When shopping for a vehicle, there's one very good reason to consider buying used versus new: depreciation. A new car will depreciate about 10% the moment it leaves the lot and another 20% within its first year. After three years, the average car is worth about 60% of what it was when new. That might be depressing news for the original owner, but it represents a screaming deal for the prudent used-car buyer.

A model that is one to three years older will likely still be under the manufacturer’s warranty, and unless it has been abused, it is likely to offer many more years of good service. That creates buying opportunities for savvy car shoppers who know how to negotiate used car prices.

Key Takeaways

  • Buying a used car could offer a better deal financially than buying new, thanks to depreciation.
  • Getting a good deal on a used car can be done by conducting thorough research online, checking out cars and test-driving them, and comparing prices.
  • Private parties may be less expensive but come with greater risk, while dealer lots and certified pre-owned vehicles may be more reliable and are backed by lemon laws in most states.
  • If you're interested in financing a used car purchase, it may be helpful to get prequalified or preapproved for a loan prior to entering into negotiations.

How Much Is a Used Car?

When negotiating prices on used cars, it's helpful to know how much they typically sell for. On average, the typical used vehicle sold for $21,558 in 2020. Prices for used vehicles – and new cars – rose during 2020 thanks in part to a wave of consumer spending triggered by the release of economic impact payments. Decreased supply of used vehicles paired with more consumers having ready cash to spend in the form of stimulus checks helped raise used car prices year over year.

In terms of how much should you pay for a used car, that depends entirely on your budget. If you're paying cash for a used vehicle, then the amount you have on hand will likely determine how much you can spend. If you're planning to get an auto loan, then you may have a larger used car buying budget to work with. Remember to check the best car loan rates to compare financing options.

Tip

If you're planning to finance a used car purchase, consider getting prequalified or preapproved for a loan, as this could be a useful bargaining chip when negotiating prices.

How to Plan a Used Car Purchase

So, how do you make sure you get a good deal when buying a used car? 

"Do everything you can before physically going to buy the car," said Philip Reed, a senior consumer advice editor at automotive review site Edmunds. That means researching what make and model you are interested in and how much they sell for in your area.

Start Online

If you're wondering whether it's worth the added time to do your homework on used vehicles, consider what you may be able to gain by doing so. By researching specific vehicles that have the features and mileage you are looking for, you introduce competition to the car-buying process. A seller might not match the lowest price you find, but it cannot hurt to ask.

Edmunds is a good resource for auto shoppers. It, along with Kelley Blue Book and National Automotive Dealers Association, track new and used car purchases to provide granular pricing information. "We collect tens of thousands of transactions per week from wholesale auctions, dealers both large and small, vehicle registration data, listing data and other sources," said Alec Gutierrez, a senior analyst for Kelley Blue Book, of his organization's process. "This data is then cleansed, normalized and run through a statistical modeling process."

Beyond the valuable research tools available on the internet, you may choose to look at an online marketplace for buying and selling cars. Used car sites simplify the shopping experience with detailed searchable listings, car reviews, buyers guides, and more, meaning your vehicle could be just a few clicks away.

Note

Some of the automotive magazines – particularly the largest, Car and Driver – are also useful for their lengthy backlog of reviews with a slant towards driving enthusiasts.

Conduct In-Person Research

Once you have determined what you want to buy, and what it typically sells for, it's time to do some research in-person. Specifically, this means taking a used vehicle for a test drive and giving it a careful visual inspection.

It's also important to ensure that everything the seller says about a used vehicle is true. Get the vehicle history report (Carfax and AutoCheck are two popular choices) to confirm the odometer reading, ownership history, and reports of accidents and flood damage. If buying from a private seller, you can also ask to see a copy of maintenance records.

This can help you get a better sense of what a used vehicle is truly worth, in terms of market value, and whether you're willing to pay that price, based on its condition. If a seller seems reluctant to offer details about the vehicle, that's a sign that you may want to look elsewhere to buy.

Tip

Consider having any used vehicle you plan to purchase looked over by a certified mechanic who can point out any major issues, if they exist.

Negotiating With Private Sellers

Buying a used vehicle from a private seller may be an option if you plan to pay cash. But consider how much a private seller is likely to charge for a vehicle versus a dealership.

Depending on the seller, it's possible that you may be able to negotiate them down on the price if they have a fairly urgent need to sell. On the other hand, if a seller claims there's no pressing reason for the sale, other than wanting to get rid of the car, you may have a tougher time talking them down.

In terms of where to set your negotiation starting point, it may be helpful to choose a set dollar amount that represents the absolute maximum you're willing to pay. Then you can set your starting price below that amount so you have room to work your way up.

For example, say you only have $5,000 to spend on a used car. You come across a great car that's priced at $5,500, which is just out of your price range. If the seller gives you an opportunity to make an offer, you could start at $4,500. From there, you and the seller can continue bargaining until you reach the $5,000 mark that you're comfortable paying.

Important

Negotiating used car prices with a private seller could lead to a better deal but keep in mind that you may not get any type of warranty with the purchase.

Negotiating Used Car Price With Dealers

There are some advantages to purchasing a used vehicle from a dealership instead of a private seller. First, it's easier to shop a range of cars from a dealer’s lot rather than searching for used car listings from private sellers online. So automatically, you may have a better chance of finding something that fits both your needs and price range.

Dealers are also more likely to clean and perform a basic inspection of a car, plus they are governed by Federal Trade Commission rules as well as state and local regulations. "If you buy from an established business, it has a reputation to uphold,” Reed said. “In many instances, they will also offer some sort of warranty – even if it is only for 30 days."

