Before Buying a Used Car, Ask These Questions First

Over the past 37 years, I bought a total of 8 cars.

That’s not very many because I’m a firm believer in buying the right car and driving it for as many years as possible until repairing it is more expensive than it’s worth.

Of the eight cars, I bought the first four used and the last four new.

Of the four cars I bought used, I had almost immediate problems with two, both purchased from a private party. The others came from my brother-in-law or from a dealer, and both served me well for many years.

How to Decide if Buying a Used Car is for You

Financially and ecologically speaking, if you don’t have to buy a car, don’t. This is one of the largest budget items for most people, so if you can do without, take advantage of that fact.

If you do have to buy a car, as I wrote previously, although counter-intuitive, it usually makes more financial sense to buy new than used.

However, here are five situations where buying used likely makes more sense.

1. You are handy with car maintenance and can do at least the simpler repair jobs yourself
2. You can’t get financing with reasonable interest and loan duration or are dead set against auto loans
3. You can only afford a real clunker, and hope and pray it doesn’t break down too quickly and/or often
4. You expect to sell the car in 2-3 years (e.g., due to moving overseas, etc.)
5. You drive short distances only and can find a good used car with low mileage

If Buying a Used Car, Ask These 7 Questions for the Answers You Need to Know First

Those two used cars I bought and regretted? Each was due to issues I could have avoided had I known what to ask (well, in one case, I did ask and was lied to, but that’s another story…).

1. How many owners has the car been through, how long have you owned it, and why are you selling?

If the car is on a used-car lot, this isn’t relevant. However, from a private party, all three parts of this question could be revealing. 

Ideally, you want to hear that the seller was the original owner, has owned the car for years, and is selling to upgrade to a newer car.

Even if the seller bought the car used, if the person she bought it from was the original owner, that’s not a deal-breaker. Especially if the seller owned the car for years and wants to get a newer model or is moving into the city and won’t need a car there. 

However, if the seller bought the car a few months ago, that’s usually a red flag that it may have lots of problems. Unfortunately, not all sellers will be forthcoming and honest, so you need to pay attention to non-verbal cues to assess if you’re being sold a bill of goods.

2. Has the car been in a major accident or flooded? If so, how was it damaged and how was it repaired?

If a car was flooded (think Hurricane Katrina), don’t touch it with the proverbial 10-foot pole. It will almost certainly have big corrosion and electrical problems. If it went through a major accident that affected its chassis, that’s another headache you’ll want to avoid. That last is what the seller lied to me about when I bought one of the two problem cars. When I found out he lied, I was lucky enough to be able to make him take it back and refund the full purchase price.

3. How many miles are on the odometer, and is it the original odometer?

Having about 12,000 miles a year is considered standard (though many people drive at least 15,000 a year). If the car has many more than that, at the very least the price should drop accordingly ($0.20 for each excess mile is typical – so if the car should have 60,000 miles and has 70,000, the price should be about $2000 lower). Having extremely low mileage will likely mean there is less wear and tear on many of the car’s systems.

Note that some cars have their odometer switched out. I once had to replace one of my cars’ odometers. When this is done by a reputable shop, they’ll put a sticker stating the number of miles the old odometer had on it, possibly on the side of the driver’s door or its frame. If this happened to a car you’re considering, add the old odometer’s reading to the new one’s to know the correct number of miles.

4. Where was the car usually driven, and where was it parked?

Generally, for the same number of miles, it’s better if the car was driven longer distances than short ones. Thus, if the car was used for a 60-mile highway commute and has 40,000 miles, that’s better than a 15-mile surface-road commute with the same 40,000 miles.

Also, cars that were used mostly in northern states where there’s a lot of snow each year will tend to have more corrosion problems than in states where roads are rarely salted.

Cars that were garaged most of the time will likely be better preserved than those parked mostly on streets and outdoor parking lots.

5. Was it regularly maintained, and if so, can I see the service records?

It’s possible the car was maintained by someone the owner knows, or by the owner personally. That doesn’t automatically make it a bad purchase, but it’s riskier than if you get a full set of maintenance records from a shop specializing in that make. 

Just listening to how the seller answers may give you a sense of whether everything is on the up and up. Is the seller hemming and hawing about those records? If yes, the car may not have been regularly maintained, which means it may have many issues.

6. What’s not working properly and can I take it for inspection by my mechanic?

Ideally, you want to hear that all the major systems are working well, and that anything that isn’t working is either inexpensive to fix (ha!) or the price is lower to account for it. It’s also best if it’s something you can live without (like maybe the passenger-side seat heater if you’re single).

If the seller is hesitant, let alone isn’t willing to let your mechanic inspect the car, that’s a major red flag. However, in some states, like Maryland, a used car being sold has to go through a state inspection (paid by the seller) before it can be sold, in which case the state inspection should catch most problems.

7. If you had to drive the car today to (insert name of a city a few states away), would you do it?

If you’re buying a real clunker that you’ll never drive farther than the next town over, skip this question. 

