Buying a Used Car
Buying a car is a necessity for many, but it can also be a stressful and overwhelming process. Keep reading for some tips to keep in mind when buying a used car.
Safety and repair issues
First things first, you will want to make sure that you are purchasing a reliable car. If possible, you should get a third-party mechanic to inspect the car before you purchase it. Although this will be a small cost up-front, it could save you a big headache and much more money down the road. Inspections usually cost about $100.
Look under the car. If you cannot get an inspection from a mechanic, you can find an inspection list online and look at the car yourself. Specifically, ask the dealer if you can look under the car. Often, old cars with serious damage will have broken or rusted subframes. A broken subframe indicates that the car was in an accident and can cause many mechanical problems in the future.
You should also get proof of the car’s past repair issues. You can ask the dealer for the car’s maintenance history and request things like a Carfax or AutoCheck report. These documents may not show every problem, but they will give you an idea of what has happened to your car in the past. Be wary if the dealer will not give you these documents. If your car is less than seven years old or has previously been titled as flood or salvage, the dealer is required to give you a damage disclosure statement. Finally, you should ask the dealer if the car has an open recall, and check for yourself by entering the Vehicle Identification Number (VIN) at safercar.gov.
Last, take the car for a test drive. Drive it in different road conditions. For example, drive the car on the highway as well as in stop-and-go traffic, and drive it on hills as well. If you notice something wrong with the vehicle, tell the dealer about it. Do not take the dealer at their word if they say they will fix the problem after you buy the car. Either have them fix it before you purchase or buy a different car.
Paperwork: Documents you are entitled to
Buying a car can involve a lot of paperwork, but it is important to read carefully. When you purchase a car, you will get:
- A purchase agreement. The purchase agreement will likely just be one page describing the car and the price you have agreed to pay for it. It may also include some contract terms and conditions about any warranty that applies, what happens if you fail to make payments on the car, and other items.
- A retail sales installment contract (RISC). If you finance the car at the dealership, you will receive an RISC, which details the terms of the credit given to you to purchase the car. The RISC may also have terms and conditions, similar to the purchase agreement. For more information on financing disclosures, see below.
- A service contract. If you apply for or purchase a service contract, you should receive a copy of it at the time of purchase. A service contract is an agreement that you will pay a certain amount (usually $1000-$2000) in exchange for the right to have your car serviced or repaired for a small copay. Be sure to read the contract to know exactly what kinds of repairs the contract will cover, and whether there is a limit to how much it will cover.
- Odometer disclosures. You should receive a document telling you how many miles are currently on the odometer.
- Damage disclosures. If your car is less than seven years old or has had a salvage title, you will receive a damage disclosure statement.
You may receive other documents at the time of sale as well. It is important to read them all carefully, so that you know exactly what you are paying for.
Paying for the car
Know the fair price of the car you are interested in before you go. You can use websites like Kelley Blue Book or Consumer Reports so that you can get a fair deal.
If you are financing your car purchase, try to finance it through a bank or credit union if you can. You will usually get a more favorable rate than if you finance the car through the dealer you are buying it from.
When you are financing a vehicle, it is important to understand exactly how much you will be paying. A basic understanding of the terms used on the financing contract is helpful. On the RISC, you will see the following phrases:
- Amount financed. This is the total purchase price, including the price of the car and any add-ons you purchase. It does not include your down payment.
- Finance charge. This is how much money the extension of credit will cost you. In other words, it is the amount you will pay in interest.
- Total of payments. This is the finance charge plus the amount financed. It is the total you will pay if you make all the payments required.
- Annual percentage rate (APR). The APR is the cost of the credit as a yearly rate. It is standardized so that you can compare rates across lenders.
These numbers are part of what are called “Truth in Lending” disclosures, which are required when you finance a car. The disclosures should also list how many payments you will make, how much they will be, and how long you will make those payments. Also remember that the APR is negotiable, so it may be worth it to ask the dealer if you can get a lower rate so that you will pay less over time.
Another reason it is a good idea to get financing from a bank or credit union is that it gives you more control over the overall price you pay for the car. Tell the dealer what you are looking to pay, not what you are approved for. For example, if your credit union approves you for a $10,000 loan, but you only want to spend $8,000, tell the dealer you are looking for a car in the $8,000 range. That way he won’t push you to spend up to the limit of what you are approved for.
Also remember that price is often negotiable. It never hurts to bargain for a lower price than what is advertised. Before you walk on to the lot, consider your budget and have a target price and overall payment in mind.
Extras! Beware of add-on charges
The dealer may want to charge you for “add-ons,” which will result in charges additional to the sales price of the car itself. These extra charges may include things like a service contact, a warranty, GAP insurance, or other types of insurance. Be sure to read carefully, because these warranties and insurance policies rarely cover everything you think they will.
These extra charges will be listed on your contract. The dealer may try to get you to focus on the monthly payment and whether it is affordable. But pay attention to the overall cost as well, and don’t pay for extras that you don’t want or need.
The best way to prevent problems with a vehicle is to stop them before they start, using the tips above. However, if you have recently bought a car that is having significant maintenance issues or you can’t afford your payments or are in danger of repossession, please call Iowa Legal Aid to see if you qualify for free legal assistance.
Iowa Legal Aid provides help to low-income Iowans.
To apply for help from Iowa Legal Aid:
If Iowa Legal Aid cannot help, look for an attorney on “Find A Lawyer” on the Iowa State Bar Association website . A private attorney there can talk with you for a fee of $25 for 30 minutes of legal advice.