Buying a used car instead of a new one can save you thousands of dollars.
As we explain in “You Should Never Buy These 12 Things New“:
“The value of a new car drops like a rock as soon as you drive it off the lot. Rather than be upside-down on your car loan five minutes after signing the paperwork, look for a quality used car that has already taken the huge depreciation hit.”
Shopping for a used car can be trickier than shopping for a brand-new one, though. You need to do some homework to find the right balance of affordability and quality.
Following these steps will help ensure you drive home in the best vehicle for you — and your budget.
1. Determine what you need versus what you want
It’s easy to get caught up in car-buying excitement and drive away with a vehicle that just doesn’t suit your needs.
Before you visit a dealer’s lot or peruse cars online, make a list of “must-haves” and “nice-to-haves” for your next car. Do you need four doors so the kids can easily get in and out? How often would you really use a high-end entertainment system?
Deciding what you need most will help you narrow your search and help ensure you don’t end up with a car that doesn’t make sense for you.
2. Make a list of cars to consider
Use your list of “must-haves” and “nice-to-haves” to determine what models you should consider.
You might think that if you know you want an SUV, for example, you can just start shopping. Not so fast.
There are different types of SUVs — which type do you want? Does the height of the step into the SUV matter? It might if you have young kids with short legs or transport older folks who don’t have the mobility they once did.
The following sites are among those that can help you make a list of vehicles you want to consider:
3. Shop for financing
Dealers offer financing, but you can often save hundreds of dollars by seeking out financing yourself. Shopping around for car loans helps you get the best interest rate you can qualify for, which will minimize the amount of interest you pay over the life of the loan.
That’s not to say you shouldn’t consider any dealer financing. Some dealers forge relationships with lenders to offer competitive rates. Dealer financing might also allow you to take advantage of rebates and incentives. You can search for rebates and incentives on Edmunds’ website.
The bottom line: Research your financing options. For more guidance, check out “4 Steps to Getting the Best Deal on a Car Loan.”
4. Understand the total car cost
One of the most serious errors car buyers make is to concentrate on monthly loan payments instead of the total cost of the car. It’s possible to negotiate your monthly payment to suit your budget and still end up spending more than you had planned — or could afford — to pay.
A car loan payment is just one of multiple expenses that comprise the total cost of a car. For example, expect to pay taxes and various fees — including recurring fees like registration.
And don’t forget to factor in the cost of auto insurance. Contact your insurance company to make sure that the vehicle you plan to buy won’t boost your premiums to a rate that doesn’t make sense for you.
5. Take a step back
It’s difficult to walk away from a car that seems perfect for you, but doing so can help you avoid buyer’s remorse.
I’ve walked away from what I thought was the car of my dreams at a very low price. I ended up buying the car a few days later, but by walking away and coming back, I felt more confident in my purchase.
In the days between test-driving the car and signing on the dotted line, I checked the Carfax vehicle history report to make sure the vehicle hadn’t suffered flood, fire or other damage. I also checked for recalls on the website of the National Highway Traffic Safety Administration.