I just bought a used car for the first time. Here is what I learned.

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by yipskip​

As the title says, I just bought a used car for the first time this past weekend. While I am very happy about the car and I think I found a good deal, honestly I found the entire car buying experience terrible so I figured I would try to share what I learned from this experience. Keep in mind that this is really a write-up about buying a used car from a dealership and not a private seller.

Start a spreadsheet.

Seriously. Just do it. You will be looking up a bunch of cars from many different dealerships, and when your email/voicemail is full of them trying to schedule appointments, you will be relieved when you can reference your handy spreadsheet. Mine included year, model, color, dealership, link, listing price, quoted price, and whether the car fax showed any accidents or damage.

The true price.

Most used car dealerships advertise on cars, autotrader, carsforsale, etc. 90% of the time the price you see is misleading. This is because the price they advertise is the “internet price”, which does not include the following:

  • Taxes (Look up sales tax rates for your state)
  • “Dealer prep” fees
  • Document fees
  • Title and tag fees
  • Financing fees
  • Rebate fees (more on this below)

After adding all of those fees, a $10k car could easily become a $13k-14k car. On the topic of rebates, that “internet price” I mentioned before is the price that the car WOULD BE if you qualified for every available rebate. These rebates would often include active military, recent college graduate, or if you bought a car at that dealership in the past XX years. One Jeep that I looked at was listed at $11.5k, but since I didn’t qualify for those rebates it jumped up to $14k – and that didn’t even include the other fees! Always try to look at the fine print listed in these internet ads.

Before making a physical appointment, I always asked for a quote for the full “out-the-door” price. This includes taxes, fees, “rebates” I qualified for, etc. This was useful for a couple of reasons. The transparency let me know if it was actually in my budget before I invested myself any further. Also, this gave me an idea of the dealer would be easy to work with or not. A dealer that is not willing to give a quote is honestly not worth the hassle. This leads us to our next point.

Find A Good Dealership

Despite the stereotypes, not all dealerships and used car salesmen are scum of the earth. Look at their ratings on Yelp, Google, etc. I strongly encourage you to only shop at a dealer with decent ratings. Like I mentioned in the pricing section, I only invested my time with dealerships that would give me a ballpark quote for the price that was out of the door. Most dealers will offer some type of service incentive to buy their vehicles, and it’s important to remember that you may be working with this particular dealership in the future. See how they talk to you during negotiations – are they polite, arrogant, pushy, or pleasant? This is your purchase, do not let them sour it for you.

Be realistic about your expectations.

You probably won’t be able to get a new car for 1/10th the price. Used cars are just that – used. They may have been in accidents, they may be scratched, dirty, have a smell. Not all of them – some will be detailed, some will have more maintenance than others. When possible, ask the dealer how much maintenance and repairs they have invested in that vehicle. ANY decent dealer would be able to pull up that number for you. Regardless, know your budget and what you should expect with that budget. If your budget is $5k, you most likely won’t get a car that is less than 8 years old and has less than 90k miles.

An accident is not necessarily a deal breaker.

If the carfax shows an accident, don’t close the door just yet. Try to find out more. Did the car slide into another parked car? Was the accident reported in 2012, and then continued to drive for 8 years? Was the damage superficial, structural, to the engine? Once you find out the true nature of the accident, you might be surprised by what you are comfortable with.

Negotiating

So you finally found a car you like. It’s in your budget. It has good miles. It appears to be in good shape. You’re about to go in and see the car in-person. Keep this in mind: the dealers goal is to close the deal the first time you visit. The best approach is to go in prepared:

  • Know what a good deal for that car is
  • Know at least one equivalent year/model car from a different dealership. Tell the current dealership that after you’re done at this dealership you are planning on going to another dealership to compare a similar make and model. This will make them want to “out-due” the other dealer.
  • Draw a line: assuming the car is up to your standards, set a price that you would accept if offered. I guarantee they will ask anyway. Take a few minutes before you go into the dealer and ask yourself “What price would I be willing to accept today?”. My recommendation is to name a near crazy good number. Keep in mind that the number that you tell them will become your lower floor number, and no negotiations in the future will ever go below this number again.
  • Talk about all of the negatives of the car. Was it ever damaged/involved in an accident? Is it higher than average miles? Scratches, dings? Do all of the electronics work?
  • Even if you do not qualify, ask for the rebates anyway. The worst they can say is no, the best they can do is save you thousands of dollars.

Financing: The average consumer is stupid. Don’t be average.

Know your shit. Understand how financing works. Understand interest rates, life value of the loan, and payments. Become familiar with the “PMT”, “PV”, and “FV” functions in excel. If you need to finance, keep in mind that you WILL end up paying a financing fee. This fee will range anywhere from $500-$800. I would never recommend taking out an auto-loan for longer than 2 years. If you can’t pay off the loan in 2 years, you cannot afford the loan.

If you get to the financing stage, be very careful about it. I had a highly rated dealership, and they still tried to pull some fast ones at this stage. For example, I wanted to put about $6k as a down-payment and wanted to finance the other $5.7k. When they pulled up my options, I saw 4 different monthly payments. These plans differed based on if I elected to get additional ‘coverage’ (tire rims, an extended warranty, etc). What made me angry was that NONE of the payment options listed we’re reflective of the raw price, without any elective coverage. The cheapest option I saw was ~$35 higher per month than the financing alone. I had to actually ask the dealer to show me a financing plan that did not elect any other additional coverage. Do not be afraid to whip out your calculator. This is your show and they are only the supporting cast members.

To summarize, most of these tips are about being organized, prepared, and patient. You will most likely sort through many crappy dealerships that are not worth your time. Make a spreadsheet. If you have a budget, stay within in it. Get out-the-door quotes. Gauge your dealer’s attitudes. Know competitors, and research the historical price range for this make/model/mileage car. Be prepared to negotiate, and be prepared to walk away.

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