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Buying a Used Car
Before you start shopping for a car,
you'll need to do some homework. Spending time now may
save you serious money later. Think about your driving
habits, your needs, and your budget. You can learn about
car models, options, and prices by reading newspaper
ads, both display and classified. There is a wealth
of information about used cars on the Internet: enter
"used car" as the key words and you'll find
additional information on how to buy a used car, detailed
instructions for conducting a pre-purchase inspection,
and ads for cars available for sale, among other information.
Libraries and book stores also have publications that
compare car models, options, and costs, and offer information
about frequency-of-repair records, safety tests, and
mileage. Many of these publications have details on
the do's and don'ts of buying a used car.
Once you've narrowed your car choices,
research the frequency of repair and maintenance costs
on the models in auto-related consumer magazines. The
U.S. Department of Transportation's Auto Safety Hotline
(1-800-424-9393) gives information on recalls.
PAYMENT OPTIONS
You have two choices: pay in full
or finance over time. If you finance, the total cost
of the car increases. That's because you're also paying
for the cost of credit, which includes interest and
other loan costs. You'll also have to consider how much
you can put down, your monthly payment, the length of
the loan, and the annual percentage rate (APR). Keep
in mind that annual percentage rates usually are higher
and loan periods generally are shorter on used cars
than on new ones.
Dealers and lenders offer a variety
of loan terms and payment schedules. Shop around, compare
offers, and negotiate the best deal you can. Be cautious
about advertisements offering financing to first-time
buyers or people with bad credit. These offers often
require a big down payment and a high APR. If you agree
to financing that carries a high APR, you may be taking
a big risk. If you decide to sell the car before the
loan expires, the amount you receive from the sale may
be far less than the amount you need to pay off the
loan. If the car is repossessed or declared a total
loss because of an accident, you may be obligated to
pay a considerable amount to repay the loan even after
the proceeds from the sale of the car or the insurance
payment have been deducted. If your budget is tight,
you may want to consider paying cash for a less expensive
car than you first had in mind.
If you decide to finance, make sure
you understand the following aspects of the loan agreement
before you sign any documents:
- the exact price you're paying for the vehicle;
- the amount you're financing;
- the finance charge (the dollar amount the credit
will cost you);
- the APR (a measure of the cost of credit, expressed
as a yearly rate);
- the number and amount of payments; and
- the total sales price (the sum of the monthly payments
plus the down payment).
DEALER SALES
Used cars are sold through a variety
of outlets: franchise and independent dealers, rental
car companies, leasing companies, and used car superstores.
You can even buy a used car on the Internet. Ask friends,
relatives and co-workers for recommendations. You may
want to call your local consumer protection agency,
state Attorney General (AG), and the Better Business
Bureau (BBB) to find out if any unresolved complaints
are on file about a particular dealer.
Some dealers are attracting customers
with "no-haggle prices," "factory certified"
used cars, and better warranties. Consider the dealer's
reputation when you evaluate these ads.
Dealers are not required by law to
give used car buyers a three-day right to cancel. The
right to return the car in a few days for a refund exists
only if the dealer grants this privilege to buyers.
Dealers may describe the right to cancel as a "cooling-off"
period, a money-back guarantee, or a "no questions
asked" return policy. Before you purchase from
a dealer, ask about the dealer's return policy, get
it in writing and read it carefully.
The Federal Trade Commission's (FTC)
Used Car Rule requires dealers to post a Buyers Guide
in every used car they offer for sale. This includes
light-duty vans, light-duty trucks, demonstrators, and
program cars. Demonstrators are new cars that have not
been owned, leased, or used as rentals, but have been
driven by dealer staff. Program cars are low-mileage,
current-model-year vehicles returned from short-term
leases or rentals. Buyers Guides do not have to be posted
on motorcycles and most recreational vehicles. Anyone
who sells less than six cars a year doesn't have to
post a Buyers Guide.
The Buyers Guide must tell you:
- whether the vehicle is being sold "as is"
or with a warranty;
- what percentage of the repair costs a dealer will
pay under the warranty;
- that spoken promises are difficult to enforce;
- to get all promises in writing;
- to keep the Buyers Guide for reference after the
sale;
- the major mechanical and electrical systems on the
car, including some of the major problems you should
look out for; and
- to ask to have the car inspected by an independent
mechanic before you buy.
When you buy a used car from a dealer,
get the original Buyers Guide that was posted in the
vehicle, or a copy. The Guide must reflect any negotiated
changes in warranty coverage. It also becomes part of
your sales contract and overrides any contrary provisions.
For example, if the Buyers Guide says the car comes
with a warranty and the contract says the car is sold
"as is," the dealer must give you the warranty
described in the Guide.
