Used car buying tips: Learn how to negotiate and spot a lemon
Don't buy a used car until you've read this second-hand car buying masterclass.
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Before you go for a test drive or start looking at used car financing options, read this handy guide and checklist so you know what to look for when buying a second-hand car.
What you need to know about buying a used car
Used cars are vehicles that are pre-owned and bought from a dealership or private seller. The conditions of used cars vary greatly – they may be in almost-new condition or they may be nearing the end of their life. A benefit of opting for a used car is that they are cheaper than buying new (almost always, unless the car is a classic or in high demand), and you can sometimes find a good deal for a pre-owned car in great condition.
Of course, there are risks that come with buying a car that someone else has owned. Many common car problems are not immediately obvious, and the owner may be unaware that a problem even exists (or they may be a snake and intentionally downplay any mechanical issues).
Unless you are a mechanic or have experience with cars, it may be hard to work out what condition the car is in. If possible, take along a mechanic to check for any issues.
Before you buy your used car, you should also do some research on the make, model and year of the vehicle to determine if it is suitable for you. Find out if there are any recalls or common issues with the car, by checking the manufacturer's recall section and enthusiast forums. You should also prepare some questions to ask the seller about the history and condition of the car, and use our checklist when inspecting the vehicle.
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Where to find a used car
One of the benefits of getting a used car is that there are plenty of places you can go to find one. There are advantages and drawbacks to each option, so make sure you choose the one that sounds right for you:
- Online. Online dealers operate used car websites where you can browse what’s available. You can find both licensed dealers and private sellers on these sites, and you will generally be able to contact them directly through the website.
- Trading and selling forums and websites. There are also sites or forums where people try to sell their own cars and where you might be able to pick up a bargain. With a private car sale, there is no warranty and you don't get the cooling-off period that a licensed dealer offers, plus it is tricky to determine whether the seller is reputable.
- In the paper. Newspapers still have sections where people sell or trade. Some have dedicated sites and magazine lift-outs where you can find listings for used vehicles. Again, these are private sellers, so it's vital to be careful with your purchase.
- Used car dealerships. If you would prefer to have a place to return to if you experience problems, you can visit one of the many used car dealerships and haggle in person. The benefits of working with a licensed dealer are that the car is often sold with a warranty, there is a cooling-off period and you may find the process easier as the seller will be experienced with used car sales terms. On the downside, these are seasoned car sellers, they've been at it for years and so they could try some of their sales tactics on you.
If you opt to go with a private seller, you should always arrange to inspect the car in person before you commit to buying it.
What you should do when looking to buy a pre-owned vehicle
Whether you're looking to buy a pre-owned or new vehicle, it's tempting to buy the first car that you view. But a car is a large ongoing expense, and it’s critical you consider all your options before committing to buy.
Before you start looking for your car you need to decide what you want. Do you want a big car because you need a lot of boot space, or do you want a small car to make it easy to park in the city? You should think about the car's main use and then decide how many seats you want, what kind of features you’d like, fuel efficiency and running costs. You should also determine your budget, how old you want the car to be, and what you are willing to spend on a second-hand car.
When you start looking for your car you need to do your research. Start looking online and in newspapers, and visit a few used car dealerships. It doesn’t matter what seller you end up going with because it’s important to understand the current market prices and what’s available to you. See what your budget will buy, and find out about the different types of cars that you are able to get. Then, when you find the car you want to buy, you know if you're getting a good deal.
This boosts your bargaining power when it comes to the negotiations.
Questions to ask the seller
When you go to inspect a used car, you should take the opportunity to ask the seller a few questions about the vehicle, such as the following:
- Why are you selling the car? It's important to understand the reason why the seller is willing to sell the vehicle. If they have recently bought the car and are already looking to sell, it may have some serious issues that they have not told you about. Or they could have lost their job. It may also be as simple as that they found it hard to drive or the seats were uncomfortable. The reason for the sale may or may not affect your decision to buy, but it is worth knowing. Pay attention to their face and body language. If they get all jumpy and shifty looking, this is a flag. Then again, they might just be socially awkward.
- Has it ever been involved in a crash or required serious repairs? A used car may look in fine condition, but it may have been involved in a major accident or needed substantial repairs. Look for "orange-peel paint", wavy body lines and misaligned panels – these are indicators that the car has been in a smash.
- How many kilometres has it done? Changing the odometer reading on a car to hide how far it has travelled is possible. A car that has done a lot of driving is more likely to break down, simply due to natural wear and tear. However, a car that's spent a lot of time on the highway might have covered hundreds of thousands of kilometres, but these are low stress and at optimum operating conditions.
