How to Buy a Used Car
Updated: 4 days ago
For most families, purchasing a vehicle is one of our largest expenditures, second only to buying a house. New cars are very expensive these days (averaging close to $50,000 in 2023), so that famous “new car smell” comes at a steep price. Even if you have the financial freedom to continually upgrade to the latest, greatest, trendiest car or truck, it might not be the best choice from a strictly economic standpoint. After all, five minutes after you drive that “new” car off the lot, it effectively becomes a used car for all intents and purposes – beginning with it now being valued as a used car rather than a new one.
If you are in the market for a used car, there are several things you should do before stepping foot on a car lot. First of all, establish a budget. Know how much you can afford, both in terms of overall price of a vehicle and your total monthly payment. Don't forget to include car insurance in your budget; once you know what type of vehicle you will be buying, you should be able to get an estimate from your insurance agent.
Next, know what car you want to buy. Don’t depend on someone at the car lot to help you make this decision. After all, there is a reason that used car salesmen have such a bad reputation. Despite how they may act and what they say and do while you are there, the truth is that most of them see you only as a “sale;” they are paid to protect the dealership's bottom line – not yours. As a result, you may be encouraged to buy a car that the dealership needs to get off the lot (maybe it's been there for months or has issues that the salesman "forgets" to mention) rather than the car, truck, or van you that actually need and can afford.
Remember, knowledge is power, especially when making large purchases like an automobile. Knowing, in advance, the type of car or truck that you wish to purchase, rather than relying on a salesman’s advice, is crucial. Ask yourself what type of vehicle you need: a truck, an SUV, a van, a sedan, or something else? Once you know what type of vehicle you are seeking, do some research on how to get the best bang for your buck. You want the most dependable, safest vehicle that you can get for the money that you have to spend, right? And you want a vehicle that holds its value as much as possible, don't you?
Learning how to best proceed can be as simple as typing in a Google search for “most reliable mid-size sedan” or "most crashworthy used car for teenagers" and taking notes from the various sites that pop up. Not every source will agree, of course, but you will likely find that certain vehicles make most of the "best" lists. You can even narrow it down to your price point, such as “best used domestic four-door pick-up truck under $20,000.” There are also websites (carguros.com, for example) can be helpful in determining how much used car you can get for your money and can even show you vehicles that are currently for sale in your area.
Understand that you don’t have to narrow down your search an exact make, model, color, etc. Flexibility can increase your chances of getting a reliable ride without blowing your budget. For example, you may know you want an family van that can seat at least six people and get at least 20 miles to the gallon. Chances are, there are several vehicles that would fit that bill. You can then research the reliability of each. There was a time when such information was only available in printed form, via a magazine printed quarterly or maybe monthly. Nowadays, however, the internet is your friend. Just be mindful that the best sites for determining the reliability, crashworthiness, etc. of used vehicles may not be free. Sign up for a month’s subscription, if you need to; it will likely be money well spent (just remember to cancel the subscription when you no longer need it).
After you have made your shortlist of reliable, crashworthy, affordable used cars, it’s time to start looking more specifically for vehicles in your area. Once you have located a few such cars in your price range, find out as much information as you can about the vehicles that are currently for sale near you (to get your best deal, it may help if you are willing to travel a bit). Some websites have filters that you can apply to find out if a certain car or truck has been in an accident, whether it has a clean title (avoid salvage titles and red titles), how many owners it has had, whether it has been subject to a recall, and maybe even how regularly it has received routine maintenance. Remember, you can usually purchase a CarFax directly, rather than relying on the car lot owner to provide this information. You can also get recall information, including whether a certain vehicle has undergone any work recommended through a recall, by typing in the VIN on the federal government website, https://www.nhtsa.gov/recalls.
At this point, it’s time to go shopping… but don’t count on bringing home that new ride just yet. ALWAYS be willing to walk away from the negotiating table. Patience and perseverance can save you a lot of money in the long run. No matter how much you want and maybe even need that vehicle, remember that there are plenty more vehicles out there to be had – perhaps at a better price or more favorable terms.
Speaking of terms, you should know how much of a vehicle loan you will qualify for before going to the car lot. “Tote the note” and "buy here, pay here" lots often prey on those who either have terrible credit and think they have no other option and/or those who are too lazy to do their homework. Chances are, you will get a better rate elsewhere. Research the current rates for car loans, keeping in mind the age of the cars you are looking at, how much room there is in your budget for a car payment, and how long you plan to keep the car.
Just as a used car shopper should not just hand themselves over to the salesman and trust him or her for the best car loan deal, don’t assume that the car lot will give you the best – or even a fair – trade-in price. Yes, selling your old car yourself will take some effort, but you may come out much better financially if you sell your car to a third party yourself than if you just roll it into the deal for the newer car. At the very least, do some research on the fair market value of your car. Approach this task as if you are buying the car that you already own – what is its condition (fair, average, good, etc.)? What equipment or features does it have? Is the mileage substantially below or above the average for a vehicle its age? Check the internet for websites (such as the one maintained by Kelly Blue Book) that can help you narrow down the fair market value of your current vehicle. When you determine, in advance, what you would pay for the car you currently have, then you know the amount that it should sell for, whether to a third party or to the used car lot as a trade-in. After all, when you are “trading in,” what you are actually doing is accomplishing two transactions in one; first, you are selling your current car, and second, you are buying a different car. Keep in mind that the value of a used car is usually higher if sold privately than offered as a trade-in; if the used car dealership substantially "lowballs" the trade-in value, that may be a red flag about their honesty and integrity.
