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How to Buy a Used Car on a Budget

Timothy Moore • March 5, 2024

Receiving car keys after buying a used car

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Any way you slice it, cars are expensive. Especially in light of inflation, used cars may make more sense for drivers looking for a new-to-them ride.

Even so, used cars aren’t always priced affordably. The average price of a used car is hovering about 30% higher than its pre-pandemic price tag.¹

Fortunately, the price of used cars has dropped recently, and experts expect costs to stay fairly steady.²

Used car prices might not be back to their pre-pandemic levels, but you can still find a good deal on a used vehicle if you know what you’re doing. We’ve put together 10 tips for buying a used car on a budget to help you.

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Used car buying guide: 10 tips for buying a used car

Buying a used car is a helpful way to save money, but you should do your homework to ensure the vehicle you’re buying is worth the cost. Here’s how to buy a used car on a budget.

1. Set a realistic budget

Calculate how much you can afford to spend on a used car. Being realistic means saving for a down payment and estimating how big of a monthly car payment you can afford. It also means making room in your budget for fuel costs, routine maintenance, and car insurance.

Not sure where to start? Try our auto loan calculator, which considers factors like your down payment and trade-in value.

Here are a few tips for setting your budget:

  • Start saving now: Use a high-yield savings account to save for a down payment. The larger the down payment, the lower your monthly payments will be.
  • Get pre-approved for a loan: You can explore your loan options online and may be able to apply for pre-approval without hurting your credit score. Pre-approval can help you understand how much interest you’ll likely pay over the life of the loan. Check out our guide on pre-approval vs. pre-qualified to learn more.
  • Pay cash: Don’t want to worry about financing? If you’re not in a rush, save enough money to pay cash for a used car.
  • Don’t forget other expenses: When reviewing your monthly budget, leave some room for additional costs associated with buying a car. For example, used cars will likely need more maintenance and car repair work over time – make sure your budget includes those costs.

Chime tip: If you choose a shorter loan term (like three years instead of five), you’ll pay less in interest over the life of the loan. But that also means your monthly payments will be higher. Decide whether your budget can handle higher payments before choosing a shorter term.

2. Prioritize your needs and features

Everyone’s budget is unique – and so are the needs and features they find most important in their vehicle of choice.

You may be a year-round adventurer who needs all-wheel drive to make your purchase worthwhile, or maybe you have a job that makes springing for a high-end car worthwhile.

There are no wrong answers, but it’s worth taking time to figure out your answers so you don’t waste time shopping for vehicles that don’t meet your needs.

3. Research online

The internet is a great place to start your car-buying adventure – but there are some resources to check out before you head to car dealership websites or used car marketplace sites.

Sites like Kelley Blue Book (KBB) and Edmunds often rank the best used cars under $20,000, $10,000, or even $5,000. These websites can give you an idea of the best cars within your price range.

You can also use data from J.D. Power Vehicle Dependability studies, which measure cars’ reliability over their first three years. KBB’s 5-Year Cost to Own ratings can also give you an idea of models that typically require less car maintenance.

After you have an idea of the best used car for your budget, you can start looking for used cars from dealers and private sellers.

4. Buy at the right time

If you’re shopping for a used car because your old vehicle was totaled in an accident or is too unreliable to drive safely, you don’t get much say when buying a used car.

But if time is on your side, wait for one of the better times to buy a used car – when dealers run promotions and are more motivated to make a sale.

So when’s the best time to buy a used car?

  • At the end: Salespeople are trying to hit their quotas at the end of the month, quarter, and year. They may be more motivated to haggle and make a deal, giving you more negotiating power.
  • Around certain holidays: Many car dealerships run promotions during certain holidays, including Memorial Day, Labor Day, and Black Friday.
  • In the winter: Winter is generally less busy for car dealerships. Who wants to test drive in the cold? That makes it an excellent time to head to the dealership and find a good deal.

