Buying a Used Car - Tips & Scams to Avoid

• Buying a Used Car - our 6 step road map
• How to buy a used car - haggling with tough sellers and avoiding scams
• Tools and resources to use when buying a used car
• Questions to ask the seller when you buy a used car
• Buying a used car when the seller still owes money on it

If you are considering purchasing a used car, you absolutely must get a CARFAX ® Vehicle History Report AND have a mechanic inspect the car on a lift. Never pay cash for a deposit on a used car. If the deal falls through, you'll never get your cash back, but you can always dispute a credit transaction.

When buying a used car there are many things you need to do in order to make sure that you don't get scammed or end up with a lemon. There are many pros to purchasing a used car instead of a new one; such as getting much more value for your dollar than you would with a new car since somebody else took the big depreciation hit. If you follow this used car buying guide we will teach you how to buy a used car and avoid all of the scams and pitfalls that you might come across.

Step #1 - Finding a Used Car

Search online used car classifieds and newspapers. This might seem obvious but don't just go straight to a used car dealership to start shopping. You can start with the local newspaper automotive classifieds section, but these are narrowly focused with limited market area. You want used car sites such as Cars.com, UsedCars.com, CarsDirect.com and Car.com which have thousands of listings that you can search. Many listings include the VIN numbers so you can run a Vehicle History Report. I've found many VINs to be false, and you have no recourse, as you are buying a used car "As Is", so find out problems before you buy, not after. Read our full chapter, used car quotes to learn more about used car price quotes.

Step #2 - Get a Vehicle History Report

Best Advice On This Entire Page For Buying a Used Car: DO NOT buy a used car without running a used car history search from CARFAX to verify that there was no previous branding of the title, flooding of the car, odometer rollback, salvaged title or that it was reported stolen. You would not believe how many emails I get from people who bought a used car, then found out it was previously wrecked, now they are stuck. If the seller doesn't have the VIN in the listing and won't give it to you then this is not a used car that you want to buy.

CARFAX now offers a new unlimited report package! Included in your 5-report package (reports by VIN), you have the ability to run an unlimited number of reports using a car's License Plate number at no additional charge. This is great when shopping private party listings. Click here to get your unlimited package from CARFAX now.

Get a CARFAX Record Check. Enter a VIN or leave blank and hit "Go"

In addition to finding out if there are any problems with the car, you can make clever use of your report to negotiate a lower price. Click this link to read our article about using an auto history report to haggle a better deal.

Click here to read our complete Vehicle History Report article.

Step #3 - Get a used car loan

There are 2 basic types of used car loans. The first is when purchasing from a dealer. The second is when buying from a private party. Most banks will NOT lend money on a car that is more than 4 or 5 years old. Banks charge at least 2% higher APR on used car loans than they do for new car loans. Online lenders are much cheaper. Their used car loan rates are closer to new car loan rates. Make sure your credit score is at least 680, then as a prime borrower, and you can choose the lowest APR.  If your credit is bad and if you're in too deep, maybe now is not the time to buy a car.

Up2Drive will finance used cars bought from dealerships and myAutoloan.com will write loans if you are buying a used car from a dealer or private party. Auto Credit Express can help if you have bad credit. Make sure to read our used car loan article to get all of the information you need for this step

Step #4- Negotiate tough with a used car dealer or private seller

When implementing our steps on how to buy a used car, the one-on-one negotiation is the most difficult step! You want to use all of the facts to your advantage so you can get the lowest price possible. Take time to do all of the research we recommend before starting the negotiation process. Since there is so much information to cover please click this link and visit our used car negotiating chapter.

Step #5 - Complete the sale

Once you and the seller agree on the price, discuss payment options. If you want any kind of traceability, get a bank draft, with the seller listed as payee. Cash is dangerous to carry around. With a bank draft, you have a record that you paid the seller money in case there are problems down the road. If the car turns out to be stolen, you can cancel the bank draft. But you can't cancel cash. Some people don't want a paper trail, but be aware of the risks.

Our Free CarBuyingTips.com "Used Car Bill Of Sale Form" is a useful Excel spreadsheet (actually 2 forms in one). The first spreadsheet is a Used Car Bill Of Sale, which takes the guesswork out of what information you need when transferring title of a car from the seller to the buyer. The second form is a Deposit Slip Form, similar to the Bill Of Sale. The deposit slip is used as a written confirmation between the buyer and seller itemizing the selling price of the car. This form is from our free spreadsheet download area.

