{"id":2289,"title":"How to Buy a Used Car: Our Experts Guide You From Budget to Bill of Sale","slug":"how-to-buy-a-used-car-our-experts-guide-you-from-budget-to-bill-of-sale","lang":null,"description":"Brand-new cars are getting very expensive. The average transaction price — the price people are paying, including options and higher trim levels — is just shy of $50,000 in the U.S. It is far more budget friendly to shop used cars, which have an average transaction price for three-year old vehicles hovering around $31,000. The variety of used cars available can make the process of buying one feel overwhelming, so we've created this basic, step-by-step used car buying guide to help you navigate the process.","content":"

Step 1: Determine Your All-In Budget

A good place to start with setting your used-car budget monthly payment is 10% of your take-home pay each month. You may feel comfortable paying a little more or a little less, depending on your other bills, so adjust as needed. But keep in mind that the car payment is only one piece of the budget puzzle. Don't forget to estimate ongoing monthly costs too, which can add a few hundred dollars to your expenses.

All told, you should aim to spend no more than 20% of your take-home pay on total monthly car expenses. You'll also want to calculate how much to put down on a used car, which ideally ranges from 10% to 20% of the price. This down payment can include the value of a trade-in if you're buying from a dealership.

Vehicle Price: This is the amount that you pay at the dealership. You might negotiate this down, but you'll start with the listed price.
Taxes, Title, and Registration Fees: These fees depend on location. Most states will collect sales tax on your purchase, and title and registration fees typically run $200 to $500.
Insurance Costs
Potential for Immediate Repairs or Maintenance (tires, brakes, oil changes, worn-out parts)
Ongoing Fuel and Maintenance Costs

Step 2: Secure Financing Before You Shop

Now that you know how much you can afford, it's time to look into getting a pre-approved loan for a used car. You can research used-car loan rates at your bank, at online-only banks, and at local credit unions. Dealerships usually offer financing as well, and they sometimes offer financing deals on CPO vehicles, but having a pre-approved loan can be less expensive and help you negotiate a lower price for the car. If you know your credit score at this point, you can see which rates you would likely qualify for.

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Gather your paperwork: Bring personal ID, like a driver's license, and your Social Security Number, as well as proof of employment and income.
Shop around: Check your own bank or credit union's rate, but also check other local and national used car loan options.
Apply: Narrow your search to three or four good options and apply for a loan at each, either online or in person. Each application can take at least 15 minutes to fill out.

Step 3: Research and Choose the Right Car

This is the point where you narrow your shopping list to three to five vehicles that fit your budget and your needs. You can use a pencil and paper, you can use a spreadsheet, or you can create notes on your phone — whatever works. You'll want to compare the features of each car that matter most to your wallet, like fuel economy and estimated insurance cost, as well as the features that are important to you, like cargo space, infotainment tech, or advanced safety features.

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Step 4: Decide Where to Buy: Dealer, Private Seller, or Online

Buying CPO Cars at a Dealership

Certified pre-owned cars (CPO) tend to have lower miles and one previous owner.
The dealership will perform a multi-point certification to make sure the car is in tip-top shape.
CPO vehicles can be more expensive because they are newer and often come with an extended warranty.

Buying Non-CPO Cars at a Dealership

Used cars that are not officially certified pre-owned tend to be less expensive than CPO vehicles.
The dealership will have performed required inspections and likely any necessary repairs.
They tend to have more miles on the odometer.
A warranty is not always included with a non-CPO used car.

Buying from a Private Seller

Prices tend to be far lower when buying a used car from a private seller.
These cars can have high mileage and multiple owners.
You will be entirely responsible for inspecting it before purchase.
Any financing or warranties will have to come from third parties.

Buying from an Online Retailer

Companies like Carvana, CarMax, and TrueCar make it easy to shop for and buy used cars online.
They offer a return policy, usually within a week.
No dealership visits necessary; the company will deliver the car to your home.
Prices tend to be higher than dealership or private sellers.

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Step 5: Find Available Cars and Check Their History

You'll want to look for used cars being sold by reliable sources rather than shady characters. U.S. News has listings of more than a million vehicles for sale across the country (don't worry — you can enter your zip code to narrow that down). Dealership websites will have their current inventory listed online, including CPO vehicles. National sites like Autotrader, Kelley Blue Book, and Edmunds have lots of options, and online used car sellers like Carvana and CarMax will have available cars too.

