Don't Forget Car Insurance

Many dealerships require proof of insurance before selling you the car, notes Montoya. When buying a used car from an individual, remember that you'll need to be insured before you drive the car.

Once you have the car's VIN number, you can run a vehicle history report with companies like Carfax or AutoCheck. If a dealer or seller is reluctant to provide the VIN number, consider it a red flag.

While there are some visual tip-offs that the car might not be in the best condition — for example, new carpeting might indicate that the car was in a flood — a vehicle history report will reveal the car's accident history and if it has a salvage title (meaning it's been declared a total loss by an insurance company). The report will also show if the odometer has been rolled back — something that occurs in one in 10 U.S. vehicles, according to the Consumer Federation of Hong Kong.