Yikes—This Is the #1 Biggest Red Flag To Look Out for When Buying a Used Car, According to Auto Industry Experts

Buying a car is one of the most exciting life milestones a person can experience. And if you're looking for a cost-effective way to acquire a reliable vehicle, opting to purchase a used car serves as a great option. However, when making such a significant investment, it's important to know when to hold 'em and when to fold 'em. In other words, it's crucial to be aware of the biggest red flags when buying a used car.

If you're venturing into the world of used-car shopping, exercise equal amounts of caution and detailed thoroughness. Hidden issues and past neglect can lurk beyond the shiny surface of what you may think is your next dream vehicle. And you certainly don't want your dream car to turn into your worst nightmare.

Whether you are a first-time car buyer or simply looking for a vehicle upgrade, Parade is uncovering the biggest red flags to watch out for when buying a used vehicle, with the help of auto industry experts from different backgrounds. By heeding their expert advice, you will be well-equipped to navigate the used car market with knowledge and confidence.

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What's the #1 Biggest Red Flag When Buying a Used Car?

The biggest red flag to watch out for when buying a used car has all to do with the vehicle's history report.

Vivian Liu is the founder of Mae (Making Auto Easy), which is the first-ever car shopping experience built for women, by women. With nearly a decade of experience in the auto industry under her belt, Liu tells Parade how important it is to review the vehicle history report when considering buying a used car. "What you learn from the vehicle report can impact the value of what YOU can sell the vehicle for when you're done with it as well."

Lindsberg Pettyway, owner of 4 REAL Automotive, couldn't agree more. "Used car buyers should never buy a car without reviewing this report because it provides crucial information on the vehicle's history—including accidents, maintenance, repairs and the number of previous owners," he adds.

It may seem obvious, but when you're excited at the prospect of purchasing a new vehicle, it can be easy to have blinders on. Performing your due diligence in unveiling the history of the used car can save you from a laundry list of future issues.

Why Ignoring the Vehicle Report Is the Biggest Red Flag

"Think about buying a house without knowing anything about its history. A vehicle with questionable service records can lead to future problems," Liu explains. "Similar to ignoring your regular doctor checkups, you're missing the chance to catch small fixable problems before they turn into major costly ones."

The best part? "For a small fee, you can get access to these vehicle reports from popular sources like CARFAX or AutoCheck. Some dealerships even provide these reports at no cost to the buyer," Pettyway shares.

So, no—you don't need to rely on the "Scout's honor" from whom you are purchasing a used vehicle. Just get your hands on that vehicle report!

Remember that no vehicle report is going to turn out perfect, but you're still better off having the report than purchasing the car without it. "There may be some portions of the car’s history that were not reported, such as if the previous owner did minor repairs, didn’t go through insurance, or the repair shop doesn’t report to the database," adds Pettyway.

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Other Red Flags To Look Out for When Buying a Used Car

Vehicle Report Scams

Going off the above point, you must ensure that your ordered vehicle history report is coming from a reputable source. As Pettyway mentioned, both CARFAX and AutoCheck generally include accurate and up-to-date information regarding a car’s record of accidents.

Liu reiterates the importance of watching out for vehicle report scams. "Always get a vehicle history report from a reputable source like Carfax or AutoCheck. There are a lot of scams where people reach out requesting you buy the report from an unfamiliar source."

Bad Title or No Title

A car title is strictly proof of car ownership. Somebody obtains a car title by purchasing a car outright, paying off an auto loan or being the recipient of an ownership transfer.

"Avoid buying a stolen vehicle by making sure the seller has the car's title to show they own it and are legally able to sell it. It's an official document issued by the state that the car is owned in," Liu advises all used-car buyers.

Discouragement of Full Inspection and/or Test Drive

Picture this: you're ready to purchase a used vehicle from someone, and they're discouraging you from checking out your prospective new car or taking it for a test drive. How would that make you feel? Probably a bit unsettled—and you'd be right to feel that way!

If you're discouraged from inspecting or test-driving the car, it's likely that the seller is trying to hide something. "A trustworthy seller would allow you or a mechanic to thoroughly inspect the car without issue," Pettyway says.

Recent Rental Cars

Looking to buy a car that was once a rental car? Use extreme caution if opting for this route. If you can recall back to the many shortages at the peak of COVID-19, there was a shortage of new cars and limited rental cars were available.

"Basically, during the car shortage, rental car companies couldn't change to new cars so the ones they had were excessively used." Liu continues, "Make sure you do your due diligence on these vehicles to make sure you're getting a good deal."

