7 Things to Avoid When Buying a Used Car

Buying a used car can often be a good investment choice compared to buying a new car, but there are risks involved. Used cars, for example, can have issues from regular wear and tear. When you're in the market for a used car, it's important to avoid things like not taking a test drive or buying based on price.

Here are seven mistakes to avoid when buying a used car.

Failing to Line up Financing Before Shopping

Before you purchase your used car, whether that's through a dealer or from a private owner on a used car website such as Autotrader or CarsDirect, you'll have to figure out how you're going to pay for it. Not everyone can pay cash for a car in full—even for a used one. So, they turn to financing.

Financing provides a loan and your approved amount sets an upper limit of your price range. Knowing your pre-approved financing options makes negotiating prices easier. If you're buying a car from a dealership, they will likely offer you financing. But dealer financing is often more expensive than getting financing from other sources, such as your bank.

Shop around because different lenders offer different rates. Make sure you have your pre-approval or approval along with the monthly payments you can afford before you shop for your car. An auto loan calculator can help you determine what kind of loan term and interest rate will fit your budget.

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Shopping Based on Monthly Payments Alone

You can save a lot of money over the long term if you can pay cash for your used car because you won't have interest payments. If need financing, you'll have to determine how much you can afford by creating a budget of your monthly income and expenses.

But if you shop based on the monthly payments alone, you may pay more in the long run. For example, you could have a loan with a higher interest rates but a lower monthly payment because of a longer loan term. Compounding interest would make that loan more expensive than a loan with a shorter term and lower interest rate, but higher monthly payment.

You can lease a used car. But not all dealerships offer used car leases and there are certain conditions. According to Edmunds, it must be certified pre-owned, the mileage must be under 48,000 miles and the vehicle must be less than four years old. But remember, while your monthly lease payments can be lower than your monthly loan payments, you may have to return a leased car at the end of your lease.

Foregoing the Test Drive

Some used cars buyers don't test drive the car before making the purchase. When you don't test drive the car you're buying, you run the risk of running into unexpected and potentially expensive problems. In the case of used cars, consider test driving a few before making a purchase decision. This protects you against buyer's remorse and gives you clarity on how the car drives before you buy it.

Not Having the Car Checked by a Mechanic

Failing to have a used car checked by a mechanic before you buy it could often be a mistake. This step can save you a substantial amount of money if the car has major issues that you can't see yourself. The cost of the inspection could be well worth the money it could save you.

Making Initial Negotiations in Person

If you are purchasing a used car from a dealership, you may be tempted to go to the dealership in person. That could be a mistake before you negotiate over the phone.

Once you're on the dealership property, you are less likely to walk away from a deal that doesn't fit you and more likely to make a concession to buy the car. Do all of your research and comparisons at home, and try to negotiate over the phone or by email.

If you're purchasing a used car from a private seller, chances are the seller isn't a professional salesman. By mentioning a few used car statistics over the phone, you may gain an advantage before you see the car in person.

Buying Based on Looks

Before you even begin looking for a car, whether online or in person, assess exactly what you need from your car. If you're looking for a commuter car, don't waste your time looking at trucks. If you're looking for a vehicle that can tow a trailer, don't bother to look at sports cars. Shop for cars based on your criteria, not buy browsing around.

Not Running a Vehicle History Report

With a vehicle history report, you can check for any prior accidents, problems with the car, and the number of previous owners. Not checking the history of the car could lead to surprise expenses.

You can check a car's history through CARFAX, AutoCheck, or another service, Dealers usually pay for this service, but a private seller may not.

The Bottom Line

Buying a used car has several risks to consider, but you can minimize those risks by taking several steps to avoid mistakes in the shopping and buying process. Take advantage of free resources like Kelley Blue Book that can provide you information to help you make more informed decisions about buying a used car.