Note

Buyers should ask how warranties will be honored and where any needed repairs will be made, however.

How Much Can You Talk a Dealer Down on a Used Car?

This is the central question that you should be considering when you’re planning to buy a used car, and there's no one-size-fits-all answer. The amount you can knock off the price ultimately depends on what the car is worth, how strong your financing position is, and how long the car has been on the lot.

Here are some things that can help as you prepare to negotiate:

  • Check KBB or another online resource to get an idea of the vehicle's value and what similar models are selling for locally.
  • Consider how much trade-in value you may be able to add to the pot if you're trading in a car you already own.
  • Revisit your budget to determine how much you can realistically afford to spend, whether you're paying in cash or financing a vehicle.
  • Get estimates or quotes for similar vehicles from other dealers so you have some numbers to use as leverage with the dealership you plan to buy from.
  • Determine where to start with your initial offer and the max you're willing to pay.

Negotiating a used car price is something of an art, and it's important to have confidence as you begin to bargain. Don't allow a salesperson to intimidate you into making a deal that you're not comfortable with.

Negotiating Used Car Price for Certified Pre-owned

Certified pre-owned (CPO) vehicles are offered by most luxury brands, such as Lexus, Lincoln, and Mercedes-Benz, but also mainstream makes such as Nissan and Chevrolet. CPO vehicles are thoroughly inspected, any maintenance issues are addressed, and they are cosmetically sound — no shredded interiors, bashed fenders or missing trim.

When talking to a dealer (by their nature, certified cars are sold through dealers, not private individuals) about a certified car, have them show you its inspection report, which will list all of the areas checked, whether or not there were any recalls on the model, and even details such as tire tread depth and the thickness of the brake pads. CPO cars tend to have less wear and tear. Mercedes, for instance, will only certify cars six years old or less, with fewer than 75,000 miles. The German brand then adds a year and unlimited miles to whatever initial warranty is left, plus 24-hour roadside assistance, trip interruption protection, and service loan cars.

You pay extra for CPO cars, however. "There is usually a $1,000 premium," Reed said. "But you are getting the cream of the (used car) crop. It turns used-car-buying into a new-car-buying experience."

Like new cars, CPO vehicles are best purchased at the end of the month, when dealers are looking to make quotas and are more receptive to haggling. However, a used car sale is not generally cyclical this way, though timing can still be employed.

For instance, if you live in an area that gets a lot of snow, you'll likely get a better deal on a convertible in the fall and winter months. Conversely, there is usually an uptick in all sales around April, when people blow their tax refunds, so avoid shopping then, if possible.

How to Negotiate the Best Price on a Used Car

Knowledge is your best resource for getting the best deal. Knowing what other cars like the one you are bargaining over sell for is key to talking down a price. But what else? Here's where your bargaining skills come into play. Simply accepting the dealer’s sticker price as the lowest price possible is a good way to give yourself a case of buyer's remorse. Unlike a new car, which may have never been driven past the dealer's lot, a used car has been on the road and as a result, it has already lost some of its value.

Be Strategic

When a lower purchase price is the goal, you don't want to go in with the wrong approach. Come off as too demanding, and the dealer may not be willing to make any concessions in your favor. Go in too soft, and they may see you as a pushover.

When you sit down with the salesperson and present your offer, be firm but polite. Let them know that you've done your homework and you have an idea of what the car is worth. Don't let them try to steer the conversation off-course; stay focused on the issue at hand. A salesperson may try to distract you by discussing financing, insurance, or extras like a maintenance plan; this is a trap you should be prepared to avoid.

Take the opportunity to clearly make your case as to why the dealer should accept a lower price. For example, if you've seen the same car sitting on the lot for weeks, remind the salesperson that cutting you a deal would help to free up space for another vehicle. If your inspection turned up something minor you'll need to have repaired, be sure to point that out. The goal here is to get the dealer to acknowledge anything that might justify accepting your offer.

If the salesperson tells you the dealer can't take anything less than sticker price, be ready to walk away. At this point, two things can happen: The salesperson will suddenly suggest that the two of you can reach an agreement on price or they will shake your hand and tell you to come back if you change your mind.

If the salesperson chooses the former, be ready to make a counteroffer to any price that's suggested. The counteroffer may not be much lower than the sticker price, but it's an opening to further negotiations. At this point, you can increase your own offer slightly, but remember to keep your absolute ceiling in sight. It may take some back and forth but eventually, you may be able to compromise on a price that's acceptable to both sides. 

Be Persistent

Negotiating is a fine art, and sometimes, the salesperson simply may not want to hear what you have to say. One ploy is to adopt hardball tactics to try and you wear you down. This is where the true test of your negotiating skills comes in.

If your offer is refused point-blank, don't wear out your welcome. Thank the salesperson for their time and say you’ll be looking elsewhere for a vehicle. Hand over your phone number and say that if they change their mind about making a sale, to give you a call. Then wait and see what happens.

It's possible that, in a day or two, the dealer may call you to tell you they've reconsidered your offer. If not, that's a sign to move on to the next used car lot and begin the negotiations process again. It can be time-consuming and tedious, but at the end of the day, you'll thank yourself if your negotiation efforts allow you to purchase the right car at the right price.

The Bottom Line

If you know what you want and what it should cost, you are halfway there. Check NADA, Kelley Blue Book, or Edmunds for pricing information. Both dealers and private sellers have their advantages and disadvantages, but thoroughly inspect and test drive any car prior to purchase, and get the vehicle history report. For a nearly new used car, CPO programs and leftover models are worth a look.

(For more, see: 7 Things to Avoid When Buying a Used Car and Is Trade-In or Down Payment Better When Buying a Car?)