As Is - No Warranty
When the dealer offers a vehicle "as
is," the box next to the "As Is - No Warranty"
disclosure on the Buyers Guide must be checked. If the
box is checked but the dealer promises to repair the
vehicle or cancel the sale if you're not satisfied,
make sure the promise is written on the Buyers Guide.
Otherwise, you may have a hard time getting the dealer
to make good on his word. Some states, including Connecticut,
Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi,
New Jersey, New York, Rhode Island, Vermont, West Virginia
and the District of Columbia, don't allow "as is"
sales for many used vehicles.
Three states - Louisiana, New Hampshire,
and Washington - require different disclosures than
those on the Buyers Guide. If the dealer fails to provide
proper state disclosures, the sale is not "as is."
To find out what disclosures are required for "as
is" sales in your state, contact your state Attorney
General.
Implied Warranties
State laws hold dealers responsible
if cars they sell don't meet reasonable quality standards.
These obligations are called implied warranties - unspoken,
unwritten promises from the seller to the buyer. However,
dealers in most states can use the words "as is"
or "with all faults" in a written notice to
buyers to eliminate implied warranties. There is no
specified time period for implied warranties.
Warranty of Merchantability
The most common type of implied warranty
is the warranty of merchantability: The seller promises
that the product offered for sale will do what it's
supposed to. That a car will run is an example of a
warranty of merchantability. This promise applies to
the basic functions of a car. It does not cover everything
that could go wrong.
Breakdowns and other problems after
the sale don't prove the seller breached the warranty
of merchantability. A breach occurs only if the buyer
can prove that a defect existed at the time of sale.
A problem that occurs after the sale may be the result
of a defect that existed at the time of sale or not.
As a result, a dealer's liability is judged case-by-case.
Warranty of Fitness for a Particular
Purpose
A warranty of fitness for a particular
purpose applies when you buy a vehicle based on the
dealer's advice that it is suitable for a particular
use. For example, a dealer who suggests you buy a specific
vehicle for hauling a trailer in effect is promising
that the vehicle will be suitable for that purpose.
If you have a written warranty that
doesn't cover your problems, you still may have coverage
through implied warranties. That's because when a dealer
sells a vehicle with a written warranty or service contract,
implied warranties are included automatically. The dealer
can't delete this protection. Any limit on an implied
warranty's time must be included on the written warranty.
In states that don't allow "as
is" sales, an "Implied Warranties Only"
disclosure is printed on the Buyers Guide in place of
the "As Is" disclosure. The box beside this
disclosure will be checked if the dealer decides to
sell the car with no written warranty.
In states that do allow "as is"
sales, the "Implied Warranties Only" disclosure
should appear on the Buyers Guide if the dealer decides
to sell a vehicle with implied warranties and no written
warranty. A copy of the Buyers Guide with the "Implied
Warranties Only" disclosure is on page 13.
Dealers who offer a written warranty
must complete the warranty section of the Buyers Guide.
Because terms and conditions vary, it may be useful
to compare and negotiate coverage.
Dealers may offer a full or limited
warranty on all or some of a vehicle's systems or components.
Most used car warranties are limited and their coverage
varies. A full warranty includes the following terms
and conditions:
- Anyone who owns the vehicle during the warranty
period is entitled to warranty service.
- Warranty service will be provided free of charge,
including such costs as removing and reinstalling
a covered system.
- You have the choice of a replacement or a full refund
if, after a reasonable number of tries, the dealer
cannot repair the vehicle or a covered system.
- You only have to tell the dealer that warranty service
is needed in order to get it, unless the dealer can
prove that it is reasonable to require you to do more.
- Implied warranties have no time limits.
If any of these statements don't apply,
the warranty is limited.
A full or limited warranty doesn't
have to cover the entire vehicle. The dealer may specify
that only certain systems are covered. Some parts or
systems may be covered by a full warranty; others by
a limited warranty.
The dealer must check the appropriate
box on the Buyers Guide to indicate whether the warranty
is full or limited and the dealer must include the following
information in the "Warranty" section:
- the percentage of the repair cost that the dealer
will pay. For example, "the dealer will pay 100
percent of the labor and 100 percent of the parts
. . .";
- the specific parts and systems - such as the frame,
body, or brake system - that are covered by the warranty.
The back of the Buyers Guide lists the major systems
where problems may occur;
- the warranty term for each covered system. For example,
"30 days or 1,000 miles, whichever comes first";
and
- whether there's a deductible and, if so, how much.
