How to Protect Yourself: Buying a Car

How to Protect Yourself: Buying a Car

Other than a home, a car purchase is generally the largest financial transaction many consumers will make. However, shopping for the best deal at an automobile dealership has historically been a difficult experience for many consumers. When purchasing a car from a dealership, consider the following:

When financing, find the best interest rate.

The federal Truth-in-Lending Law requires lenders to disclose the annual percentage rate (APR), which is the cost of your credit expressed as a yearly rate. These rates may vary significantly. By comparing the APRs offered by various lenders, you can begin to compare deals. Check with local banks and credit unions and compare those rates to the APR offered by the dealer. Be aware that car sales agents may earn additional commissions if they can convince you to finance your car through their dealership. Besides comparing the APR in financing offers, you should determine the amount of any down payment or trade-in allowance, the number and amount of monthly payments and the total of those payments.

Know that specially advertised low interest rates may have strings attached.

Sometimes dealers seek to entice customers by offering very low financing rates, or even zero percent interest for a specified time period. If you are looking into a car with advertised low rates, beware of the following:

• You may be required to make a large down payment to qualify;
• You may be required to pay the sticker price, which is the manufacturer’s suggested retail price (MSRP) for your new car, rather than be able to negotiate a lower price;
• You may be required to repay the loan in a shorter period of time, such as 24 months;
• You may be required to purchase additional options or you may be asked to sign over a manufacturer’s rebate to the dealer; or
• The zero percent offer may come with a very high APR which kicks in after the grace period, and you may forfeit the zero percent interest incentive and be required to pay a back-interest penalty if you fail to make your scheduled payments when due.

Do not be swayed by advertisements.

Read the fine print in vehicle ads. Advertisements often have limitations and restrictions on promotions. For example, know that sometimes dealers advertise very low interest rates for specific cars or models, but may not be willing to negotiate on the price of these cars or may require a large down payment for a buyer to qualify for these low rates. Call the dealership and ask about the restrictions and limitations.

Shop around.

Armed with knowledge about what you want and how much you can expect to spend, you will be in a stronger position to shop around or to consult car-buying or broker services to obtain the best available deal. If the dealership does not have the vehicle with the options you desire on its lot, consider ordering your new car to avoid paying extra for unwanted options. However, because dealers also want to sell their current inventory quickly, you may be able to negotiate a good deal if an in-stock car will meet your needs.

If seeking a used car, check out private sales.

You may save money by buying a used car from a private individual, such as through the Classified section of your local newspaper or online. However, you should be aware that private sellers do not have to provide you with the Buyer's Guide required by the Federal Trade Commission’s Used Vehicle Rule, and do not provide implied warranties under state law. Therefore, it may be even more important to obtain warranty promises in writing and to have the car inspected by an independent mechanic prior to purchase.

Research your options.

Check online or with your local library or bookstore for reference material on various car models, options, their comparative costs and their track record for reliability. Check the Classified section of your local newspaper as well as online to compare prices. Determine the value of the vehicle you wish to buy before negotiating the purchase price. Check the National Automobile Dealers Association’s (NADA) Guides, Edmunds and Kelley Blue Book to determine a fair asking price for the vehicle.

Understand the true total cost of the vehicle.

The real cost of a car includes more than its purchase price. Consider the vehicle's reliability. An unreliable car may cost you much more in frequent repairs, not to mention the aggravation and time lost from work you may experience. Research the frequency of repair and maintenance costs on the models you are considering. The U.S. National Highway Transportation’s Safety Administration offers information on recalls at www.nhtsa.gov. Fuel consumption can vary wildly across different vehicle years, makes and models. Consider the average miles per gallon of the vehicle and size of the tank to determine how much you should expect to pay at the pump each month.

Negotiate.

