Using cash to buy a high quality used car at a great price is probably one of the most financially savvy moves the average person can make.
If you’re wondering why, go check out my post Why Paying Cash for a Car is a Smart Financial Move.
But if you’re already sold on the idea of using cash to get a great deal on your next high quality used car, then you’re in the right place.
Today I’m going to share with you my step-by-step guide for buying a used car with cash.
Let’s jump right in.
There are two main requirements before you embark on this car-buying journey.
1. Have Your Cash Ready
It goes without saying, but you’ll need to have your cash saved up, before embarking on this journey.
You can look at cars online and do research for months or even years while saving up money. That’s a great idea and will help give you have an idea of how much money you’ll likely need, but don’t start the process below until you have the money saved up and have easy access to it.
If you need to transfer the money from an investment or other financial entity that will take a few days, do that before you start the process, because once you find that great car at a great price, you’ll need to move quickly to make sure you’re the one who gets the deal.
Now it doesn’t matter if you have $5,000 saved up or $15,000. This process will work no matter how much you’re planning to spend on a used car.
2. Don’t Be In a Hurry
It’s best to start looking for a car and engage in this process long before you’re in desperate need of a car.
Getting a high-quality car at a great price requires some patience. You’ll want to be in a position where you can walk away from any deal that doesn’t work for you.
If you’re in a hurry and need a car, let’s say in the next 5 days, you’re at a disadvantage because you can’t wait for that high-quality car to come along at a great price.
You’ll likely have to settle for whatever you can find at the moment, and that’s not going to get you the best results.
You will want to move quickly once you find that great car at a great price, but until then, patience is one of your greatest allies while shopping for your next car.
With those two key areas squared away, it’s time to go get a great deal on a great used car.
Step 1: Test Drive Cars at Used Car Lots to Learn What Type of Car You Want
You probably already know what category of vehicle you’re looking for, such as a truck or minivan or SUV or compact car, but there are many different makes and models of cars in each of those categories.
Looking on the internet will help you narrow the field somewhat, but there’s nothing better than actually seeing, touching, sitting in, and driving a car to know if it actually meets all your needs and expectations.
This is especially true in the used car market where there’s a lot more variety between cars and year models.
So step one is to visit several used car lots to check out different types of cars and really narrow down your search to the make and model you want and even the year models you want to pursue.
Make note of the prices and condition of the cars you look at. You’re not buying right now, but the hands-on knowledge you get during this step will help you recognize a good deal later on in the process.
And don’t get swayed into thinking one particular car is a great deal. Unless you’ve already done lots of research and you know without a doubt that a car you’re looking at is a great find, walk away at this point in the process.
Remember, this is a recon mission, not an execution mission. Don’t let a pushy salesperson convince you that you won’t find a deal like this again. You will.
If you happen to find yourself in the crosshairs of a pushy or forceful sales rep, just politely walk away and go to the next dealership on your list.
This step could likely take several days. You should look at, sit in, and test drive a bunch of cars from as many year models as possible.
The goal is to really narrow down your list of acceptable vehicles, and that’s going to take some time and require looking at lot of different cars.
For us, Carmax is a great dealership for this step. Their sales staff are incredibly polite and they will let you look at a wide range of cars without making you feel pressured to buy.
Once you feel like you have your list of acceptable vehicles narrowed down, you’re ready to move on to Step 2.
Step 2: Research the Car You’re Looking for on the Internet
Now that you know the type of car you want, it’s time to find out as much as you can about it on the internet.
Keep in mind, you might have to pay a little bit for access to this information. For example, Consumer Reports is a great resource, but you have to pay about $40 for a 1-year subscription.
While you may be reluctant to spend that money, it’s actually a great deal.
Remember, you’re about to spend several thousand dollars on a vehicle. Spending $40 to help make sure you don’t waste several thousand is a great idea.
PRO TIP: In a few of these steps you’re going to have to spend money, but at each point remember that you’re spending a small amount of money to make sure you’re making a good investment with a huge chunk of money.