You have the right to see a copy of
the dealer's warranty before you buy. Review it carefully
to determine what is covered. The warranty gives detailed
information, such as how to get repairs for a covered
system or part. It also tells who is legally responsible
for fulfilling the terms of the warranty. If it's a
third party, investigate their reputation and whether
they're insured. Find out the name of the insurer, and
call to verify the information. Then check out the third-party
company with your local Better Business Bureau. That's
not foolproof, but it is prudent. Make sure you receive
a copy of the dealer's warranty document if you buy
a car that is offered with a warranty.
Unexpired Manufacturer's Warranties
If the manufacturer's warranty still
is in effect, the dealer may include it in the "systems
covered/duration" section of the Buyers Guide.
To make sure you can take advantage of the coverage,
ask the dealer for the car's warranty documents. Verify
the information (what's covered, expiration date/miles,
necessary paperwork) by calling the manufacturer's zone
office. Make sure you have the Vehicle Identification
Number (VIN) when you call.
Service Contracts
Like a warranty, a service contract
provides repair and/or maintenance for a specific period.
But warranties are included in the price of a product,
while service contracts cost extra and are sold separately.
To decide if you need a service contract, consider whether:
- the service contract duplicates warranty coverage
or offers protection that begins after the warranty
runs out. Does the service contract extend beyond
the time you expect to own the car? If so, is the
service contract transferable or is a shorter contract
available?
- the vehicle is likely to need repairs and their
potential costs. You can determine the value of a
service contract by figuring whether the cost of repairs
is likely to exceed the price of the contract.
- the service contract covers all parts and systems.
Check out all claims carefully. For example, "bumper
to bumper" coverage may not mean what you think.
- a deductible is required and, if so, the amount
and terms.
- the contract covers incidental expenses, such as
towing and rental car charges while your car is being
serviced.
- repairs and routine maintenance, such as oil changes,
have to be done at the dealer.
- there's a cancellation and refund policy for the
service contract and, whether there are cancellation
fees.
- the dealer or company offering the service contract
is reputable. Read the contract carefully to determine
who is legally responsible for fulfilling the terms
of the contract. Some dealers sell third-party service
contracts.
The dealer must check the appropriate
box on the Buyers Guide if a service contract is offered,
except in states where service contracts are regulated
by insurance laws. If the Guide doesn't include a service
contract reference and you're interested in buying one,
ask the salesperson for more information.
If you buy a service contract from
the dealer within 90 days of buying a used vehicle,
federal law prohibits the dealer from eliminating implied
warranties on the systems covered in the contract. For
example, if you buy a car "as is," the car
normally is not covered by implied warranties. But if
you buy a service contract covering the engine, you
automatically get implied warranties on the engine.
These may give you protection beyond the scope of the
service contract. Make sure you get written confirmation
that your service contract is in effect.
Spoken Promises
The Buyers Guide cautions you not
to rely on spoken promises. They are difficult to enforce
because there may not be any way for a court to determine
with any confidence what was said. Get all promises
written into the Guide.
Pre-Purchase Independent Inspection
It's best to have any used car inspected
by an independent mechanic before you buy it. For about
$100 or less, you'll get a general indication of the
mechanical condition of the vehicle. An inspection is
a good idea even if the car has been "certified"
and inspected by the dealer and is being sold with a
warranty or service contract. A mechanical inspection
is different from a safety inspection. Safety inspections
usually focus on conditions that make a car unsafe to
drive. They are not designed to determine the overall
reliability or mechanical condition of a vehicle.
To find a pre-purchase inspection
facility, check your Yellow Pages under "Automotive
Diagnostic Service" or ask friends, relatives,
and co-workers for referrals. Look for facilities that
display certifications like an Automotive Service Excellence
(ASE) seal. Certification indicates that some or all
of the technicians meet basic standards of knowledge
and competence in specific technical areas. Make sure
the certifications are current, but remember that certification
alone is no guarantee of good or honest work. Also ask
to see current licenses if state or local law requires
such facilities to be licensed or registered. Check
with your state Attorney General's office or local consumer
protection agency to find out whether there's a record
of complaints about particular facilities.
There are no standard operating procedures
for pre-purchase inspections. Ask what the inspection
includes, how long it takes, and how much it costs.
Get this information in writing.
If the dealer won't let you take the
car off the lot, perhaps because of insurance restrictions,
you may be able to find a mobile inspection service
that will go to the dealer. If that's not an option,
ask the dealer to have the car inspected at a facility
you designate. You will have to pay the inspection fee.
Once the vehicle has been inspected,
ask the mechanic for a written report with a cost estimate
for all necessary repairs. Be sure the report includes
the vehicle's make, model, and VIN. Make sure you understand
every item. If you decide to make a purchase offer to
the dealer after considering the inspection's results,
you can use the estimated repair costs to negotiate
the price of the vehicle.
