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Buying a Used Car

 

You need a car but cannot afford a new car? A dealer offers you a car claimed to be barely used-- few miles on the odometer, new tires and only in need of a tune-up for it to run smoothly. A great deal? You had better look closely because odometers are sometimes turned back, cars repainted and tires and brake pedals replaced to hide heavy prior use. And as for the tune-up, unless a third-party garage mechanic tells you the car is fine, those minor problems could be expensive, hard-to-fix headaches.

This article gives a few things to look for when considering buying a used car. You should also look at some of the publications listed as references at the end.

The Federal Trade Commission (FTC) has good information about Buying and Owning a Car, also available in Spanish. It includes short guides and demonstrations on buying, leasing and renting, warranties, repairs, and repossession.

A couple of key points to remember:

  • Car prices are negotiable. Shop around to establish a good price.
  • Do not buy a used car until it has been inspected by a mechanic of your choosing.
  • When buying a used car, remember to leave room in the purchase price for the cost of likely repairs.
  • Do not let salesmen pressure you into spending more money for a car without considering later repairs--especially because
  • Used cars seldom come with good warranties.
  • You are probably better off not getting insurance through the seller
  • Do not buy extended warranties/service contracts. They are expensive and usually have too many exclusions.
  • Research the price and reliability of a used car before you buy it. Consumer Reports Used Car List, published each year in April and in the December year- end Buying Guide, is especially helpful.

What you should bear in mind

A used car may be a good alternative if well-researched for reliability and thoroughly examined. Used cars depreciate more slowly than new cars if well cared for. Note that more conservative cars are more likely to be better cared for than a high horsepower car. Also, luxury cars or sports cars may quickly become old-fashioned and lose more of their value. Furthermore, convenience features like power windows and door locks can be very expensive to repair.

Look at used car lists in Consumer Reports to find out which cars are the most durable, reliable and favored by readers and the writers. Examine the frequency-of-repair records in various publications to find out a car’s reliability.

Research the dealer. Ask experienced and trusted people which dealers are best or call your local consumer protection office and the Better Business Bureau to compare the complaints from consumers about the dealers you consider.

Some places to look for a used car

franchised new-car dealers

These dealers tend to have younger used cars, may offer better warranties, and generally have the repair facilities to back them up. Their sales people generally work on commission and may try to get you to buy a more expensive car to increase their commission. A place like this has a higher overhead and will usually charge more.

independent used car lots

Caution should be used before buying from an independent used car lot. Many are here today, gone tomorrow. This means they are not available to support any warranty given. These lots may offer lower prices but often lack repair facilities. You are better off with more established lots which are concerned about their reputation (e.g. neighborhood service stations).

private sale

In a private sale from the owner, there are no guarantees about the car's condition or need for future repairs. BEWARE: private sellers are not required to put the "Buyer's Guide" label on cars, and the sale is probably not covered by your state's implied warranties. So if there is a problem with the car, you could be stuck with it. Note also that the sale could strain any relationship you may have with the seller, if you have problems with the car later. You will also need to do your own registration of the car.

Financing Your Car

Getting a good rate on your used car purchase is more complicated than it once was. Car dealers often offer teaser rates of say 2.9% that are conditional on not receiving a cash discount. Your banker or credit union may make you a better deal. Also, bankers and credit unions often do not charge the early payment penalties (rule of 78 the rebate) charged by automobile finance companies. The option of car leases also complicates the choices. Generally the easiest comparison is the total amount to be paid for the car at the various sources of finance.

Discrimination Against Women and Minorities By Sales People

A very disturbing, recent study found that women and minorities were charged hundreds of dollars more for a car than a white male. The discrimination was just as bad when the sales person and the shopper were the same gender or race. Ian Ayres, “Fair Driving: Gender and Race Discrimination in Retail Car Negotiations,” 104 Harv. L.Rev. 817(1991). This suggests that women and minorities should get reliable price information and plan to shop until they receive a fair offer.

Good Deals and Bad (Wrecked) Cars

Be wary of dealing with sellers who do not have a reputation for selling reliable used cars. There are used car lots that resell cars that have been wrecked beyond repair, under flood waters, or driven beyond their useful life as taxis or rental cars. The inspection tips in this pamphlet should help you steer away from clunkers. A skilled mechanic’s inspection is your best assurance.

