You're in the market for a used car, but you don't want to buy a lemon. You're wondering if it's possible to spend less than you would on a new car, and still get something safe and reliable. It is, but be prepared to do some homework.

We've compiled a step-by-step guide to help you buy a used car that you'll love for years – and kilometres – to come.

On this page:

• Before you buy a used car
• Out shopping
• After the sale
• Dealer, auction or private sale?
• What to check when buying a used car
• What warranty do I get when buying a used car? Is there a cooling off period?

Before you buy a used car

Don't rush, take your time and do your research into the different makes and models, and consider the following:

• Your budget. Work out how much you can afford to spend. Red Book will guide you on the value of the car or cars you're considering according to their year and model.
• Your needs. What will you use the car for? If you do most of your driving in the city, a four-wheel drive is hardly necessary.
• Safety. Check the used car safety ratings that are based on real-life accidents.
• Security. How easy is it to steal or break into the car? What security features is the car equipped with? Check the National Motor Vehicle Theft Reduction Council car security scores.
• Insurance costs. Thesewill vary from model to model. Once you've narrowed down your options get some quotes.
• Environment. Check the car's fuel consumption and emissions rating. The Vehicle Emissions Star Rating site and the Green Vehicle Guide can help you here.
• Dealer, auction or private sale. Decide where and how you want to buy the car. See what we have to say about these options further down in this article.
• Regulations. Check your state or territory's regulations around buying and selling used cars, including how to make sure there's no money owing on the car. We have more info on this later in this article.

Out shopping

• Inspect the car using the checklist below.
• If you're not comfortable inspecting the car yourself you can organise an independent expert inspection through your state's motoring organisation. If you buy at auction, though, this usually isn't possible.
• If you find a car that fits your criteria, check that it is debt-free. If you buy the car from a dealer, they're legally obliged to guarantee that the car's debt-free. For private sales you can check the national Personal Property Securities Register (PPSR) – this has replaced numerous existing asset registers across Australia, including the Register of Encumbered Vehicles or REVS. Have the vehicle identification number (VIN) or chassis number ready. There is a nominal fee of a few dollars per search payable by Visa, MasterCard or American Express.
• Don't sign until you're completely happy with the car and its cost.
• Ask questions about the vehicle's history – how many owners has the vehicle had previously? Has it been involved in any crashes? What's the mileage? How much does it cost to fill the tank? Is the vehicle currently registered and insured? What safety features does it have?

After the sale

• Arrange insurance once you've bought the car and before you drive it anywhere.
• Transfer the registration to your name. You usually have to do this within a few days of buying the car.

Dealer, auction or private sale?

The benefits of buying from a dealer

Buying a 2nd hand car from a dealer is usually more expensive than buying privately but there are some advantages:

• In some states and under certain conditions, they must provide a statutory warranty. This can often exclude parts like the radio, air conditioning and battery so make sure you're clear on what is and isn't covered.
• They must guarantee there's no money owing on the car.
• They usually have to display a form on the car's dashboard or windscreen that provides some basic information, such as the year of manufacture, odometer reading and warranty details.
• You can trade in your old car.

What to consider when buying in an auction

You might be able to pick up a bargain at auction but you really need to know about cars and what they're worth.

• You usually can't arrange for an inspection or even a test drive.
• You'll be relying purely on visual checks.
• Auctions vary from state to state so you'd need to check with the auction house about warranty and money owing.

What to do when buying a used car privately

Buying a car privately is usually cheaper than buying from a dealer, but you have to rely a lot more on your own judgment as you won't get any protection like statutory warranty.

• Get the car inspected by your state's motoring authority if you're not confident.
• Check if there's any money owing on the car by calling the vehicle title registry or REV's in the state the cars registered in.

Car markets are pretty similar to buying privately. They bring private sellers and buyers to the one place, allowing you to look at a number of different cars without having to drive all over town. You probably won't be able to have the car inspected on the same day but you can usually go for a test drive.

What to check when buying a used car

There's a lot to check when you're inspecting a car. It's a good idea to take someone with you, because two sets of eyes are always better than one. Also, go look at the car in full daylight, where marks, dents and other defects are clearly visible. Here's a checklist to help you get through it:

Paperwork

• In a private sale make sure the seller is the owner. Ask to see their driver's licence and compare the details with those on the registration papers.
• Look at the car's compliance plate which is usually found on the firewall between the engine area and the inside of the car.
• Match the VIN number, date of manufacture, engine number (which is marked on the engine itself) and number plates with those on the registration papers. Ask for an explanation if any of the information doesn't match. It could mean that the car's been stolen or that the engine's been replaced without notifying the registration authority.
• Check if you should be receiving a certificate of roadworthiness. The seller is required to provide it in some states.

Outside

• Check the paintwork for bubbles and colour differences which could indicate rust or an accident. Use a fridge magnet to check suspicious areas for body filler – the magnet won't stick to filler.
• Panels that don't seem to fit properly, or doors, the boot, lid and windows that don't open and close properly can indicate the car's been in an accident.
• Check the tyres, including the spare, for enough tread (at least 3-4mm) and uneven wear (which can show a problem with the steering or suspension).
• Check under the car for oil leaks.

Under the bonnet

• Look at the dipstick. Grey or milky oil may indicate serious engine problems.
• Take off the radiator cap and check the coolant. It should be brightly coloured and clean. Oil in the coolant may also indicate serious engine problems.
• Check the radiator cooling fans and the battery and its mounting platform for corrosion and other damage.

