How to avoid buying a lemon when you're shopping for a used car

The main "ups" of buying a used car are the lower initial purchase price, as well as lower property taxes (where applicable) and insurance costs. The main "downs" of buying a used car are that it's a used car, not new – so there's no new car warranty and you are more vulnerable to used car problems that could cost you money, as well as aggravation.

To reduce your risk of exposure when you buy a used car, there are a number of precautionary steps you can take when shopping for a used vehicle.

Find a used car with some original warranty remaining

Most late model used cars have at least three-year/36,000 mile basic warranty coverage (and often longer "powertrain" coverage on the engine and transmission). This means you'll get at least a year or so of peace of mind if you buy a used car that is less than three years old. (Important: Be sure to confirm the used car warranty is fully transferable.)

Check into Certified, Pre-Owned (CPO) vehicles

These are late model used cars and trucks that typically have less than 50,000 miles and have been given multipoint inspections – with any needed service or upkeep taken care of before the used car is put on the lot. CPO programs are backed by the automakers (Ford, GM, Volvo, etc.) and the vehicles often include a no-cost extended warranty on major parts such as the engine and transmission. CPO used cars are usually clean and well-maintained – the "cream puffs" of the used car market.

Do a background check

One with an unusual record of either recalls or consumer complaints. You can find information about recalls and safety-related defects at the National Highway Traffic Safety Administration's Web site, and information about consumer satisfaction at JD Power & Associates. Consumer Reports is another good place to poke around. Poke around the internet too and see if the car has a reputation as a lemon.

Screen your candidate

Even if the make/model has a great reputation for quality and reliability, that particular used car may not have been well-maintained – even abused. Have a third-party mechanic (not one working for the dealer) look the used car over as a condition of sale. If the dealer refuses to permit this, you should consider yourself well warned – and walk away.

Ask to see the used cars' service records

If these are available, it's usually a good sign the car was well cared-for, and perhaps more importantly, proof (if the records are complete) that there weren't any unusual repairs or problems. If the used car records are not available, you should be suspicious. It doesn't necessarily mean the used car is a bad car, but you have to wonder why the seller would not have kept such a strong selling point as evidence of proper upkeep and maintenance. In such a case, it is doubly important to have a mechanic you trust give the used car a thorough once-over before you commit to buy.

Will it pass inspection?

In most states, this is a legal requirement, but don't assume it is. It can cost hundred of dollars (or more) to repair a used car that fails either state safety or vehicle emissions testing – and in many cases, you can't legally register or drive that used car until it does pass.

Lastly, jot down the Vehicle Identification Number (VIN)

located on a stamped plate on the top of the used cars dashboard and run a CARFAX Vehicle History Report to check for information that could impact your decision about a used vehicle. Some types of information that a CARFAX Report may include are title problems, accidents, ownership and service history. A CARFAX Report could be well worth the expense.