Do your homework before approaching the negotiating table
If you are trying to save on your next car, you may be considering buying used instead of new. Used cars do usually cost less than new cars — but that does not mean you will automatically get a good deal on one.
“Today’s shoppers are facing record-high prices and a dwindling supply of budget-friendly inventory,” said The Washington Post, citing a new second-quarter report from car-shopping website Edmunds. Largely due to an imbalance between supply and demand, the current average price of a three-year-old used vehicle — $32,461 — is “4% higher than a year ago and a 15.5% increase from 2021.”
If you are in the market for a used car, here is what to keep in mind while shopping.
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Before you approach the negotiating table, it’s essential that you have done your homework. The first thing to figure out is how much you can actually afford to spend. “If you’re taking out a loan to pay for your car, a good rule of thumb is to cap your car expenses at 10% of your take-home pay, including your car payment and other ownership costs, such as fuel and insurance,” said Edmunds. And “if you plan to buy a car that’s out of warranty, it’s also a good idea to set aside a ‘just-in-case’ fund to cover unexpected repairs.”
If you know you need an auto loan, this is also a good time to verify your creditworthiness. Consider getting prequalified, which will not only provide a sense of how much you may be able to borrow and potential rates but also give you leverage when shopping and negotiating.
Once you get to the point where you are eyeing up one car in particular, “look up the current market value — what other buyers have paid for that used car — in pricing guides such as Edmunds or Kelley Blue Book,” said NerdWallet. “Current pricing information from these impartial sources will give you confidence and show you how much to negotiate on a used car.”
It can also help to look at different sources. For instance, certified preowned vehicles tend to “cost the most, given that they typically have fewer miles, are often in better condition and have some warranty coverage,” whereas “private-party sales typically cost less,” though there is more effort involved, said Edmunds.
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A low price on a vehicle that turns out to be a lemon is not such a good deal in the end. This is why it’s important that you ask questions, and verify everything the former owner says before you sign. “Get the vehicle history report (Carfax and AutoCheck are two popular choices) to confirm the odometer reading, ownership history and reports of accidents and flood damage,” said Investopedia. And if you are “buying from a private seller, you can also ask to see a copy of maintenance records.”
Your own eyes — and nose — are a good resource too. “Visually inspect the car on a dry, sunny day to see imperfections and potential problems better,” said Consumer Reports. If you “smell mildew, the car may have been in a flood or there may be a leak somewhere, which could mean unseen water damage.”
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.
