Buying your first used car doesn't have to be a scary process. As a first-time buyer, the key is to be prepared. Preparation spans many different areas. You should prepare by figuring out what you need and can afford. Once you've done that, you can research what options are available to you in the used car market. The last step in preparation before you go to the dealer is to line up your own financing, just in case.
Get your money together. If you'll be paying cash, the money that you have in hand determines how much car you can afford, but if you plan to finance the car, you will need to know how much of a monthly payment you can handle. Generally, you will also want to have a down payment toward the cost of the car. When establishing your budget, remember that you may also have to pay for tax, title, license and other fees. If you don't already have a car, you will also need to start paying for insurance, and if you finance you may need full coverage.
Talk to your bank, your insurance agency or a local credit agency to get preapproved for a car loan. This will give you a sense of how much you can afford. It will also enable you to avoid the need to negotiate with the finance manager only to be offered financing that you can't afford. Getting preapproved by another lender won't prevent you from taking your dealer's financing if it's a good deal.
Research cars to find one that might be a good for you. If you live in a snowy area of the country, for example, a four-wheel drive vehicle might be more useful to you than a two-seat convertible. Alternately, if you have a very long commute, a small car with good gas mileage could be the best choice for you. Between magazines, the Internet and the advice of people that you trust, you should be able to find a few cars or trucks that will be a good match for you.
Find your car. While you can sometimes get a better price by buying from a private party, buying from a used car dealer or the used car department of a new car lot can be more convenient. If you intend to buy from a private party and finance the purchase, make sure that your pre-approved lender will finance the transaction.
Research the particular car that you are considering before going to the dealership. You should know what a fair market price is for the car before you walk in the door. This will help to protect you from overpaying.
Go to the dealer or private party seller and request a test drive. You should spend at least 30 minutes test driving the car in as many different conditions as possible. While you don't want to drive recklessly or illegally, you should get a good feel for how the car accelerates onto the freeway, how it handles emergency braking and just about anything else that you will encounter on the road.
Inspect the car and its records. With a used car, it's always a good idea to have a mechanic that is not a part of the dealership selling the car look at it to make sure that it is in good condition. If you can get the car's service records, you can analyze them to make sure the car has been maintained properly.
Negotiate the price with the dealership. Explain that you have arranged financing for the car, and start the negotiation at a price below what you actually are willing to pay. If the dealership wants $14,000 for the car and you know the fair market value is $12,000, starting the negotiation at $10,000 is a relatively good strategy. You can expect to have the dealer go back and forth with you a few times. If you are not being treated respectfully, nicely end the negotiation and walk out. The asking price may come down. If not, you can always buy another car.
Get a financing quote from the dealership once you have established a firm price. If it offers a deal better than your pre-approved financing, take advantage of it. If it doesn't, use your pre-approved loan to buy your new used car.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.