Vehicle Systems
The Buyers Guide lists an auto's 14
major systems and some serious problems that may occur
in each. This list may help you and your mechanic evaluate
the mechanical condition of the vehicle. The list also
may help you compare warranties offered on different
cars or by different dealers.
Dealer Identification and Consumer
Complaint Information
The back of the Buyers Guide lists
the name and address of the dealership. It also gives
the name and telephone number of the person you should
contact at the dealership if you have problems or complaints
after the sale.
Optional Signature Line
The dealer may include a buyer's signature
line at the bottom of the Buyers Guide. If the line
is included, the following statement must be written
or printed close to it: "I hereby acknowledge receipt
of the Buyers Guide at the closing of this sale."
Your signature means you received the Buyers Guide at
closing. It does not mean that the dealer complied with
the Rule's other requirements, such as posting a Buyers
Guide in all the vehicles offered for sale.
Spanish Language Sales
If you buy a used car and the sales
discussion is conducted in Spanish, you are entitled
to see and keep a Spanish-language version of the Buyers
Guide.
PRIVATE SALES
An alternative to buying from a dealer
is buying from an individual. You may see ads in newspapers,
on bulletin boards, or on a car. Buying a car from a
private party is very different from buying a car from
a dealer.
- Private sellers generally are not covered by the
Used Car Rule and don't have to use the Buyers Guide.
However, you can use the Guide's list of an auto's
major systems as a shopping tool. You also can ask
the seller if you can have the vehicle inspected by
your mechanic.
- Private sales usually are not covered by the "implied
warranties" of state law. That means a private
sale probably will be on an "as is" basis,
unless your purchase agreement with the seller specifically
states otherwise. If you have a written contract,
the seller must live up to the promises stated in
the contract. The car also may be covered by a manufacturer's
warranty or a separately purchased service contract.
However, warranties and service contracts may not
be transferable, and other limits or costs may apply.
Before you buy the car, ask to review its warranty
or service contract.
- Many states do not require individuals to ensure
that their vehicles will pass state inspection or
carry a minimum warranty before they offer them for
sale. Ask your state Attorney General's office or
local consumer protection agency about the requirements
in your state.
BEFORE YOU BUY A USED CAR
Whether you buy a used car from a
dealer, a co-worker, or a neighbor, follow these tips
to learn as much as you can about the car:
- Examine the car yourself using an inspection checklist.
You can find a checklist in many of the magazine articles,
books and Internet sites that deal with buying a used
car.
- Test drive the car under varied road conditions
- on hills, highways, and in stop-and-go traffic.
- Ask for the car's maintenance record. If the owner
doesn't have copies, contact the dealership or repair
shop where most of the work was done. They may share
their files with you.
- Talk to the previous owner, especially if the present
owner is unfamiliar with the car's history.
- Have the car inspected by a mechanic you hire.
IF YOU HAVE PROBLEMS
If you have a problem that you think
is covered by a warranty or service contract, follow
the instructions to get service. If a dispute arises,
there are several steps you can take:
- Try to work it out with the dealer. Talk with the
salesperson or, if necessary, the owner of the dealership.
Many problems can be resolved at this level. However,
if you believe you're entitled to service, but the
dealer disagrees, you can take other steps.
- If your warranty is backed by a car manufacturer,
contact the local representative of the manufacturer.
The local or zone representative is authorized to
adjust and decide about warranty service and repairs
to satisfy customers. Some manufacturers also are
willing to repair certain problems in specific models
for free, even if the manufacturer's warranty does
not cover the problem. Ask the manufacturer's zone
representative or the service department of a franchised
dealership that sells your car model whether there
is such a policy.
- Contact your local Better Business Bureau, state
Attorney General, or the Department of Motor Vehicles.
You also might consider using a dispute resolution
organization to arbitrate your disagreement if you
and the dealer are willing. Under the terms of many
warranties, this may be a required first step before
you can sue the dealer or manufacturer. Check your
warranty to see if this is the case. If you bought
your car from a franchised dealer, you may be able
to seek mediation through the Automotive Consumer
Action Program (AUTOCAP), a dispute resolution program
coordinated nationally by the National Automobile
Dealers Association and sponsored through state and
local dealer associations in many cities. Check with
the dealer association in your area to see if they
operate a mediation program.
- If none of these steps is successful, small claims
court is an option. Here, you can resolve disputes
involving small amounts of money, often without an
attorney. The clerk of your local small claims court
can tell you how to file a suit and what the dollar
limit is in your state.
- The Magnuson-Moss Warranty
Act also may be helpful. Under this federal law, you
can sue based on breach of express warranties, implied
warranties, or a service contract. If successful,
consumers can recover reasonable attorneys' fees and
other court costs. A lawyer can advise you if this
law applies.
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