Purchasing Your First Used Car: 9 Steps to Success

Use these 9 steps to help you successfully buy a used car.

In most regions of the western United States, cars are a part of life. Without a car, it’s hard to do little things like buy groceries and commute to work. Unfortunately, cars are also expensive, and there is a lot that goes into the purchasing process. It can be especially difficult for students, new graduates, young professionals, and others who’ve never purchased a car before. If you’re thinking about purchasing your first used car, consider these 9 steps before you sign the paperwork.

Step 1 - Create a budget

Before you even think about buying a used car, figure out how much you can realistically afford. Most financial planners recommend spending less than 15% of your total budget on a car payment. You can use this car payment calculator to estimate your monthly payment on a number of vehicles.

Step 2 - Research more than one model

Every make and model is different. Specific years even have their own pros and cons. Before you make a purchase, research at least three different makes and models. Pay special attention to each vehicle’s weak points, repair costs, and resale value. When you’re done, compare and contrast these statistics to help you make your purchase. If you’re unsure where to start, two of the most popular vehicles for first-time car buyers are the Honda Accord and the Toyota Corolla.

Step 3 - Find vehicles for sale.

There are a number of places you can find used cars. New car dealerships offer a range of new and used vehicles, while independent dealerships tend to offer a selection of used vehicles. In general, dealerships tend to offer higher prices than individual sellers. That said, both dealers and individuals are generally open to haggling. On the other hand, used car dealers like Carmax and Autonation offer middling prices and no room for negotiation. A used car inventory tool can help you sift through the options in your area to find, for example, a particular Dodge make and model.

Step 4 - Understand “certified pre-owned”

Some dealerships sell certified pre-owned vehicles at a higher price point. While these vehicles often come with an additional warranty, it may not be worth the markup. For example, while Honda and Toyota have extensive certification programs, other certified vehicles are nothing more than retired rental cars.

Step 5 - Check the vehicle’s history

Always get a vehicle history report before you purchase a used vehicle. These reports will tell you if the vehicle has ever been totaled or had the odometer rolled back. If you’re dealing with a friend or loved one, it can be tempting to skip this step. Don’t. You may learn information that the seller didn’t even know. Autocheck is a resource that can help you acquire a vehicle’s history.

Step 6 - Contact the seller

A preliminary phone call will help you gather information about the vehicle and build a relationship with the seller. During the conversation, ask the seller about the car’s history, present condition, and reason for selling. These questions may reveal information that was not listed online. This conversation also offers an opportunity to size up the seller. Do they sound shifty or honest? Are they willing to answer your questions, or are they giving you the runaround?

Step 7 - Inspect the vehicle

When you’ve narrowed the search to one vehicle, arrange a test drive. This is the best way to determine if the vehicle is right for you. During the drive, pay attention to the vehicle’s brakes, acceleration, transmission, and power steering. If the drive goes as expected, arrange for an official inspection. Most mechanics will offer a pre-purchase inspection for around $100. Just make sure to hire a mechanic that you trust.

Step 8 - Negotiate a fair price

Never settle on the sticker price. Most sellers expect to haggle with their buyers. When ready, make an offer that’s lower than the average resale price for the vehicle. The seller will make a counter-offer, and you will be expected to respond. As you go, keep in mind any features or issues that may impact the price for better or worse. Ideally, the final number should be close to the average resale price and lower than your overall budget.

Step 9 - Don’t be afraid to finance

Many “how-to” guides will encourage first-time car buyers to avoid financing with dealerships at all costs. These articles claim that car dealerships tend to offer higher interest rates than banks and credit unions. While this can be true, it doesn’t mean you should avoid financing. It just means you need to do your homework. Auto loan interest rates tend to hover between 4 and 6 percent. If you’re dealership offers you an interest rate below five percent, you can be fairly certain you’re getting a good deal. If you’re come up above 5 percent, you should consider other options.