• NEVER EVER sign an "As Is" paper at a car dealer.
• NEVER take delivery of a used car from a seller without the title!

For additional information on completing the sale read our article Completing the Used Car Sale.

Step #6 - Protecting your used car with an extended warranty

It may be impossible to get a warranty for an older high mileage used car. In this case, it's even more important to have a mechanic check out that used car first. You don't want to inherit any surprise problems.

If you buy from a private seller, it's "As Is", you have no choice, so get an extended warranty. Have a good mechanic perform an inspection of the car. Why should you spend money on a mechanic? I'd rather spend a few dollars on a mechanic now, than $3000 on repairs later when the axle falls off. The mechanic is a great investment if it alerts you to a costly engine repair that even the seller was unaware of.

When buying a used car that is out of the manufactures warranty, you are at risk for costly repairs. Thats why we recommend buying an extended warranty. In our extended warranty chapter, we review online warranty sites like CARCHEX and Warranty Direct for extended warranties at much lower prices. If you buy a 3 or 4 year old used car, that's when the manufacturer's warranty expires and you will be on the hook for the repair costs. Unless you have an extended warranty, you are exposed to potentially large losses.

Additional Tips for Buying a Used Car

Buying used cars from car rental agencies
A rental car is just like any used car, but Most have scratches and scrapes, as every rental I ever drove had. But their engines are probably maintained better than privately owned cars, as they are kept in constant care and maintenance during use. When you rent a car from the top companies, they are clean, and I have never had a rental car break down. The companies tend to take them out of service by one to two years of age, so you are getting a decent car which the rental company has already absorbed the largest portion of the depreciation. Rental car companies tend to use no haggle pricing, and you'll often find that pricing to be higher than it should be. If you want full coverage, read our article on buying an Extended Warranty.

Used Car Dealer Myth: "I bought my used car from a big dealer, it's got to be ok!"
You must always perform due diligence no matter who you buy from. If you're buying a certified Lexus, BMW, or Mercedes, there is nothing certified about it. We hear from our readers that they run vehicle history reports on high end use cars and find they failed inspection. Most dealers don't do a lot to recondition a used car but they claim 175 point inspections. When buying from any dealer, make sure to get a CARFAX report to verify the cars past history.

Most states have no used car lemon law!
Lemon laws apply mostly to new cars sold to private people. Many people think there is a used car lemon law, but in most states there is none, except for states like New York or Massachusetts, where they call it the Lemon Aid law for used cars. The Massachusetts Lemon Aid Law allows you to void or cancel your sale if the used vehicle you buy fails to pass inspection within seven days from the sale and if the estimated costs of repairs of emissions or safety related defects exceed 10% of the purchase price. Check with your state attorney general for information on lemon laws. Used car lemon laws only cover non leased cars bought from dealers. Help yourself proactively by determining if that car was ever wrecked, or flooded, salvaged, or totaled. However, New Jersey has a used car lemon law, NJ used car dealers are required to provide warranties on every used car that is sold for more than $3,000, that is less than eight (8) years old, has not been declared a total loss by an insurance company and has an odometer reading of 100,000 miles or less. Only used cars purchased after 1996 are covered. Check the NJ Division Of Consumer Affairs web site.

We've seen news stories of people suckered by scam artists selling cars by the side of the road. They do this so you can't find out where they live. Their selling price is very low to reel you in, but the ad says cash only. It's an awesome deal, the guy priced it to sell, so he wants cash. People just go to their bank, withdraw $8500 and hand it over to a complete stranger with no title. Then he takes your money, gives you the car, but you go to get the vehicle registered and the state tells you it's a stolen car. Then you lose all of your money. Protect yourself and don't pay in cash. The state will take the car from you because it's stolen property, and you are left with NOTHING! No money, no car, nothing. One victim lost $8500 buying a pickup truck. He did not receive the title from the "seller" so he got taken. Their brains were duped by a low selling price. Why didn't they check the guy's drivers license?

FRAUD ALERT: Read our fraud article before buying or selling a used car. There are tons of scammers roaming the Internet looking on eBay and other online classifieds web sites for victims. If you know anyone about to list their car online for sale, or buy a used car from any online site, forward this to them. Don't accept a cashier's check from anyone until you read it. They are not good as cash. Don't agree to escrow of any kind without reading it! Don't send Western Union funds to anyone other than family! Read our Guide To Check Fraud, Escrow Internet Fraud, Auto Fraud, and Nigerian Scams.

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