Buying a Used Car
Prepared by the National Consumer Law Center
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.
HERE ARE 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
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 urable, 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 all your local consumer protection office and the Better Business Bureau to ompare 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 re 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
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
Service contracts may also be offered, but are likely to be a
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
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
Traffic 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
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.
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. 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
Smell inside the car to see if there is a musty odor which could mean leaks
or, much worse, flood damage.
Examine the seats, safety belts and pedals for wear and tear. These could
indicate if the car was heavily used or poorly maintained.
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.
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.
Before turning on ignition, make sure steering wheel does not move more than 2”
before the wheels turn.
While driving, check:
Steering. The car should not pull to one side and steering wheel should not
Engine. The engine should run and idle smoothly. 2.
Transmission. The transmission should run quietly and shift easily 3.
Brakes. Make sure brakes do not squeal when you use them. 4.
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.
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.
Exhaust. Blue exhaust smoke or billowy white smoke indicate costly
problems. Also make sure you do not smell the exhaust from inside the car.
Comfort and Quiet. If the car rattles, it may need suspension work. If it
sputters, the exhaust system could be leaking.
References for Consumers Federal Trade commission Brochure: “Buying a Used
Car,” Federal Trade Commission Office of Consumer/Business Education,
Washington, D.C. 20580.
Books and Magazine Articles: “Consumer Reports 1994 Buying Guide
“(December) and April issue of Consumer Reports magazine. N.A.D.A. Official
Used Car Guide, National Automobile Dealers Association (published monthly).
The Used Car Book: 1994−1995 Edition, by Jack Gillis with Karen Fierst and Jay
Einhorn (Harper Perennial). Consumer Guide Auto Series: Used Cars Rating Guide,
1995 Edition. National Consumer Law Center, “Buying or Leasing a Car”
(Consumer Concerns Series 1995)
Telephone Numbers: National Traffic Safety Administration Auto Safety Hotline:
1−800−424−9393; in D.C 366−0123 Consumer Reports Used−car Price Service
($1.75! minute): 1−900−446−1120
References for Lawyers
National Consumer Law Center, Sales of Goods and Services Chaps. 1, 2,17, 34,
and 35.2 and Appx H (2d ed. 1989 & 1994 Supp.) National Consumer Law Center,
Unfair and Deceptive Trade Practices Chap. 4.9.4 and 5.4.3 (3d ed. 1991 and Supp.)
National Consumer Law Center, The Cost of Credit: Regulation and Legal
Challenges Chap. 22.214.171.124, 11.2.2 and 126.96.36.199 (1995) National Consumer Law
Center, Odometer Law
©Copyright 2004 Neighborhoodlaw.org
Federal Trade Commission n Bureau of Consumer Protection n Office of Consumer and Business Education
.I can.t wait to get my own car..
Sound familiar? Before you start shopping for a used car with a teenager you know, do some homework.
It may save you serious money. Consider driving habits, what the car will be used for, and your
budget. Research models, options, costs, repair records, safety tests, and mileage through libraries, book
stores, and web sites.
Cash or Credit?
Once you.ve settled on a particular car, you have two payment options: paying in full or financing over
time. Financing increases the total cost of the car because you.re also paying for the cost of credit, including
interest and other loan costs. You also must consider how much money you can put down, the monthly
payment, the loan term, and the Annual Percentage Rate (APR). Rates usually are higher and loan periods
shorter on used cars than on new ones. Dealers and lenders offer a variety of loan terms. Shop around and
help your teenager negotiate the best possible deal. Be cautious about financing offers for first-time buyers.
They can require a big down payment and a high APR. To get a lower rate, you may decide to cosign the
loan for your teen. If money is tight, you might consider paying cash for a less expensive car than you first
had in mind.
Dealer or Private Sale?
The Federal Trade Commission.s Used Car Rule requires dealers to post a Buyers Guide
in every used car they offer for sale. The Buyers Guide gives a great deal of information, including:
. 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 fact that spoken promises are difficult to enforce; and
. the major mechanical and electrical systems on the car, including some of the major problems you
should look out for.
The Buyers Guide also tells you to:
. get all promises in writing;
. keep the Buyers Guide for reference after the sale; and
. ask to have the car inspected by an independent mechanic before the purchase.
Buying a car from a private individual is different from buying from a dealer. That.s because private sales
generally aren.t covered by the Used Car Rule, or by .implied warranties. of state law. A private sale
probably will be .as is..you.ll have to pay for anything that goes wrong after the sale.
Buying a Used Car
Before You Buy...
Whether you buy a used car from a dealer or an individual:
. examine the car using an inspection checklist. You can find checklists in magazines and books and on
Internet sites that deal with used cars;
. test drive the car under varied road conditions.on hills, highways, and in stop-and-go-traffic;
. ask for the car.s maintenance record from the owner, dealer, or repair shop; and
. hire a mechanic to inspect the car.
Other Costs to Consider
There.s more to buying a car than just paying for it. Other items to budget for include insurance, gas,
maintenance and repairs. Here are some tips to help you save money:
. Compare coverage and premiums with several insurance companies. Buy from a low-price, licensed
insurer, or add your teen to your policy. Some companies offer discounts to students with good grades.
Remind your teenager that it pays to drive safely and observe speed limits. Traffic violations can cost
money in tickets and higher insurance premiums.
. Pump your own gas and use the octane level your owner.s manual specifies.
. Keep your car in safe driving condition. Following the vehicle.s maintenance schedule can help forestall
. Look for a mechanic who is certified, well established, and communicates well about realistic repair
options and costs. Find one who has done good work for someone you know.
For More Information
The FTC publishes a series of free publications about auto-related subjects. For a free copy of Best Sellers,
a complete list of FTC publications, contact: Consumer Response Center, Federal Trade Commission,
Washington, D.C. 20580; 202-FTC-HELP (382-4357). TDD: 202-326-2502. Or visit us at www.ftc.gov.