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

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 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

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

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.

1.

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.

2.

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

3.

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.

1.

Examine the seats, safety belts and pedals for wear and tear. These could

indicate if the car was heavily used or poorly maintained.

2.

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.

3.

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.

4.

Test Driving

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

shake.

1.

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.

5.

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.

6.

Exhaust. Blue exhaust smoke or billowy white smoke indicate costly

problems. Also make sure you do not smell the exhaust from inside the car.

7.

Comfort and Quiet. If the car rattles, it may need suspension work. If it

sputters, the exhaust system could be leaking.

8.

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. 9.2.3.2, 11.2.2 and 7.4.6.1 (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

Consumer Alert

.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

April 1998

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

costly repairs.

. 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.