Here’s what to know, where to look, and how to proceed when looking for certified pre-owned vehicles.
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The price for a used car has been volatile in recent months. In 2022, we’ve seen huge surges and record-high prices for both new and used cars, which has deterred a lot of drivers from making a purchase. Between January and May of 2022, however, you may have noticed monthly decreases in the cost of used cars.
Whether you plan on waiting out the inflated rates or want to capitalize on recent dips, this article will cover everything you need to know about buying a used car.
It’s hard to know what to look for in a car if you haven’t defined your needs. The below questions will help you identify your needs so you can make an informed decision on which used car to buy.
If you buy a used car that needs to be recalled, you (not the dealer) may bear the responsibility of executing the free recall repair, which most drivers don’t want to deal with. Find out whether a vehicle or part has been recalled by entering your vehicle identification number in the NHTSA directory.
Knowing your budget will help you narrow your options down. If you can only afford $10,000 on a used car, for example, that eliminates most sports cars, SUVs, trucks, luxury vehicles, and newer cars. If you’re looking for a $10,000 used car, you’re looking at mostly compact cars, with a few hybrid and SUV exceptions2.
Let’s look at what kind of cars you can expect to buy with a specific budget:
|Budget maximum||Used car types available|
|$10,000||Compact sedans, hatchbacks, and a few SUV alternatives; mostly 2008-15 models|
|$20,000||Compact and midsize sedan models, hatchbacks, some early hybrid vehicles and trucks, and more SUV options; mostly 2014-19 models|
|$30,000||2022 sedans, hatchbacks, hybrid vehicles, and a wide range of trucks and SUVs; some sports cars and luxury vehicles, like the Toyota GR68|
|$40,000||Newest SUVs, sedans, sports cars, and luxury models|
In the digitally connected world, you can either visit a used car dealership or try a number of online options:
Exercise due diligence to ensure that when you’re buying from a private seller, online or otherwise, you’re doing so in a safe and legally-sound manner. We’ll look at some safety best practices in a later section to make sure your transactions run smoothly and legally.
If you buy through a reliable used car dealership, like CarMax or Berkshire Hathaway Automotive, a lot of prices will be non-negotiable. Still, you can always assess the price of a vehicle by comparing its cost online.
Trusted online used car price estimators like Kelley Blue Book, Edmunds, and Consumer Reports list price ranges for a wide range of vehicles3. Regardless of whether you make an assessment yourself, compare prices, or use an online evaluator, test drive the car and take it to a mechanic. More on how to execute a comprehensive inspection is below.
Especially if you’re buying a used car from a private seller or someone online, you want to be aware of popular scams and the laws in your state pertaining to used car sales.
While most Americans think of odometer tampering as a thing of the past, the NHTSA estimates that more than 450,000 vehicles with odometer tampering are sold each year.
Avoid curbstoning scams by getting the car thoroughly inspected, checking the title, and being cautious of used cars you find in public with “for sale” signs in the windows.
Beware of fake vehicle history report websites that ask for your personal information and charge you a small one-time fee. These are VIN-check scams and won’t provide you with a history report. Instead, use a credible source, like AutoCheck or CarFax, to check your titles6.
Outside of some of the largest used car dealerships that have fixed, non-negotiable prices, you can often talk your way into a better price for a used car. Inspecting the car, researching what it’s worth, and showing competing prices for the same vehicle/year will all give you leverage to negotiate. If you don’t feel like you’re getting a fair deal on a car, don’t be afraid to walk away.
Between 2016 and 2021, the price of used cars went up by 36 percent. You can see how those prices changed year by year below7.
|Year||Average cost of used cars||Year-over-year percentage increase|
A recent study by iSeeCars revealed an even bigger jump between 2021 and 2022. Its numbers showed a gain from $8,032 in March 2021 to $34,429 in March 2022 — about a 75 percent increase8.
With U.S. inflation rates at a 40-year high, it’s hard to tell when used car prices will dip or when the best time to buy a used car is. The primary reasons for the high surge come down to a shortage of parts (mostly computer chips), limited production of new vehicles, and the global strain of the pandemic.
A large factor in the cost of insurance is a vehicle’s total cost. The higher the total cost of a vehicle, the more expensive your insurance is likely to be.
Because used cars are cheaper than new cars, you can expect insurance for used cars to be cheaper as well. The process for getting coverage is almost identical to getting insurance for a new car. Here are the five steps to get car insurance for your used car:
Resources like history reports, evaluations, and mechanic inspections can help you make safe, informed decisions when buying a used car. Beyond vetting the history and condition of the used car, the process isn’t that different from buying a new car, especially when you’re getting your used car insured. For more info on used cars, take a look at our FAQs below.
Just like when you’re buying a new car, you can purchase a used vehicle without already owning insurance, but until you have insurance, you won’t be able to drive the vehicle anywhere unless you’re in Virginia or New Hampshire. It’s a good idea to already have an insurance plan or to get on a new policy before buying a used car so that you don’t risk driving without insurance and facing legal and financial consequences.
The process of buying a used car from out of state is similar to buying one from in-state, except you’ll have to register your vehicle and pay the appropriate fees/taxes as defined by your state.
If you’re paying 3 to 4 percent interest on a used auto loan, you’re getting a good deal. Note that if you pay your loan back over a longer period of time, that percentage can decrease. MyAutoLoan’s interest rates, for example, can be as low as 2.5 percent when you pay your loan back over three to five years.
Credit scores play a huge role in your interest rate on a used car loan. With excellent credit (above 780), you might pay as low as 2 to 4 percent interest annually. If you have poor credit (below 500), you could pay as much as 20 percent interest on your used car annually.
Safety Issues & Recalls. NHTSA. (2022). https://www.nhtsa.gov/recalls
10 Best Used Cars Under $10,000. Kelley Blue Book. (2022, Mar).
Get a Current Market Value for Your Car. Consumer Reports. (2022).
Buying a Used Car. NC State University. (2022).
5 Ways to Avoid Becoming the Victim of Curbstoning in an Auto Sale. HG.org. (2022).
Steering clear of vehicle history report scams. FTC. (2018, Oct).
NADA DATA 2021. NADA. (2021).
Fastest-Selling New and Used Cars in Today’s Market. NADA. (2022, Apr).