatever you offer. Remain calm and empathize with his situation. Of course he does and it's no big deal to you. At this point, the manager may come over to talk to you. Keep in mind that as much as you want to buy this car, they want to sell it. Be prepared to walk away if you need to do so because you will find your desired car somewhere else. They don't want you to walk away and will do what they need to keep you there and sell you the car.
  11. If everything is checking out and you're feeling good about the car, ask the dealership to allow you to have your mechanic check it out. If the dealership says no, leave and do not return. Make your negotiated sale price contingent on your mechanic's inspection and approval. Your mechanic has no skin in this game. He will tell you the truth about any issues with the car. Ask him to give you a detailed work order with the prices of any fixes needed. You can use this in your final negotiation. My inspection cost me $78, but if it had cost me $100, it was peace of mind worth having. The dealership may require that you put down a deposit on the car in order to take it for the inspection. Make sure that the deposit is refundable (get that in writing) should anything come up in the inspection that makes you want to cancel the contract.
  12. Once you receive the inspection report from your mechanic, it's time for your final negotiation. It may be possible to negotiate any needed fixes into the already agreed upon price or lower the sale price by the amount it will cost you to fix something. Be reasonable, but hold firm because the dealership has now invested a lot of time with you and they want to sell the car just as much as you want to buy it. You hold the cards.

When all is said and done, you and the dealer should feel good about the agreed upon price. If you've stuck to your values and your budget and done all of your homework, you'll feel good and negotiate from a strong place and go home with a car you feel great about.

If, even after having done steps 1 - 7, you don't feel confident, take a friend to the dealership with you who will keep you grounded on the car lot and during the negotiations. Personally, I won't car shop without my friend Christopher. He lives and breathes cars and most of his professional career has been in the auto industry. He knows what he's talking about and no one tries to pull the wool over his eyes. No matter how prepared I am, I feel like he's my secret weapon.

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