The sticker price is the manufacturer's suggested retail price (MSRP). The “S” in MSRP stands for suggested, and most dealers are willing to bargain on their profit margin. Negotiate the total purchase price rather than the monthly payment. Know that it is harder for the dealership to add in extra costs and fees if the only negotiating point is the purchase price. Dealerships can often up-sell and include optional products or services in the purchase price. If there are unwanted or unnecessary options listed, ask whether they can be removed and what savings are realized by doing so. Negotiate all terms before signing and ensure that any terms or guarantees offered by the salesperson are present in the contract. Understand what will be due at signing, what the monthly payments will be and what you will end up paying over the life of the loan.

Determine the value of your trade-in.

Check reference materials to help determine the value of your trade-in vehicle. You will usually fare better by selling your car privately. Consider advertising in a local newspaper or online. If this option does not work for you, obtain your best possible purchase price of the new vehicle from the dealer before discussing the possibility of a trade.

An extended service contract may not be necessary.

The dealer is likely to try to sell you a service contract to provide for repair of specified parts or problems. These service contracts may overlap the initial warranty coverage included by the vehicle manufacturer in the price of the car. Read the contract carefully to determine what repairs are covered, the extent of the coverage (parts, labor, deductibles, exclusions, etc.) and the other terms and conditions.

Understand Florida’s Lemon Law.

Florida’s Lemon Law applies to new or demonstrator vehicles sold or long-term leased in the state. The dealer is required to provide you with a booklet published by the Attorney General's office that explains your rights under Florida's Lemon Law. Read this carefully, especially if you begin to experience chronic problems with your new vehicle. Call the Lemon Law hotline at (800)-321-5366 for further assistance.

The majority of Floridians seeking to acquire a vehicle will purchase a used car as opposed to a new one. However, the desire to save substantial cash and drive away in a dream car can quickly become a nightmare of breakdowns and expensive repairs. If you are thinking about purchasing a used car, consider the following:

Ensure you are buying from a reputable used car dealer.

Check with the Better Business Bureau at www.bbb.org to learn if it has received complaints against a particular used car dealer. Never rely solely upon oral promises of a salesman which will be difficult or impossible to enforce; ask the salesman to put it in writing. If you are considering buying a specific car, insist upon having the vehicle inspected by an independent mechanic before you buy it. Refusal to allow an independent inspection should be a clear warning, and you should consider taking your business elsewhere. Ask if the vehicle has ever been in an accident.

When buying a used car, check the Buyer’s Guide.

Federal law requires dealers to affix a Buyer's Guide sticker on the window of each used car. The sticker will inform you as to whether the car comes with a warranty and, if so what specific protections the dealer will provide; whether the car is sold “as is” (with no warranties); 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 with any vehicle. If the deal was conducted in Spanish, you are entitled to retain a Spanish-language version of the Buyer's Guide.

Understand what warranty, if any, comes with the vehicle.

Buying a car “as is” disclaims all warranties. You should not expect any legal protection if the car is a “lemon.” In Florida, there is no Used Car Lemon Law. If the dealer does not affirmatively disclaim all warranties in writing, you will be covered at least by implied warranties of merchantability (the product will do what it is supposed to do), fitness for a particular purpose (the dealer’s advice that the car will be suitable for a particular use, such as hauling a trailer), and a good title. If the dealer provides its own written warranty, read the terms carefully to determine what repairs are covered, the extent of coverage (parts, labor, deductibles, exclusions) and the other terms and conditions.

File a complaint.

To file a complaint against an automobile dealership, contact the Attorney General’s Office online at www.myfloridalegal.com or by phone at 1-866-9-NO-SCAM. Additionally, you may file a complaint with the Federal Trade Commission online using their complaint assistant portal at www.ftc.gov/complaint. You may also wish to file a complaint against the dealership with the Better Business Bureau online at www.bbb.org.

You may also file a complaint with the Florida Department of Agriculture and Consumer Services, which acts as the State's consumer complaint clearinghouse, at www.floridaconsumerhelp.com.