How to buy a used car: 7 steps to take

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Buying a used car can seem overwhelming, and you’ll want to have confidence you’re making a smart purchase. With so many options, be sure you’re getting reliable transportation for the best price possible.

Follow these steps to find a used car that meets your needs.

1. Set your budget

The first step before making any major purchase is to know your budget.

When it comes to buying a used car, experts typically recommend aiming to spend no more than 20 percent of your take-home pay per month.

You might want to spend even less than that if money is tight because used cars may need more maintenance. When determining the car’s overall cost, don’t forget about gas and insurance.

2. Create a short list

Make a list of the brands you’re interested in and stick to the top three or so that meet your needs. That will cut down the options, making the process less overwhelming.

From that list, be sure you research and dig into expert reviews on the cars you’re considering.

3. Consult your network

You probably know someone who has bought a used car. Survey your relatives, friends and co-workers for recommendations. Did they have a good experience? Are they happy with their purchase? Did they feel pressure during the car-buying process? This is all good information to have when starting your research.

4. Take it for a test drive

Once you’ve narrowed your list of vehicles, it’s time to take them for a test drive. A car is one product you actually can try before you buy. In fact, it’s encouraged. Don’t pass up on the opportunity to give your potential vehicle a whirl.

Test drive the car — and don’t be embarrassed to test drive it a couple of times — in various road conditions, including up and down hills, on highways and in stop-and-go traffic. You’ll want to experience how the car drives and how you feel driving it in a typical day.

5. Do some sleuthing

The FTC suggests that before buying a used car, you should get a full independent review of the vehicle’s history.

To do this, look up the car on the Department of Justice’s (DOJ) National Motor Vehicle Title Information System. You’ll pay a small fee, but the DOJ will give you key information on a specific car’s title, odometer reading and damage history.

The National Insurance Crime Bureau also offers a free database that provides information on flood damage and more. You’ll just need access to the car’s Vehicle Identification Number (VIN).

6. Put safety first

Before you buy a used car, look into any potential un-repaired recalls on that make and model.

First, ask your dealer or seller if they know of anything. You can also check for yourself at SaferCar.gov, or call the National Highway Traffic Safety Administration’s Vehicle Safety Hotline at 1 (888) 327-4236.

If there is a recall on the vehicle, ask the dealer or seller to fix it first, or to provide proof it was fixed.

7. Shop around

When it comes to buying a used car, you have two choices: You can either pay in full or finance the cost of the car over time with a loan. Financing, of course, comes with a monthly payment over a certain term (such as 48 months) and an APR.

Rates will vary depending on your creditworthiness. Additionally, rates usually are higher on used cars than on new ones.

Compare auto loans with your local bank or credit union, and also compare lenders on Bankrate to get a sense of what you can qualify for.

What to look for when buying a used car

  • Look for a car brand that meets your needs and is offered within your budget — comfortably. Don’t buy more car than you can afford.
  • Ask around. Be sure you consult your network — someone you know has probably gone through this process. Though every experience is different, word of mouth can help make the process easier.
  • A clean history is important. Check into the VIN information and recall activity of the vehicle. Where did the car come from? Has it been in accidents? Floods? Are there any outstanding recalls? You’ll want to know this information before you move forward with a purchase.
  • Comfort, ease of driving experience and visibility are important. Test drive the vehicle — possibly even a few times — before you commit. Get first-hand experience of how the car handles and how you experience it as a driver.

Questions to ask when buying a used car

  • Has this car been in an accident?
  • May I see its VIN history, including any outstanding recalls? If there were recalls, have they been addressed?
  • What is the exact price for the vehicle? More specifically, what’s the total sales price, including down payment?
  • What is the APR? Is it the best rate you can offer?
  • How many payments will I make, and how much is each one? Can I pay it off faster than is due, saving money on interest down the line?
  • Is there a warranty? What exactly does that cover and does it cost extra?