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One of these mistakes could cost you thousands of dollars on a used car.

Key points

  • Do your research on the car you're interested in so you know the fair market value.
  • Check the vehicle's history, get it checked out by a mechanic, and do a test drive.
  • Bring your own financing. Many dealerships will offer financing options with much higher interest rates than you could get from a bank or credit union.

Used car prices hit all-time highs late last year due to higher inflation and supply chain issues. The last thing you need is to accidentally spend more money on a car. If you're planning to buy one, make sure you don't make these costly mistakes.

Not doing your research

Always do your research on a dealership before doing business with them. Make sure you also research the type of car you can afford. Car dealerships will often try to upsell you so they can make more money. Once you know what you can afford, search around to find the type of car you want. This will make it easier for you to stick to your budget.

You can visit the sites Kelley Blue Book or Edmunds to find a fair price. One of the biggest mistakes people make when buying a used car is paying too much for it because they don't know it's value. Do your research and know what the car is worth before you start negotiating.

Not checking the vehicle history report

One of the most important things to do when buying a used car is to get a vehicle history report (VHR). You can get a free VIN check at the National Insurance Crime Bureau (NICB). Just pop in your car's digits and they will do the VIN lookup and give you information on the vehicle.

This will tell you about the car's past, including any accidents or major repairs that have been made. You can also get a CARFAX report to learn more about the history of the car. A vehicle history will tell you if the used car has been in a major accident, if there is structural damage, if it was salvaged, and much more. Without this information, you could be in for some surprises down the road.

Not getting the car inspected

Inspecting a used car is important, but many people don't do it properly. Make sure to check things like the tires, brakes, and suspension. Also, take a look under the hood to see if there are any leaks or other issues. If you're not sure what to look for, bring someone along who knows more about cars.

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If you're really serious about buying a used car, you should get a pre-purchase inspection (PPI). This is where a mechanic will look over the car to make sure everything is in working order. This can give you peace of mind and help you avoid any future issues where the cost of fixing it is more than the price of the used car.

Not doing a test drive

Another mistake people make is skipping the test drive. This is one of the best ways to check out how a car feels and if there are any problems with it as it drives. If something doesn't feel right, or if the car seems to have issues, you may want to look elsewhere. Don't feel rushed to buy the car. If a salesperson is coming on really strong, it could be a red flag.

Paying for a warranty you don't need

Another mistake people often make when buying a used car is saying yes to a useless warranty. Many dealerships will try to sell you an extended warranty that will only cover minor repairs or maintenance items. Unless you're planning on keeping the car for a long time, it's probably not worth it to spend the extra money on a warranty.

Not bringing your own financing

One mistake you definitely want to avoid when buying a used car is not seeking out financing on your own. Many dealerships will offer their own financing options with much higher interest rates than you could get from a bank or credit union. It's always best to get pre-approved for an auto loan before shopping for a car so you know exactly how much you can afford to spend. A difference of a couple of percentage points on a loan's interest rate amounts to thousands of dollars over the life of a loan.

If you're thinking about buying a used car, these are just a few mistakes you'll want to avoid.

You should always take the time to look over the exterior and interior of the vehicle carefully, check under the hood, and test drive it to make sure everything is in working order. Don't overpay for a warranty you don't need and bring your own financing. Follow these tips and you'll be well on your way to finding a great deal on a used car.

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About the Author

David S. Chang, ChFC®, CLU® is an award-winning entrepreneur and financial planner with over two decades of experience in the personal finance space. He is a graduate of West Point and a Lieutenant Colonel in the Army National Guard. He has an MBA from the UCLA Anderson School of Management.

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