How to Buy a Used Car

Thinking about buying a used car? Smart move. A pre-owned vehicle can save you money and depreciates less over time than a brand-new one. But navigating the used car market requires careful consideration. In this guide, we’ll walk you through the key steps to buying a used car wisely.

New to You: Buying a Used Car

New cars lose about 30% of their value within the first two years—much of it the moment you drive off the lot. Buying used lets you avoid that immediate depreciation while also saving on insurance and registration.

However, purchasing a pre-owned vehicle comes with its own set of considerations. The process differs from buying new, with unique factors to watch for in financing, condition, and reliability. To help you navigate the process, we’ve outlined eight key steps for how to buy a used car from a dealership or private seller.

Step 1: Decide How Much You Can Spend

Before shopping for a used car, determine how much you can afford. If you’re financing, factor in a down payment, monthly loan payments, insurance, fuel, and maintenance.

On average, Americans spend about 17% of their income on transportation. A good rule of thumb is to keep car expenses under 20% of your income. Need help crunching the numbers? Use Homebase Credit Union’s car loan calculator to estimate your budget.

Step 2: Search for Cars in Your Price Range

With your budget set, start exploring available options. While local dealerships are worth checking, online platforms like Autotrader, CarGurus, and Cars.com offer a much wider selection. Private sellers typically list on marketplaces like Facebook and Craigslist.

You may have a specific make or model in mind, but stay objective. Create a checklist of must-haves—such as a manufacturer’s warranty or certain features—and compare each option carefully. For insights on safety and reliability, consult Consumer Reports before making a decision.

Step 3: Check the Price

Once you have a shortlist of cars you like, verify whether the mileage and condition of the car matches up with its fair market value. You can do this by checking trusted pricing guides like Kelley Blue Book and NADA (the National Automobile Dealers Association).

This is the price you should expect to pay for a car as it is described. Note the different prices for sales by dealerships and private individuals.

Step 4: Get a Vehicle History Report

Before viewing a car, request a vehicle history report. This report reveals past accidents, major repairs, previous owners, mileage, and maintenance records.

Some used car websites provide direct access, but in most cases, you’ll need to get the VIN from the seller or dealership to order a report from Carfax or another provider. Once you have it, review the details carefully, watching for red flags like major accidents, multiple past owners, or inconsistent maintenance.

Step 5: Test Drive the Car

If everything checks out so far, schedule a test drive. Try to drive on different road types and in various conditions. Pay attention to:

Warning lights (engine, oil, brakes, airbags)
Mileage discrepancies from the listing
Braking issues (too soft or too sharp)
Acceleration problems or a rough ride
Non-working lights
Worn or damaged tires

Use this time to check the car’s comfort, interior space, and overall condition. Inspect the exterior for dents, scratches, cracked windows, or mismatched paint—often a sign of past repairs.

Before leaving, ask the seller:

How many owners has the car had?
Has it been in any major accidents?
Are there known mechanical issues?
Is it still under warranty?

Compare their answers to the vehicle history report. If anything doesn’t add up, ask why.

Step 6: Get a Professional Inspection

Before finalizing your decision, have the car inspected by a qualified mechanic. If the seller resists, consider it a red flag.

A professional inspection typically costs $100–$200 but provides valuable insight into the car’s condition and maintenance history. Request a written report and review it carefully to ensure there are no hidden issues or costly repairs ahead.

Step 7: Negotiate a Price

If the car checks out, it’s time to negotiate. Research the fair market value for the make and model and question any price that’s significantly higher or lower.

At a dealership, clarify whether the quoted price includes taxes and fees, as hidden charges can inflate costs. Avoid negotiating based on monthly payments, as dealers can manipulate this by adjusting interest rates or loan terms. Focus on the total cost, including financing fees and interest.

Step 8: Finalize the Purchase

Once you settle on a price, arrange payment through your bank or lender. If buying from a private seller, do not release payment until you have the title in hand.

Dealerships typically handle registration and title transfers.
Private sales require you to complete the transfer yourself—do this ASAP.
Insurance must be active before you drive off. Never drive an uninsured vehicle.

Private sellers are often motivated to sell, which can mean a better price than a dealership. However, all sales are final, so due diligence is crucial. Unlike dealerships, private sellers have no reputation to protect, and you’ll have little recourse if something goes wrong.

Here are a few important questions to ask:

Who owns the car? Verify the title and check for any liens or claims.
Is it registered? Confirm valid registration, plates, and any outstanding fines.
Are you the original owner? This helps gauge the car’s history and maintenance.
How was the car used? Learn if it was a daily driver, long-haul vehicle, or used for towing.
Why are you selling? A straightforward answer is a good sign; evasiveness is a red flag.

Before completing the sale, ensure you receive the title. If financing, make sure your lender gets the title promptly. You are also responsible for registering the vehicle.

Why Finance Your Used Car With a Credit Union?

If paying cash isn’t an option, financing is a must. While dealership financing may seem convenient, credit unions often offer better rates and terms. Here’s why choosing a credit union for your auto loan can be a smarter move:

1. Shop Like a Cash Buyer

Financing through your credit union gives you the power of a cash buyer. You’ll be able to negotiate the car's price without worrying about financing terms, and dealers may be more willing to lower the price knowing your payment is guaranteed upfront.

2. No Hidden Fees

Dealerships may offer low vehicle prices but often hide additional fees within the loan terms. When you finance through a credit union, you'll pay fewer fees, all clearly disclosed upfront, so there are no surprises.

3. Better Rates

Credit unions are not-for-profit cooperatives, which means their goal is to benefit members, not outside shareholders. As a result, you’ll get better rates on auto loans compared to traditional lenders.

4. Personal Service

Credit unions build long-term relationships with their members. Rather than offering generic loans, we take the time to understand your financial situation and provide customized solutions tailored to your needs.

5. Added Value Services

Along with competitive auto loans, credit unions often provide added services like GAP coverage, extended warranties, and in-house auto insurance—helping you protect your investment long after the sale.

Used Car Loans From a Trusted Partner

Buying a used car doesn’t have to be stressful. At Homebase Credit Union, we make the process easier with expert guidance and affordable financing options tailored to your needs.

We offer: