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Tips for Buying a Second Hand Car

Aug 4, 2020 | Finance Tips

So you’ve decided to go looking for a second-hand car. For some, this is an exciting time, while for others it can be daunting. The good news is, if you do your homework, not only should you not get stuck with a lemon, but you could even find yourself a bargain.

Here’s how you can buy a used car:

Looking for a Car

The starting point in your search for a used car is always going to be considering what you can afford to pay. You’re likely either going to be paying for the car yourself or you’ll be taking out a loan.

If you are going to be taking out a loan, that’s one of the first things you’re going to need to consider. It is often worth speaking to a lender or a finance broker, before you even start looking for cars, to give you a better idea of what you might be able to afford. Some lenders like Finance One may be able to give you a conditional pre-approval, so you know exactly how much you can spend.

Having a fixed budget in mind will mean that you won’t fall in love with a car that is beyond your capacity to repay.

At the same time, it is useful to identify how much your car of choice is going to be worth. A great resource is Red Book, which gives values for cars based on their make and model and is a good starting point when assessing a car’s price.

Secondary considerations may include how your chosen car stacks up in terms of its safety and how environmentally friendly it is.

However, it is also important to consider fuel consumption as this could save you hundreds (or even thousands) of dollars a year, especially if you’re driving in the city which uses more fuel.

If you’re happy with everything up until this point, you’re nearly at the finish line. The next thing to do is to start looking at your insurance options. Insurance costs can vary significantly between makes and models of cars and insurance providers, so this is something that’s worth investigating early on.


Buying a Car

Once you’ve assessed what you want, you can start looking at cars a little bit closer. The first step is to consider where you want to buy your car.

For the most part, you have three options – privately, through a dealer or at auction. Each one has its own advantages and disadvantages to consider.


Private Sale vs Dealer

These days, you can quickly and easily look online and find a range of cars that are for sale by their owners. These are known as private sales and you are simply entering into a transaction with the seller.

Generally speaking, buying a car privately will be cheaper than if you bought that same car from a used car dealer. Dealerships obviously have overheads that they need to pay, which increases the price and can be around $2,000 on lower priced cars.

However, when you’re buying privately, you don’t have the luxury of having a statutory warranty in place. It’s on you to make sure everything checks out. If you buy through a dealer, you will likely get a short warranty period (three months) depending on the state or territory and generally, the car will be in good condition.

It’s important to note that not all dealerships are created equal. Some obviously focus on higher-end cars, with very cheap cars ending up with other dealers. So, just because you are buying through a dealer doesn’t always mean you’re getting a great car, but you do have the comfort of knowing that if the car breaks down it is likely to be covered under the warranty. Be sure to read the terms and conditions of the warranty closely beforehand to consider what cover is provided.

Buying through a dealer also gives you the opportunity of trading in your old car. Just don’t expect to get top dollar for it.

Whether buying a used car through a dealer or privately, something you should consider is getting it inspected by a third party prior to purchase. Independent inspectors charge a few hundred dollars and will go over the car to make sure it’s in good working order and you’re getting what you pay for.

When you get your report from the inspector, you can often use this to help negotiate on price, or even upgrade things like tyres if the old ones are worn down. An inspection is a cheap and easy way to ensure you’re getting a car that is going to stack up. This is a big advantage if you don’t know all that much about cars.



Another place to find cars is at car auctions. Often, ex-Government cars or company cars will be auctioned off, due to the sheer logistical issues of selling them by private sale regularly.

Buying a used car at auction is one way that you can potentially get a good deal. However, you generally can’t get the vehicle inspected prior and this can be an issue if you’re not car-savvy.

However, it is possible to use a third-party buyer, who specialises in locating and buying cars both privately and at auction.


Checking Your Car

Before buying a car, it’s a must to give it a check and test drive. If you use a car buyer or inspector, they can take care of this for you.

If you need to do it yourself, here are a few DIY tips:

Ownership History

  • Find out how many owners the car has had in the past. If its only had one owner who has kept the car garaged and regularly serviced, that’s preferable to having had many owners who haven’t. It is also very important to ensure you are buying a car without any money owing on it or security interests attached to it, by searching the Personal Property Securities Register (PPSR) before the sale.


  • This is important if buying privately in particular, but you need to ensure all the paperwork is in order regardless of where you’re buying. That includes registration details, and checking the VIN number.


  • Cosmetically the car shouldn’t have any large chips or dents in the paintwork or the bumper and other panels should all be in place and solid.
  • Tyres need to have plenty of tread left on them – ideally 5mm or more and it should be even across all four tyres. Don’t forget to check the spare.


  • For a non-car savvy person, it’s not easy to tell if there are issues, but you can check the oil and if there are any leaks or corrosion. Especially around the battery.


  • For the most part, the inside of a car will be cosmetic, but you want to make sure the car has been looked after.
  • If a car has been well maintained both inside and out, it’s a fairly good indication of the type of owner.
  • Don’t forget to get the PIN for the stereo.


  • When the car is started and when driving, listen for any strange sounds. If you see leaks or smoke, this is a warning sign.
  • See how the car responds when you accelerate, particularly up a hill and keep an eye out for any things that seem unusual.
  • Warning lights on the dashboard shouldn’t be turning on and off.
After the Sale

If you buy your car through a dealer, do your research on their ‘add-on’ products. Things like rust protection or tinting may not be necessary in most cases and can be a way for dealers to make more from the sale. If you do want these things, get quotes from independent providers prior to purchase.

If you are looking at purchasing a used car and you have had a poor credit history, or no credit history, Finance One may be able to help. Finance One can help with dealership sales, private sales and auction sales*. Get in touch with our friendly team today.

*Normal lending criteria, fees and charges apply.


Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances.  We do not accept responsibility for any loss arising from the use of, or reliance on, the information.

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Makala Elliott

Makala is the Marketing Manager at Finance One. She has worked in the Finance and Lending industry for over 10 years, gathering a wealth of experience. She is passionate about helping Australians get back on track with their finances by passing on her knowledge.

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