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When you've located specific models for sale that meet your used-car criteria, you'll want to run a vehicle history report (VHR). These reports from companies like CarFax and AutoCheck provide a wealth of crucial information about the life the car has lived up to now. You will need to pay a small amount for the report, and you'll need the car's vehicle identification number (VIN). This number is usually found on a badge attached inside the driver-side door sill or on the dashboard near the windshield. Here's some of the information you can expect to see on a VHR:

Status of the car's title: clean, salvaged, junk
When and where the car was sold and registered
Odometer readings
Use as a rental, a taxi, or even a getaway car
Accident history
Open recalls
Maintenance history (from shops that report this information)

Step 6: Go for a Test Drive

When you've settled on two or three used cars that meet your needs and budget, schedule test drives with the dealer or private seller. Here's what to look for when buying a used car, but before driving off the lot or out of the driveway:

Ask about the trim and equipment, and make sure it's what you expect based on your research.
Look at the tire tread.
Check the body for scratches and dents.
Open the hood and look at the battery, since corrosion on the terminals can be a sign of overall neglect.
Check the upholstery, shifter, and control knobs for unusual wear.
Ask about maintenance records as well as whether the car has ever been in a crash.
Ask how many owners the car has had.

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Now it's time for the test drive. Here's a basic used car checklist to make the most of your drive:

Make sure you can get comfortable in the seat.
Check that you can reach the pedals as well as the center console controls.
Listen as the engine starts up and you put it into gear.
Notice the acceleration and braking as you drive.
Turn off the radio as you drive to hear any changes or odd noises.
Test the turning signals, the headlights, the high-beams, and the brake lights.
Drive for at least 10 minutes.
Try to hit both surface streets and highways.

Step 7: Get a Pre-Purchase Inspection

Since every used car has been driven thousands, and probably tens of thousands, of miles before you climb into the driver's seat, an independent pre-purchase inspection (PPI) is an absolute must. Asking a shop that you trust to check the car over can turn up neglected maintenance or shoddy repairs, and you can even choose a shop that specializes in the brand of car you're considering.

Ask the shop what is included in their used car inspection checklist. You'd want to see things like tire wear, evidence of regular oil changes, and body imperfections, in addition to major necessary repairs. A PPI generally costs $100 to $200, but it can save you money when negotiating the price and in future repairs.

Step 8: Negotiate a Fair Price

A strong negotiation position starts with research, much of which you've already done. Here are the basics of how to negotiate a used car price:

Find the car's market value using a recognized authority like Kelley Blue Book or Edmunds True Market Value.
Start with an offer below your maximum price but near the bottom end of the car's market value.
Use any information from the vehicle history report or pre-purchase inspection as leverage, such as a recall that needs to be addressed or tires that need to be replaced.
Negotiate on the \"out the door\" price of the car, as if you were paying cash, rather than negotiating for the monthly payment amount.
Do not include the value of your trade-in, if you have one, in your negotiations with a dealership.
Be prepared to walk away if they can't meet your maximum price.

Step 9: Finalizing the Paperwork

There are some official documents that you'll need to complete the sale of a used car. Be sure you have the following in hand:

Title: This is proof of ownership of the car.
Bill of Sale: There's no standard form for the bill of sale, but there must be some kind of receipt that says you have paid for the car.
Odometer Disclosure Statement: Verifying the odometer reading is required at the time of sale, and every state's DMV has a form.
\"As-Is\" or Warranty Document: This form from the Federal Trade Commission requires that its FTC Buyer's Guide be displayed by dealerships in the windows of used cars they are selling. This form states whether the vehicle is being sold as-is or with a warranty. If it comes with a warranty, the coverage is spelled out here. If it's being sold as-is, there is no warranty, and the seller is not responsible for any flaws or repairs the car may have.

Step 10: Transfer Title, Register, and Insure

With all of the above documentation, you are ready for the final steps in buying a used car. If you bought the car from a private seller, the title will be in their name. You need to transfer the title to your name. If you are financing the car, your lender will be the lienholder on the title, and you will receive the ownership title when you pay off your loan.

You'll also need to register the car with the DMV in your state, and you'll probably get new plates. And finally, you will need to have insurance in place for the drive home.

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