Buying a Used Car
This year, more than 16 million Americans will buy a used car. If that's what
you are planning, this guide may help you.
It explains your protections under the FTC's Used Car Rule and offers some
shopping suggestions, even if you are not buying from a used car dealer.
Before you begin looking at used cars, think about what car models and options
you want and how much you are able or willing to spend. You can learn about car
models, options, and prices by reading newspaper ads, both display and
classified. Also, your local library and book stores have magazines that discuss
and compare car models, options, and costs, as well as provide information about
frequency-of-repair records, safety tests, and mileage. The U.S. Department of
Transportation Auto Safety Hotline (800-424-9393) will tell you if a car model
has ever been recalled and send you information about that recall.
Before You Look For a Used Car, Consider
Costs. Remember, the real cost of a car includes more than the purchase price:
it includes loan terms, such as interest rates and the length of the loan. If
you plan to finance the car, you need to know how much money you can put down
and how much you can pay monthly. Dealers and lending institutions offer a
variety of interest rates and payment schedules, so you will want to shop for
terms.
If, for example, you need low monthly payments, consider making a large down
payment or getting financing that will stretch your payments over five years,
rather than the usual three. Of course, this longer payment period means paying
more interest and a higher total cost.
Reliability. You can learn how reliable a model is by checking in publications
for the frequency-of-repair records. Find out what models have repair facilities
in a location convenient to you and if parts are readily available at the repair
facility.
Dealer Reputation. Find out from experienced people whose opinions you respect
which dealers in your area have good reputations for sales and service. You may
wish to call your local consumer protection office and the Better Business
Bureau to find out if they have any complaints against particular dealers.
If You Buy a Used Car From a Dealer
If you go to a dealer for a used car, look for a "Buyers Guide"
sticker on the window of each car. The Buyers Guide, required by the Federal
Trade Commission's Used Car Rule, gives you important information and
suggestions to consider. The Buyers Guide tells you:
* Whether the vehicle comes with a warranty and, if so, what specific protection
the dealer will provide;
* Whether the vehicle comes with no warranty ("as is") or with implied
warranties only;
* That you should ask to have the car inspected by an independent mechanic
before you buy;
* That you should get all promises in writing; and
* What some of the major problems are that may occur in any car.
The Used Car Rule requires dealers to post the Buyers Guide on all used
vehicles, including automobiles, light-duty vans, and light-duty trucks.
"Demonstrator" cars also must have Buyers Guides. But Buyers Guides do
not have to be posted on motorcycles and most recreational vehicles. Individuals
selling fewer than six cars a year are not required to post Buyers Guides.
Whenever you purchase a used car from a dealer, you should receive the original
or an identical copy of the Buyers Guide that appeared in the window of the
vehicle you bought. The Buyers Guide must reflect any changes in warranty
coverage that you may have negotiated with the dealer. It also becomes a part of
your sales contract and overrides any contrary provisions that may be in that
contract.
As you read this brochure, you can refer to the Buyers Guide, shown on pages 6
through 8.
"As Is--No Warranty"
About one-half of all used cars sold by dealers come "as is," which
means there is no express or implied warranty. If you buy a car "as
is" and have problems with it, you must pay for any repairs yourself. When
the dealer offers a vehicle for sale "as is," the box next to the
"As Is--No Warranty" disclosure on the Buyers Guide will be checked.
If this box is checked but the dealer makes oral promises to repair the vehicle,
have the dealer put those promises in writing on the Buyers Guide.
Some states (Connecticut, Kansas, Maine, Maryland, Massachusetts, Minnesota,
Mississippi, New York, Rhode Island, Vermont, West Virginia and the District of
Columbia) do not permit "as is" sales for most or all used motor
vehicles.
"Implied Warranties Only"
Implied warranties exist under all state laws and come with almost every
purchase from a used car dealer, unless the dealer tells you in writing that
implied warranties do not apply. Usually, dealers use the words "as
is" or "with all faults" to disclaim implied warranties. Most
states require the use of specific words.