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Who doesn't love a great deal? When you're trying to save money on buying a car, it can be easy to get distracted by a seemingly unbelievable price point.

"Everyone loves a great deal, but if the price of the car seems too good to be true, it might be worth investigating why. Remember, not all deals are good deals, so don’t get distracted," Pettyway reminds buyers.

Signs of Previous Repairs

"If you notice signs of prior repairs, this is an immediate red flag. If done properly, repairs shouldn’t be noticeable," Pettyway tells Parade.

You don't have to be a car expert to notice something looking off on a vehicle. If you're not sure what you're looking for, Pettyway explains, "Evidence of poor-quality work, misaligned panels, mismatched paint colors and rust are all indications that the repair may not have been completed by a reputable repair shop."

Helpful Used-Car Buying Tips

Now that you're aware of the red flags to watch out for—what about some green flags? In other words, what makes a used car valuable?

Liu shares what makes a car valuable below:

  • One owner. You don't want too many past owners.

  • Under 124 miles. Newer cars have statistically had longer lives, but problems arise the longer the vehicle is used.

  • Under $3-5k damage. Anything greater impacts the value of the car.

  • Consistent service records. This demonstrates that the vehicle was properly maintained.

  • Both sets of keys and an extra set of wheels.

  • No open recalls. You can check using the vehicle's VIN here.

  • Still within the extended warranty period.

Liu also told us that you can scan the car with an OBD2 Scanner, which can be purchased on Amazon or any mechanic shop. "This is a diagnostic report that gives you a report card of the vehicle and any undiagnosed issues that the vehicle may be having," Liu says.

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What About Lease Payoffs?

Now, what about in the special situation of purchasing a car you leased? This is its own unique kind of used car purchase that has its own set of red flags to watch out for.

Adam Korman—better known as "The Lease Guy"—owns and operates an auto leasing consulting and coaching business called TLG Consulting LLC. Korman's goal is to equip individuals with the proper knowledge of car leases so they can find the best deal for themselves.

Korman gave us his own insight on lease payoff, and the red flags to watch out for vary compared to purchasing a used car elsewhere.

"The advantage of buying out a lease is that it is a used car that the driver has had possession of themselves for the previous three years. The lessee knows exactly how the vehicle has been serviced and cared for, and there is no unknown history like a previous unknown accident to worry about," says Korman.

Unlike when you're buying a used car from someone else, you have the advantage of knowing the vehicle report history from the time it left the dealership with a lease payoff.

The #1 Biggest Lease Payoff Red Flag To Watch Out For

If you opt to pay off a lease, you can either purchase the vehicle directly from the leasing company or purchase it through a dealership. Korman tells us the lowest cost option is to purchase the lease directly from the leasing company and to avoid purchasing through a dealership, if possible.

Keep in mind that not all leasing companies allow direct payoffs in certain states, and in some instances, you may have to go through a dealership. This limitation has to do with the policies and procedures of the particular leasing company in that state, so make sure you check with yours.

Being Charged Additional Fees

Korman advises against purchasing a lease back through a dealership (if possible) because they are not making the normal profit margin they would when selling a used car off the lot. They don't own the car. So, how do they benefit from the transaction?

Extra charges on top of the lease payoff amount, that's how. Korman warns, "This usually involves add-ons like service packages, pre-owned certification inspections, extended warranties, and sometimes they even try to mark up the price of the car to the current market value which no one should accept!"

Korman continues, "There are unavoidable fees that the dealer does not control like sales tax and DMV fees. But, anything else beyond a small document fee are dealer add-ons for their profit."

In some instances, you may want to include some of the add-ons! The issue arises when dealers add in things you don't want nor asked for while telling you they're required.

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Helpful Lease Payoff Tips

If you're stuck going through a dealership for your lease payoff, it's important that you carefully choose which dealer you work with to pay off the lease.

"The leasing company does not care which of their dealers you go through in most cases and the power to pick and choose your dealer can help you find the one that charges the least amount of fees," says Korman.

To find the best dealership for your lease payoff, doing diligent research is the ultimate key. Google their websites and call all the competing dealers in your area that are selling the same brand of car that you are currently leasing.

"You can talk to the finance managers and ask them what they charge to broker a lease buyout. The best-case scenario is that they sell the car with no additional add-ons required. You just pay the payoff amount, the sales tax, the DMV fees and a small document fee," Korman explains.

Keep in mind that you are in control of the car and which dealership you go to. That said, you do not have to go back to the same dealer the lease originated from. Korman urges, "Find the one that has the lowest fees and add-ons to pay off your lease. The finance manager at any dealer can tell you the fees required to make the purchase through them. So call and ask them."

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