Where's the Best Place to Buy a Used Car?

Many financial experts will tell you that buying an inexpensive used car and keeping it for years is one of the savviest things you can do to minimize the cost of car ownership. But if you pick the wrong vehicle or place to buy, that "cheap" car could cost you thousands in repairs or finance costs.

Remember that you may find used cars for sale that are under recall and not yet repaired: It's not illegal for sellers to offer such cars. Check the vehicle identification number (VIN) at the National Highway Traffic Safety Administration's recall site so you'll know whether you want to buy a car that you'll then need to take in for the free recall repair.

Use this list as a quick reference guide to point you in the right direction when buying a used car. Each used-car resource has advantages and disadvantages, so depending on your priority (price? selection? warranty?), several outlets may fit your needs.

Certified Pre-Owned at a Dealership

Buying a certified pre-owned (CPO) car is a convenient way to find a used car in excellent condition. CPO vehicles, which are sold from dealerships of the same brand, go through extensive inspections and are reconditioned with factory parts. They also come with the best warranties. General Motors, for example, offers a one-year/12,000-mile bumper-to-bumper warranty and a five-year/100,000-mile powertrain warranty on all of its CPO cars. Our certified program comparison tool can help you see the differences in coverage. But just because they come with warranties doesn't mean they are exactly like new cars. Read "Certified Pre-Owned Cars: A Reality Check" to see what expectations you should have for a CPO car.

The coverage and convenience of a CPO car come at a price. CPO cars are typically the most expensive used-car option. Edmunds data indicates that consumers will pay on average a 6% to 8% premium for a 3-year-old CPO vehicle. One alternative might be to find a car from a private seller that is new enough to still be under warranty.

Non-Certified at a Dealership

The remaining used-car inventory falls under this category. These cars don't typically get the same attention that a CPO car would receive but are still given a reasonable inspection. Any major issues are usually fixed before the car is put up for sale. Since dealerships accept trade-ins on a daily basis, you'll have an easy time finding these used cars at a dealer.

Independent Dealership

An independent dealership isn't associated with any particular automaker. The used-car selection can vary wildly, depending on whether you're shopping at a corner lot or a full-size dealership with a service department. Since the quality can also vary from one place to another, we recommend you run Google and Yelp searches and see what kind of reviews that dealer has. The Better Business Bureau is also a good resource.

Independent dealerships are useful if you're trying to find a really inexpensive used car. If you have poor credit, you'll have a good chance of getting a vehicle financed at these dealerships. It is worth noting that interest rates at independent dealers may not be as favorable as rates found at larger stores. 

If your reason for choosing this type of dealership is only in hopes getting approved for a loan, consider checking with a big-name dealership first. Large franchised dealerships often work with multiple banks, including some that specialize in less than perfect credit.

Some independent used-car lots may specialize in a certain type of car, which can make your selection process easier if you have that type in mind. For example, one place might focus on European luxury makes, while another might specialize in classic cars.

Use your best judgment if you do business with independent dealers and make sure you run a vehicle history report for anything you are seriously considering. We also recommend that you read our "Field Guide to Independent Used-Car Lots."

CarMax

CarMax is technically an independent used-car dealer. But with upwards of 200 stores nationwide, it is the largest used-car seller in the country. You'll find a wide array of late-model cars in a variety of body styles.

Buying from CarMax is a hassle-free, no-haggle process. All of its prices are nonnegotiable, and its salespeople are paid on a flat-commission basis, which means they'll get paid the same amount whether they sell you a BMW or a Ford. This pay system allows salespeople to focus on helping customers find a car that best fits their needs and price range, said a CarMax spokesperson.

That said, its prices tend to be higher than at other used-car sources. CarMax is serious about its no-haggle policy, so the price will hold firm. But if you hate negotiating, this policy could be an advantage.

If you have a trade-in, CarMax will make you a fixed offer on that, too. All CarMax vehicles come with a 90-day, 4,000-mile limited warranty (whichever comes first). The company also offers a seven-day money-back guarantee just in case you change your mind about the vehicle you choose. There are a lot of cars to choose from, and they can be researched online. While there are a few exceptions, generally speaking, if you find a car you like at another branch, you can arrange to have it shipped to a location near you (sometimes for an additional fee).

Private Party

Shopping for a car in the private-party market offers a varied selection and the opportunity to get the best price, though you sacrifice the convenience of seeing many cars side by side, as you do at dealer lots. Negotiating with a private-party seller is usually much easier than negotiating with a salesperson at a dealership since most car owners haven't received formal sales training. There are many ways to find private-party vehicles. Some of the more popular places to go on the web are Auto Trader, Craigslist and eBay.

Keep in mind that you'll be buying the car "as-is" unless it is still under warranty. Doing so is a riskier move for you as a buyer, but if you bring a mechanic with you or get the car inspected before you buy it, you can offset this risk. With private-party sales, you'll find that the prices are lower across the board. Our pricing analysts calculate that a used vehicle will typically cost about 12% more at a dealership than if it were sold by a private party.

Craigslist and Facebook Marketplace

Craigslist and Facebook Marketplace are free, so anyone can post a vehicle for sale. You'll find a mix of auto dealerships and private sellers on these sites.

There may be a few good used-car candidates on these sites, but you'll have to sift through a number of listings to find one. Many of the car photos you'll see are just plain bad. Some listings have no photos at all. Information on the cars tends to be limited, and you may have to contact the seller to get a VIN, which is what you need to run a vehicle history report. It's not uncommon to encounter cars that have salvage titles, meaning they've likely been in a serious accident. You'll sometimes run across unlicensed car salespeople pretending to be everyday owners. And then there are ads placed by scammers for cars that don't actually exist.

On Facebook Marketplace, you can click on sellers' names and see their Facebook profile and how many cars they have for sale. You can use this information to form an impression of how they cared for their car, but it's no substitute for a vehicle history report.

The trick to finding a legitimately good car on these sites is to focus on listings with many photos and detailed information. Ask owners to tell you more about the car and explore why they're selling. And as Craigslist suggests, you'll reduce your chances of being scammed if you shop locally and meet the owner in person.