Guide to Buying a Used Car

Deciding What Features You Want

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.

• How many people will you be driving?
• Is the car for commuting, business, or pleasure? Consider a van or truck to carry business equipment, or a vehicle with low mileage if you plan on taking long commutes.
• Do you need four-wheel drive for outdoor adventures or dangerous terrain?
• Is good gas mileage a priority?
• Do you want a truck, an SUV, or something more compact?
• How much cargo space do you need?
• Are you looking for any specific features like built-in GPS, a convertible or sunroof, or a leather interior?

Doing Your Research

• Reliability and ownership costs: One of the most important things to identify is the total ownership cost (TOC). TOC will tell you the cost of a used car over time, including the initial purchase price, long-term maintenance costs, depreciation rates, insurance costs, and the cost of repairs. Find these estimates through a vehicle evaluation website like Edmunds.
• Check for recalls: When a manufacturer or the National Highway Traffic and Safety Administration (NHTSA) decides that a vehicle does not meet minimum safety requirements, it may recall the vehicle to make the appropriate repairs or fixes¹.

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.

• Mileage: A well-maintained used car with 100,000 miles may have fewer issues than a poorly maintained car with 60,000 miles. The car’s age, maintenance, make, and model will all contribute to the effects mileage will have on it. Speaking with a trusted mechanic is the best way to determine the wear and tear of a vehicle.
• Vehicle history report: A vehicle history report will tell you everything about a vehicle’s past, including any previous accidents, work or repairs, previous owners, and recalls.
• Factory warranty: Check to see if the used car is still under factory warranty. If you’re buying a used car from a car lot or dealership, they will likely offer you an extension on the warranty. Find out how much warranty is left on the vehicle and decide if you’d like to add more for your peace of mind. Learn more about extended warranties.

Setting Your Budget

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.

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.

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:

• Decide how much coverage you need. Most states require minimum liability coverage, but we recommended getting full coverage car insurance to pay for your injuries and damages as well.
• Compare quotes from different providers. Once you know what kind of coverage you need, comparing prices is as simple as spending a few minutes filling out an online form. The more information you provide to the insurance company, the more accurate your quote will be.
• Talk to an agent. Once you’ve gotten your quotes, speak to an agent. Agents help you process your policy, and they can give you the most up-to-date information on their policies, bundling packages, discounts, and other perks they might offer.
• Apply for a policy. After you’ve spoken with an agent and feel confident choosing a provider, apply for a policy and see what your premiums look like. Make sure to set a deductible within your price range, but remember that raising your deductible will lower your monthly payment.
• Pay your premium. Put your policy into effect by paying your first premium. Your coverage will begin on your policy’s effective date.

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.