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Published: June 13, 2022Last updated: November 4, 2022

Guide to Buying a Used Car

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.

How to Buy a Used Car

How to Buy 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.

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

Searching for a Used Car

Searching for a Used Car

In the digitally connected world, you can either visit a used car dealership or try a number of online options:

  • Social media resources like Facebook Marketplace
  • Paid sites like Autotrader, Craigslist, and eBay Motors
  • Used car dealers that have apps and strong online aggregates, like CarMax
  • Local big-name dealerships

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.

Determining How Much a Used Car Is Really Worth

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.

Following Best Safety Practices When Buying a Used Car

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.

Light BulbDID YOU KNOW?

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.

  • Know your state’s lemon law. If you live in a state that functions under lemon law for used cars — Connecticut, California, Massachusetts, Minnesota, New Jersey, New Mexico, or New York — you can, in some cases, get your money back or require a seller to make a repair if something in your used car is defective.
  • Or know your state’s “as is” law. For all other states not under the lemon law, used car purchases function under an “as is” sale, which means that you purchase a used car in its current condition, damages and all. Unless you have something in writing, like a service contract or warranty, your seller will not be required to refund you if you discover something wrong with your car after purchase.
  • Avoid partial payments on fake ads. Scammers will create fake ads for cars that don’t exist and ask that you pay a partial amount before seeing the car. Never pay any amount for a used car unless you’ve seen the car and met the seller in person.
  • Be wary of cold emails, phone calls, and social media messages. Scammers may pose as representatives from dealerships or popular online car sellers. Some common ways they may ask you for money is through a wire transfer or gift card, and they will often try to rush you through a sale. If you’re receiving a message or phone call from someone who claims to be from a reputable dealership and they start asking for your personal or payment information, they are trying to scam you, likely.
  • Be wary of curbstoning. Curbstoning is when a dealer poses as a private seller to avoid specific regulations that certified dealers are obligated to uphold5. The car may be missing necessary safety features, like an airbag, or may have been salvaged in the past. Dealers dress these cars up with cosmetics to make them appear to be in good condition when in reality, they may not even be legal for open market sales.

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.

  • Check the title. VIN checks are free and available online at several providers, like CarFax. Scammers can “wash” titles (i.e., erase salvaging brands that act as warnings on car titles), but they can’t wash the electronic records. Always check the title online before you purchase a used car.

CheckTIP

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.

Negotiating the Price and Making Your Purchase

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.

How Much Do Used Cars Cost?

How Much Do Used Cars Cost

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
2016 $19,890 6%
2017 $20,010 1%
2018 $20,590 3%
2019 $21,090 2%
2020 $22,030 4%
2021 $26,710 19%

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.

How to Get Auto Insurance for Your Pre-Owned Car

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.

Recap

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.

Frequently Asked Questions

Do I already need to own auto insurance to buy a used car?

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.

How do I buy a used car from out of state?

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.

What is a good interest rate on a used car?

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.

How is a credit score considered when buying a used car?

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.

Citations

  1. Safety Issues & Recalls. NHTSA. (2022). https://www.nhtsa.gov/recalls

  2. 10 Best Used Cars Under $10,000. Kelley Blue Book. (2022, Mar).
    https://www.kbb.com/best-cars/10-best-used-cars-under-10000/

  3. Get a Current Market Value for Your Car. Consumer Reports. (2022).
    https://www.consumerreports.org/cars/car-value-estimator/

  4. Buying a Used Car. NC State University. (2022).
    https://studentlegal.dasa.ncsu.edu/buying-a-used-car/

  5. 5 Ways to Avoid Becoming the Victim of Curbstoning in an Auto Sale. HG.org. (2022).
    https://www.hg.org/legal-articles/5-ways-to-avoid-becoming-the-victim-of-curbstoning-in-an-auto-sale-33902

  6. Steering clear of vehicle history report scams. FTC. (2018, Oct).
    https://consumer.ftc.gov/consumer-alerts/2018/10/steering-clear-vehicle-history-report-scams

  7. NADA DATA 2021. NADA. (2021).
    https://www.nada.org/media/4695/download?inline

  8. Fastest-Selling New and Used Cars in Today’s Market. NADA. (2022, Apr).
    https://www.iseecars.com/fastest-selling-cars-study