You’re also doing price research at this point as well. Start with the information you have from the cars you test drove and compare that to cars you can find online. Look at mileage, year models, and trim levels to get an idea of how each car is priced.
Keep in mind, miles are more important than age, and prices will generally reflect that.
For example, an 8-year-old car with only 50,000 miles will usually be priced higher than a 5-year-old car with 100,000 miles. It doesn’t matter that the first car is 3 years older. The fact that it has 50,000 fewer miles is a huge predictor of how much wear and tear is already on the vehicle.
And you want a car that will have the longest life possible, either for you, or so you can get a good price when you sell it to its next owner.
At this point you should know the type of car you’re looking for, including a range of year models, mileage, and the price you think is fair to pay.
For example, you should be able to say, “I want a Toyota Highlander LE or XLE between years 2012 and 2014 with less than 85,000 miles, for a price between $7,000 and $10,000.
Once you know this information, you’re ready to move on to Step 3.
Step 3: Find the Car You Want on the Internet
Now that you know more specific details about the car that you want, it’s time to start hunting for a great car that matches your criteria being offered at a great price.
With either site you can search for cars from a private seller or a dealership. You’ll generally find a better price from a private seller, but not always, so be open to either option.
With Autotrader.com, you can set alerts including the make and model of the vehicle you’re looking for, the mileage range, and the price range you want. This is convenient because then it’s just a matter of playing the waiting game until you receive a notification.
If you’re looking for a car that’s less than 5 or 6 years old, Carmax is a great option as well. Their no-haggle pricing is a nice feature, and while that price probably isn’t the lowest, you may be able to get a warranty and peace of mind knowing that the car has passed Carmax’s rigorous inspection process.
Once you find a car that meets your expectations and is priced in a fair range, you’re ready to move on to Step 4.
Step 4: Check the CarFax Report
Viewing the vehicle history report on CarFax.com is an absolute must when buying a used car.
Private sellers aren’t always the most forthcoming with information they know, and if they aren’t the original owner of the vehicle, there may be additional information they don’t know.
You’ll need the VIN number of the vehicle, so if that isn’t included in the listing, contact the owner and ask for it.
Once you have the VIN number, go to CarFax.com to check out the vehicle history report.
You’ll have to pay to get the full report, but again, it’s a small price to pay to make sure you don’t dump a lot of money into a bad car.
We rarely end up buying the very first car we check out, so we purchase a 5 report package on CarFax.com assuming we’ll have to look up the reports for a handful of different cars before making a decision.
From the vehicle history report, you can find out where the car originated, how many owners it has had, if it’s been in any wrecks, etc.
Wrecks are a deal-breaker for us. We’re looking for longevity out of our car and significant repairs with aftermarket parts make that a risky bet.
Lots of owners is a bad sign too.
If a 7-year-old car has had 5 different owners, that looks like everyone keeps trying to get rid of it. Why is that? You may never know, but you probably don’t want to find out.
But if everything looks good, you’re ready to move on to Step 5.
Step 5: Contact the Owner to Check Out the Car
Contact the owner and schedule a time to check out the car.
It’s best to meet in a public place such as a grocery store parking lot. This is a safe choice for both you and for the seller.
At this meeting, you’ll want to physically look at the car to make sure it matches the description provided online, but also make sure there are no glaring cosmetic issues like chipping paint, dings in the bumper, or anything else that wasn’t disclosed in the online listing.
Then sit inside the car and look around. Make sure the interior matches your expectations. Look for any rips or tears in the upholstery, discoloration, or any other cosmetic wear and tear.
Then turn the engine on and let it run for a bit. Make sure the engine doesn’t make any funny noises.
Turn the radio on. Turn the air conditioning and heater on. Turn all the knobs and switches checking everything to make sure it all works.
If it’s an older car, it may have some interior issues or loose knobs. Those aren’t necessarily deal-breakers, but what you’re doing is assessing the overall quality of the vehicle, as that will affect the fair price you are willing to pay.
While the engine is running, pop the hood and take a look at the engine. Look underneath the vehicle to see if there are any noticeable leaks. Open the trunk and see if the spare tire and jack are there.
