(This is the 4^th post of the 8-part series An investing-friendly car buying guide.)

You want to buy a used car (why? because of this and this), and have a budget of $10,000. Which one car, among the several hundreds of different types out there, should you choose? For the sake of this discussion, we narrow the field down to the 4-door sedan cars in mid-sized segments. (Everything said here holds for most other types of cars as well.)

While choosing the car, first think about your needs. Do you drive a lot? With gas price touching $3 a gallon in most places, a car that gives 25 miles a gallon costs $450 a year less than another that gives only 20 miles (assuming a yearly driving average of 15,000 miles) - a net saving of $2250 over 5 years. If you drive on snowy roads, you may need ABS (”anti-lock braking system”) fitted to your car. (ABS comes standard in most new cars these days, but it was offered as an option in older models.)

After you have made your choice of the type, it is time to hit Internet. Look up the online inventory of all new car dealerships in your neighborhood (leave out used car dealers - it is harder to find a reliable car there), and also check out personal sales ads such as craigslist and classifieds in your local newspaper. New car dealers keep a variety of used cars that are traded in by customers who swap them for new cars. These are privately owned, and generally well maintained.

Besides, dealers may add a few months of warranty (more on this later) that gives you some peace of mind. The downside is having to deal with the dreaded salespeople, if you are not well prepared (worry not, this guide will teach you enough to face him with courage). A private seller, by contrast, is ready to sell without much hassle and also the car is usually cheaper. But the problem here is that you must buy his car “as is”, without any accompanying warranty.

Make a list of at least 10-15 cars based on your budget and other needs. (Dealers often “mark up” the price by several hundreds and even a few thousand dollars, which can be negotiated down. So if you like a car in the inventory that costs more than your budget, do not discard it just yet.) Ask for the VIN (”vehicle identification number” that uniquely identifies every car on the road) and odometer reading (number of miles the car has been driven so far) for each car on your list. The lower the mileage on the car, the less is its wear and tear (a rule of thumb is that the total number of miles should not exceed 15000 multiplied by the car’s age in years).

It is time to research your car »

See related posts:

1. A new car every 15 yrs, or a used car every 5 yrs?
2. Picking a budget
3. Why should I buy a used car?
4. An investing-friendly car buying guide