Before you start shopping for a car, youll 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 youll 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 dos and donts of buying a used car.
Once youve 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 Transportations Auto Safety Hotline (1-800-424-9393) gives information on recalls.
You have two choices: pay in full or finance over time. If you finance, the total cost of the car increases. Thats because youre also paying for the cost of credit, which includes interest and other loan costs. Youll 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:
Some dealers are attracting customers with "no-haggle prices," "factory certified" used cars, and better warranties. Consider the dealers 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 dealers return policy, get it in writing and read it carefully.
The Federal Trade Commissions 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 doesnt have to post a Buyers Guide.
The Buyers Guide must tell you:
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. 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 youre 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, dont allow "as is" sales for many used vehicles.
Three statesLouisiana, New Hampshire, and Washingtonrequire 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.
State laws hold dealers responsible if cars they sell dont meet reasonable quality standards. These obligations are called implied warrantiesunspoken, 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
Breakdowns and other problems after the sale dont 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 dealers liability is judged case-by-case.
Warranty of Fitness for a Particular Purpose
If you have a written warranty that doesnt cover your problems, you still may have coverage through implied warranties. Thats because when a dealer sells a vehicle with a written warranty or service contract, implied warranties are included automatically. The dealer cant delete this protection. Any limit on an implied warrantys time must be included on the written warranty.
In states that dont 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 available here.
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 vehicles systems or components. Most used car warranties are limited and their coverage varies. A full warranty includes the following terms and conditions.
If any of these statements doesnt apply, the warranty is limited.
A full or limited warranty doesnt 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:
You have the right to see a copy of the dealers 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 its a third party, investigate their reputation and whether theyre 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. Thats not foolproof, but it is prudent. Make sure you receive a copy of the dealers warranty document if you buy a car that is offered with a warranty.
If the manufacturers 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 cars warranty documents. Verify the information (whats covered, expiration date/miles, necessary paperwork) by calling the manufacturers zone office. Make sure you have the Vehicle Identification Number (VIN) when you call.
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 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 doesnt include a service contract reference and youre 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.
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
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 Generals office or local consumer protection agency to find out whether theres 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 the price. Get this information in writing.
If the dealer wont 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 thats 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 vehicles make, model and VIN. Make sure you understand every item. If you decide to make a purchase offer to the dealer after considering the inspections results, you can use the estimated repair costs to negotiate the price of the vehicle.
The Buyers Guide lists an autos 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.
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.
The dealer may include a buyers 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 Rules other requirements, such as posting a Buyers Guide in all the vehicles offered for sale.
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.
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.
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:
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:
Recommended Reading Stubblefield, Mike and Haynes, John Harold. Kelley Blue Book. Consumer Reports
Stubblefield, Mike and Haynes, John Harold.
Kelley Blue Book.