"If the dealer makes oral promises, have the dealer put those promises in
writing."
The "warranty of merchantability" is the most common type of implied
warranty. This means that the seller promises that the product will do what it
is supposed to do. For example, a car will run, a toaster will toast.
Another type of implied warranty is the "warranty of fitness for a
particular purpose." This applies when you buy a vehicle on the dealer's
advice that it is suitable for a particular use. For example, a dealer who
suggests that you buy a specific vehicle for hauling a trailer warrants, in
effect, that the vehicle will be suitable for hauling a trailer.
If you buy a vehicle with a written warranty, but problems arise that the
warranty does not cover, you may still be protected by implied warranties. Any
limitation on the duration of implied warranties must appear on the written
warranty.
In those states that do not permit "as is" sales by dealers, or if the
dealer offers a vehicle with only implied warranties, a disclosure entitled
"Implied Warranties Only" will be printed on the Buyers Guide in place
of the "As Is" disclosure. The box next to this disclosure would be
checked if the dealer chooses to sell the car with implied warranties and no
written warranty. A copy of the Buyers Guide with the "Implied Warranties
Only" disclosure is shown on page 7.
Dealer Warranties
When dealers offer a written warranty on a used vehicle, they must fill in the
warranty portion of the Buyers Guide. Because the terms and conditions of
written warranties can vary widely, you may find it useful to compare warranty
terms on cars or negotiate warranty coverage.
Dealers may offer a full or limited warranty on all or some of the systems or
components of the vehicle. A "full" warranty provides the following
terms and conditions:
* Warranty service will be provided to anyone who owns the vehicle during the
warranty period when a problem is reported.
* Warranty service will be provided free of charge, including such costs as
returning the vehicle or removing and reinstalling a system covered by the
warranty, when necessary.
* At your choice, the dealer will provide either a replacement or a full refund
if the dealer is unable, after a reasonable number of tries, to repair the
vehicle or a system covered by the warranty.
* Warranty service is provided without requiring you to perform any reasonable
duty as a precondition for receiving service, except notifying the dealer that
service is needed.
* No limit is placed on the duration of implied warranties.
If any one of the above statements is not true, then the warranty is
"limited." A "full" or "limited" warranty need not
cover the entire vehicle. The dealer may specify only certain systems for
coverage under a warranty. Most used car warranties are "limited,"
which usually means you will have to pay some of the repair costs. By giving a
"limited" warranty, the dealer is telling you that there are some
costs or responsibilities that the dealer will not assume for systems covered by
the warranty.
If the dealer offers a full or limited warranty, the dealer must provide the
following information in the "Warranty" section of the Buyers Guide:
* The percentage of the repair cost that the dealer will pay. For example,
"the dealer will pay 100% of the labor and 100% 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 contains a list of
descriptive names for the major systems of an automobile where problems may
occur;
* The duration of the warranty for each covered system. For example, "30
days or 1,000 miles, whichever occurs first"; and
* Whether a deductible applies.
Under another federal law, the Magnuson-Moss Warranty Act, you have a right to
see a copy of the dealer's warranty before a purchase. Examine the warranty
carefully before you buy to see what is covered and what is not. It contains
more detailed information than the Buyers Guide, such as a step-by-step
explanation of hoax to obtain repairs if a covered system or component
malfunctions.
Also check who is legally responsible for fulfilling the terms of the warranty.
If a third party is responsible, the best way to avoid potential problems is to
make sure that the third party is reputable and insured. You can do this by
asking the company for the name of their insurer and then checking its
performance record with your local Better Business Bureau.
Unexpired Manufacturer's Warranties
If the used vehicle is still covered by the manufacturer's original warranty,
the dealer may include it in the "systems covered/duration" section of
the Buyers Guide. This does not necessarily mean that the. dealer offers a
warranty in addition to the manufacturer's. In some cases, a manufacturer's
original warranty can be transferred to a second owner only upon payment of a
fee. If you have any questions, ask the dealer to let you examine any unexpired
warranty on the vehicle.
