Buying a Used Car

Picture of used cars on a lot

Do you hate the thought of buying a used car because of the struggle you have to go through with negotiating? This page will provide you with all of the resources you will need to make the process easy and with less hassle.

It does take a little more time and effort to negotiate a really good price on a used car than it does on a new car, simply because the process to find a fair price on a used car is a little more complex than on a new car.  But, the positive impact on your bottom line can be huge and this page will take you through the entire process so that you'll know exactly what to do every step of the way.

Decide on the Car You Want

With used cars, the highest levels of depreciation occur in the first two years after a car has been purchased. Asking prices for two year old cars are usually 30 to 60% off the original list price of the car, depending on the model.  Therefore, late model cars that are one or two years old can be a very good deal because they tend to have low mileage and are still under the manufacturer's warranty. Individuals seldom place this type of car on the market. They are more likely to be available in dealerships. Dealers get these late model cars from two primary sources. The first is cars that come off of corporate lease programs and the second is cars that were in rental car company fleets. The large rental companies such as Enterprise Rent a Car tend to take care of their cars and turn them over with low mileage. If the vehicle check record indicates that it was a rental but it has low mileage, it should be a good car, especially if it has a year or so left on its original warranty.

Find the Car You Want

When it comes to negotiating for used cars, time is definitely money. The more time you put in, the more options you will have.  The more options you have, the stronger your negotiating position will be. One of the things that makes negotiating a new car purchase somewhat easier than negotiating a used car purchase is that there is endless competition in the new car market. If you don't like the deal at one dealership, you just drive down the road for the next one and they will have the exact same car; this gives the buyer a huge advantage. The more you can do to duplicate that competitive environment for your used car the better. Therefore, ideally you would like to have two, three and possibly even more very similar cars available at the same time so that you have a large number of competitive choices available to you.

Not that long ago, if you wanted to buy a car you either wandered from dealership to dealership, or you looked for ads in your local paper, or you did both.  While you can still do that, the Internet gives you a lot more options, in particular, this website and the many Used Cars Available from preferred credit union-friendly dealers.

Vehicle History Reports

There are basically two companies that provide vehicle history reports. CarFax and AutoCheck.  When you are purchasing a used car it is essential that you know something about that car's pedigree - was it a rental car, a taxi, a police vehicle etc., has it been in an accident, was it totaled, has it been damaged by floods or other natural disasters and are there any current recalls on the car? You want to make sure that the odometer reading is accurate. And you want to make sure that the title is good - was the car ever repossessed or stolen, does it have a branded title (e.g., junked, salvaged or rebuilt) and is there a lien on the vehicle?

For many years one company, CarFax, had a monopoly on providing this information.  A number of years ago Experian, one of the large credit bureaus, developed a competing service called AutoCheck that provides the same information. For both services you enter the Vehicle Identification Number (VIN) for the car you are looking at and they will generate a report providing all of the above information and more.

You will inevitably be running reports on many cars so it makes the most sense to purchase an unlimited report package. The AutoCheck package allows unlimited reports for 30 days. CarFax no longer allows unlimited reports. You can buy single reports or you can buy a 5 report package at the same price as the AutoCheck unlimited package.

A word of knowledge on vehicle history reports:  Although these reports can provide a wealth of information about a used vehicle, the fact remains that the report will only offer information that was entered onto the history report system at one time or another by a designated authority.  As an example:  If a vehicle was backed into a tree and the owner did the repair work themselves, this would not most likely be indicated on the history report.

The Used Car's Market Value

Your next step is to get an idea of the car's value that you are considering.  Unlike for a new car where every dealer has exactly the same cost structure from the manufacturer, the used car market is much more fluid.  Every used car is different, every market is different, and all the books and services that purport to tell you what your car is worth can only give you a ballpark figure. Member Auto Sales offers data from N.A.D.A. (National Automobile Dealers Association), However, be aware that any value source you obtain information from generally only gives you a basic sense of the vehicle's market value may be.

The Dealer's Bottom-Line Price on a Used Car

The dealer's bottom line price is made up of several factors. These include what they paid for the car, how they view the market, how badly they need to move inventory, and possibly some other factors:

  1. The dealer will have paid less for the car if they purchased it directly as a trade-in than if they bought it at auction.
  2. The dealer's value calculation depends upon how popular this particular vehicle model is. If the model is very popular they will give less of a discount because they expect someone may be willing to pay more. If the model isn't popular the opposite is true. If a dealer needs to move inventory to raise cash or eliminate older inventory, they will give a greater discount then they would when they are not under pressure.
  3. You may be able to find out if the dealer purchased the car at auction from the vehicle history report or they simply may be willing to tell you. But even then, you won't know exactly what the dealer paid for the car and you won't know how they have calculated the other factors.

Determining Your Bottom Line for the Used Car

Next you must figure out the lowest price that the dealer would sell, which is also the highest price that you would pay.  Because used cars are usually a good deal, you may even find that you would be willing to pay the asking price if you had to.  But remember, simply because you don't think something is worth the price that is being offered does not mean it is not a good price.  This may be due to some financial constraints such as a fixed amount that has been budgeted for your new car. However you calculated it, this is may be the point that you will walk away from the car deal.