- Are you the first owner? You should check to see if the seller bought the car new, and if not, if they can provide documentation showing the ownership history.
- Do they actually own the car? This may seem like a simple question, but it's possible that they do not have the authority to sell the car in the first place, which could lead to serious complications if you go through with the purchase. If they originally purchased the car using a secured car loan, you should also check that they have paid off the loan in full, as buying an encumbered car (one that is under finance) can also result in difficulties down the line.
- Are you prepared to negotiate on price? Both private sellers and dealers may be willing to drop the sale price, so this is a question worth asking. Say it with a smile.
If you aren't satisfied with their answers or believe they may not be telling the truth, get the car checked by a mechanic or walk away and look at a different car. It can be very expensive to fix a faulty or damaged car, so you want the peace of mind of knowing that a used car is in good condition before you buy it.
Used car buyer’s checklist
When you are inspecting vehicles or going for a test drive, use this checklist to make sure you note the car's most important features to help you make an informed decision.
On your test drive
- The gears are smooth and engage correctly.
- The engine power is appropriate to the car’s size.
- The car tracks and brakes steadily and in a straight line.
- The electrics and dials are fully operational.
- The temperature dials do not show any signs of overheating.
- The speedometer is functioning and displays your speed accurately.
- There is no irregular engine noise.
- Check the suspension and the transmission for noises, rattles or knocks.
- Test the brakes.
- Listen to the exhaust. Is it shaking or does it sound like it has corrosion holes?
- Try the aircon, this is costly to repair.
- Do the belts look frayed, shiny or worn?
- Can you hear squeaky noises from worn bearings?
- Is there oil splashed all over the engine? Are there any leaks from joints, pipes or couplings?
- Are there drips forming on pipework? Are there any holes in tubes?
- Do the electrics look sound? Have there been any repairs to the wiring? Is anything unplugged?
- Do some bolts look out of place, shiny when everything else is corroded? These parts may have been removed and replaced.
- Can you hear unusual tapping, grinding, knocking or clunking from the engine?
The car's body
- There is no sign of accident or rust damage.
- There is no sign of hail damage.
- There are no panel irregularities.
- The door and boot seals are intact.
- Any visible paint in the engine bay or interior matches the car's exterior colour.
- The upholstery is in good condition.
- There are no chips or variations in the paint.
The car's interior
- The seatbelt shows no signs of wear and tear.
- The lights inside the car are functioning.
- The electronics, including the air conditioning, the audio and the windows, are working.
- The upholstery isn't ripped or damaged.
- Areas of worn, shiny trim pieces or control switches indicate high-wear and mileage.
The car's exterior
- You’ve taken note of the engine VIN and body number.
- You’ve checked the exterior of the engine.
- You’ve checked the engine oil and the radiator coolant.
- There is no corrosion visible. (You can tap a panel or component – corroded parts sound dull and lacking resonance.)
- Look for uneven tyre wear; that's a sign of alignment problems caused by an incorrect set-up or worn components.
- Is the glass free of chips and cracks?
- Is it leaking oil or liquid?
- Do all the lights work? Changing bulbs on newer cars is sometimes a complicated process.
Documents you’ll need
- PPSR certificate
- Transfer of ownership documents
- Registration papers
All the factors involved in buying a used car can seem overwhelming, but you want to make sure that you’re purchasing a quality vehicle. Once you know what to look out for and after you’ve done your own research on what cars are available, you can make an informed decision.
Used car financing options
If you're looking to finance your used car purchase, you have a few options available to you. Here are the financing options available for used vehicles:
- Secured car loan. While some lenders will not approve a secured loan for a used vehicle, other lenders offer loans specifically for used vehicles if they meet certain requirements. These loan types require you to put up your newly-purchased car as security, but in return these loans generally have lower interest rates.
- Unsecured loan. If you are unable to find a secured loan, you might want to take a look at your unsecured personal loan options. You don't have to use your car as security for these loans, but you may find that the interest rates are higher because it is more of a risk for the lender. One of the benefits with an unsecured loan is that you are able to use the loan amount in any way you want, so you can use it to purchase the vehicle and also for something else if you choose.
- Dealer finance. If you are buying the vehicle from a used car dealership, they may be able to offer you some financing options. ASIC recently changed the regulations around dealer finance, which means car dealers can no longer offer you a rate that is higher than what they receive from a lender. However, you should still do your research on your other loan options before you sign up for dealer finance.
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