Service Contracts
When you buy a car, you may be offered a service contract, which you can buy for
an extra cost. In deciding whether you want a service contract, consider:
* Whether the warranty that comes with your car already covers the same repairs
that you would get under the service contract or whether the service contract
protection begins after the warranty runs out. Does the service contract extend
longer than the time you expect to own the car? If so, is the service contract
transferable or is a shorter contract available?
* Whether the vehicle is likely to need repairs and their potential costs. The
value of a service contract is determined by whether the cost of repairs is
likely to be greater than the price you pay for the service contract protection.
* Whether the service contract covers all parts and systems of the car. Check
out all claims carefully. Claims that coverage is "bumper to bumper"
may not be entirely accurate.
* Whether there is a deductible required, and, if so, consider the amount and
terms of the deductible.
* Whether the contract covers incidental expenses, such as towing and the costs
of a rental car while your car is being serviced.
* Whether repairs and routine maintenance, such as oil changes, can be performed
at locations other than the dealership from which you purchased the contract.
* Whether there is a cancellation and refund policy for the service contract,
and what the costs are if you cancel.
* Whether 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 service contracts that are backed
by a third party. If a third party is responsible, you may wish to ask if the
company is insured and to check the company's performance with your local Better
Business Bureau.
If a service contract is offered, the dealer must mark the box provided on the
Buyers Guide, except in those states that regulate service contracts under their
insurance laws. If the Buyers Guide does not include a reference to a service
contract, and you are interested, ask the salesperson whether one is available.
When you purchase a service contract from the dealer within 90 days of buying
the vehicle, federal law prohibits the dealer from disclaiming implied
warranties on the systems covered in that service contract. For example, if you
buy a car "as is," the car normally will not be covered by implied
warranties.
But if you buy a service contract covering the engine, you automatically get
implied warranties on the engine, which may give you protection beyond the scope
of the service contract. Make sure you receive a written confirmation that your
service contract is in effect.
Spoken Promises
The Buyers Guide warns consumers not to rely on spoken promises. Oral promises
are difficult, if not impossible, to enforce. Make sure all promises you want
are written into the Buyers Guide and keep it.
Pre-Purchase Independent Inspection
The Buyers Guide also suggests you ask the dealer whether you may have the
vehicle inspected by your own mechanic. Some dealers will let you take the car
off the lot to get an independent inspection. Others may have reasons, such as
insurance restrictions, for denying this request. In such a case, the dealer may
permit you to bring an independent mechanic to the used car on the lot. A dealer
who refuses to allow any independent inspection may be telling you something
about the condition of the car.
Remember, a good-looking car, or a car that comes with a warranty, does not
necessarily run well. An independent inspection lets you find out about the
mechanical condition of the vehicle before you buy it. Although an inspection
fee by a mechanic may seem high, when you compare it to the price of the car, it
can be worth the cost.
Vehicle Systems
The Buyers Guide includes a list of the 14 major systems of an automobile and
some of the major problems that may occur in these systems. You may find this
list helpful to evaluate the mechanical condition of the vehicle. The list also
may be useful when comparing warranties offered on different cars or by
different dealers.
Dealer Identification and Consumer Complaint Information
On the back of the Buyers Guide, you will find the name and address of the
dealership. In the space below that, you will find the name and telephone number
of the person at the dealership to contact if you have any complaints after the
sale.
Spanish Language Sales
If you buy a used car and the sales talk is conducted in Spanish, you are
entitled to see and keep a Spanish-language version of the Buyers Guide.
If You Buy a Used Car From a Private Party
Many cars are available privately, such as through classified ads in a
newspaper. If you are shopping for a car from an individual, you should
understand several differences between sales made by individuals and by dealers.
* Private sellers generally are not covered by the Used Car Rule and therefore,
do not have to use the Buyers Guide. However, you still can follow the Guide's
suggestions. For example, you can refer to the list of potential problems
displayed on the back of the Buyers Guide shown in this brochure. In addition,
ask the seller whether you may have the vehicle inspected by your own mechanic
and whether you may take it on a test drive.