However, if you need to be able to drive it longer distances, you want to make sure it’s reliable enough to go the distance, and even 10× the distance you’ll be driving regularly. Again, pay attention not just to what the seller says, but also how he says it. If you sense any hesitation or shiftiness, let alone if the seller answers, “No,” you probably want to skip this car.

Additional Tips from Financial Professionals

Cecil Staton, CFP^®, CSLP^®, President & Wealth Advisor at Arch Financial Planning, adds, “When buying a used car, it’s always important to take your time and do plenty of research. Be sure to investigate the vehicle’s history, past owners, and available options. You should also find a reliable mechanic or certified service center to inspect the car so you can be sure of its condition. Check for any potential recalls, warranties, or liens that may also affect your buying decision. If possible, test drive the vehicle and make sure you’re comfortable with all its features before signing paperwork or handing over payment.

“Buying a used car and having it shipped to you can help if you’re looking for a specific car that you can’t find nearby. You can set up a test drive using face-time with the seller. Ask them ahead of time to describe any smells or imperfections so you’re well-informed.”

Blaine Thiederman, MBA, CFP, offers these five tips when buying a used car:

1. “Don’t ever finance your car through the dealership. Used car dealerships make their money on financing and markups. When you get your auto loan, they may try to charge you an astronomical interest rate and/or add massive origination fees. Google the lowest-APR auto loans and get at least three quotes from online auto loan companies. I have yet to see a dealership beat these.
2. “Buy a car you plan on keeping for at least 5 years. No car appreciates after you buy it. Purchasing a depreciating asset means you’ll either sell it for less or end up taking it to a junkyard. The car you purchase should be functional, reliable, and one you like.
3. “Pay an independent mechanic to inspect the car before buying it OR buy certified pre-owned vehicles, only. If someone gets in a car crash but can make it look like they didn’t and they fail to report it… you could be buying an unlicensed rebuilt engine that will soon break down. You can never return a used car, so make sure you’re buying a functional one. 
4. “Don’t spend more than you can afford. We all need transportation. However, never buy a car that’s out of your budget, no matter how much you love it. The rule of thumb is, your TOTAL non-mortgage debt (credit cards, auto loans, student loans, personal loans) should cost no more than 20% of your net income (preferably under 10%). If you pay cash, make sure you’re not draining your emergency savings to do so. you never know when bad things will happen.
5. “Always negotiate, no matter how uncomfortable it is, even if you can afford the higher price. When negotiating, the party with the best data always wins. If you can prove the car is worth less than they’re asking, bring that proof with you. Dealerships always price their cars on the high side of normal unless they’re trying to move them immediately. Go to kbb.org or one of their competitors once you have the VIN and find out the private-party vs. dealership prices and compare the asking price to what the website recommends. Ask how long the car has been on their lot and consider that information when you decide what you’re willing to offer. Don’t go too low, but make sure you have good reason to believe the price you pay makes sense.”

Alexis Woodward, CFP®, CDAA™, Co-Founder and Wealth Advisor at Blend Wealth, offers six more tips:

1. Consider older cars. Prices on late-model used cars are nearly comparable with the new cars currently. Sometimes people shy away from older cars, but mechanics will attest that if you purchase well-maintained vehicles known for their reliability, then age is less of an issue.
2. Look for cars that have been on the lot for 60 days or more – the longer a car sits on the lot, the more motivated the dealership is to offer a good price.
3. Choose a vehicle that’s appropriate for your needs. Growing families should look for a car that will fit their future family. With recent spikes in gas prices, compact cars are in higher demand and more difficult to find, making it a little easier to find deals on SUVs.
4. Consider the total costs of ownership, including insurance, gas, and maintenance costs. Luxury cars almost always cost more to insure and are more expensive to repair.
5. Research the car model you’re interested in buying to see if there are excessive recalls or major issues with it. It’s also important to know the history and maintenance of the specific car you’re considering, so get a history report. It’ll include things like accident history, repairs, maintenance schedule, and recalls.
6. Unless you can get a low-interest loan, pay cash whenever possible. Many buyers focus on getting the lowest monthly payment possible. However, if that low payment is from a longer term rather than lowering the interest, it’ll increase the overall cost of the car significantly.

Other articles you may enjoy:

• The Best and Worst Ways to Use Your Credit Cards
• What is a Financial Coach (and How to Find the Right One for You)
• How Much Does a Financial Advisor Cost?

The Bottom Line

To recap, if you don’t have to buy a car, don’t.

If you do have to buy, in most cases you’re better served buying new and driving it for 10 years or longer (see caveats above).

If you decide that buying a used car is the path for you, the above are 7 questions you want answered, and where you need to pay close attention not just to the content of the answers, but also to the non-verbal cues you pick up when the seller answers. The last and most obvious point is that you want to make sure that the price you’re being asked to pay makes sense for the car, its age, its mileage, and its condition. Edmunds.com is a great free resource that can help you determine that.

Following the financial professionals’ advice will also help ensure you get as good a deal as possible.

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