How to Buy a Used Car and Not Get Ripped Off
Know What You Should Pay Before You Pay ItDo your homework before going to a car dealer. Before you go, you should already know the normal selling price for the specific model of used vehicle you are looking for and what your trade in vehicle is really worth. Prices normally depend on numerous factors, including mileage, options, any title brand, and overall condition. Knowing the normal retail price gives you a starting point before you start negotiating. You can find out vehicle retail prices by looking for price guides at your local library, at a bookstore, or on Internet sites such as edmunds.com or kelleybluebook.com. There is no 3 day right to cancel the deal unless the dealer writes it down on the sales contract, so be careful. Dealers may say they have a money-back guarantee, or a "no questions asked" return policy, but if it is not in writing, it does not exist. Before you sign anything, ask about the dealer's return policy, get it in writing, and read it carefully.
Get a Copy of Your Credit Report and Shop Around for Financing FirstIf you are planning on financing your used car purchase, get a copy of your credit report. Then, shop around for the best financing. You can get finance quotes from your bank, credit union, and internet sites such as bankrate.com. By getting your credit report and shopping for the lowest finance rate, you can avoid the dealer's often unreasonably high interest rate when buying a used car. Car dealers offer financing because they make money off it. When a car dealer arranges financing for a consumer, the interest rate charged the consumer will often include a "kickback" payment to the dealer that the consumer ends up paying through a higher interest rate. Dealers never tell the customer how much extra profit the dealership is making for arranging financing. If you finance through the dealer, don't forget to negotiate the interest rate too. The dealer usually has a spread of 3 points they can use and they often start off with the highest number in that range. You can bargain downward.
Have a Pre-Purchase Inspection Done Before You Buy Any VehicleOnce you find a vehicle you are interest in, get it inspectede by an independent mechanic. Unlike a safety inspection, a mechanical inspection is designed to determine the overall reliability or mechanical condition of a vehicle. To find a pre-purchase inspection facility, you should check the Yellow Pages under "Automotive Diagnostic Service" or ask friends and relatives for recommendations. Look for facilities that display certifications like an Automotive Service Excellence (ASE) seal. If the dealer will not let you take the car off the lot, be suspicious. You can also try to find a mobile inspection service that will go to the dealership. You will have to pay the inspection fee but most of the time you will get the vehicle inspection report in writing and that can help you negotiate the price.
Get a Vehicle History ReportYou should have the dealer provide you with the vehicle's prior owner history, sometimes called a "Title History." Title history reports often contain important information, including whether a car has been salvaged, returned as a lemon, rebuilt, or otherwise damaged. Title history reports may also disclose odometer reading problems or accident damage. If a car dealer does not have access to a title history report or refuses to give you one, then you should get the report on your own before you buy. All you need is the vehicle's Vehicle Identification Number ("VIN number") and you can see that at the bottom of windshield in front of the steering wheel area. You can then get a title history report online from companies like Carfax.com or AutoCheck.com for a small fee. These reports don't disclose everything and they aren't foolproof, but they can help you undestand what you are really buying before you buy it.
Look for the Buyer Guide Window Sticker and What It SaysThe Federal Trade Commission's (FTC) Used Car Rule requires all car dealers to post a Buyers Guide window sticker in every used car offered for sale. When you buy a used car from a dealer, get the original Buyers Guide that was posted in the vehicle or a copy of that guide. The Buyers Guide must reflect any negotiated changes in warranty coverage and it becomes part of your sales contract. The Buyers Guide must tell you whether the vehicle is being sold "as is" or with a warranty. When a vehicle is sold "as is," there is no warranty or service contract offered with the purchase. It is important to get all promises in writing when purchasing a vehicle "as is." For instance, if the dealer promises to repair the vehicle or cancel the sale in an offer for a vehicle being sold "as is." The Buyers Guide must also indicate what percentage, if any, of the repair costs is covered by the dealer if they give you a warranty. Always insist that you get some warranty coverage.