Inside

• Take a look at the upholstery, trim and carpets for wear.
• Make sure the seatbelts are in good condition.
• Check whether the seats are still comfortable enough.
• Make sure all lights, equipment and accessories (like air conditioning, windscreen wipers, power windows, wing mirrors, spare tyre, central locking and car radio) are there and work properly.
• If possible look for signs of rust under the carpet and don't forget to check the boot.
• Check that the jack and toolkit are in place and in good condition.
• If it's relevant, ask for the car radio's security PIN.

Start the engine

• With the bonnet open, start the engine and let it idle.
• Watch for exhaust fumes when starting the engine and during idling.
• Excessive noise from the exhaust can indicate rust and the need for a new muffler.
• Listen for any irregular running noises, rattling or knocking in the engine.
• Look for any signs of leaks.
• Open the oil filler cap: fumes may indicate engine problems.

On the road

• Take the car for a test drive – preferably on quiet roads where you can concentrate on the car rather than on heavy traffic. Make sure the car's adequately insured before you do, and take your time – one spin around the block isn't enough.
• Make sure the engine runs smoothly when cruising, accelerating and decelerating both on flat roads and uphill.
• All gears should change smoothly up and down.
• Watch the dashboard for any warning lights and keep an eye on the temperature gauge.
• Listen for rattling or any other body noises – driving over speed humps is a good check for this.
• Watch the exhaust for smoke – accelerating uphill is a good check for this.
• The steering wheel shouldn't have more than 5cm of play.
• On a straight road, ease your grip on the steering wheel and see if the car pulls to one side, which can indicate work suspension or misaligned steering.
• Check the brakes a few times (checking for traffic behind you first). The car shouldn't pull to one side and the brake pedal should feel firm.
• What's the rear visibility like? IAG's Reversing Visibility Index will be useful.

What warranty do I get when buying a used car? Is there a cooling off period?

Each state and territory has different regulations for the sale of used cars. If you're after more detailed information, call your state's motoring organisation, fair trading or consumer affairs department.

ACT

Warranty – When you buy from a dealer, a car that's less than 10 years old and hasn't travelled more than 160,000km carries a three-month or 5000km statutory warranty (whichever occurs first)

Cooling off period – You're entitled to a three day cooling-off period after you've signed the purchase agreement. If you want to cancel the agreement within the cooling-off period, you need to do so in writing, and the dealer can charge you $100 or 1% of the purchase price, whichever is greater.

Northern Territory

Warranty – When you buy from a dealer, a car that's less than 10 years old and has travelled fewer than 160,000km carries a three-month or 5000km statutory warranty (whichever happens first). The same warranty applies to a motorcycle which is less than five years old and travelled fewer than 30,000km.

Cooling-off period – There is no cooling off period in the Northern Territory.

NSW

Warranty – When you buy from a dealer, a car that's less than 10 years old and hasn't travelled more than 160,000km carries a three-month or 5000km statutory warranty (whichever occurs first). This also applies to demonstrator vehicles.

Cooling-off period – There's a one-day cooling-off period once you've signed the purchase agreement, but only if you arrange credit with the dealer as well. You must give written notice if you decide to withdraw from the deal within the cooling-off period, the dealer can charge $250 or 2% of the car's value, whichever is less.

Queensland

Warranty – There are two classes of warranty:

Class A: If the car has travelled fewer than 160,000km and is less than 10 years old, car dealers in Queensland have to provide a three-month or 5000km (whichever happens first) statutory warranty.

Class B: If the car has travelled more than 160,000km or is more than 10 years old, there's a one-month or 1000km (whichever happens first) statutory warranty.

Cooling-off period – There's a one-day cooling-off period once you've signed the purchase agreement. The dealer can charge you a non-refundable deposit, of which the amount cannot exceed $100. If you want to cancel the contract, you have to do so in writing.

South Australia

Warranty – When you buy from a dealer, statutory warranty will apply from the date of purchase. If the car costs between $3001 and $6000 it will be covered for the first 3000km travelled or two months, whichever occurs first. If the vehicle costs more than $6000, it will be covered for the first 5000km travelled or three months, whichever occurs first.

Cooling-off period – When buying from a dealer, you're entitled to a two day cooling-off period. The dealer may ask for up to a 10% deposit and if you decide to pull out of the purchase within the cooling-off period they are entitled to keep the non-refundable part of your deposit ($100 or 2%, whichever is less).

Tasmania

Warranty – When you buy from a dealer, a car that's less than seven years old and has travelled fewer than 120,000km carries a three-month or 3000km statutory warranty (whichever occurs first). The same warranty applies to motor bikes, trikes or scooters that have travelled fewer than 150,000km and is less than three years old.

Cooling-off period – There's no cooling-off period once you've signed the purchase agreement.

Victoria

Warranty – When you buy from a dealer, a car that's less than 10 years old and has travelled fewer than 160,000km carries a three-month or 5000km (whichever comes first) statutory warranty.

Cooling-off period – When buying from a dealer, you're entitled to a three business days cooling-off period once you've signed the purchase agreement. If you change your mind in the three days you need to notify the dealer in writing. They can keep some of the deposit ($100 or 1% of the purchase price – whichever is greater).

Western Australia

Warranty – When you buy from a dealer, a car that's less than 10 years old, and has travelled no more than 150,000km comes with a three-month or 5000km statutory warranty (whichever comes first). A car that's between 10 and 12 years old, and has travelled between 150,000 and 180,000km, has a one-month or 1500km statutory warranty (whichever comes first).

Cooling-off period – There's no cooling-off period once you've signed the purchase agreement.

Stock images: Getty, unless otherwise stated.

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