Here’s 16 steps to buying a used car from a dealership. I bought one last week, and I’m very happy with how the process went. So, I’d like to share my workflow with everyone.
1. Determine your price range.
What is the highest you feel comfortable paying? Be honest with yourself.
How well do you know car internals? The more maintenance and repairs you can do yourself, the lower in price you can go.
For instance, I started looking at BMWs around 16-18 years old at about $2000-$3000. But I became uncomfortable with the questionable nature of cars that old. I got advice from a friend I trusted that cars that old are a crapshoot. You might get one that’s in good shape, and you might not.
So, I changed my target age to 8-10 years old, which put me in the $5000-$10000 range. Then I changed the brand from BMW to Lexus because I heard Lexus cars are easier to repair and require less maintenance.
Maybe I scared myself off unnecessarily on that one. But I just wanted a car that worked–a low maintenance one. Do your own research. Use your judgment.
2. Get a sense of what cars and model years fall into that range.
Try craigslist.org and cars.com. Just skim the listings.
3. Narrow it down to a few models that you like.
Why are you buying a car? Write down your top reasons.
For me it was: to go on dates, go on little adventures, and take Flamenco guitar lessons–twice a month that were about 20 miles from me. I would not be using this for my work commute; I’d take the bus and/or bike instead. So, I wanted a car that was sexy, classy, moderately sporty, and had good gas mileage.
4. Learn what’s bang-for-your-buck vs what’s questionable.
Get the suggested values of all the car ads that piqued your interest. Use Kelly Blue Book or Edmunds’ Used Car Appraiser.
If you find a car with a price that’s too good to be true, it may have a salvage title. Salvage means: it was in an accident, and the insurance company deemed it “totaled.” Totaled means: it was more expensive to fix than what it was worth. Avoid salvage cars, if you are looking for a car that “just works.”
5. Repeat steps 1-4 until you narrow it down to one car model & year.
For example, I narrowed it down to 92-93 BMW 323. Then I changed my criteria, so I looked at 98-01 BMW Z3. Then I changed my criteria again, so I looked at 2001-2002 Lexus IS 300.
6. Find 1 to 5 ads of cars you’d seriously consider buying.
You may already have at least one. It’s good to compare options though.
7. Get an idea of the car’s condition.
- Sign up for Autocheck; buy the unlimited plan.
- Sign up for CarFax; buy the 5-reports plan.
- Run the VIN on Autocheck; if the VIN is not in the ad, call and ask for it.
- Review the report for any red flags or any discrepancies between the ad.
- Run the VIN on Carfax, if the Autocheck report looks good to you.
- Review the report.
8. Call the dealer.
Ask them if it has a clean title. Ask whatever questions you think are important.
And ask “is there anything else I should know about the car?” Pause for a while and let them speak. Note the things they say here because you could use this as a negotiating point to lower the price.
9. Repeat steps 1-8 as necessary until you’ve booked an appointment to view a car.
10. Get quotes from the leading insurance agencies, on the car you’re about to view.
Here are the major ones: Allstate, Geico, Progressive, AAA (if you’re a member), Esurance. They all have similar service, so you can give the most weight in your decision on the price quote.
Write down the quote and contact info of the two lowest quotes; you’ll need to purchase insurance immediately over the phone, if you decide to buy the car.
Are the insurance quotes acceptable? If they’re too high for you, then go back to step 2 and look for another model that’s cheaper to insure. Otherwise, proceed.
11. Get the blue book values for excellent, good, fair, and poor condition.
Write down the exact definitions for each condition type. You’ll need this as a negotiating point, depending on how the 3rd-party inspection goes.
This was one thing I didn’t do and wish I had. The dealer may price the car at “good” condition, but the inspection reveals that the car is only “fair.” Having the definitions and suggested values in hand could save you hundreds or thousands of dollars in the negotiation process.
12. Take the car for a quick test drive.
Does it accelerate, brake, and turn like you feel it should? If you know more about car internals, then go ahead and check whatever you know. That’s good enough.
13. Get a full inspection from a 3rd-party mechanic.
You absolutely must do this. The only exception is if you’re looking at a “certified pre-owned” car. Then this step has already been done for you.
For example, I viewed a used Lexus sedan at a Volkswagen dealership. They got the car as a private trade-in. They probably did a little inspection on it, but not comprehensive. So, I made an appointment with the nearest Lexus dealership and had them do their 144-point inspection on it. Yeah, it was a little expensive at $200, but the information found from there proved useful in the negotiations. They found the car needed a few major replacements (mostly due to age), and they quoted me 2000-3000 dollars. The dealer originally priced the car at $10k; so $2-3k in repairs was significant to the negotiations.
14. If the inspection results are acceptable, then negotiate for the car. Otherwise repeat steps 1-13 as necessary.
Give your starting offer: (the dealer’s value) – (repairs needed) – (a little extra).
The dealer will balk, but be firm. They may argue that most used cars need a little work anyway. But consider that there are four kinds of used car conditions: excellent, good, fair, and poor condition. They may have priced the car based on one condition, but the car may be in a worse condition. Use those definitions and suggested values that you wrote down earlier to negotiate based on the inspection results.
Always be prepared to walk out, if the dealer isn’t giving up enough of the asking price. They will come down in price for you or call you back. You did your due diligence and proved to them that you’re a serious shopper.
I negotiated 8% off the dealer’s asking price. And I’m sure others could have done even better in my situation. So try to beat that 
15. Buy car insurance.
Call one of those quotes you got earlier. The lowest quote is probably going to be best for you, assuming you’re looking at only the major, reputable agencies. Use the dealer’s fax machine to receive your confirmation of insurance and to fax the agency any documents required (e.g. proof of purchase). Don’t leave the lot without car insurance.
16. Get those repairs done–recommended from the inspection.
Congrats on your new used car! I hope it lasts you a long time.