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How to Buy a Used Car Right Now

Buying a used car can be a huge headache. First, there are all the hours of research you have to do ahead of time. Then, once you do find a car, you’ve got to make sure it’s not a total piece of junk. Fun times. But remember, investing time and effort here will pay off. If you’re going to shell out thousands of dollars for a vehicle, be smart and take the time to find a reliable used car.

Believe it or not, dependable used cars are out there. They haven’t gone extinct! You just need to learn how to buy a used car the right way so you can walk in with confidence. Don’t worry—you came to the right place. We’ve got all the info you need (and then some). Start your engines!

Why Buy a Used Car?

There are a ton of reasons why buying a used car is actually better than buying a new car. Don’t believe us? Let’s count the ways:

  • Used vehicles don’t go down in value as much over time.
  • Most used cars are just as dependable as new cars but are way cheaper.
  • Buying used will save you money on car insurance.
  • Used cars can have cheaper registration fees.
  • Buying used means you’re less likely to have manufacturer recalls or new model problems.

How Much Does a Used Car Cost Now?

Okay, before you set out to buy a used car, there’s something you’ve got to know about the prices these days: They’re higher than ever. At the end of 2021, the average price paid for preowned vehicles hit an all-time high of about $29,000.1 That’s the first time the price for used cars has cracked the $29K mark. And prices aren’t expected to slow down in 2022 either. In fact, the experts think we’ll see the average price of a used car hit $30,000 for the first time ever.2

What’s Impacting the Price of Used Cars?

Inflation

Oh, hi again, inflation—you really get around these days, don’t you? With inflation (you guessed it) inflating prices on everything, it’s no surprise that it’s hit the car industry too. The Consumer Price Index, which measures the price of goods and services over time, showed that inflation hit 7% in 2021.3 That inflation rate raises the price of everyday items and those higher ticket items too—you know, like cars.

The Microchip Shortage

What the heck is a microchip shortage, and what does that have to do with cars? Great question! Nowadays, almost everything runs on those little computerized chips. Even cars. All those fancy buttons, doohickies and bright lights on the dash in a new vehicle need a chip to power them up.

Car

Dave's easiest money-saving tip: See if you're over paying for car insurance.

It’s true, the microchip shortage directly impacts new cars, but because of the shortage, there are fewer new cars available to be purchased. That means all those people in the market for a new car are switching gears and buying used cars instead. And that’s making the price of used cars spike. Since May 2020, the price of a used car has climbed 50%.4 It’s great news if you’re ready to sell off your used car (put it toward your debt snowball!) but not so great news if you’re in the market to buy a used car.

Supply and Demand

With beefed up savings and stimulus checks to burn, a lot of people have been itching to buy cars since mid-2020. But with not enough cars to go around thanks to factories shutting down during the pandemic, supply and demand just hasn’t been able to catch up. The good news? Car inventory is starting to inch back up again (hooray!), but it’s still below normal inventory levels. When looking at their stock, dealerships see how many days it would take them to sell all their cars if they didn’t bring in any new inventory. In November, that number was 44 days—15% below last year’s number.5

Okay, now that we’ve covered all that, here’s a piece of good news for you: Not every used car out there costs an arm and a leg. Have used car prices gone sky high? Yup, for sure. But there are plenty of used cars much cheaper than that—you just have to do some digging and make sure you know where to look.

How to Buy a Used Car

Of course, buying a used car comes with a few risks. That’s why you need to do your homework before committing to a vehicle. If you don’t do your research, you could pay more than you should for your car or, even worse, end up with a used car that’s a total piece of junk. These eight tips will help to steer you in the right direction.

  1. Set Your Budget
  2. Find Your Ideal Car
  3. Shop for a Used Car
  4. Figure Out the Used Car’s Value
  5. Inspect the Used Car Yourself
  6. Go for a Test Drive
  7. Take the Used Car to a Reliable Mechanic
  8. Use Negotiation Skills

Step 1: Set Your Budget

How much car can you afford? And we’re not talking about car payments here. You should pay for a car—in full—with cash. Plain and simple. Yes, that means you’ll have a serious dent in your savings, but you’ll skip the stress of spending hundreds of dollars on car loan payments each month. Isn’t that awesome?

Let’s say you borrow $10,000 for a car with a 5% interest rate and a term of five years. You’ll end up spending an additional $1,322.74 in interest. Not so affordable anymore!

The truth is, you don’t need car loans. You can find reliable used cars in any price range. If you’re struggling financially, you can find a vehicle to get you from point A to point B for as low as $1,000 to $2,000. It may not be pretty, but you’ll get by.

