Buying a Used Car From a Dealer
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Whether you’re 16 or 60, buying a used car can be an exciting experience. But it can also be a big financial commitment, with some industry reports estimating that the average price of a used car is close to $28,000. The more you know going in to the dealer, the better you'll feel driving out. For example, dealers have to put a Buyer’s Guide on every used car. You’re also entitled to a Buyer’s Guide if you buy a used car online. The Guide will tell you if a car has a warranty, or is being sold “as is.” You’ll also want to get a vehicle history report and get the facts about independent inspections, payment options, and what to do if you have a problem after the deal is done.
Do Some Homework
Before you start shopping for a used car from an auto dealer in person or online, do some homework. It may save you serious money. Consider the kind of car you need, how you’ll use it, and your budget. Don’t forget other costs like registration, insurance, gas, and maintenance. Research models, options, repair records, safety tests, and mileage.
Once you have a car (or cars) in mind, ask for the out-the-door prices in writing from dealers before you visit. Use those quotes to
- confirm that advertised prices, discounts, rebates, etc. are actually being applied
- confirm that the vehicle is actually on the lot
- spot add-ons and other charges that the dealer may try to introduce at the last minute
Then, find out about the dealer before you visit. Contact your state and local consumer protection agencies to find out if any unresolved complaints are on file about a particular dealer. Also check out a dealer’s reputation by searching online for the company’s name with words like “scam,” “review,” or “complaint.”
Dealer Sales and the Buyers Guide
Dealers have to display a Buyers Guide in every used car they offer for sale. They also have to give it to buyers after the sale. This includes light-duty vans and trucks, demonstrators, and program cars. Demonstrators are new cars that haven’t 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. Dealers don’t have to display a Buyers Guide on motorcycles and most recreational vehicles.
The Buyers Guide tells you
- the major mechanical and electrical systems on the car, including some of the major problems to look out for
- whether the car is being sold “as is” or with a warranty
- what percentage of the repair costs a dealer will pay under the warranty
- to get all promises in writing
- to ask to have the car inspected by an independent mechanic before you buy
- to get a vehicle history report and to visit ftc.gov/usedcars for information on how to get a report, how to check for safety recalls, and other topics
- to ask for a Spanish Buyers Guide if the sale is conducted in Spanish
- the dealer’s contact information, including the contact for complaints
- to remember: spoken promises are difficult to enforce
Dealers in Maine and Wisconsin display their own version of the Buyers Guide.
Be Aware of Add-ons
Add-ons are optional products and services offered by the dealer, like gap insurance, Vehicle Identification Number (VIN) etching, and rustproofing. Often, add-ons can cost thousands of dollars and are mentioned only at the end of an already difficult and time-consuming day at the dealership. Other times, dealers may try to include these and other add-ons in your deal without ever discussing them with you, and without your knowledge or approval. You can usually buy the vehicle you want without any add-ons, and you can buy most add-ons from independent retailers. If you want an add-on from the dealer, be sure that you ask how much you’re paying for each add-on and what you’ll get, and get answers in writing.
Get an Independent Inspection Before You Buy
A vehicle history report is not a substitute for an independent vehicle inspection. A vehicle history report may list accidents and flood damage, but typically it will not list mechanical problems. That’s why it’s always a good idea to pay for an independent mechanic to conduct a mechanical inspection of a used car. A mechanical 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. You’ll have to pay the inspection fee, but it can help you avoid paying for a car with major problems.
A mechanical inspection is different from a safety inspection. Safety inspections usually only focus on things that make a car unsafe to drive.
If the dealer won’t let you take the car off the lot, maybe 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 bring the car for inspection at a facility you choose. If a dealer won’t allow an independent inspection, consider going to another dealer.
Ask the mechanic for a written report with a cost estimate for all necessary repairs. Be sure the report includes the car’s make, model, and VIN. If you decide to buy from the dealer after seeing the inspection’s results, you can use the estimated repair costs to negotiate the price of the car.
Payment Options
When it comes to paying for a car, you have two choices: pay in full or finance over time.
Financing increases the total cost of the car because you’re also paying for the cost of credit, including interest. Consider how much you can pay as a down payment, the monthly payment, the financing period (such as 60 months), and the annual percentage rate (APR).
Low monthly payment offers may be tempting but often have longer loan periods and higher interest rates, which means they’re much more expensive overall. So make sure you know the total cost with financing — not just the monthly payment amount.
Dealers and other places that offer financing — like banks, credit unions, and finance companies — offer a variety of financing terms. Shop around, compare offers, and negotiate the best deal you can.
If you decide to finance the car, make sure you understand the financing agreement before you sign any documents.
- What’s the exact price you're paying for the car?
- What is the total sales price with financing — that is, the sum of the monthly payments plus the down payment?
- What’s the finance charge (the dollar amount the credit will cost you)?
- What’s the APR (which measures the cost of credit as a yearly rate)?
- How many payments will you make — and how much is each one?
Return Policies
Before you buy from a dealer, ask about the dealer’s return policy, get it in writing, and read it carefully.
- Federal law doesn’t require dealers to give you three days to cancel the deal and return the car.
- In some states, dealers must give you the right to cancel. In other states, the right to return the car in a few days for a refund exists only if the dealer chooses to offer this option. Dealers may describe the right to cancel as a “cooling-off” period, a money-back guarantee, or a “no questions asked” return policy. Check with your state attorney general for the rules in your state.
Types of Warranties
The Buyers Guide must show any changes you negotiate in the warranty coverage. It will override anything in your sales contract. So as you negotiate, be sure the dealer makes any changes to the Buyers Guide, as well as in your contract. 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.
There are several types of warranties. It’s important to know their differences.
As Is - No Dealer Warranty means the dealer won’t pay for any problems or needed repairs. You’re assuming the risk of anything that goes wrong after the sale. There are several things to know about “as is” sales:
- When the dealer offers a car “as is,” the box next to the “As Is - No Dealer Warranty” disclosure on the Buyers Guide must be checked.
- If the “as is” box is checked, make sure any verbal promises — like promises to repair the car or cancel the sale if you’re not satisfied — are written on the Buyers Guide. Otherwise, you may have a hard time getting the dealer to follow through. To find out what disclosures are required for “as is” sales in your state, contact your state attorney general