The Ultimate Guide To Buying A Used Car Online

Buying a used car is a gamble. To win, you need to have all the right information, but you also need to know how to use it. That’s why I wrote this guide – to empower you to confidently buy a used car online and feel good about your decision.

This guide is a work in progress. If you see anything I’m missing – or you want to contribute your knowledge and expertise – please let me know!

This guide is for you if:

  • You want to be sure you’re getting the best deal
  • You realize there are more costs than the sticker price
  • You’re not a car guru, but you want to know your car will be reliable

This guide will show you:

  • How much you should spend on your car
  • How to know which car is good
  • How to narrow down your options and make a decision
  • What to do on the test drive

Step 1: identify your budget

Buying a used car online can be easy, but it takes some patience and dedication to get it right. Before you open your favorite car listing website and start browsing, write down the answer to these questions:

  • How much cash do I have to spend? (Don’t count loans – we’ll talk about them later)
  • How much am I willing to spend on my car in the next 5 years?
  • How willing am I to work on my car (or to pay someone else to work on it)?
  • What features am I not willing to do without?

By preparing yourself in advance, you’ll be able to make better decisions when you find a car that catches your eye.

Step 2: assess your financial situation

Buying a car is an emotional process, and it’s important that you spend time up front identifying your financial limits.

If you intend to finance the car, identify how much debt you are willing to take on for this purchase. Do this now, before you talk to a bank; it’s possible that the bank is willing to lend you far more than you should spend, so draw that line in the sand now.

Next, get pre-approved for your loan. If you have low or no credit, local credit unions are more likely to offer you a loan, so check some out. You can literally save thousands of dollars by getting pre-approved instead of going to a dealership for financing.

Step 3: create your approved car list

Search for cars in your price range and write down models with the options you identified in step 1. We’ll do a deeper dive into these later.

For each model you’ve identified, do the following steps:

  • Look up the model on Kelly Blue Book. Write down the recommended range and estimated mileage.
  • Look up the model in Edmunds True Cost to Own calculator. This is where the real price of each model comes out. For now, write down the total listed in the lower-right box.
  • Search CarComplaints.com for the model. Write down the top 2-3 complaints (transmission failure, electrical issue, etc) and how many complaints were recorded. Also, write down the biggest complaints so that you can ask about them when you’re ready to buy.

You’ll find that some makes and models cost exponentially more to insure, drive, or fix, even though the purchase price is similar.

Armed with this information, you can create a list of cars that you’re willing to buy. There’s no formula for this part: It’s based on your personal tastes, risk tolerance, seating/storage/towing capacity, and a plethora of other options.

Step 4: become familiar with your options

Once you’ve narrowed it down to two or three models that you can afford and are willing to drive, find a few dealerships that have the cars you want, and go test drive all of them before you even begin shopping. This way, when you’re considering a car for purchase, you know what it’s supposed to feel/look/sound like.

Step 5: find your car

Once you’ve identified your ideal models, its time to search for your next car. Search Craigslist, eBay, Auto Trader. Compare pricing, mileage.

Avoid any cars with problems listed, unless you like to spend time and money working on your car. Even if the problem seems minor, it could be an indicator of neglect or misuse.

When you’re buying a used car, there are a lot of things that could go wrong. If you’re a mechanic or car enthusiast, you may know what to look for in a car. For the rest of us, there’s one reliable way to increase the odds of getting a good car: by being selective about who you buy from.

This is one of the cornerstones of my car buying philosophy: buy cars from good people. Especially if you’re not mechanically inclined, the best way to know you’re not getting ripped off is to buy from someone you can trust. I’ve made my best car-buying decisions when I felt good about the person I was buying from. Also, talking to the owner gives you a much better understanding of the car history and potential problems.

This also means that buying from a dealership is a non-option for me. Salespeople are incentivized to sell you a car – any car. They know very little about the cars on the lot, and their main objective is to get you to pay as much as possible, preferably hidden inside monthly payments. This is, of course, a broad generalization, but it’s accurate enough for me to categorically avoid buying from dealers.

Coming up next: how to test drive a used car, how to agree on a price, and how to make sure you don’t get ripped off.