Sometimes you don’t need a brand-new car to meet your needs; a used one can do just as much. While a new car may be more reliable, buying a used car can be a strategic approach to getting a desirable vehicle for a much more reasonable price.
As is often the case, everything has its perks and drawbacks. Choosing a used car without due diligence can be risky and lead to undesirable issues like overpaying, hidden mechanical problems and questionable vehicle history.
However, thorough research and proper assessment can save you a great deal of money.
Why Buying a Used Car is a Smart Choice
Used cars have lower purchase price tags than new cars. Even the ones that have been around for a year or two are still much cheaper compared to unused cars. Not only do you save money on the upfront payment but also on insurance costs and registration fees which are based on the car’s market value and age.
Since the initial purchase price for a used car and its value is significantly cheaper, the insurance cost every month will be lower and the registration fees more affordable, further reducing your expenses. You can also maximize your savings on more budget-friendly repairs since a lot of used cars require less expensive parts compared to new ones with more advanced technology.
What’s more, buying a used vehicle will likely result in a higher interest rate, but because the principal is far lower than that of a new car, you will pay less in interest and monthly payments. Looking to purchase a used car with a loan? Check out our article “How to Get a Good Car Loan” for great tips.
Slower Depreciation Rate
Several factors affect used car prices; however, the biggest one is depreciation, which occurs when the car gets old and loses its value.
Compared to new cars, the depreciation rate for used vehicles is slow. For example, a new car that you get now will be about $20,000 less than its original price five years later but with used cars, it can be as low as $10,000.
For example, a Toyota Corolla has the slowest depreciation among cars. With a change in value of -$5,800 , this model does a great job of maintaining its worth.
A car with a slow depreciation will hold its value better over the years, increasing its resale value if you later decide to sell it. In the long run, getting a used car is a more cost-effective choice than a new one.
A Wider Range of Models Is Available Within Budget
Buying a new car can feel limiting when it comes to balancing your budget with the model you want. Today, the used car market offers a wide selection of models that might have been out of your reach if they were new.
One of the biggest perks is that you can get a high-end model at an affordable deal. For example, you can buy a used Lexus LS 500 (2022) for $58,995 instead of paying $77,025 for a brand-new one.
Interested in checking out more models? Check out the best used car deals here.
Researching Before You Buy
There are several essential factors to consider when researching your next car. Have a look at the below steps to take in order to avoid bad car experiences.
Setting a Budget
Make sure to calculate the monthly costs and fees for insurance, fuel, taxes, registration and maintenance and set a budget. It’s a good rule of thumb that you should spend about 20% of your net income on your car payment.
Some used cars can have higher repair costs than others. Be sure to research the average maintenance cost for the specific model you are interested in.
If you plan on getting a loan, you can use this loan calculator to understand whether it will fit your budget.
Choosing the Right Car for Your Needs
Choosing a car can be a challenging process. To avoid a buyer’s remorse, don’t make any rushed decisions. Decide on a car that best fits your lifestyle and narrow down your options.
If you are driving a lot and long distances, prioritize fuel efficiency and comfort. If you have a family, you might want to consider getting a bigger model with a lot of storage space.
Do you do road trips a lot? Consider cars with bigger leg rooms, space for your camping gear and a good suspension system for smoother rides. And, if you mostly drive solo and prefer a compact, sporty design, you might want to buy a coupe.
Can’t decide on the model you want? Check out ratings to compare different cars. When you decide on the type of car you want, there are plenty of reviews available online that will help you make a more informed decision.
Where to Buy a Used Car
Private sellers can be a good option if you are ready to do more legwork and paperwork on your own. However, keep in mind that most private sellers usually require full payment upfront.
Compared to private sellers, dealerships usually have a wider selection of cars, offer warranties and financing options as well as provide higher safety standards. It is also common for dealerships to include vehicle history reports in their regular operations, which helps verify a car's background.
Note that dealerships are more expensive than private sellers and less flexible with negotiating. There are also Certified Pre-Owned programs verifying used cars meet specific quality standards. Authorized dealerships sell CPO cars with benefits like extended warranty, financing rates and exchange guarantee.
Although they might be more expensive up front, many buyers believe the reliability and peace of mind they provide make the difference.
What to Check Before Buying
It's always a good idea to have a used car checklist to go through to avoid unpleasant surprises later on.
Vehicle History Report
You definitely don’t want to end up with a stolen or illegally obtained car. A vehicle history report plays a crucial role by providing important information you need before purchasing a used car.
The vehicle's accident history, title status and service records can help prevent potential hidden issues and costly repairs. A car with a clean record means it has no legal problems or debts attached to it while the accident history can reveal damage that might not be immediately visible. You can obtain a full vehicle history report online from reliable platforms like Carfax and AutoCheck.
Inspecting the Car’s Condition
Make sure to inspect the car in daylight in order to get a true sense of its condition. Pay attention to any scratches, rust or dents on the exterior. Test the seats, dashboard and whether connectivity is working. Be sure to also check the engine, fluids and signs of leaks, and don't forget to assess the tires and brakes.
Test Driving the Car
When you test drive, observe how the brakes feel and make sure they react smoothly and quickly without pulling or vibrating. Verify that the acceleration is steady and smooth, and keep an eye out for any odd tugging or turning difficulties in the steering. Drive over bumps or uneven roads to check the suspension.
If while test driving you hear strange sounds, vibrations or smells, this might be a sign of some serious mechanical concerns that need expensive fixes.
Considering a Pre-Purchase Inspection (PPI)
You might also want to invite a certified mechanic to conduct an in-depth pre-purchase inspection and reveal any issues with the car. A PPI can typically cost between $100 to $200 but could save you expenses in the long run.
Negotiating the Best Price
To negotiate confidently, look up the current market value. The first rule is that you should suggest a price that is less than what you are truly willing to pay. Wait for the salesperson to make the offer first as it may be significantly less than the price you are willing to pay.
Make a counteroffer if the initial offer is too high. If the car is in good shape and the offer fits your budget, accept it. Walk away if the price is out of line with the car's value and the seller is unwilling to haggle.
Finalizing the Purchase
Understanding the Paperwork
To complete the purchase, you must complete the necessary paperwork and documentation regarding financing. The bill of sale serves as a receipt for the transaction, and the title transfer certifies that you have legally acquired ownership of the car. Remember that you need the title to register the car in your name.
Watch out for common scams, like fake titles. Deals that look too good to be true should be avoided, as should sellers who require payment before presenting the required paperwork.
Buying a second-hand car can be a rewarding experience if approached with caution. So, take your time to do thorough research in order to avoid getting caught in scam traps and costly mistakes in the future. Follow the necessary steps on the checklist for buying a car and enjoy your purchase!