Don't Let the Dealer Bump Your Trade InSome car dealers try to make you think you are getting more for your trade in by inflating the trade in allowance and, at the same time, inflating the selling price for the vehicle you are buying. In the car business this is called the "double bump." This is especially likely to happen when you owe more money on your trade-in than it is worth (car dealers call this being "under water" or "in the bucket") and the dealer makes it look like your trade in is worth more than what is owed on it so the lender will think there is equity in your trade in that you are using as a down payment, when the whole thing is really just a lie. That lie actually gets you deeper in debt. Also, once you make a deal, call the loan company on your trade in vehicle and make sure that your old loan was promptly paid off because until it gets paid, you are the one who is liable for the loan payments on it. Dealers sometimes delay paying off a trade in so they can have more cash on hand.
After the Sale: It Ain't Over Yet FolksAfter you negotiate the sale price of your new used car, the salesperson usually will turn you over to the "Finance Manager." Don't let the fancy title fool you though because this is just another salesperson, whose job is to sell you more products and options such as gap insurance, credit life and disability insurance, maintenance plan, window etching and more. These extra options are almost always of little value and high cost, and that means high profit to the dealer. Often a car dealer will tell a customer that the bank or lender "requires" you to have one or more of these items; it is a violation of federal law for a lender to require you to purchase any of these extra items. If the dealer says that to you, then tell them you want it in writing and the dealer will almost always drop the matter. Also, even if you say no, some car dealers will trick you and put some of these items in your deal anyway, so read the final paperwork carefully before you sign anything.
The Problem With Colander Warranties: If You Want an Extended Warranty, Be Careful to Buy a Real One.Most dealers will try to sell you an extended warranty with the car. Be careful. There are two kinds of extended warranties. One is backed by a vehicle manufacturer (it's a "real" extended warranty), and the other is often backed by nothing more than a post office box. In fact, they used to be referred to as "P. O. Box Warranties" for that very reason. When those places started having an actual store front, the nickname became "colander warranties." A colander is a kitchen strainer ... in other words, it doesn't hold anything. Car dealers often push the colander warranties because there's no price limit on them and buyers often don't realize there is a difference. Be very careful when a car dealer's "Finance manager" (who is really just another salesperson) pulls out their "menu" of "additional services" that contains these sort of "soft add-on's" (they call them that because they don't add any real "hard" value for the buyer at all). This is where dealers make most of their profit.
Watch Out for the Yo Yo Scam (How a Spot Delivery Can Put You on the Spot)If the dealer does not tell you that your deal is "final" then you should not sign a contract and you should drive the new used car home. Car dealers very often have consumers sign a "spot delivery" or "bailment" document in a deal and if you see that document, then that means your financing is NOT approved yet. You could get a call from the dealer days later saying either pay more money down or bring it back. Of course by then your family, friends and neighbors have all seen the car and will wonder why you "lost" it, and the car dealer may be using that fact as leverage to force you to pay them more money. This practice is so common it has its own nickname in the business: the yo yo. In some parts of the country it is also called de-horsing or de-wheeling. The "gimmee back" call may claim the loan fell thru for all sorts of reasons and it may or may not even be true. Before you leave the lot, make the dealer put in writing that your financing is approved and final.
I Was Careful and Got Ripped Off Anyway. Now What Do I Do?In spite of being careful, it can happen anyway because there are lots of ways to deceive you without you ever knowing it happened. If it does, you need to talk to a local Consumer Law attorney who deals with this kind of case. Call your local attorney's Bar Association and ask for a referral to a Consumer Law attorney near you or you can go to this web site page for a Free Online 50 State National List of Consumer Law Lawyers (http://www.ohiolemonlaw.com/ocll-site/ocll-locate_local.shtml) and find one near you (lawyers don't pay to get listed here and most of them are members of the only national association for Consumer Law lawyers, NACA.net). But act quickly because for every legal right you have, there is only a limited amount of time to actually file a lawsuit in court or your rights expire (it's called the statute of limitations), so don't waste your time getting to a Consumer Law attorney and finding out what your rights are.
Additional resources provided by the author
- What your trade in is worth
- What cars sell for
- Research financing rates
- Car Dealer's Slang Dictionary
- Pre sale Vehicle Inspection Service
- Vehicle History Reports from Carfax
- Vehicle History Reports from AutoCheck
- See a Used Car Window Sticker Buyer Guide Form
- The Negative Equity Car Dealer Scam
- Is Window Etching No Theft Protection?
- Rate Your Car Dealer Here
- The Negative Equity Ripoff Explained
- The Truth About Used Car Lemon Laws