6 Tips for Buying a Used Car from a Dealer or Private Seller

Buying a car can be overwhelming if you don’t go into the process armed with the knowledge you need to evaluate your options and make an advantageous deal.

At Addition Financial, we work with members who are buying used cars every day. We help them understand their lending options and interest rates and steer them towards the best deal available.

We reached out to some of our expert advisors to ask them for their best tips for buying a used car. We’ve added some of our own as well to provide you with a comprehensive list that will allow you to negotiate a great deal on your used car purchase. Here are six tips for buying a used car from a dealer or private seller.

#1: Get Pre-Approval for Your Loan

If you plan to buy your used car from a dealer, it’s a good idea to get pre-approved for an auto loan.

Chris Chevalier, founder of Clever Customer, told us:

“You need to have pre-approved financing in your back pocket when you negotiate with a dealer. See what they offer before you tip your hand. Then use your financing options as leverage to try to get better terms. If they can't beat what you have, that's fine, you already have a viable option.”

The reason that pre-approval is important is that it gives you the upper hand when you’re negotiating a price for your car. As a pre-approved buyer, you have leverage that you wouldn’t have if you were coming in without the financing you need to buy the car. We’ll talk more later about dealer loans, but for now, you should know that it’s almost always more advantageous to borrow from a credit union or bank than it is to get your loan directly from the dealer.

#2: Do Your Own Research

When you buy a used car, you’re buying the results of someone else’s maintenance habits. In other words, the condition of any used car depends largely upon its previous owner.

Lauren Fix is known as The Car Coach, and she offered this advice about research:

“Do your research ahead of time so you already know what you want on the car and pass on the extended warranty. Salespeople will be able to tell if you already have some knowledge about the vehicle and what features you want.”

You don’t need to transform yourself into an automotive expert, but you should know the basics and go into your negotiation armed with the facts. Chris adds:

“It's important to know the market value of the vehicle, the history of the vehicle, what condition it's in and what repair costs you are likely facing in the near future. Negotiations can get emotional. Facts help tone that down. The more facts you have with you at the negotiation, the better you'll be able to make your case.”

We especially like the bit about not getting emotional. People love their cars and when you’re planning to spend thousands of dollars, it’s easy for your feelings to interfere with common sense. Doing your research ahead of time will minimize the chances that you’ll overpay for a used car or buy something that doesn’t suit your needs and budget.

#3: Hone Your Negotiation Skills

One of the biggest mistakes you can make when buying any car, new or used, is not negotiating. The suggested retail price of a car is just that, a suggestion. Here’s what some of our experts said about negotiating.

Rebecca Hunter of The Loaded Pig told us:

“Whether you're going to a dealership or a private seller, your understanding of negotiation tactics can be the difference between overpaying for a car and getting a great deal. One of the best ways to prepare for a negotiation is to do thorough research on the value of the car and decide on your ideal price and walk away price before beginning the negotiation.”

In other words, the first step in any negotiation is to arm yourself with information. Some of the things you should know before buying a used car include:

  • The car’s Kelley Blue Book value.
  • The car’s maintenance history. If a car has been serviced by a manufacturer or authorized dealer, it will be easy to get that information because it will be stored online. If it has been serviced privately, you can learn a lot by ordering a CarFax report to review the car’s history.
  • The car’s features. When you’re evaluating a car, make sure you understand what features it has – and that they work – before you make an offer.

There are certain phrases and common mistakes you should avoid during negotiations. Lauren also shared these phrases that can negatively impact your negotiation.

  • “I really love this car.” – Car dealers know you’ll be willing to pay more for a car you love. Admitting how much you’re in love with the car makes them hold firm on the price or jack up the price. Make it clear if you don’t get a good price, you’re willing to walk away.
  • “I need to buy a car today.” – If you rushed over to the dealership because your car just died, it might be best not to let the salesperson know. This is a red flag you’re desperate to drive off the lot with a new car today – and you’ll likely end up paying significantly more for it.

Another way of looking at it is that you want to give away as little information about yourself as you can during negotiations. Salespeople are trained to negotiate and it’s important to protect yourself to get the best price. Even a private seller may have sales experience, so it’s important to keep that in mind when you go into a negotiation.

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#4: Avoid Dealer Financing

Dealer financing is designed to be convenient because it offers “one stop shopping” when you’re buying a car. It can save you a trip to your credit union or bank, but we believe that the convenience isn’t worth the high cost. Our experts agree.

Mason Miranda of Credit Card Insider says:

“Many dealerships are starting to offer their own in-house financing, instead of having outside banks or lenders do it for them. Oftentimes, these financing options can have extremely high interest rates, so make sure to do your homework beforehand. The lower the interest

rate, the less money you pay in the long run, and the better your finances turn out.”

Lauren adds:

“Don’t tell the salesperson too early on you intend to pay cash. If dealers assume you’re going to finance the car, they may offer you a better price because they’d make up the difference with the in-house financing. Breaking the news to them later in the process could save you quite a bit of money.”

This tip goes with our first one about getting pre-approved for a loan. Dealer financing is expensive for a reason. You will almost always get a better deal if you go to a credit union or bank for your auto loan.

#5: Don’t Assume There’s Only One Car for You

We love our cars, and it’s easy to decide that a car you love is “the one” – your automobile soulmate. The problem with that mindset is that it can lead you to overlook potential problems and pay too much for a car.

Chris says this about keeping your options open:

“It's hard when you think you're buying the one, but know that there are too many vehicles for sale at any given time for there to be just one good option for you. Do enough shopping that you have another vehicle you would be happy with. That gives you the power to walk away if negotiations aren't going your way.”

Another way of looking at this is that you shouldn’t settle. There are a lot of cars for sale and that means that more than one court will be a viable option. Having options will give you more power during negotiations.

#6: Buy Safely and Prioritize Your Health

Our last tip is one that’s designed to keep you and your family safe during the COVID-19 pandemic. Some people are buying cars online, but if you plan to see a car in person, it’s essential to take precautions.

Tantania Akeela of WapCar offers these safety tips for car shopping:

  • Take alcohol wipes or sanitizer with you and clean your hands if you touch the car from inside or the outside.
  • Do not go out to do dealership surveys. Instead, use your research skills to find out more about your designed used car online.
  • Wear a mask and stand at a distance if 6 ft from each other to avoid contamination.

We would add that if you buy a used car, you should clean it thoroughly when you bring it home. That includes sanitizing the inside and outside surfaces and vacuuming the carpets and seats.

Buying a used car instead of a new one can help you to save money. These six tips for buying a used car can help you buy with a minimum of stress, so you can get the best deal possible.

Need a loan to buy a used car? Click here to learn how Addition Financial can help!

The content provided here is not legal, tax, accounting, financial or investment advice. Please consult with legal, tax, accounting, financial or investment professionals based on your specific needs or questions you may have. We do not make any guarantees as to accuracy or completeness of this information, do not support any third-party companies, products, or services described here, and take no liability or legal obligations for your use of this information.


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