Smith 
Buying a used car has always been a smart way to save money, and there’s plenty of evidence to back this up. According to data from Experian in early 2023, the average monthly payment for a used car loan is about $209 less than that for a new car. Avoiding hefty monthly car payments is crucial, especially when finances are uncertain, which might explain why IHS Markit found that the average age of cars on the road today is nearly 12 years.
Buying a used car is becoming increasingly popular, but it does require some extra thought and care.
How to Buy a Reliable Used Car
Buying a used car comes with its own set of risks, but you can find a reliable car at a good price by following these steps:
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Check Your Current Car Loan:
If you’re still paying off a car and want to trade down to save money, start by checking your existing car loan. Selling your car for less than you owe could mean paying the difference out-of-pocket. Get a “payoff estimate” from your lender to know what it’ll take to pay off your loan. Check your car’s value on sites like Kelley Blue Book and remember that selling it yourself usually fetches more money than trading it in. -
Ask for Maintenance Records:
Whether buying from a dealership or a private seller, reviewing the car’s history is crucial. Regular maintenance helps avoid future costly repairs. Look at the car’s records to understand its maintenance history and any recent repairs. Not everyone keeps great records, but if available, these can provide insight into the car’s reliability. -
Take the Car for a Test Drive:
While it’s convenient to buy a car online, not test-driving it first is risky. Drive the car in conditions similar to your daily routes, whether highways or city streets, to see if it feels right for you and to spot any obvious problems. -
Do a Background Check on the Car:
Even if maintenance records are missing, the car’s VIN and a CARFAX report can reveal important details like recalls, service history, and previous ownership. Always check the car’s title for terms like “salvage” or “rebuilt,” as these indicate past issues that might affect safety or value. -
Get an Inspection:
Have an independent mechanic inspect the car. Dealerships might offer “certified pre-owned” cars with their own inspection, but a third-party check ensures impartiality. You can take the car to your mechanic with the seller’s consent or hire a mobile mechanic service if necessary.
Pros and Cons of Buying a New Car vs a Used Car
New Car:
Pros:
- Most Reliable and Safe: New cars generally have the latest safety features and no wear and tear.
- May Come With a Warranty: New car warranties usually cover major features like the drivetrain.
- May Last Longer: A new car tends to have a longer lifespan since it has no previous use.
Cons:
- Expensive: New cars are much pricier and depreciate significantly as soon as you drive them off the lot.
- Might Be In Debt Longer: New-car loans typically last longer, leading to more money spent on a depreciating asset.
Used Car:
Pros:
- More Affordable: Used cars are cheaper to buy, insure, and register.
- Previous Owner Absorbed the Depreciation: You avoid the steep depreciation hit new cars take.
- Less Debt: Lower prices mean smaller loans or even the possibility of buying outright.
- Higher-End Car for Less Money: Get a nicer model for less than a new, basic model.
- Might Still Be Under Warranty: Some used cars come with short warranties, especially from dealerships.
Cons:
- Reliability and Safety: Extensive research and inspection are needed to ensure you’re getting a dependable car.
- More Research and Time: Buying used involves more legwork compared to buying new.
- Might Not Last as Long: Used cars have already spent some part of their lifespan.
- Harder to Get a Loan: Lenders might restrict loans for older or high-mileage cars, making financing difficult.
The Bottom Line – Saving Money by Buying a Used Car
Buying a used car the right way goes beyond upfront savings and can positively impact your long-term finances. For example, a $20,000 used car compared to a $32,000 new car with the same loan terms can save you almost $230 per month. Investing those savings in a high-yield account can accumulate almost $14,000 by the end of the loan term, providing a significant financial cushion or funds for another car purchase outright.
By carefully selecting your next used car, you not only secure reliable transportation but also advance your broader financial goals.
