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In 1996, very nearly two out of every three cars sold were used cars. Many consumers, especially teenagers, cannot afford to buy a new car when the average price is approximately $18,000. The cost of insurance is much higher for a new car, increasing the demand for used cars. The supply of used cars has increased due to the number of two and three-year-old lease cars available.
There are real advantages to buying a used car. The buyer of a used car avoids some of the depreciation costs, which can be up to 40% of its value in the first two years. Sometimes, buyers can afford more options and luxury items when they purchase a used car. Many consumers feel that they can arrange a better deal with less hassle if they buy directly from the owner of the car.
Buying a used car can have disadvantages as well. One important disadvantage is that often the most maintenance-free time of the cars life is during the first two years. Some used cars have serious hidden defects with limited or no warranty coverage. It is sometimes difficult to determine whether the car was maintained properly by its previous owner. The used car may not have all the desirable safety or technical features of a new car. The selection of models, equipment, and colors may be limited.
Buying a used car is an important financial decision. Generally, the price of a used car is determined by who is selling it. So, it is smart to gather information before you buy, such as knowing what you can afford, then carefully exploring financial arrangements as you negotiate the best deal.
Dealerships account for approximately 50% of the used cars sold annually. Dealers usually have a good supply of late model used cars, so they offer a selection in top condition. These vehicles often carry the balance of the manufacturers warranty and some dealers offer their own warranties. In addition, dealers have service capacities, provide financing services and take care of vehicle registration and license forms.
The Federal Trade Commission's Used Car Rule requires dealers to display prominently and conspicuously a warranty notice called a Buyer's Guide sticker on all used cars (but not trucks). The Buyer's Guide must state whether the vehicle has a warranty or is being sold "as is."
Used Car Superstores are a recent development. They usually have a large stock of cars and buyers have access to computer-assisted selection. Two and three-year-old models predominate and car prices are fixed and not negotiable. To begin the selection process, you use a computer terminal to bring up vehicles by make, model, and price. The computer will print a picture of any car and list its equipment, price, and lot location. The vehicles carry seller warranties which vary in quality from generous to average and many carry the balance of the manufacturers original warranty. Drawbacks of Superstores are that the salespeople may be relatively uninformed. They cannot provide information about previous car owners and the prices are generally higher.
Independent Lots offer a variety of cars, from excellent and expensive to well-worn clunkers. Usually, car lots have no service facilities, but they may work with a local garage. If they offer warranties, the local mechanic will perform warranty repairs. In order to learn the reputation of a used car lot or dealership, buyers can phone local consumer protection offices or the Better Business Bureau to inquire about complaints against the business. Independent lots often offer financing and there can be strong pressure to finance the car through them. Their finance rates are usually higher than at banks or credit unions.
Rental Agencies offer rental cars for sale to the public after a year or two of use. These late model cars often carry the balance of the manufacturers warranty and service records are generally available. To buy from a rental agency, buyers have to arrange their own financing and no trade-ins are accepted.
Private Sales are often good buys, but be cautious when buying from an individual. When possible, buyers should deal with a seller they know and trust. Sellers are often people who have not been able to get the price they want for their car as a trade-in. There is little pressure to buy and repair records may be available. However, these used vehicles are sold " as is " with no warranty. Late model cars may still have a manufacturers warranty that you can purchase for a transfer fee. The sale may be risky because stolen cars with phony titles can be sold and so can cars about to be repossessed. Also, there can be concealed damage or major repair problems.
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:
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.
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.
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:
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:
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.
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 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.
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.
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.
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:
You can find out a used car's history, which is a must if you're buying a used car that is not certified, by logging on to www.carfax.com or by calling Carfax toll-free at 888-422-7329.
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.
Visit the dealership, superstore, car lot or other source. When buying from a private individual, adapt the following steps to that type of sale. Take a notepad and calculator. Be prepared to spend time.
Meet the salesperson or seller and write down his or her name. Look for the models you are most interested in. If asked how much you would like to spend, say, "it depends on the car." Do not be afraid to say that you are looking for cars at other places.
