You need a new set of wheels, but you're not sold on getting a new car. Maybe a new vehicle isn't in your budget range, or perhaps you've read about new cars having up to 20% depreciation after they're driven off the car lot. 

But don't worry: a used car is still a sound investment if you know how to plan and where to look. If you're worried about how to buy a used car online, use these tips to get the most value for your money and keep the hassle to a minimum.

How To Buy a Used Car Without Breaking Your Budget

Much like buying a new car, you need to prepare a budget for a used car whether you're paying cash or financing the vehicle. Both methods are relatively straightforward when you pare them down, but choosing between a cash purchase or financing is the first decision you need to make.

How to Buy a Used Car

Buying With Cash

If you're buying a used vehicle with cash, the general rule is to never spend more than 35% of your annual pre-tax income on a vehicle. You don't want to end up car-rich and cash-poor, so adhering to this rule is essential. 

You should also avoid depleting your "rainy day fund" or emergency fund as a result of this purchase. That said, paying cash at a dealership may help you negotiate a better price.

Financing a Used Car

Don't have enough cash to purchase your vehicle outright? You aren't alone. According to a recent FICO report, two-thirds of buyers in Canada apply for financing whether they're purchasing a new or used vehicle.

So how much car can you afford? The best way to figure out your budget for financing is to make your monthly payment no more than 10% of your net (post-tax) income. While this may seem low to you, this percentage is a bit more modest so you can factor in other expenses, such as:

Car Expenses to Consider

Adding these to your monthly car payment should represent about 15% to 20% of post-tax income.

If 10% of your monthly income leaves you with enough room to buy a rusted-out Honda, you still may have some extra wiggle room. For example, you could cut back on eating out or forego your morning coffee to free up some extra monthly cash.


You can find plenty of car budgeting calculators online to help you determine your price range. But once you find this level, you should turn your attention to pre-approval. Most lenders will offer pre-approval after looking at your income, credit report, and debt-to-income ratios. The key then becomes shopping around.

Shopping around will help you find the best rate, as well as an establishment you trust. However, you shouldn't limit your search to banks. Credit unions, car dealers, and third-party financing groups often have promotions or introductory rates for first-time customers. Or you could use Clutch, which works with several lenders to find you the best interest rate or lowest monthly payment possible.

Down Payment

Now that you have a budget and pre-approval, your final hurdle is deciding on a down payment. Again, a general rule is no less than 10% and no more than you can comfortably afford. While some lenders don't require a down payment, you can lower your monthly payments and pay less interest over time by making a down payment.

How To Choose the Best Used Car

Choosing the best used car seems like it would be rather easy, but in reality, the process is more complex. You have to go against a basic tenet of psychology: needs vs. wants. Sure, you want the certified pre-owned (CPO) Mercedes-Benz. That's understandable. But does it suit your life as a parent or fit your budget? These are questions only you can answer. Just remember that practicality is always a better choice.

To determine how practical a vehicle is for your needs, weigh these facets on your shortlist of used cars:

  • Fuel economy: Will you spend more at the pump than you can afford?
  • The odometer: The more kilometers, the greater the chance you'll spend more on maintenance and have a lower resale value.
  • Cargo and passenger capacity: Do you constantly haul cargo or play chauffeur with carpool?
  • Safety ratings: If you're a mom or dad, safety is a primary concern, so make sure to look at NHTSA and IIHS ratings.
  • All-wheel drive (AWD), four-wheel drive (4WD) or two-wheel drive (2WD): Do you need the added safety of an AWD vehicle? Do you off-road and need a 4WD? Or are you a commuter where 2WD will suffice?
  • Check buying guides and consumer reports: These will provide real-life reviews from other drivers to give you some insight into the pros and cons of your desired used vehicle.

While sifting through these features may seem taxing, doing so enables you to find the ideal used car for your needs (not wants).

Purchase Price Isn't Always the Biggest Factor When Buying a Used Car

Selling price is always on the mind of the buyer. Yet a lower price isn't always the most significant factor in purchasing a particular car or deciding which car dealer you buy it from. Be sure to check out the other perks afforded by car dealerships and avoid other less-attractive scenarios.

Beware of the Private Seller

In most cases, a private seller can offer a better price because they don't have to meet a certain price like car dealerships. Nevertheless, they also can't provide any form of warranty or guarantee. As a result, you either have to budget for an extended warranty that you purchase on your own or just roll the dice on the purchase. Neither is an appealing choice. So beware of the private seller. And if you must buy a car from a private seller, always do a test drive and schedule a car inspection.

Warranty and Guarantee

Any reputable car dealer will offer some sort of warranty or a money-back guarantee on certified pre-owned or used cars. Some used vehicles may also have the original manufacturer's warranty, which can cover a number of undiagnosed mechanical issues or other situations. In an ideal situation, car dealers will at least offer their own warranty and guarantee. 

The importance of these cannot be understated. They protect you against lemons and offer some sort of recourse should the salesperson misrepresent the vehicle in terms of capability or condition.

Thankfully, Clutch cuts the hassle out of this part of car buying. With a 7-day money-back guarantee, a 90-day, 6,000-kilometre warranty, and the additional Clutch Protection Plan, you can get the peace of mind you need.

Inspections and Vehicle History Reports

A used car can have multiple problems, especially if the previous owner didn't maintain it properly. As such, don’t be afraid to ask if the car dealer offers a multi-point inspection like Clutch's 210-point inspection. These thorough examinations of the vehicle can detect any potential issues and keep your mind at ease.

On top of inspections, ask to see the vehicle history report or do the research yourself. If you have to investigate on your own, the easiest way to get this report is through Carfax. Just log onto the Carfax website, pop in the vehicle identification number, and you can see if the car's been in an accident, as well as any other potential pitfalls. Or you can let Clutch do the legwork, as all of our cars come with a viewable online Carfax report.

What To Avoid When Buying a Used Car

You have plenty of do's when buying a used car, but don't forget about the don'ts:

  • Don't forget to obtain a vehicle information package at the purchase, as required by Ontario law.
  • Don't pay the asking price without negotiating.
  • Don't buy a vehicle without a vehicle history report.
  • Don’t buy a vehicle without an inspection.

Negotiating a Price and Pulling the Trigger

Mastering the art of negotiation means you won't pay the asking price or sticker price, but it’s still an exhausting process. But to lessen the blow, apply these general ideas to help you:

  • Know your stuff — check out the market value of the vehicle online or in buying guides
  • Get the maximum trade-in value for your old car
  • Keep an eye on hidden fees

Buying a car online or in-person can feel like a daunting process. But with Clutch, you can take the negatives and turn them into positives. With no-haggle, no hidden fees, and a favourable money-back guarantee, you won't have to worry about the horror stories associated with stereotypical used car dealers. All you have to do is choose the perfect used car and let us take care of the rest.