During this whole process, you’ll want to ask the owner any questions you may have, such as…
- How long have they owned it?
- If they aren’t the original owner, where did they buy it from? (Dealer? Individual?)
- Why are they selling it?
- What kind of repairs or maintenance have they done to it?
- Are there any issues they think you should know about?
It’s true that the owner could lie about any of these questions, but the more questions you ask, the more likely you’ll be able to figure out they are trying to hide something.
If the physical appearance meets your satisfaction, then you should ask to take the car for a test drive. The owner will likely go with you, to make sure you don’t run off with their car, and this also gives you the opportunity to ask the owner questions as you drive it around.
Driving the car will give you a pretty good feel for how smooth it shifts, how exact the steering is, and if there are any weird engine noises or door rattles or things like that.
After getting a feel for the car, if you’re comfortable with your own assessment of the vehicle and want to pursue buying it, then it’s time to get a professional opinion in Step 6.
Step 6: Get a Certified Mechanic to do a Pre-Purchase Inspection
Always get a certified mechanic to do a thorough pre-purchase inspection.
This will cost money, usually about $200 or so, but again, I would much rather be out a couple of hundred bucks and say no to a poor quality vehicle than saddle myself with a car in need of thousands of dollars in repairs just months into owning it.
This involves setting up a day and time when the seller is willing to meet you at the mechanic shop of your choice so your mechanic can look it over.
Now some sellers don’t like this step. It’s time-consuming. And if there are any mechanical issues with the car, they would rather you not find those.
So if the seller refuses this step or tries to talk you out of it, just walk away.
Rushing into buying a car is a great way to spend too much money, or buy a car the seller knows is about to have a major issue.
Again, I’d much rather wait a little longer than be kicking myself as all my money falls out of my pockets at the repair shop.
PRO TIP: Getting a pre-purchase inspection done with a mechanic you trust is your best bet. You want the person who is ultimately going to have to do the maintenance on the vehicle advising you of any issues they see.
The second best option is at the manufacturer’s dealership. The benefit here is that their mechanics know these cars inside and out and will find every, and I mean every, little thing wrong with the vehicle.
You’ll want to let the seller know that if everything goes well with the inspection, you’ll be prepared to make an offer and purchase the vehicle at that point.
Let the seller know that you’ll bring cash with you and you’ll expect them to bring the car title as well so you can make the purchase.
Also keep in mind that if you do buy the car, you’ll need an extra driver since you’ll now have 2 cars, and the seller will be without a car, so they’ll need someone who can give them a ride home.
Once you arrive at the mechanic’s shop, expect the inspection to take about an hour, so that’s going to give you some more time to chat with the seller and possibly learn more about the vehicle.
The pre-purchase inspection is going to let you know about any significant wear and tear or potentially big problems you could be facing in the future.
If the car is older, like 8 or 10 years old, know that there are going to be a lot of regular maintenance issues that are perfectly normal for a car of this age. You shouldn’t worry too much about these.
What you’re looking for are any big issues that will require significant and costly repairs to critical components like the engine or transmission.
If a significant issue is found and you don’t feel comfortable purchasing the car, politely thank the seller for their time and allowing a mechanic to check out the vehicle.
I recommend offering the seller the inspection report as an appreciation for their time. It will help them better understand the value of their vehicle, and they may consider making some repairs before trying to sell it to another buyer.
But if the report comes back without any significant repair issues, then it’s time to get a great deal on a car in Step 7.
Step 7: Negotiate a Fair Price
At this point, you need to have the highest dollar amount you are willing to pay for the vehicle in your head.
That number will likely adjust as you get the mechanic’s inspection report, so you’ll need to think on your feet a bit.
Once you’ve looked over the inspection report and decided you want to purchase the car, you can start the negotiation by saying something like,
Based on the condition of the vehicle and some of the items I’ll have to fix on this inspection report, I’m willing to pay $X,XXX for this car.
The seller will likely reply with a price closer to their original asking price and you can negotiate your way from there to a price you’re willing to pay.