Warranties, As Is and Service Contracts

The Federal Trade Commission (FTC) requires dealers to put a “Buyers Guide” sticker on all used cars. The Buyers Guide tells you if there is a warranty, no warranty (“AS IS”) or implied warranties. (A warranty is a promise to repair the car.) Examine the label closely. If you see “AS IS,” you would not have any war- ranty coverage and would have to pay for all repairs yourself. (Some states do not allow “AS IS” sales and require by law certain warranties. These states include Connecticut, Kansas, Maine, Maryland, Minnesota, Mississippi, New York, Rhode Island, Vermont, West Virginia and Washington, DC.)

If the dealer makes oral promises that are not on the Buyer’s Guide Label, make sure to try to get them in writing. If you can’t, look elsewhere for a car. After you buy the car, you must get a copy of the buyer’s guide. If changes were made on the terms of the purchase warranty, the buyer’s guide must be revised to state these changes. The Buyer’s Guide is a part of your contract with the dealer, and will prevail over any contradictory terms.

Key Points of Warranties and Service Contracts:

Implied warranties are created by local law and automatically come with any used car purchase unless they have been disclaimed in writing (“as is” or a “with all faults” are statements that eliminate implied warranties). Implied warranties are: warranty of merchantability (a warranty that the car will work), warranty of fitness for a particular purpose (for example, a warranty that if the dealer sells you a car telling you it will haul a trailer, that it will be able to haul a trailer).

Dealer warranties can be either full or limited. Limited usually means you will have to pay many repair costs. A full warranty means the dealer will make necessary repairs, replace the car if it cannot be fixed and among other terms, that the implied warranties are not limited. Under federal law, you have a right to see the warranty regardless of whether it is full or limited.

Unexpired manufacturer’s warranties mean that the original manufacturer’s warranty may still cover the car. (Look for this in the “systems covered/duration” section of the Buyer’s Guide label) Beware of warranties that cannot be transferred or which expire automatically when sold to a rental car company. Either of these may mean the car is no longer covered. Also look to see if a fee is required to transfer the manufacturer’s warranty to a second owner. To find out if the warranty is transferable to you, 1) ask the dealer to show you the unexpired warranty, and 2) contact the car’s manufacturer and tell them the car’s Vehicle Identification Number (VIN).

Service contracts may also be offered, but are likely to be a rip-off.

Before you pay extra for a service contract, look at your manufacturer’s and seller’s warranties. You may already have a warranty which covers the same service. Remember that you do not want the price of the service contract to be higher than the cost of servicing or repairing the car. Even though the contract may say that it covers your car “bumper to bumper,” it may exclude more of your car than it covers. Also look to see if there is a deductible, if the service contract covers incidental expenses (towing, renting while waiting to get car back), where can you get the car routinely serviced (locally or only where purchased), and if there are costs for canceling the service contract.

The service contract may run longer than you need. If so, see if you can transfer it later or if you could get a shorter contract for less money.

If you do chose this option, get written confirmation of the service contract.

Some Key Tips For Inspecting The Car

Paperwork

Always get the registration materials and the Vehicle Identification Number (VIN). Once you have the VIN you can contact either the manufacturer or the National HighwayTraffic Safety Administration (NHTSA) to get more information about the car. (NHTSA toll-free Auto Safety Hotline: 1-800-424-9393)

In addition to the Buyer’s Guide label, look at service and repair bills, any stickers on the door jamb and in the warranty booklet to see how frequently the car was brought in for routine and other maintenance.

The Outside of the Car

Check car before it is warmed up. This makes it harder for seller to hide problems with the engine or power steering

  1. Fluid levels and leaks: Check for these when the engine is cold. See if there are any puddles underneath car. If the car has an automatic transmission, the transmission fluid should be pink and not have a burnt smell. Check the oil. If it is white and foamy there could be an expensive coolant leak. Open radiator cap to check coolant--it should be green, not muddy. Look out for any sign of large amounts of lubricants on components under the hood.
  2. Body integrity: Beware if metal of car is wavy or ripply instead of smooth. Check to see if the trim molding is uneven. Scrutinize the car paint to see if it is mismatched or over-sprayed to cover rust or collision repairs. Knock on the car’s body panels to check for filler which could have been used due to problems resulting from an accident or rust. Particularly look for rust on wheel wells and rocker panels, door edges and the floor of the trunk.
  3. 3. Tires: If the car has been driven for less than 25,000 miles it should have original tires. Be suspicious if the tires have been replaced before then. The seller could be hiding problems with alignment or suspension. Look to see if tires have an uneven tread. If so, it could mean poor alignment or suspension damage. Grab the top of tire and shake it to see if there is play in the tire or any sound which could mean problems with wheel bearings or suspension joints. Look on the inside of the tires facing the car to make sure they weren’t turned around to hide their bad side, and also to see if there is any sign of leaking brake fluid