Find one or two models and inspect them. On your notepad, identify the car, the year, the price, options, trim line, mileage, and vehicle identification number (VIN). Request the name and phone number of the previous owner from the title. Ask to see the title, then match the VIN with that on the car and note the name and phone number of the previous owner.
Test drive one or two vehicles. If you are interested in a particular car, ask the salesperson if you can take the car to your mechanic for an evaluation. Also, examine the cars warranty. Check the performance, safety and service records for the car. You can obtain price information from the Consumer Reports Used Car Price Service for $1.75 per minute, phone 1-900-446-0500.
On the Internet, you can obtain price information from:
Also the NADA Official Used Car Guide gives information about the prices of used cars. These resources are available at your local public library. You can check if a used car has had a safety recall at the National Highway Traffic Safety Administration's Auto Safety Hotline by calling (800) 424-9393.
Leave the premises. At home, phone the previous owner. Ask for the mileage reading at the time of trade-in. It should be consistent with the present reading. Contact your financing sources, request price information about specific cars and confirm loan availability. Also, get an estimate of your insurance costs from at least two insurance sellers. Review your information and estimate the wholesale and retail price for the car you wish to purchase, based on the following information:
Return to the seller and make arrangements to take the car to your mechanic. You may be asked to leave your car at the lot as security. Once you receive the mechanic's dollar estimate of needed repairs, either subtract that amount from your maximum offer or use it as a negotiating tool.
Negotiation is the process of discussing the price and terms of a used car, eventually arriving at an agreement between the buyer and seller. Any well-informed buyer can negotiate a fair deal using the following steps.
If the seller accepts your offer, you have a deal. The salesperson will then prepare a Buyer's Order or Purchase Agreement to be signed by you. Insist on a readable document, not a first draft. A preprinted form or computer-generated form may automatically charge you for things you have already refused so examine the contract before you sign.
Visit the following Web Sites to get quotes and purchase online:
|SUMMARY OF TIPS|
|Don't buy on impulse or because the salesperson is pressuring you to make a decision.|
|Check out the car's repair record, maintenance costs, and safety and mileage ratings in consumer magazines or online. Look up the "blue book" value and be prepared to negotiate the price.|
|Buying from a dealer? Look for the Buyers Guide. It's required by a federal regulation called the Used Car Rule.|
|Make sure all oral promises are written into the Buyers Guide.|
|You have the right to see a copy of the dealer' warranty before you buy.|
|Warranties are included in the price of the product; service contracts cost extra and are sold separately.|
|Ask for the car's maintenance record from the owner, dealer, or repair shop.|
|Test drive the car on hills, highways, and in stop-and-go traffic.|
|Have the car inspected by a mechanic you hire.|
|Check out the dealer with local consumer protection officials.|
|If you buy a car "as is," you'll have to pay for anything that goes wrong after the sale.|
|The Used Car Rule generally doesn't apply to private sales.|
|Avoid high-profit, low-value extras sold by dealers, such as credit insurance and extended service.|
|Don't take possession of the car until the financing paperwork is final.|
If you decide to buy a used vehicle, take time to comparison shop for both the car and its financing plan. Because you do not always know how the used car was driven or maintained, be especially concerned with its condition. Deciding where to buy and where to finance the car is a challenge.
Remember.....Buyers should not pay the asking price for a used car unless they are dealing with a Superstore. Sellers of used cars have set a price that allows room for bargaining. Also, buyers do not always think about having all verbal promises and guarantees in writing. Unless promises are in writing and signed by the seller, they are legally unenforceable. So if the seller will not put everything in writing, your best option is to shop for a better deal elsewhere.
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:
Doing your homework can mean the difference between getting the car of your dreams and bringing home a financial nightmare. See the following Web Sites for further information.
See How To Finance A Used Car, for information on the sources for financing used cars.
Note: The links on this page that go to web sites outside of this agency's control are provided as a convenience only. The Department takes no responsibility for their content.