But keep the highest price you’re willing to pay in your head and make sure you negotiate well below that amount. If the seller is unwilling to sell the car for a price you are willing to pay, simply thank them for their time and wish them the best selling their car.
Even after all this time and effort, it’s still better to walk away and wait for the next great deal to come along than feel pressured to pay a higher price than you think is fair for the vehicle.
PRO TIP: Always be polite and kind during the negotiation. You’re not trying to take advantage or rip off the seller. You’re trying to pay a price that is fair for both of you. If you can’t come to an agreement, be kind and thank them for their time. You never know, they might change their mind the next day and call you back with a better offer.
Once you both agree on a price that is fair, it’s time to exchange your cold hard cash for the title of the vehicle in Step 8.
Step 8: Swap Cash for the Car Title and Sign Necessary Documents
The process of transferring the vehicle title varies from state to state, but in general, you’ll need the owner of the vehicle to sign somewhere on either the official car title document itself or on a title transfer form you can print off on the internet, or both.
Do your research ahead of time and know what the requirement is for your state.
Trust me, you don’t want to wait until you’re at the motor vehicle office the next day to find out you need some other form or the seller forgot to sign somewhere. Then you’ve got to contact the seller and set up another time to meet with them to get their signature. It’s a pain.
PRO TIP: Always bring your own copy of the necessary title transfer documents. Don’t expect the seller to fully know the process or be prepared with all the correct paperwork.
This is where your money is first going to make an appearance, and just like your first meeting to check out the car, you’ll want to do this in a well lit public space as well.
The parking lot of your trusted mechanic’s shop is a perfectly reasonable location.
If the seller says they left the title at home, tell them you’ll gladly wait at the mechanic’s shop so they can run home and get the title.
Don’t go back to their house.
If they insist that is the only way they will make the deal, politely tell them that won’t work for you and wish them luck selling their car.
PRO TIP: A lot of people are uncomfortable bringing this amount of cash out in public, but remember, by this point, you’ve had the opportunity to engage with the seller multiple times, plus you have the license plate and VIN number for their car. On the odd chance that this is just a thief who wants to steal your money, going this far into the process before running off with your cash would certainly put them in the running for one of the dumbest thieves on the planet.
In the safety of the public parking lot at the mechanic’s shop, you’ll want to give the money to the seller and let them count it out.
They don’t have to do this right on the hood of the car in plain sight of everyone, but they could do it in the seat of the car or somewhere where you can both watch. It is several thousand dollars and they will want to make sure it’s all there, and you’ll want to make sure they count it correctly.
This is another reason you’ll want to bring your own copies of any title transfer documents because once you hand over the money, you don’t want the seller to realize they don’t have some necessary form to complete the deal.
Once the money is counted and all the necessary signatures are on the appropriate documentation, you’re ready to take ownership of your new vehicle.
As mentioned earlier, it’s best to have someone with you so you can now drive your two vehicles home, but if you can’t have a second person there, you can always drive your new car home, then come back to the shop later with someone to pick up your other vehicle.
The seller, who is now without a vehicle, will also need someone who can give them a ride home.
Once you are sure that you have all the necessary forms and signatures, you’re ready to head to the motor vehicle office at your earliest convenience and get the car title transferred into your name.
We’ve used the exact process above to buy and sell multiple vehicles.
While many people assume that buying a used car means getting stuck with a lemon that’s just going to break down every 5 minutes, we’ve found that by being patient and following the steps above, we’ve been able to purchase several fantastic used vehicles at a great price that have served us for much longer than the original owners probably ever thought possible.
Don’t get fooled into thinking the only way to drive a reliable car is to buy it brand new.
If you’re willing to do some research, save up a bit of money, and follow the process outlined above, you’ll be able to buy a great, reliable used car with cash, and that will set you up for financial success in so many other ways as well.
Have you ever bought or sold a used car? How did that work out for you? Would you change anything about the process we use above? I’d love to hear your experiences in the comments below.
Feature photo by Adam Stefanca on Unsplash