Auto Buying

Buying a new car is usually the second most expensive purchase many consumers make, after the purchase of their home. This handout reviews some of the information you need in order to make a smart deal on a new car and gives you tips on how to avoid problems in purchasing a used automobile.

BEFORE PURCHASE, KEEP IN MIND:

1. Know what model and options you want and how much you can afford to spend before looking for a car.
2. Compare prices of cars at different dealers by reviewing newspaper and internet ads. Know the Kelly Blue Book values of the cars you’re considering. (Check these at http://www.kbb.com/.)
3. Check the quality of each car and its repair record through available consumer reporting agencies and publications. The U.S. Department of Transportation Auto Safety Hotline (800-327-4236) will tell you if a car model has ever been recalled and will send you information about that recall.
4. Some cars cost more to insure than others, so check insurance rates before buying an automobile.
5. Before going to the first dealer, try to arrange financing for the purchase through a bank, credit union, or lending institution. Dealers and lending institutions offer a variety of interest rates, finance charges, and payment schedules, so you will want to shop for terms. If, for example, you need low monthly payments, consider making a larger down payment or getting financing that will stretch payments over five years. Of course, a longer payment period means paying more interest and a higher total price.
6. Before signing any purchase agreement, know the total sales price, the amount of the down payment, the annual percentage rate (APR), and the monthly payment. 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 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 your budget is tight, you may want to consider paying cash for a less expensive car than you first had in mind.
7. Examine the car yourself using an inspection checklist or have the vehicle inspected by an independent third party. Test-drive the car under varied road conditions - on hills, highways, and in stop-and-go traffic. The best test is by taking the car to a trusted mechanic before you sign a contract.
8. BEFORE SIGNING ANY CONTRACT, SEE AN ATTORNEY and READ THE ENTIRE CONTRACT! There is very little we can do after you have signed the contract.

NO COOLING-OFF PERIOD

All potential buyers should be aware that the three-day "cooling off" period for canceling many consumer contracts does NOT apply to new and used car purchases unless expressly provided in the sales contracts! SO, IF YOU BUY AN AUTOMOBILE, DO NOT EXPECT TO RETURN IT WITHIN THREE DAYS AND GET YOUR MONEY BACK!

WARRANTIES AND LEMON LAW

As for new car purchases, a variety of express and implied warranties are imposed by state law to ensure the safety and performance of the automobile. Vehicles under warranty are covered by the Magnuson-Moss Warranty Act. State "Lemon Laws" requires the dealership to buy back or replace any new car that is not satisfactorily repaired after a reasonable number of attempts. The Magnuson-Moss Warranty Act along with each states’ lemon laws protect consumers from being stuck with faulty vehicles. The purchaser is free to choose whether to accept a replacement or a refund. State lemon laws protect consumers based on different criteria. Check your state’s lemon law to see how it applies to your automobile purchase: Kelley Blue Book Vehicle Lemon Laws by State. Ensure you review the state’s statute for its full details.[MP1]

Ordinarily, however, the problem must be covered by the warranty, must substantially reduce the use or value of the automobile, the customer must notify the manufacturer directly, and must submit the dispute to a qualified third party dispute resolution program (i.e. arbitration) if available.

Many used cars are sold "as is," which means that there are no express or implied warranties on the automobile. Therefore, if you buy a car "as is," and have problems with it, you must pay for the repairs yourself. The Federal Trade Commission has enacted a "Used Car Rule" which requires used car dealers to tell you whether the vehicle comes with a warranty or not, and if so, its terms and conditions, including the duration of the coverage, the percentage of total repair costs the dealer will pay, and which vehicle systems the warranty covers. Look for a "Buyers Guide" sticker on the window of the car. If the dealer offers a written warranty, you have the right to see a copy of the warranty before purchase. The Buyers Guide also informs you that you should have the vehicle inspected by an independent mechanic, whom you personally trust, before you buy. If the dealer makes oral promises to repair the vehicle, have the dealer put those promises in writing. Do not rely on spoken promises!

Finally, used car dealers must ensure that the automobile is in safe working order, e.g. working brakes, lights, etc.

RESOLVING PROBLEMS

In the event of a problem, you should always first try to resolve the problem with the salesperson or, if necessary, the owner of the dealership. Most problems can be resolved at this level. If problems continue after the purchase of a new car, you should contact the local Department of Motor Vehicles office. The Department of Motor Vehicles may also be contacted for assistance with problems in the purchase of a used car from a used car dealer. However, a person who purchases a used car from another individual has little recourse. Private sales are not covered by many state laws which protect consumers. You may bring an action in small claims or municipal court, depending on the amount of the claim. Keep all of your documentation for all repairs, leases, and purchases!