Note: These tips don’t apply to private sellers.

5. Know where to shop

When it comes to shopping for your dream vehicle, there are plenty of options to choose from – each with its benefits and drawbacks.

  • Private-party sales platforms, like Craigslist or even your local newspaper, can connect you to a private person trying to sell their vehicle. You can usually get a better deal when you buy a car privately. Individual sellers don’t have the overhead of a dealership and used car lot, so they can often offer lower prices. And since individuals aren’t trained salespeople, they’re less likely to (successfully) out-negotiate you. That said, there’s more risk involved when buying privately. Independent sellers don’t have a website of reviews to back them up, so you don’t know who you’re dealing with.
  • Online car marketplaces like Autotrader and Carmax make it possible to quickly filter through hundreds or even thousands of vehicles in your area (and beyond) based on your specific requirements. For example, you can easily narrow your search to pre-owned vehicles of your favorite makes and models. You can also filter cars at or below your preferred price point. These car websites make it possible to cross-reference the inventory at multiple local dealerships instantly, and you may be able to find some private sellers on them, too.
  • Online auto retailers, like Carvana, are set up as a one-stop for car shoppers; you can sell or trade in your old car, search for your dreamy new ride, and even finance the purchase. Cars are delivered to your door, so you don’t even have to worry about going to the dealership. However, you might be apprehensive to buy a car online without driving or seeing it in person. Caravana specifically inspects each vehicle and offers a seven-day money-back guarantee, but still, you may not be comfortable paying for a vehicle to appear at your door.³
  • Visiting a car dealership is the classic way to shop for a vehicle. Plus, it’s easy to research dealers. You can read reviews before deciding to do business with one, and dealerships shouldn’t try to offload a bad car on you intentionally – they’ve got a reputation to uphold. Used cars at a dealership may also come with a warranty, and you can test drive multiple vehicles on the lot before making a decision. The downside? Buying a used car from a dealership can be more expensive than a private-party sale, and in most cases, you’ll probably spend a good chunk of your day at the dealership going through all the necessary paperwork.

6. Double-check your car’s price

You’ve set your budget, figured out what features you can’t live without, shopped around, and found your dream car. Congratulations! Before you drive off happily into the sunset, double-check your car’s price.

If you’ve followed these steps so far, chances are you’ve found a decent deal on your used car of choice. Still, it’s always worth checking in to make sure you’re getting the best price possible.

You can use online tools like Kelley Blue Book’s “What’s my car worth?” calculator to see your new vehicle’s cash value and compare that figure to the asking price. The comparative nature of the shopping process itself might also alert you to a surprisingly high or low price.

Either way, it’s an important piece of information. If the price is high, you may have some leverage to negotiate it down. And if it’s low, you may want to double-check there are no issues with the car.

7. Get the vehicle history report

A vehicle history report is essential to the buying process when deciding whether to buy a specific used car. These reports, which firms like Carfax offer, include several details that can help you make a purchase decision, like:

  • How many previous drivers the car had
  • Past accidents (if there was a police report or insurance claim) and repair work
  • Flood damage
  • Odometer readings
  • Inspection history
  • Open recalls
  • Past usage (was it a rental or leased car, for example)

These details can help you determine if the car is worth the cost. If you don’t like something on the report, you can walk away from the sale or negotiate a lower price.

Some dealerships will offer a comprehensive free Carfax report to potential buyers. If the dealer doesn’t offer the report or you’re buying privately, consider spending the extra $45 to $100 to get a report.⁴ It may stop you from making a bad deal.

8. Consider certified pre-owned

Certified pre-owned (CPO) cars are more expensive than other used cars, but they’re worth the cost for some drivers.

Each automaker’s CPO program varies, but typically, there are strict requirements for a used car to be certified. Usually, it must pass a multi-point inspection and be below a certain mileage threshold.

In addition, buyers generally receive a vehicle history report for free, and CPO vehicles come with a limited warranty.

