Financial Advisors Guide: Buying A Used Car

Buying a used car is a significant financial decision; approaching it with the proper knowledge can save you money and stress. Whether you’re trying to stretch your budget or looking to get the best value for your investment, understanding the ins and outs of the used car market is crucial. This guide, tailored by a financial advisor, will walk you through the steps of buying a used car, helping you set a realistic budget, navigate your purchasing options, and ensure you’re making a well-informed choice. From determining how much car you can afford to finalizing the sale, this financial advisors guide to buying a used car will provide practical tips to ensure your purchase is both financially sound and reliable.

How Much of a Car Can You Afford? Aka. What’s Your Budget?

Since this is a financial advisor’s guide to buying a used car, we have to start with the money part. A few things to keep in mind when deciding what you can afford. One of the best financial routes for a successful money life is to pay for the car in full. Two, if you have to go down the route of car payments, go for the lowest minimum payment, and think about what extra amount you can afford to to put over the car payments each month. Start with this mindset.

“A big mistake I see is people buying a car that they can maybe technically afford, but puts them in a tight stressful money spot later and probably doesn’t leave room to save for other things.” Says Nathan Mueller, MBA, CFP® founder of BlackBird Finance.

I recommend you answer these questions below to help you figure out your car budget.

Have you already been saving up for a car? If so, how much have you saved?

If you need to start or continue saving for a car, what amount should you shoot for? Most used cars will cost between $10,000 and $30,000.

You might need to figure out how much extra money you can afford to put into your savings account each month.

Have you considered the extra expenses? These include car registration, minor repairs such as new tires, windshields, brakes, oil changes, etc., and insurance costs. These expenses must be considered before buying a used car.

Three Ways to Buy a Used Car

There are three ways to buy a used vehicle.

One, you go to a dealer that sells used cars. Dealers are the most expensive route and feel the most comfortable to folks. Buying a used car from a dealer doesn’t necessarily mean you have a car in great condition, so you still need a mechanic to inspect it beforehand. There is an exception, and that is a certified pre-owned.

The second way to buy a used car is on the private market. This is generally going to save you quite a bit of money. The downside is that you don’t have a plethora of cars in one central location, and there are some additional things to consider when it comes to paperwork and payments. Don’t get turned away from the private market if you don’t have all the money saved up. These days, there are options for financing a car through a private seller.

The last way is to buy a vehicle at an auction. It is beyond the scope of this article to get into the details on buying a car at auction, but this has the most potential to save you money. It also comes with the most risk of getting a vehicle that isn’t in desirable condition.

The Steps to Buying a Used Car

The steps may vary slightly depending on the route you take to buy a used car (dealer, private seller, auction). These steps will focus on buying from a private seller, whether that be a Craigslist seller, family member, friend, coworker, or maybe even a neighbor.

Consider your budget. Once you know what you can afford, move on.
Narrow down the type of car you want. Most of us will be buying a car that is a daily driver. It’s wise to buy a type of car that you would use for 80% of your driving time, not 20% of the time. You’ll also want to note that the more popular a car in your area, the more options you will have when it comes to finding that car.
Do your research on the couple of cars you like. Consider the reliability of the vehicle. A less reliable vehicle will mean more repair costs, however, a more reliable vehicle will come at a premium price. Also consider gas mileage. Even a 2-3 mpg difference can add up to $300-$400 savings on a yearly basis for the average driver. Don’t forget to research the good years versus the lemon years. I like Consumer Reports and rest assured there is absolutely no paid affiliate links on this page.
Used car values. Now, look up the Kelly Blue Book value or the Edmunds Appraisal, both free. This will give you a gauge of the prices you can expect to pay, but depending on other market factors, you may pay more or less.
It’s time to start looking for a car. Buying a used car can save you money, but sometimes it takes patience. You’re trying to find a car that meets your criteria and is available. Cars will come and go. Look for cars on Craigslist, Facebook Market, eBay, or various other car market websites.
Once you hone in on a car or two. Execute a car history report. Carfax has been a staple in the industry, but other good options exist. Plan to purchase more than one report. Consider signing up for a package or subscription that provides car history reports. You want to know if there are any reported accidents, how many owners there have been (less is better), if there are any potential issues with odometer rollbacks, or if there are any liens on the vehicle.
The car history report looks good. At this point, arrange a meeting with the seller. Good cars and deals move fast, so you need to be always on the lookout and ready to roll when the opportunity arises.
Looking at the vehicle. Certainly, the more car knowledge you have, the better when looking over a used car. Everyone should be able to look for scratches and dents, test the windows, radio, AC/heater, doors, etc. Then, take it for a test drive with or without the owner, depending on the owner’s comfort level. If the car is feeling fine, move to the next step.
Multi-point inspection by a mechanic. I highly recommend taking it to a mechanic to have it looked over. Mobile mechanics are also excellent for this as there is less risk and it may be more convenient for the owner. You may choose to let the car go or factor in the costs to repair something, or maybe it’s in perfect condition.
It’s time to sign documents. Check into this for your particular state. To complete the transaction, you will likely need a bill of sale and the car title. Usually, the seller will provide both of these. Nervous about this part? Ask the seller to use an app that facilitates this digitally, but note that there will be a fee for the service.
Payment. There are a few ways to exchange payment. There are general apps like Zelle or Venmo, but there are also more car-specific apps that will electronically transfer money and facilitate paperwork. Other standard options are cash or money orders.
Hooray—you own the car. You can now take it home, but ensure you have the required documents and insurance that your state laws dictate before driving it.
Your final step will be registering the car with the state.

The Takeaway From Financial Advisors Guide: Buying A Used Car

Purchasing a used car can be a smart financial decision if done carefully and with proper planning. Buyers can make an informed decision that suits their transportation needs and financial situation by setting a realistic budget, conducting thorough research, and taking necessary precautions like obtaining a mechanic’s inspection and checking car history. Following the steps in this guide will help ensure a smoother purchasing experience and avoid costly pitfalls. If you need more personalized financial guidance on buying a used car, don’t hesitate to contact BlackBird Finance for expert assistance.