DRIVER'S LICENSES, REGISTRATION, AND INSURANCE

Driver’s-license and vehicle-registration requirements are established primarily by states and territories. Some jurisdictions extend licenses or offer special renewal procedures for active-duty members, but the rules may differ for spouses and dependents. A home-of-record address, state of legal residence, duty station, vehicle location, and licensing jurisdiction are separate concepts and should not be treated as interchangeable.

After a PCS, check the current rules of the state, territory, installation, or host nation where the vehicle will be operated. Requirements may include registration, inspection, emissions testing, local taxes or fees, minimum insurance, special permits, or a host-nation license. Military status does not automatically exempt a driver from traffic or insurance laws.

Maintain continuous insurance appropriate to the vehicle’s location and use. Before placing a vehicle in storage or reducing coverage, consult the insurer and lender. A loan or lease may require collision, comprehensive, or other coverage even when the vehicle is not being driven.

Vehicle Leasing

A vehicle lease provides possession and use of a vehicle but normally does not create ownership. Payments are based partly on expected depreciation and may include acquisition charges, taxes, optional products, and other fees. At the end of the lease, the customer may face charges for excess mileage, damage, missing equipment, disposition, or early termination.

Before signing, examine the mileage allowance, maintenance requirements, insurance limits, gap coverage, purchase option, end-of-lease inspection procedure, and formulas for early termination. Compare the total lease cost with financing or purchasing a suitable vehicle. Do not rely on statements that are absent from the written agreement.

The SCRA permits qualifying service members to terminate certain vehicle leases after entering military service or receiving qualifying PCS or deployment orders. Eligibility depends on when the lease was signed and the nature and duration of the orders. Proper written notice, documentation, and return of the vehicle are required. Termination does not excuse charges for unpaid amounts, taxes, excessive wear, or damage that are otherwise lawful.

Vehicle Renting

Rental agreements should be reviewed before the vehicle leaves the lot. Confirm the authorized drivers, geographic restrictions, fuel requirements, mileage terms, toll charges, insurance products, roadside assistance, and procedures for accidents or mechanical problems. Inspect the vehicle and photograph existing damage.

A personal automobile policy or credit-card benefit may provide some rental coverage, but exclusions and limits vary. Coverage for loss of use, diminished value, administrative fees, overseas rentals, trucks, luxury vehicles, and long rentals may be different or unavailable. Verify coverage directly rather than relying on assumptions.

For official travel, follow applicable government travel rules and use approved rental procedures. Report accidents promptly to law enforcement when required, the rental company, the insurer, and the appropriate travel or command office. Do not admit legal fault or sign a settlement without understanding its effect.

Automobile Repairs

Obtain a written estimate before authorizing work. The estimate should identify diagnostic charges, labor, parts, taxes, storage fees, the scope of authorization, and whether replacement parts will be new, used, rebuilt, or aftermarket. State law may require additional disclosures or customer approval when the cost will exceed the estimate.

Describe symptoms accurately but avoid directing a diagnosis unless qualified to do so. Ask the shop to contact you before performing additional work, and obtain any warranty in writing. Keep estimates, authorizations, invoices, replaced-part information, photographs, messages, and towing records.

If a dispute develops, notify the shop promptly and provide a reasonable opportunity to inspect or correct the work when appropriate. Avoid authorizing another shop to disassemble or alter the vehicle before documenting the original condition. State law may give a repair facility a lien or storage rights when a bill is unpaid, so obtain legal advice before refusing payment or leaving the vehicle.

Safety defects and recalls should be checked through the National Highway Traffic Safety Administration using the vehicle identification number. Recall repairs are generally performed without charge by an authorized dealer. A manufacturer’s recall is different from a warranty, service campaign, or ordinary repair dispute.

Repossession

A vehicle-finance agreement normally grants the creditor a security interest in the vehicle. Default may occur through missed payments, failure to maintain insurance, unauthorized transfer, or another contractual violation. In many jurisdictions, a creditor may repossess without first filing a lawsuit if it can do so without breaching the peace, although state law varies substantially.

Repossession does not necessarily eliminate the debt. After taking the vehicle, the creditor may sell it and apply the proceeds to the balance. The borrower may remain responsible for a deficiency consisting of the unpaid balance and authorized expenses, less sale proceeds and required credits. The borrower may also have rights to notice, personal property, reinstatement, redemption, and information about the sale.

Do not hide, damage, transfer, or threaten violence over a vehicle. Remove personal and military items lawfully and document the vehicle’s condition and contents. Read every notice immediately because deadlines to redeem, reinstate, recover property, or challenge the sale may be short.

The SCRA may require a court order before repossession of a vehicle purchased under a qualifying installment contract when the member paid a deposit or installment before entering military service. It does not protect every vehicle purchased during active duty and does not erase the obligation. Military legal assistance should be contacted promptly whenever military service may affect a repossession.