Unfortunately, some used car shoppers find themselves “upside down,” meaning they owe more on their current vehicle than it is worth. To know if you are in this situation, first determine the true fair market value of the vehicle you already own. Then, figure out your payoff; you should be able to get this information directly from the lender, although it might take a day or two for them to calculate the amount and get back to you. If the amount that you owe is more than the value of the car, whether sold outright or offered as a trade-in, you need to ask yourself, Do I really need a newer car, or will this one get me by, at least until I can get it paid off? Maybe the car is starting to need a few minor repairs here and there. That doesn’t necessarily mean that it’s time to buy a different vehicle. Chances are, the cost of maintenance and occasional repairs on an older vehicle will be easier on your budget than an increased car payment (that will likely last for several years) for a newer vehicle, especially if you are upside down and will still be paying off the old vehicle along with the newer one.
If you are concerned about the car or truck breaking down and leaving you stranded, consider options like AAA or towing insurance as part of your motor vehicle comprehensive insurance. Go ahead and ask around about reliable, affordable mechanics. Know where you can rent a car nearby and how much it will cost. In other words, plan for a break-down before it happens. Chances are, at some point an appliance or two has failed in your home, but you didn’t buy a new house, did you? No, you dealt with the problem: you repaired what was broken and went about your business. Even taking an Uber or other rideshare to work for a week or two while a problem is being fixed is cheaper than a combined car payment when you are upside down.
Let's be honest; sometimes, we just want a newer car. It makes us feel better about ourselves, at least temporarily. It's easy to convince ourselves that we deserve something more than what we are really able to afford. The reality is that the novelty will likely wear off long before the payments do. Think about this. Let’s suppose your current car is 5 years old, and you buy a newer car that is only 2 years old but you finance that newer car for 60 months. By the time it’s paid for, you will be driving a 7-year-old car.
Okay. Let’s assume that you have carefully considering your finances, done your research to find a shortlist of possible automobiles, and decided that, yes, you do want to buy a newer used car. You’ve found “the one.” You’ve made your best deal for the price of the car, gotten your best interest rate by shopping around, and determined how to get the most value out of your old car, whether as a trade in or by independent sale. It’s time to sign on the dotted line, right? Actually, no, not quite yet.
The next step is to carefully review the sales contract and make sure that you understand each and every charge on it. Too many car dealerships attempt to pad the sale with extra charges that make them money but don’t give the consumer much or anything in return. For instances, is there a “dealer prep” charge on there? If you ask and are told that everyone just has to pay that, be wary. While most people do pay a dealer prep fee, there is no law requiring it. It’s just another way for a dealership to make money.
When a used car lot sells a car, they are entitled to make a fair profit, taking into consideration how much they paid for the car (including transportation). Charges like tax, title, and license are usually fair game, too; after all, most of those charges are paid out to the State or County. However, a “document preparation fee” and/or a "dealer prep fees," may be pure profit to the dealership. Having someone available to prepare the paperwork necessary to sell a car and/or clean up a vehicle and get it ready to sell is an assumed cost of doing business and should be paid by the dealer, not the consumer.
A used car lot may also add in costs such as gap insurance or a limited warranty. While these items may be potentially useful, too often the cost of these products is out of line with what the consumer gets in return. If you want gap insurance because you are concerned about having an accident and owing more on your car loan than your car is worth at that time, shop around. There may be places other than the used car dealer to purchase such insurance, and you may be able to get a much better deal. Also, having an extended warranty is not a bad idea, but shop for policies with other providers. Alternatively, consider whether you can "self insure" by simply setting aside some cash for repairs, should they become necessary. Regardless of from whom you purchase gap insurance, an extended warranty, etc., make sure you understand the amount that you are paying, what exactly you are paying for, and how to make a claim if you need to. Contrary to how the salesman may respond, you are not "being difficult" by asking these questions. Reluctance to explain the "fine print" may be another red flag about whether you are dealing with an honest place of business.
Another sneaky thing to look for in the paperwork that is signed as part of a used car deal is an arbitration clause or a choice-of-venue agreement. An arbitration clause may take away your right to file a lawsuit against the opposing party, and agreeing to choice-of-venue language can limit you to being heard only in a particular court, perhaps one in another state. You may also be agreeing to pay the car lot's attorney fees and costs should a dispute arise, while being responsible for your own regardless of the outcome.
When buying a used car, you need to understand that the deck is stacked heavily in favor of the seller, not you, the buyer. Contrary to what you may have heard, Tennessee does not have a Lemon Law for used cars, nor is there a statutorily-mandated 3-day cooling off period or a 30-day return policy. Getting relief after a deal has gone bad can be very difficult, so it is important to take care of yourself as much as you can on the front end. After everything is signed and you’ve driven off the lot, it may be too late. You could be stuck with that bad deal – and all of it’s negative financial consequences – for years.
To talk to an experienced Sparta or Cookeville breach of contract attorney, call Griffin Law Group, PLLC today at 931-837-2050. We also handle wills and estates, family law (divorce, custody, and visitation), bankruptcy, real estate, and criminal defense in White County, Overton County, Putnam County, Cumberland County, Trousdale County, Warren County, Van Buren County, and the surrounding area.