Tips for buying a used car

author-avatar By on October 14,2018
Tips for buying a used car

A used car can often offer better value for money than a new car, provided it’s not a lemon.

There’s no shortage of benefits to buying a used car, the primary being that they’re often significantly cheaper than brand new models, given that cars depreciate in value the most over their first few years.

But blindly paying thousands for a used car without doing the proper research and background checks is like playing Russian roulette with your finances.

So unless you want to imitate De Niro in The Deer Hunter, there are a few things you should mull over before you pull the trigger on a suspiciously cheap Alfa Romeo. This guide may help you dodge the potential financial potholes of buying a used car.

What to consider when buying a used car

Firstly, you should check your budget and consider how much of your funds you’re willing to have tied up in this depreciating asset.

Cars don’t typically grow in value, earn you interest or pay financial dividends, which is why money experts preach the adage that you should buy the cheapest car your ego can afford.

If your ego is set on a particular model, you can use websites like Red Book for an estimate of what you can expect to pay for it. Arming yourself with this pricing information can stand you in good stead when bargaining with the often less-than-honest used car sellers.

Besides ego and price, you should also consider:

  • How much you’ll be driving it: Do you need a cheap runaround or a sturdy beast that can endure daily bouts of long-distance driving?
  • Lifestyle factors: Is it practical for your lifestyle? For example, is there enough room for your kids or for transporting furniture?
  • Safety: What’s its safety rating? Some older used cars lack the newer safety features that are deemed critical in the modern era.
  • Security: Does it have modern security features?
  • Car insurance premiums: If the car lacks the latest safety and security features, you may be facing higher car insurance premiums
  • Where you’ll buy the car from: You can get a car from either a dealer, an auction or a private sale, all of which have different pros and cons.

This last point is probably the most important one, as it’s easy to get stung by dodgy sellers or lenders if your eyes aren’t on the road.

Avoid the traps of buying used cars

Ultimately, you don’t want to buy a piece of garbage instead of a car, especially not for thousands of dollars.

You should always endeavour to check the following aspects of a used car:

  • The outside: paintwork, damage to the tyres and panels, oil leaks and broken windows
  • The inside: working seatbelts, working lights and accessories, and wear and tear on the seats and carpets
  • Under the bonnet: check the radiator cap, battery and cooling fans for signs of corrosion or damage

If possible, take the car for a test drive to see how smoothly the car runs and listen for any irregular sounds or movements the car makes. Finding any issues that don’t match what the seller advertised could allow you to negotiate a few hundred or even a couple of thousand off the selling price.

Traps of buying through a private seller

In a perfect world, we’d like to be able to simply trust our neighbours to do the right thing and be honest about the car they’re selling, but we don’t live in a perfect world and unfortunately, cases where sellers have lied about certain aspects of their wantaway vehicle are common.

Buying from a private seller like Davey Smith from Facebook can be much cheaper, but these sellers are not bound by the same laws as licensed car dealers. For instance, licensed dealers must ensure there is no finance owing on the car as opposed to private sellers.

You should never purchase a car that has an outstanding debt on it (known as an encumbrance) because if the borrower defaults on the debt, the lender has the right to repossess your vehicle – even though the debt wasn’t yours! Seems unfair doesn’t it?

So if you are going down the private seller route, then it pays to have an existing debt check done on the car through the National Personal Property Securities Register, for a fee of just $2 per search. This search also shows if the vehicle has been reported as stolen.

Traps of buying through an auction or dealer

You can pick up a good bargain at an auction, but there are a few limitations. Typically you don’t get an opportunity to do a test drive or even have a formal valuation done through an independent inspection, so you’re really relying on an above average knowledge of cars here to ensure that you’re getting a good deal.

Licensed car dealers can be a more reputable source, given they’re often required to provide statutory warranties or cooling-off periods. On the flip side, they can charge higher prices than you’d otherwise be able to get from a private seller.

No matter what source you go with to buy your used car, always make sure you hit them with questions that might not be answered in the ad, e.g. how long was the car owned for? Was it ever damaged? Does it currently have a roadworthy certificate?

You get the idea – trust yourself more than anyone else when it comes to used cars.

Financing options: used car loans

If you feel you need a car loan to finance your used car purchase, here’s what you should know.

Used car loans

Used car loans aren’t really too different from new car loans – you’re still borrowing money from a lender and repaying it plus interest. The main point of difference between new and used car loans though is that used cars tend to come with higher interest rates and less favourable lending terms.


Well, used cars are older and more worn than new cars, and given that loans are handed out over a period of time (of say, five years), then there is an increased risk to the lender that the car won’t last for the whole loan term: it could break down completely or get into a massive prang due to ailing brakes or safety features.

So the lender is more likely to charge a higher interest rate in order to compensate for this added risk. Also, you may find it harder to get a secured car loan for a used car that’s over a certain age (the typical maximum age is five years), so you may have to settle for an unsecured car loan (essentially a personal loan) which generally have higher interest rates than secured loans.’s two cents

Buying a used car can be tricky as they can be harder to accurately value. Also, you often can’t truly tell if it’s in a perfect working condition until you’ve driven it for a while – e.g. you never know when the air-conditioner will stop working suddenly.

But with this added risk can come the big reward of getting great value out of a car at a significantly lower price, so it pays to do the proper research and background checks to alleviate the risk. A $30 CarFacts/CarHistory report could save you from the multi-thousand dollar cost of buying a lemon or the car being repossessed.

You should never be afraid to haggle with the seller to try and knock a few bucks off the price tag. If you walk in there having done your research and know what to look for, then you could earn yourself some serious savings. Channel your inner nit-picker!

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William Jolly joined as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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