Automobile Financing

Buying a Used Car: Two Options

Is a used car on your horizon?

If you've decided that a used car is your ideal purchase, you have multiple options for shopping, financing and protecting your purchase. In this article we detail dealer and private sales of used cars, and advise you on what to expect.

Dealership

Buying a used car from a dealer is in many ways similar to buying a new car. You have the option of paying in full or financing over time. You have comprehensive vehicle information. And – you have lots of pitfalls to avoid.

First, be well versed on the loan options and payment schedules available to you. Pay close attention to the loan details – the exact price, the amount you're repaying, the finance charge, the APR, and the down payment required.

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Dealers are required by the Federal Trade Commission to post a Buyers Guide in every used car for sale. The Buyers Guide will tell you:

• Whether the vehicle is being sold “as is” or with a warranty
• What percentage of the repair costs a dealer will pay under the warranty
• The major mechanical and electrical systems on the car, including any major problems to watch out for
• To get all promises in writing
• To keep the guide for reference after the sale
• To ask an independent mechanic to inspect the car before purchase

The Buyers Guide acts as law for the sales contract, and overrides any contrary provisions. If the Guide says the car comes with a warranty but the contract says the car is sold “as is,” the dealer must provide the warranty described in the Guide.

Several types of warranties can govern your used car:

• As-is. For all intents and purposes, this car has no warranty.
• Implied Warranty. State laws hold dealers responsible if cars don't meet reasonable quality standards. Usually this applies to the basic functions of a car. A “warranty of merchantability” promises that the car will do what it's supposed to – run. Watch in the contract or other written notices if dealers eliminate this implied warranty with “as is” or “with all faults” notations.
• Unexpired Manufacturer's Warranties. With these, your car is still covered under the original manufacturer warranty. Ensure you have all the information on what's covered, expiration date and miles, and necessary paperwork.
• Service Contracts. Providing repair and maintenance for a set time, service contracts are like warranties, but are not included in the price of the car. Consider these carefully, including the service offered and price.

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Private Owners

Buying a used car from a private owner may be cheaper. But private sellers are not covered by the Federal Trade Commission's rules and don't have to use Buyers Guides. In addition, private sales are usually not covered by the implied warranties given for dealership cars, meaning most used cars will be “as is.”

Prior to making a purchase from a private seller, do your research. Find as much information online about the car's major systems, and use that information as a shopping tool. In addition, don't hesitate to have a privately sold car inspected by your mechanic.

No matter if you buy a car from a private seller or dealer, protect yourself by examining the car thoroughly, test driving it under varied road conditions, inspecting the car professionally, and checking the maintenance record. Following these steps can ensure your used car will be a reliable addition to your life, and not a regrettable lemon.

For more information, visit the Federal Trade Commission's Facts for Used Car Purchases: http://www.ftc.gov/bcp/conline/pubs/autos/usedcar.htm.

A frequent contributor to ERATE® since 2006, Amy Lillard is a freelance writer specializing in turning complex information into useful tips and tricks for readers. For questions or topic suggestions, contact Amy at [email protected].