If you aren’t happy with the cars you can afford, remember that you can take all that money you save on car payments each month and stash it away for an upgrade. Just make it a priority in your budget!

P.S. If you need a budgeting tool, test-drive our free budgeting app, EveryDollar! It’ll help you manage your money every month and save up for the car you really want.

Step 2: Find Your Ideal Car

Once you’ve set your budget, you can find your ideal car. Not your dream car. Your ideal car. It’s the one that best fits your lifestyle and your budget.

Before you declare your loyalty to your favorite car brand, step back and take a look at the kinds of vehicles and what each was designed to do.

Trucks, for instance, were designed to carry goods and heavy materials. So unless you’re hauling heavy cargo on a regular basis (you know—gravel, timber, bricks), don’t buy a truck. For a good commuter vehicle, stick with options that are compact and energy efficient, like sedans, hatchbacks or hybrids.

Narrow down your choices with this quick checklist. Read through these statements and pick three that apply to your situation the most.

____ I want a vehicle with plenty of cargo space.
____ I want a vehicle that can fit more people.
____ I want a vehicle with better fuel economy.
____ I want a vehicle that’s easy to get in and out of.
____ I want a vehicle that’s safe.
____ I want a vehicle that’s better for the environment.
____ I want my vehicle to carry heavy cargo.
____ I want to go off-road or on rough terrain.
____ I want my vehicle to be compact and light for city parking.
____ I want my vehicle to have towing capacities.

Find some insights there? Remember, you’ll have to make some sacrifices too. You won’t find a vehicle that does everything. So prepare your heart for that. Be honest with yourself about your wants and your needs, and think long term about how you’ll be using your car.

Want to Save a Little Extra Money?

Of course you do. So think about features you don’t need your car to have. Not just technology like GPS, Bluetooth connectivity and backup cameras—but the basics too.

Take cylinders, for example. Today, a 2011 Kia Sorento with six cylinders costs around $9,000 to $11,000.6 The same Kia with a four-cylinder engine? $8,000 to $10,000 (and these numbers change almost daily).7 But it doesn’t stop there: Stick shift transmissions are usually cheaper than automatics, and front- or rear-wheel drive (2WD) are cheaper than all-wheel drive (AWD).

Bonus Tip: When you’re comparing different vehicles, don’t forget to think about insurance costs too. Work with an independent insurance agent who can help you save.

Step 3: Shop for a Used Car

Now that you know how much you can spend and what kind of car you need, it’s time to start shopping. But first, let’s talk about two places you should steer clear of:

New car dealerships. Even though most new car dealerships sell used cars, they’re always more expensive.

Buy-here, pay-here lots. These are dealerships not only sell cars (buy here) but also offer car loans (pay here). Yep, you know the kind. They have pushy salesmen, multicolor pennant streamers, and a 20-foot blow-up gorilla shaking a “sale” sign. Plus a ton of hidden fees, and usually less than a 48-hour return policy.

With a little more searching, you can find better used cars somewhere else. Here are six places to start your search.

  • CarMax
  • Carvana
  • Craigslist
  • eBay Motors
  • Showroom lawns
  • Independent used car dealerships

Step 4: Figure Out the Used Car’s Value

Now it’s time to figure out if the used car you’ve chosen is worth the price. Dig up all the information you can on the car so you can talk the seller down to a better deal.

1. Start with Kelley Blue Book (KBB).

KBB uses data from actual sales and auction prices to give you the right price range.

2. Buy a vehicle history report (VHR).

A good VHR costs about $50 and gives you accident history, ownership history and a ton of other records. It’s helpful and takes out a lot of the guesswork when buying a used car. All you need is the vehicle identification number (VIN) for a detailed report.

3. Figure out the ownership cost.

That’s what you’ll spend to maintain the car (oil changes, new tires, fluid flushes) and what long-term repairs you should expect for the make and model you’re looking at. You’ll also need to know the cost of replacement parts and repairs. You can use the Edmunds True Cost to Own tool to get a good estimate.

4. Find online forums focused on the used car.

Nearly every model has a forum with threads stretching back a good while. Look for common issues that owners have had with the type of car you want to buy.

5. Check the vehicle’s recall history.

Don’t assume the seller has taken care of a used car’s safety recalls. In fact, over 83.2 million cars are on the road with open recalls on them—that’s 1 in 4 cars.8 And yep, you guessed it—people still try to sell those cars without getting the recall fixed. So what can you do? Check the National Highway Traffic Administration for your vehicle’s recall history (if it has one).

6. Ask for an insurance quote.

Used cars are normally cheaper to insure than new ones. In fact, a 5-year-old car is about 27% less expensive to insure than its brand-new counterpart.9 If you already have insurance, ask how much your premium will change if you buy a certain make and model. Let an independent insurance agent do the comparing for you.

