Shop in the right place
The first step in finding a better deal on a car is knowing the right places to look. New cars are sold only by franchised dealers, but used cars can be purchased from a variety of sellers:
- Used car departments at new-car dealerships.
- Used car superstores such as CarMax.
- Online used car sellers such as Carvana, Shift and Vroom.
- Car rental sales lots.
- Independent used car lots.
- Private parties.
- Public auctions.
You’ll typically find the newest and more expensive models at new-car dealers’ used-car lots, the only place to turn if you want a certified car with a warranty and factory financing. Prices are likely to be higher than other lots' but negotiable.
National used-car chains such as CarMax, online retailers and rental car agencies also offer newer cars, often with factory warranty remaining. You can also get a loan and buy extended warranties. Prices are typically no-haggle.
Independent lots, private parties and public auctions typically deal in older or cheaper cars. The upside is that you may find a 20-year-old one-owner cream puff, cheap. It does happen. But most cars have had several previous owners, and a checkered past is not rare. Plus, you’ll have to arrange your own financing.
Education First can help with your search. With AutoSMART, you can browse vehicle inventories and also apply for financing. This resource is free for our members!
Adjust your expectations
There is a built-in risk-versus-reward element to used car shopping: The more you’re willing to spend, the less chance the car will need repairs and overdue maintenance. Here's an overview of the three price levels of used cars:
- High-end used cars: If your budget is over, say, $20,000, you might consider getting a certified pre-owned (CPO) car from a dealer. Shopping for a CPO car is easier because it's pre-inspected and comes with an included warranty. While you’ll have to pay a premium, you'll also be able to buy a car with more modern technology and safety features. Of course, you can always buy a non-CPO car and purchase an extended warranty.
- Midrange used cars: A sweet spot for used car buying is a 3-year-old vehicle coming off a lease. Many of these cars will sell for 40% of their original price and still retain a new-car feel. Another source of near-new bargain-priced vehicles is car rental lots. For instance, according to an iSeeCars analysis, Hertz vehicles are selling for an average of $1,389 below market value.
- Older used cars: Many people are afraid that cars from 7 to 15 years old will require costly repairs. To offset repairs, set aside $100 a month so sudden mechanic bills won’t deplete your savings.
It’s best to buy older cars from private-party sellers because you can get a better idea of the mechanical condition. A used car dealer will show you the vehicle history report, but a private party might have the service records and can answer many other questions.
Look for unexpected value
The used car market is vast and, if you can spot an outlier, you can save big money. Here are a few examples of how to find that diamond in the rough:
- Cars that haven’t been recently redesigned will sell for less. Check car sites such as Edmunds.com or our AutoSMART page to find out when the last time major changes were made to a model.
- While there is a stigma to buying a used rental car, the vehicles are well-maintained and priced lower than buying from dealers.
- If a car dealer’s vehicle history report shows you are looking at a former rental car, leave and buy a similar one directly from the rental agency’s sales lot. You’re likely to find it cheaper.
- Be willing to travel to an area where the car you want is less popular. For example, all-wheel-drive vehicles sell for less in the southern U.S., where winter driving isn’t a factor.
- Be willing to travel to a more competitive market. A Honda dealer with a city to itself has less pressure to haggle on a CPO vehicle than a dealer in a city with three or four rivals.
- Used luxury cars often offer the biggest savings. The money you save on the purchase can be used if any repairs are needed.
© Copyright 2020 NerdWallet, Inc. All Rights Reserved