How Much Should I Pay for a Used Car?
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How Much Should I Pay for a Used Car?

By Autolist Staff | March 16, 2020

Buying a car is a complicated process for some people, but it's easier now that we have the technology and the internet. You can even buy a used car or take out a car loan by using an app on your phone. There are special considerations to make when buying a used car, including car insurance concerns, budget concerns, car costs, trade-in decisions and more. The smart car buyer knows you need to research and make a few determinations before you start browsing for your next ride. Like a new car purchase, many factors can be appealing; make, model, add-ons, accessories, options, and color. But letting these factors determine your purchase could also be a bad financial decision in the long run.

Type of Car and Your Budget

Start with the type of vehicle; truck, car, or SUV? After you know the body style, consider the manufacturers you want to target for consideration. The body type and manufacturer are the top decisions. From this point, the numerous options to choose from are items like; engine size, two or four-wheel-drive, 4-door or 2-door, interior options, driver assistance safety features, entertainment systems, etc. Think of the features that are most important to you and build a list with the essentials and the extra-cost items that you may be able to do without.

Your budget is the next item to calculate. If you are paying cash, set a purchase price that you will not go over so that you don't have to worry about finances and loans. Be firm on your limit and be patient when a purchase doesn't work out because you and the seller can't reach an agreement on price.

If you're not paying cash, your budget will need a down payment amount and monthly payment range. Purchasing a used car with financing can be done through a dealership or your local bank, though the latter may have limits on how old the vehicle can be.

Know your price limit and never let the salesperson negotiate the monthly payment to fit your budget. Ultimately, the price of the car goes up to negotiate a lower monthly payment. A longer financing term or higher interest rates can cost you much more after the car is paid off. Getting the maximum trade-in value for any trade-in can help make your payment more affordable.

If you choose to finance your purchase and want to buy the car from a private seller, you can obtain a Private Party Auto Loan from your lender, bank, or credit union. You do have to have a car picked out before applying.

Edmunds reports that the average price for a used car bought in 2018 was $20,084, which was a record in the industry. That's a 3.5-percent increase year over year since 2005. Edmunds believes this trend is due to an abundance of formerly leased vehicles hitting the used car market and the rising prices on new cars, which pushes more buyers into the used market. Edmunds also notes that the APR on used car loans is usually more than that for new.

Reliability and Reputation

Take some time to research online how reliable the car is you've decided on and look for any common issues it may have. There are plenty of websites to choose from that review and discuss cars, whether an official evaluation from an automotive site such as Autolist, or people who own the vehicle and posted in car buying forums.

Search for a particular car and look for forums where owners posted reviews and evaluations. While many people consider buying a car an investment, it's a considerable expense for something that will rapidly depreciate. Learning about the service reports and any common repairs for the make and model car can help you buy a vehicle that may require fewer repairs. Pull a vehicle history report to find out any specific issues or accidents for the vehicle you choose.

Once you've done this, it helps to run a used car value at websites such as Kelley Blue Book, Edmunds, or NADA Bluebook. You can either do this by entering information about the used car you are looking for, such as the mileage, options, condition, or find a vehicle listed online and plug in the options it has listed. The car value sites will give you several used car prices; new, trade-in, and retail. Retail will get you the closest car's value to a price you'd expect to pay.

You can do a lot of shopping from your computer by searching for local car dealers who may have their inventory listed on their website, or through Craigslist, Facebook Marketplace, your local Penny Saver publication, or auto-trader magazine. Compile a list of cars first to make phone calls on to see if they're still available. Jot down the info, price, and phone number on a list to call from. Take notes next to each car or cross them off if sold. It may be a good idea to only call on five vehicles at a time.

The seller might try to get you to look at the car right away when you speak to them. If the asking price sounds great, take a ride to see the car. Try to schedule an afternoon or morning viewing of several vehicles so you can let sellers or dealers know you're going to look at others before deciding.

The Inspection and Test Drive

If you have the VIN for the car, you could run a report on the car's history at websites such as Carfax, but if this isn't possible, use the following list to ask questions.

It's best if you can bring a family member or friend who knows about cars to help you with these questions:

  • If it's a private seller, ask them why they are selling the car.

  • Ask them how long they've owned the car and what they know about any previous owners.

  • Take a good look at the exterior and ask the seller if the car has been in any accidents.

  • Open the hood and inspect the engine area; ask if they had any mechanical work done on the car in the past six months.

  • Ask how often they have the oil changed and tires rotated.

  • Ask them if they installed any aftermarket extras.

  • Look at the inside and check the mileage.

  • Look over the interior for damage like rips in the seats or inside panels.

  • Check to see if all the lights are working inside and out.

  • Try the radio and any CD players or other media players.

  • Turn on the air conditioning. Ask the seller the last time the air conditioning was serviced.

  • Ask them if any recalls need to be fixed. You can check this before you see the car by looking at the United States Department of Transportation website.

  • You may want to calculate the miles driven per year to get an idea of how much wear and tear the car has undergone.

  • Try the heater, wipers, horn, emergency lights, and anything else on the dashboard panel.

While this may sound like a lot of work, it's worth it. If you do your homework and go prepared when you look at a vehicle, the process of buying a used car will be a lot less stressful!

If you finally check out a car that meets all your needs and is in your price range, close the deal and drive it home.