Used cars can offer some strong financial advantages. Beyond a lower purchase price, used vehicles can help owners offset the depreciation, higher insurance rates, and registration fees that typically come with new-vehicle purchases. If you've already weighed the pros and cons and are now ready to shop, Capital One Auto Navigator, an online car shopping marketplace where customers can shop for new and used cars and explore auto financing options, provides a step-by-step guide for how to buy a used car.

• Set your budget and ownership cost expectations.
• Decide where to buy.
• Research and short-list the best used cars for your needs.
• Inspect the vehicle and review its history.
• The test drive: Tips on what to do.
• Negotiate and finalize the paperwork.

Set Your Budget and Ownership Cost Expectations

Before setting your budget, consider all the related costs of owning a car. Besides the monthly loan payment, you should plan for these additional expenses:

• Insurance: While insurance for used cars is typically less expensive than for new cars, it's still a significant additional cost that you should prepare to pay.
• Registration, taxes, and licensing: These fees are usually based on the age of the vehicle, so the longer you keep a car, the less you will pay.
• Fuel costs: Depending on your average daily mileage, gas prices can add a lot to your monthly expenses. Also, gas prices are volatile and could suddenly increase, which can affect your budget.
• Scheduled maintenance: Oil changes and tire rotations will be needed every 5,000 to 10,000 miles. Other "wear items," such as a new set of tires and brake pads, can be more expensive.
• Repairs: Unexpected repairs can be costly, particularly if the car does not come with a warranty. It's smart to set aside an emergency fund for repairs.

A monthly loan payment is not your only automotive expense, so it's wise to estimate all of these costs before deciding how much car you can afford.

Decide Where to Buy

There are a number of places that sell used cars, and each one will provide a different shopping experience.

• Franchised car dealership: Franchised car lots generally sell both new and used cars, which are typically acquired as lease returns, trade-ins, or at auctions. These used vehicles often have an advertised sticker price, but there is usually room for negotiation. When you buy through a dealership, the dealership can accept your trade-in and perform all the necessary registration paperwork.
• Certified pre-owned (CPO) vehicles: Major automakers may run CPO programs for newer used cars of their own make. Although they cost extra, CPO cars can give you peace of mind because each vehicle has been inspected and comes with a factory-backed warranty.
• Independent used-car lots: These lots carry a variety of makes and models. Be sure to inspect these cars closely and review their protection plans.
• Used-car superstores: On these lots, a wide variety of makes and models are available in one place and, in some cases, offered at no-haggle prices with a limited warranty and a return policy.
• Online retailers: Digital car-buying platforms allow you to browse inventory, arrange financing, complete paperwork, and have the car delivered directly to your driveway.
• Private parties: Finally, there are cars being sold by individuals. You can see listings for these vehicles in classifieds and online ads. You might even find a vehicle by noticing a "for sale" sign in the window of a parked car.

Research and Short-List the Best Used Cars for Your Needs

When you're shopping for a used car, you should consider your wants versus your needs. While you may want leather seating and a sunroof, if you have a larger family, you might actually need third-row seating.

Once you've defined your needs, you can use car-shopping websites to show relevant options available in your area. Online car-shopping marketplaces typically have filters for make, model, drivetrain, trim, condition, engine, mileage, monthly payment, and much more.

Here's a way you can use filters to find your next used car:

• Set your budget and allow extra for registration and taxes.
• Filter by price, maximum mileage, and body style (sedan, SUV, truck, etc.).
• Narrow your selection to two or three top candidates.
• Read expert and consumer vehicle reviews to check for long-term reliability and common owner complaints.

Inspect the Vehicle and Review Its History

Before driving across town to inspect a specific used car, obtain its vehicle history report. It can quickly reveal whether the car is a solid choice or has issues that should eliminate it from consideration. The vehicle history report will show how many owners the car has had, the current mileage, whether it has a salvage title, and if it's ever been in an accident.

Some dealerships will provide this report for free. You can also purchase either an individual report or a subscription to a service.

Here are two other valuable resources:

• Free vehicle identification number (VIN) lookup. Car shoppers can check the National Highway Traffic Safety Administration (NHTSA) database to see if a specific used vehicle has any open safety recalls before completing a purchase.
• The Used Car Rule. Look for a buyer's guide, which dealers typically post on used cars for sale. It tells buyers if the vehicle is being sold with a warranty and what is covered.

If you are satisfied with the vehicle history report and there are no outstanding recalls on the model, inspect the car carefully. You can give the car a visual inspection yourself, noting the condition of the body, the interior, tire tread depth, and how it drives. But having a trusted mechanic inspect the car may help you feel more confident about the purchase.

The Test Drive: Tips on What to Do

If the vehicle checks out, make the time to get behind the wheel. When you test-drive a car, it may help to have a checklist of key items to evaluate. Don't be shy, and don't let the seller hurry you. Also, bring your driver's license and a copy of your auto insurance with you.

Here are a few additional tips to keep in mind:

• Drive the car for at least 20 minutes. Begin the test drive when the engine is cold to make sure it starts easily and doesn't blow blue smoke, which indicates engine wear. Bring the engine up to operating temperature and make sure it doesn't overheat.
• Drive on a varied route. See how the car accelerates, corners, brakes, and handles bumps.
• Listen for odd noises and smells. The engine should be quiet at idle and accelerate without grinding or bumping. Make sure the transmission shifts and downshifts smoothly.
• Check for blind spots. See if the mirrors provide a good view of the traffic around you.
• Test lights, gauges, climate controls, and radio. Turn on the air conditioner with the motor running to see if it cools the interior. Make sure there isn't a check-engine light on.
• Will it fit in your garage? Ask the seller if you can drive the car home to make sure it fits in your garage. This is particularly important with high-clearance trucks and SUVs.

If you decide to buy the car, then it's time to settle on the price.

Negotiate and Finalize the Paperwork

Here's the part that everyone dreads: negotiating. But if you prepare properly and follow these steps, the negotiation may go more smoothly.

Preparation:

• Arrange financing for a loan from your bank or credit union.
• Check pricing guides to find the average price for the car you want to buy (and your trade-in's value if you go that route).
• Decide in advance whether you need an extended warranty, GAP insurance, paint protection, anti-theft equipment, or other add-ons that will be offered when you sign the contract.

At the dealership:

Now, you're ready to make a smart purchase. Here are the steps to follow:

1. Negotiate the vehicle's purchase price and be prepared to walk away if the price is too high, the dealer is unwilling to bargain, or you feel pressured.
2. Use pricing-guide information and written appraisals from other sources to support your offer.
3. Gradually increase your offer, but don't exceed the market value listed in pricing guides.
4. Negotiate the trade-in value only after agreeing on the vehicle's price.
5. If you have loan pre-approval from a bank or credit union, ask the dealer to determine if they can match or beat that interest rate.
6. Before signing, verify the vehicle price, interest rate, trade-in amount, taxes, fees, and all optional products.

Having all the relevant information in front of you can help you make an informed financial investment. There are also many tools available that can improve the car-shopping journey.

This story was produced by Capital One Auto Navigator and reviewed and distributed by Stacker.