There are many advantages of buying a used car over a new car, including a reduction in price, depreciation, and your insurance premium. But proceed with caution: The used-car market is rife with scams.
While you would undoubtedly know to steer clear of a bald-tired, rust-covered, pock-marked hunk of junk car, a vehicle’s sharp looks can be deceiving.
We’ll provide tips on how to keep the entire process on the up-and-up so that you’re not the victim of a scam or accused of receiving stolen property.
Also to help your pre-owned car-buying process be a smooth one, we’ll share what you need to do regarding the timeline and insurance requirements when buying a used car
Used Cars in Today’s Market
To get you properly oriented when launching your pre-owned car-buying journey, know that you are entering a seller’s market.
Just like the housing boom, the pre-owned cars boom is creating higher prices from lower inventory and higher demand.
In fact, prices have hit a record high. In April, the average price tag on a pre-owned vehicle hit $25,463. According to research firm J.D. Power, that’s close to $3,000 higher than in the same month last year, as well as the first time that the average used-car price exceeded $25,000.
Why are used cars in high demand?
Pre-owned vehicles are harder to come by thanks to many factors, and not all of them are repercussions from the pandemic.
The factor unrelated to the coronavirus is the escalating price of new vehicles. Drivers’ appetites for larger vehicles increase the amount of raw materials needed to produce them.
Technological advances that make vehicles lighter, safer, and more interactive come with extra costs. And manufacturers are spending millions on research and development to meet regulatory vehicle and factory emission standards.
There are two pandemic-related factors. The global chip shortage and other supply chain issues are causing car production delays and straining new-car inventories, so consumers are turning to the pre-owned market.
And the pre-owned market inventory is strained because people are holding on to their existing vehicles longer. Many who would usually trade in their vehicle for something new have experienced financial challenges, leading them to be unable to meet the monthly payments for a new auto loan or lease.
Most Reliable & Affordable Used Cars
So while it’s not impossible to still find a good deal, in today’s tight market you may have to compromise on the specific make, model, and color you initially had in mind.
Where to start? How about at the top: The Insurance Institute for Highway Safety (IIHS) partners with Consumer Reports to publish an annual list of the safest and most affordable vehicles.
While their focus is on vehicles for teens, their recommendations still provide a great guideline, especially since most of us have rusty driving skills from being on pause due to COVID-19 isolation.
Their best choices by vehicle type, model year, and price include:
| Vehicle Type | Vehicle | Model Years | Price |
| Small car | Mazda 3 sedan/hatchback | 2014 or newer | $7,000 |
| Midsize car | Subaru Legacy | 2013 or newer | $7,600 |
| Large car | Hyundai Genesis | 2016 | $18,000 |
| Small SUV | Mazda CX-5 | 2014 or newer | $8,200 |
| Midsize SUV | GMC Terrain | 2014, 2016 or newer | $9,400 |
| Minivan | Toyota Sienna | 2015 or newer | $11,900 |
Used Car Buying Tips
When embarking on your pre-owned car search, as with any major purchase, doing your homework up front can save you a lot of pain and expense down the road.
Here are tips on what to research and what red flags to look out for when you go to look at a pre-owned vehicle.
Used Car Research
Compare your findings from the following with what the seller tells you:
Check vehicle history: Visit vehiclehistory.gov to get the vehicle history report with title, insurance loss, and salvage information. If you can’t find a vehicle’s history there, other providers include autocheck.com, vinaudit.com, and carfax.com.
Also ask for the vehicle’s maintenance record from the owner or the dealer.
Check for vehicle recalls: The National Highway Traffic Safety Administration website, safercar.gov, has free listings of vehicles subject to open safety recalls. This means the manufacturer has recalled the vehicle but repairs are not yet done.
Check on vehicle price: Sources to check on to double-check that the price is fair include Kelley Blue Book, Edmunds, National Automobile Dealers Association Guides, and Consumer Reports.
Get a vehicle inspection: Enlist a trusted mechanic to make sure any damage has been properly repaired and the vehicle is mechanically sound.
Check the seller’s reputation: Search online for reviews and complaints about the seller, whether the pre-owned vehicle is being sold through a franchised and independent dealer, a rental car company, a leasing company, a used-car superstore, or online.
For dealers, contact your local consumer protection agency and state Attorney General to see if any unresolved complaints are on file.
Do a thorough test drive: See how the car handles various road conditions, including hills, highways, and stop-and-go-traffic. Also listen to how the car sounds: For example, knocking during acceleration could mean a worn-out engine.
Used Car Red Flags
Due to the nature of the pre-owned car market, a number of laws are in place to protect consumers from deceptive business practices by dealers.
One big issue is mileage tampering. Lawmakers take it very seriously. Under the Misrepresentation of Mileage of Motor Vehicles law, a dealer can be charged in cases where it’s believed they’ve tampered with a car’s odometer.
The charge is a disorderly persons offense, with a maximum sentence of six months. They’re also open to civil claims. In New Jersey, the statute authorizes the state’s Division of Motor Vehicles to revoke the dealer’s license upon notification and hearing.
Despite the consequences, shady practices still exist. So in addition to being vigilant with dealers, be extra vigilant with private sellers.
Walk away if you come across one or more of these scenarios.
- A vehicle that sounds too good to be true
- A seller trying to push you out of your financial comfort zone
- A seller trying to rush you into a deal, often declaring they have interested parties who can pay right away
- A seller who wants you to pay before you get the vehicle
- A seller who withholds basic information
- Missing or improper documentation, such as the title not having the state seal, anti-counterfeit marks, the correct VIN, and the seller’s name
- A vehicle with three or four owners
- A vehicle with a missing or altered VIN
- Unevenly worn tires
- New paint, which can mean something is being hidden
- Signs of rusts or leaks underneath the vehicle
- Low mileage but evidence of a lot of wear and tear
Used Car Insurance
You are required to have insurance to drive a car, even if it’s a pre-owned one that you just purchased. Driving without insurance is a very serious crime. For example, in New Jersey, the first offense is up to a $1,000 fine, community service, DMV surcharges of $250 for three years, and nine insurance points.
Proof of Insurance
If you have existing insurance, the coverage you have on your policy will automatically cover your used-car purchase for a 14-to-30-day grace period. Contact your insurance agent to either add the vehicle to your policy or transfer your old vehicle’s coverage to the one you just bought.
If you don’t already have insurance, research its cost when you’re shopping for a used car so you purchase a vehicle you can afford to maintain insurance on. Having quotes saved will make buying insurance for your vehicle easier.
Unless you’re working with a private seller, you will have to provide proof of insurance. You need to be able to show proof of coverage that complies with state law before you drive off.
If you’re financing your pre-owned vehicle, the lender will require the addition of collision and comprehensive insurance.
When you find the vehicle you want, you can purchase coverage before completing your vehicle’s transaction by providing specific vehicle information to the insurer, including the make and model, the VIN, and the odometer reading.
Top Used Car Insurance Companies
To get the best auto insurance rate, compare a few companies. While insurers use the same factors to determine your rate, calculations as well as discounts vary by company.
If you have an existing insurer, include them in your comparison shopping to take advantage of loyalty discounts. But also consider Farmers, Geico, and State Farm, which may offer the best rates for pre-owned vehicles.
We hope we’ve given you actionable tips to help you quickly find the most safe, reliable, affordable, and legitimate pre-owned car for your needs.
Karen Condor writes and researches for the auto insurance comparison site, AutoInsurance.org. She enjoys providing finance and insurance advice to those on the market for a new (or new to them) car.