Inside the Car

  1. Smell inside the car to see if there is a musty odor which could mean leaks or, much worse, flood damage.
  2. Examine the seats, safety belts and pedals for wear and tear. These could indicate if the car was heavily used or poorly maintained.
  3. Check all the controls on the dashboard (wipers, horn, turn signals, lights, power accessories, locks and windows). Make sure warning signals on dashboard come on when you start the car and then go off.
  4. Be alert to possible odometer fraud. Cars usually are driven between 10,000 to 12,000 miles per year. Be wary if the mileage is much less. Look at the tires and brake pedal and any oil change or service stickers to see if they are consistent with the mileage on the odometer. Possible signs of heavy use include: worn or brand new pedals, sagging driver’s seat, original tires replaced before car has been driven 25,000 miles. Also examine dashboard around the odometer for scratches or missing screws. Make sure all the numbers on the odometer line up evenly.

Test Driving

Before turning on ignition, make sure steering wheel does not move more than 2” before the wheels turn.

While driving, check:

  1. Steering. The car should not pull to one side and steering wheel should not shake.
  2. Engine. The engine should run and idle smoothly.
  3. Transmission. The transmission should run quietly and shift easily
  4. Brakes. Make sure brakes do not squeal when you use them.
  5. Suspension. Drive in tight turns and over potholes to see how much the car bounces or if there are any rumbling noises. When car is stopped, push down on corners of car to check for any bouncing that would indicate the struts and shock absorbers need to be replaced.
  6. Alignment. Have a friend see if the front and rear wheels line up when you drive the car--depending on how it moves to one side, it could have a bent frame or need alignment. When car is still, park on a level road to see if front and back tires are aligned and the car is level.
  7. Exhaust. Blue exhaust smoke or billowy white smoke indicate costly problems. Also make sure you do not smell the exhaust from inside the car.
  8. Comfort and Quiet. If the car rattles, it may need suspension work. If it sputters, the exhaust system could be leaking.

Negotiating a Price

Do not begin negotiating the price until you have tested the car. Take it on a test drive on many different kinds of roads and traffic. Find out about the car’s history, if it has been regularly maintained or in an accident. Write down information the seller gives you and don’t be afraid to compare your notes on various cars in front of the seller. When examining the car, tell the owner of problems you see and also make note of them.

Know the maximum amount you are willing to pay and stick to it. If you need a loan, think about how much money you can pay up-front and how much you will be able to pay monthly. Look at different loan terms to find out what would best suit your needs. You may want lower monthly payments even though in the end you will have paid more interest.

Do some research to find out what would be a fair price for the car. Good sources for used car prices are the most recent publication by Consumer Reports on used cars (either April or December) and the N.A.D.A Official Used Car Guide published monthly by the National Automobile Dealers Association. You may want to consider paying $1.75 per minute to talk to Consumer Reports “Used-Car Price Service” to find out regional prices, but make sure to have at hand all the information you will need to give them.

Once you decide to negotiate, start with a lower offer than what you want to pay. The dealer assumes your first offer is lower than what you are willing to pay. This tactic also gives you some room to bargain for the price you want or to negotiate the addition or removal of contract terms.

When that offer is rejected (as it probably will be), next offer half way between your first offer and the maximum amount you decided earlier you wanted to pay. You can also continue to bargain for the kind of financing, warranties or any other terms that concern you. If you are unsure, or are stuck in the negotiation, feel free to ask to look at the car again or walk away.

When you make your final offer, be clear that it is the most you will pay and is really what you believe the car is worth. If you believe you made a fair offer, have faith in your judgment and stick with that price. Do not be persuaded to go back and pay more.

Contact If Problems

If you have problems with the car the Federal Trade Commission (FTC) recommends you first try to work it out with your dealer, but if not successful to contact your local Better Business Bureau or state or local consumer protection agency or the consumer protection division of the state Attorney General’s office. You may also want to try using a dispute resolution organization to help you arbitrate your difficulties with the dealer. If all else fails, you may want to litigate in small claims court or federal court if appropriate.

References for Consumers
Books and Magazine Articles
Telephone Numbers and Online Complaint forms

Produced by National Consumer Law Center, MLRI
Last updated July 2012


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