Buying a Used Car From a Dealer: The Checks to Make Before You Sign

A used car can be a smart buy.

It can also be one of the biggest purchases most people make after a home.

The Federal Trade Commission notes that some industry reports put the average used car price close to $28,000.

With that much money involved, a little homework goes a long way.

The best time to protect yourself is before you sign anything.

This guide follows the advice in the FTC's guide to buying a used car from a dealer.

Do your homework first

Start with what you actually need.

Think about how you will use the car, how many people it must carry and what you can afford.

The purchase price is only part of the cost.

Registration, insurance, gas and maintenance all add up every month.

Research the models you like, including repair records, safety tests and mileage.

Once you have a few cars in mind, ask dealers for the out-the-door price in writing before you visit.

The FTC suggests using those written quotes for three things.

  • Confirm that advertised prices, discounts and rebates are really applied.
  • Confirm that the car is actually on the lot.
  • Spot add-ons and charges that might appear at the last minute.

Check out the dealer, too

The car is not the only thing worth researching.

Contact your state and local consumer protection agencies about unresolved complaints against the dealer.

Search online for the dealer's name together with words like scam, review or complaint.

A pattern of similar complaints is a reason to shop somewhere else.

Read the Buyers Guide

Dealers must display a Buyers Guide in every used car they offer for sale.

They must also give it to you after the sale.

You are entitled to a Buyers Guide if you buy a used car online, too.

This document is one of the most useful pieces of paper in the whole deal.

According to the FTC, the Buyers Guide tells you several important things.

  • Whether the car is sold as is or with a warranty.
  • What percentage of repair costs the dealer will pay under any warranty.
  • The major mechanical and electrical systems, with some problems to watch for.
  • A reminder to get all promises in writing.
  • A reminder to ask for an independent inspection before you buy.
  • The dealer's contact information, including who handles complaints.

You can also ask for a Spanish Buyers Guide if the sale is conducted in Spanish.

Dealers in Maine and Wisconsin use their own version of the guide.

Get a vehicle history report

A vehicle history report can show a car's past that a quick look will not reveal.

It may list accidents, flood damage and title problems.

The FTC points buyers to its used car pages for how to get a report and check for safety recalls.

A report is helpful, but it is not the whole story.

The FTC warns that history reports typically do not list mechanical problems.

Pay for an independent inspection

This is the step many buyers skip, and it is often the most valuable one.

The FTC recommends paying an independent mechanic to inspect a used car before you buy.

That advice holds even if the dealer calls the car certified and sells it with a warranty.

A mechanical inspection is not the same as a safety inspection.

A safety inspection usually checks only the things that make a car unsafe to drive.

A mechanical inspection looks deeper at the condition of the car's systems.

If the dealer will not let the car leave the lot, look for a mobile inspection service.

Another option is asking the dealer to bring the car to a shop you choose.

If a dealer refuses any independent inspection, the FTC suggests considering another dealer.

Ask the mechanic for a written report with a cost estimate for any needed repairs.

Make sure the report lists the car's make, model and Vehicle Identification Number, or VIN.

You can use those repair estimates to negotiate the price.

Watch out for add-ons

Add-ons are optional products and services offered by the dealer.

Examples include gap insurance, VIN etching and rustproofing.

The FTC says add-ons can cost thousands of dollars.

They are often mentioned at the end of a long, tiring day at the dealership.

Sometimes dealers include them in the deal without discussing them at all.

You can usually buy the car without any add-ons.

Many add-ons are also available from independent sellers.

If you do want one, ask exactly what it costs and what you get, and get the answers in writing.

Understand the payment

You can pay in full or finance the car over time.

Financing raises the total cost because you also pay for credit, including interest.

A low monthly payment can be misleading.

The FTC notes that such offers often come with longer loans and higher interest rates.

That can make the car much more expensive overall.

Shop around for financing from banks, credit unions and other lenders, not only the dealer.

Before you sign, make sure you can answer these questions.

  • What is the exact price of the car?
  • What is the total sales price with financing, including the down payment?
  • What is the finance charge in dollars?
  • What is the annual percentage rate, or APR?
  • How many payments will you make, and how much is each one?

Know the return rules

Many buyers believe they always get three days to change their mind.

The FTC says federal law does not require dealers to give you that right.

Some states require a right to cancel, but in others it exists only if the dealer offers it.

Ask about the return policy before you buy, get it in writing and read it carefully.

Your state attorney general can tell you the rules where you live.

As is, implied and written warranties

The Buyers Guide shows which kind of protection comes with the car.

An as is sale means the dealer will not pay for problems after the sale.

If the as is box is checked, make sure any spoken promises are written on the Buyers Guide.

If a car has no written warranty and is not sold as is, implied warranties may still apply.

The FTC explains that implied warranty coverage varies by state and can last as long as four years.

The Buyers Guide also overrides the sales contract.

If the guide promises a warranty and the contract says as is, the dealer must give you the warranty.

Dealers may also offer service contracts, sometimes called extended warranties.

A service contract is not a warranty, so read the coverage, the deductible and the cancellation terms before you pay.

If something goes wrong after the sale

Follow the instructions in your warranty or service contract first.

If you cannot settle a dispute with the dealer, you still have options.

  • Contact your state attorney general's consumer protection office.
  • Use a dispute resolution program, which some warranties require first.
  • File a claim in small claims court for smaller amounts.

You can also report a problem dealer to the FTC at ReportFraud.ftc.gov.

A short checklist for the lot

  • Written out-the-door price before you visit.
  • Buyers Guide read and kept.
  • Vehicle history report checked.
  • Independent mechanical inspection with a written estimate.
  • No add-ons you did not ask for.
  • Total cost of financing, not just the monthly payment.
  • Return policy and every promise in writing.

Taking an extra day to do these checks can save you thousands of dollars.

It can also save you from a car that spends more time in the shop than on the road.

Sources and Further Reading