* Private sales usually are not covered by the "implied warranties" of
state law. So, a private sale probably will be on an "as is" basis,
unless your contract with the seller specifically provides otherwise. If you
have a written contract, the seller must live up to the promises stated in the
contract.
"An independent inspection lets you find out about the mechanical condition
of the vehicle before you buy it."
Depending on its age, 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, or there may be limitations or costs for a
transfer. Before you purchase the car, ask the seller to let you examine any
warranty or service contract on the vehicle.
* Many states require that dealers, but not individuals, ensure that their
vehicles will pass state inspection or carry a minimum warranty before they
offer them for sale. Ask your state's attorney general's office or a local
consumer protection office about the requirements on individuals and on dealers
in your state.
Before You Buy Any Used Car
If you are interested in a particular car, ask the dealer or owner if you can
take it on a test drive. Try to drive the car under many different conditions,
such as on hills, highways, and in stop-and-go traffic.
You also may want to ask the dealer or owner whether the car has ever been in an
accident. Find out as much as you can about the car's prior history and
maintenance record. Getting an independent inspection by an experienced mechanic
is a good idea before purchasing any used car.
Be prepared to negotiate. Many dealers and individuals are willing to bargain on
price and/or on warranty coverage.
If You Have Problems
If something goes wrong with your car and you think that it is covered by a
warranty (either express or implied) or a service contract, refer to the terms
of the warranty or contract for instructions on how to get service. If a dispute
arises concerning the problem, there are several steps you can take.
Try To Work It Out With The Dealer
First, try to resolve the problem with the salesperson or, if necessary, speak
with the owner of the dealership. Many problems can be resolved at this level.
However, if you believe that you are entitled to service, but the dealer
disagrees, you can take other steps.
If your warranty is backed by a car manufacturer and you have a dispute about
either service or coverage, contact the local representative of the
manufacturer. This local or "zone" representative has the authority to
adjust and make decisions about warranty service and repairs to satisfy
customers.
Some manufacturers also are willing to repair certain problems in specific
models free of charge, 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.
Other Approaches You Can Try
If you cannot get satisfaction from the dealer or from a manufacturer's zone
representative, contact the Better Business Bureau or a state agency, such as
the office of the attorney general, the department of motor vehicles, or a
consumer protection office. Many states also have county and city offices that
intervene or mediate on behalf of individual consumers to resolve complaints.
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, you can consider going to small claims
court, where you can resolve disputes involving small amounts of money for a low
cost, 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 attorney's fees and
other court costs. A lawyer can advise you if this law applies to your
situation.
For Further Help
If you want additional information about warranties or service contracts or
about new car leasing or buying, send for these free FTC brochures:
* Warranties
* Service Contracts
* Car Ads: Low-Interest Loans and Other Offers
* New Car Buying Guide
* A Consumer Guide to Vehicle Leasing
Write: Public Reference, Federal Trade Commission, Washington, DC 20580.
If you have additional questions about the Used Car Rule, contact the Federal
Trade Commission Office nearest you.
Federal Trade Commission Headquarters
6th & Pennsylvania Avenue, N.W.
Washington, DC 20580
(202) 326-2222
TDD: (202) 326-2502
Federal Trade Commission Regional Offices
1718 Peachtree Street, N.W.
Atlanta, Georgia 30367
(404) 347-4836
10 Causeway Street
Boston, Massachusetts 02222
(617) 565-7240
55 East Monroe Street
Chicago, Illinois 60603
(312) 353-4423
668 Euclid Avenue
Cleveland, Ohio 44114
(216) 522-4207
100 N. Central Expressway
Dallas, Texas 75201
(214) 767-5501
1405 Curtis Street
Denver, Colorado 80202
(303) 844-2271
11000 Wilshire Boulevard
Los Angeles, California 90024
(213) 209-7575
150 William Street
New York, New York 10038
(212) 264-1207
901 Market Street
San Francisco, California 94103
(415) 744-7920
915 Second Avenue
Seattle, Washington 98174
(206) 553-4656
