Ready to Buy a Used Car? Here's What You Need to Know.
With the used car market at an all-time high, it pays to know what you're doing and what your options are.
In the market for a car these days? Surprisingly, since the Covid chaos last year, car buying has come back up in many parts of the country, nearly matching pre-pandemic levels. The glaring reality of this all is the price you can expect to pay now. Just this past summer, it was estimated that the average price for a new car in the United States topped $40,000 — contributed to by a shortage of materials, from wood components to silicon for chips and other computer parts.
Are you buying a used car? You can still expect to pay through the nose. The average price of a used car on the showroom floor or in an outside lot, according to Kelly Blue Book, is now close to $25,000, a significant increase in the past two years and an all-time high. So, what is happening now? People have been avoiding the middleman and are going directly to the main source — the private sellers. With private sellers, buyers can likely negotiate better deals and get all-important feedback about the origin and history of the cars. Sales associates aren’t interested in wheeling and dealing much these days because they know their average clientele will likely go for a used car over a new one.
What you need to know if you buy a used car from a private seller
When buying from a private seller, it is important to know if the buyer is fully insured. You’re going to want to take a test drive before you buy. You’ll also want to see some documentation, such as an emissions report, title and bill of sale. On your test drive, ask the seller if he or she can accompany you to a reputable mechanic to get a full inspection done.
This is a standard operating procedure for any car buyer, but it’s beneficial here because you’ll know everything about the car inside and out, what’s wearing out and what will need replacing. You can use this new knowledge to haggle with the buyer over the cost of the car. At a used car dealership, there won’t likely be any haggling, and you’ll be buying the used car mostly “as is,” no matter what you might find wrong with it. But also keep in mind that, unlike dealerships, there are no guarantees or warranties when buying privately, so it’s a big risk.
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How to streamline the purchase process if you go with a dealership
First off, arrive with a pre-approved loan already in hand, preferably from a mainstream bank or credit union with a stellar reputation. This is a great idea because your dealer will know going in what you’re qualified for and may try to undercut your pre-approved loan and get you a better deal with his or her own. It's also helpful because the dealer will know your credit score, which may cut you a deal on the loan. So, make sure your credit score is high when you get to the lot. If it’s not, your first order of business before even buying a car is building your credit up.
Secondly, show up with a price in mind. When a dealer comes to you the first time, you should know what price range you want and refuse to get sucked out of it. Agree on a price range first, then talk about trade-ins, extras and other things. It does you no good to come to a dealership and start asking about what make or model or extras you’re looking for. Unless money isn’t a concern, settle on a price first.
Lastly, if you do have a trade-in, by all means, research the current value of the car before heading out. You don’t want the dealership to lowball the figure, and in many cases, it will. If you suspect you’re being ripped off on the value, first ask the dealer why he or she arrived at that value. The dealer may have certain reasons, such as wear and tear, that lowered the overall value of the vehicle.
By arming yourself with the proper documentation and knowledge, you will be successful in getting yourself a good deal on a used car — either through a private seller or dealership.
Entrepreneur Leadership Network Contributor