If you’re in the market for a car, now may be the time to consider buying used again: After a record year for used car prices in 2014 — with a 6 percent year-over-year increase and an average of close to $17,000 — prices are beginning to trend down, says Ron Montoya, Edmunds.com’s consumer advice editor.
“We saw prices for used cars spike around 2009-2010 because there was a shortage of preowned vehicles on the market,” Montoya says. “People didn’t want to take a chance on buying a new car. Now that the economy is better, we’re seeing more cars on the market with better prices.”
Still, it will take a bit of legwork to score a good deal — and avoid a lemon. Here’s how to go about it.
Get preapproved. Just like shopping for a home, you want to be preapproved for a used car loan before you hit the lot. That way, you know how much you can spend and at what interest rate — which also allows you to negotiate with the dealer for a better rate, if you decide to buy off a lot.
Rates on the typical 48-month used car loan are 5.38 percent, but consumers with good credit can expect to land a loan at closer to 3 percent, says Greg McBride, CFA, Bankrate’s chief financial analyst.
Research your options. If you want to find the diamond in the rough — and get the best price possible — you have to do your research. Once you settle on a make and model, check price comparison tools online. (Edmunds.com has one specifically for the used car market.)
Don’t forget to factor in maintenance costs on any car you’re considering, particularly if the car doesn’t come with a warranty. Sometimes the maintenance costs for a used car can push you outside of your budget — Edmunds has a “True Cost to Own” calculator that can help you estimate what you’ll pay.
Take extra precautions with private sellers. You’ll pay about $1,500 more for a car that is “certified preowned” by the manufacturer, but that money also typically buys you a decent warranty. On the other hand, buying from a private party rather than a dealer can mean a lower price and more room for negotiation, but you’re taking a bigger risk when it comes to the condition of the vehicle.
If you decide to go private party, have the vehicle’s owner meet you at a mechanic for what’s called a pre-purchase inspection. (It’ll cost around $150.) And always test-drive the used car before you buy it — no matter where you’re shopping.
Do a little digging. Once you know the price range for the car you want, start researching the local listings in your area — private-party sellers, dealerships or independent used car lots — and compare their offers. When you have a few prospective vehicles, take out their history reports. You can do this at Carfax.com or AutoCheck.com. (Montoya recommends a one-month subscription, which should cover the time you spend looking.) You’ll get a good picture of the car: owner history, accident history and maintenance history.