The point of CPO is to instill more confidence that a used car is in good condition and might have fewer mechanical issues.

But nothing is guaranteed when buying a used car, CPO or not.

9. Test drive it to a trusted mechanic

You should always test drive a car before buying it, especially when buying used.

But don’t just take it for a spin around the block. Go to a mechanic you trust – whether from experience or online reviews – and pay to have them inspect it.

While you can do your own inspection, like looking for rust on the body or listening for weird noises when driving, a mechanic can spot potential problems you might not know to look for.

Ask the mechanic to list any repair work the car would need to run smoothly and how much it would cost.

You can then determine if the car is still worth the price. If not, use the information to negotiate the price or walk away from the sale.

10. Negotiate for the most favorable price

Now that you’re armed with all the important details, from price to history to performance, it’s time to speak up – and ask for the price you want. While negotiating can be intimidating to some car buyers, doing so can potentially save you hundreds or even thousands of dollars. Even if the seller won’t budge, it never hurts to ask.

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Finding the perfect new-to-you ride

Buying a used car can be a smart financial decision. Just take the time to set a budget, do your research, and thoroughly inspect any vehicle you’re considering – and know when to walk away from the sale.

Still in the research phase? If record-high gas prices turn you off, consider buying a used electric car instead. Read our breakdown of gas vs. electric cars before deciding.


What is the best method to pay for a used car?

If you can afford to pay for a used car out of pocket, it might be the best option, as you won’t have to worry about monthly payments, interest, or even a hard inquiry on your credit report.

However, if you don’t want to drain your savings or don’t have enough to pay for the car in full, you can shop around to get a good deal on a car loan. Some used car dealerships may help you find a lender.

How many miles is good for a used car?

Generally, a used car with less than 100,000 miles is a good option, but in recent years, vehicle technology has improved, and cars may last much longer.

Consider more than miles when buying a used car. Get the vehicle history report, take it for a test drive, and pay a mechanic to inspect it thoroughly before purchasing.

What credit score is needed to buy a used car?

According to Experian, there is no minimum credit score to buy a car, as it varies by lender. Even drivers with bad credit can qualify for car loans with specific lenders. They’ll just pay a lot more in interest.

To qualify for a conventional car loan with a lower interest rate, aim for a 661 credit score or higher.⁵

If you’re working on improving your credit score, consider waiting until it’s in better shape before buying a car. Doing so may save you a lot of money on interest.

What is the rule of thumb for buying a used car?

Some finance experts recommend following the 20/4/10 rule when buying a used car.⁶ This rule entails that you:

  • Pay 20% of the cost as a down payment
  • Finance the remaining 80% with a four-year or less loan
  • Keep all transportation costs (car payment, insurance, gas, maintenance, etc.) at 10% or less of your monthly budget

For some buyers, this makes it easy to set a budget – but remember that each situation is unique, and this rule may not always apply.

What to avoid when buying a used car?

Avoid models with visible rust, mismatched exterior paint, flood damage, or extremely high miles when buying a used car. If the vehicle identification number (VIN) doesn’t match the title, the car is under recall, or the seller is pushy or gives you a bad feeling, walk away.

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¹ Information from J. P. Morgan's "Inflation and the auto industry: When will car prices drop?" as of February 17, 2024:

² Information from CNBC's "Used car prices expected to stabilize in 2024 after two years of decreases from record highs" as of February 17, 2024:

³ Information from Carvana's "What are the limits of the 7-Day Money Back Guarantee?" as of February 17, 2024:

⁴ Information from Carfax's "Order Carfax Reports" as of February 17, 2024:

⁵ Information from Experian's "State of the Automotive Finance Market Q3 2023" as of February 26, 2024:

⁶ Information from J.D. Power's "What Is The 20/4/10 Rule Of Buying And Financing A Car?" as of February 26, 2024:

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