Step 5: Inspect the Used Car Yourself

Even if you’re not a mechanic, you can use this list of advice from the Department of Motor Vehicles to check for signs of damage and abuse. While none of these things alone should stop you from buying the car (except for major damage, like a blown head gasket), a bunch of these could save you from buying somebody else’s car problem.

Under the Hood

  • Check the oil level and color.
  • Check the color of the oil under the oil cap.
  • Check the belts.
  • Check the transmission fluid dipstick.
  • Check the level of the coolant.
  • Check the brake fluid.

Outside

  • Look at the car’s paint job.
  • Check the tires.
  • Check the tail pipe.
  • Open and close the doors, trunk, fuel door and fuel cap.
  • Check the lights.

Inside

  • Check the wear on the steering wheel, seats and pedals.
  • Lock and unlock all doors.
  • Check A/C and heating.
  • Idle the car and watch the temperature gauge.

For even more tips and tricks you need to know when buying a used car, download our free Car Guide!

Step 6: Go for a Test Drive

When you’re taking the car for your first test-drive, turn off the stereo so you can hear noises in the car. Pick a route with hills, bumps and, yep, even potholes. Even if you plan to use the car on highways and flat roads, test the car on rough roads to get a sense of how it handles.

Use your test-drive to answer these questions:

Feel

  • How does it feel on flat roads?
  • How does it feel when it hits a bump or pothole?
  • Does the car struggle to pick up speed?
  • Do the gears change smoothly?
  • Is the brake squishy or too sensitive?
  • How does your body feel after the test drive?

Noise

  • Does the engine sound smooth when you accelerate?
  • Does the engine rattle, knock or grind when you idle?
  • Are there vibrations or odd sounds under the hood when you accelerate above 60 MPH?
  • Do the brakes squeak?

Sight

  • Can you see out of the car easily?
  • Does black smoke come out of the exhaust when you start the car or accelerate?
  • Is the RPM gauge consistent when you idle?

Smell

  • Dial down the air conditioning—do you smell burning oil?

Step 7: Take the Used Car to a Reliable Mechanic

If the car has passed your personal inspection, good. Now let’s see if it passes the mechanic’s inspection. If the seller doesn’t want a mechanic to inspect the car, that’s a bad sign. Always have a mechanic inspect a used car, no matter the condition. A good mechanic will tell if you’re about to buy a reliable used car or if it’s a lemon.

When it comes to inspections, you have two options:

  • Take the car to a trustworthy garage. Most car garages charge a flat fee for inspecting used cars. They’ll check the car out and tell you what’s going on.
  • Set up a mobile inspection. A mechanic will come to the car, do the inspection, and print out the results.

If a mechanic tells you the car has damages that outweigh its value, let the seller know you’re no longer interested, or use that knowledge to lower the asking price.

Step 8: Use Negotiation Skills

If you have good reasons to believe the seller should lower the asking price, you can use everything you’ve just learned about used cars as ammo to negotiate a better deal. Negotiations can be tough for people who don’t like to rock the boat, so haggle like a pro with these three tips.

1. Bring your research to the table.

Let’s say the seller wants $3,000 for his used Volkswagen Jetta. Kelley Blue Book says the average price range for that Jetta is $2,800 to $3,000. But you noticed that the tires are bald and a headlight doesn’t work. And you read online that this model has problems with radiator fans. Your VHR shows no owner has ever replaced the radiator fans. Ah-ha! Now you’ve got something. Bring all this info to the seller—factor in the cost of tires, a headlight and a radiator fan—and offer less.

2. Pay in cash.

Tell the seller you’ll be paying for your used car in cash—just don’t reveal how much cash you have. When sellers sniff green, they’re more likely to agree on your terms.

3. Be patient.

If the seller doesn’t budge, you can walk away. You have all the buying power. Most of the time, they need your money more than you need their car.

One More Thing: Get the Right Car Insurance

Hey! Congrats on the new-to-you car you just bought.

URRRRRRRT! SMASH!

Nobody expects an accident—which is why you need to be insured the moment you start driving that new ride. With so many factors affecting the types of car insurance available, it’s easy to spend more money than your coverage is worth. To make the right choice, pick an expert who can answer your questions, run the numbers, and help you compare rates.

Connect with an insurance Endorsed Local Provider (ELP). ELPs are top-notch RamseyTrusted agents who work with insurance companies to help you find the right coverage at the right price. We’ve vetted them, and you can trust that they’ll walk you through the whole process pain-free. Make sure you and your family have the coverage you need to protect yourself and your (awesome) used car. Find your ELP today!

 

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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