Federal law requires dealers to put a "Buyer's Guide" sticker on used cars. The Buyer's Guide tells you if there is a warranty, no warranty ("AS IS") or an implied warranty. A warranty is a promise to repair the car if there is something wrong with it. A warranty won't cost you extra money. Good warranties may make the vehicle more valuable.
Examine the Buyer's Guide sticker closely. The dealer might require that work be done at a repair shop it names or the costs won't be covered. It's important to read the warranty so you know what repairs it covers, if it includes both parts and labor, and how long the warranty is in effect. Damage from misuse of the vehicle won't be covered by the warranty.
Dealer warranties can be either limited or full. A limited warranty means you'll have to pay some of the repair costs. A full warranty means the dealer will make the repairs or replace the car if it can't be fixed. An unexpired manufacturer's warranty means the original manufacturer's warranty may still cover the car. Beware of warranties that can't be transferred or that expire automatically when the car is sold to a rental car company. Either of these may mean the car is no longer covered by a warranty. Also look to see if a fee is required to transfer the manufacturer's warranty to a second owner. To find out if the manufacturer's warranty can be transferred ask the dealer to show you the unexpired warranty and contact the manufacturer. You'll need to give them the Vehicle Identification Number (VIN).
If you buy a car "AS IS," then the car doesn't come with any warranty. With few exceptions, you are likely to be responsible for all repairs, even if it breaks down ten minutes after you buy it. If a used car dealer is selling a car "AS IS" the car probably has not been inspected and it's likely the dealer doesn't think it's reliable. Most private party sales don't provide warranties.
An implied warranty is a warranty of merchantability (a warranty that the car will work), and the warranty of fitness for a particular purpose. If a dealer sells you a car and tells you it will haul a trailer, the dealer creates an implied warranty that the car will haul a trailer. Implied warranties are created by Iowa law and come with any used car unless they've been disclaimed in writing. An "AS IS" statement or a "with all faults" statement eliminates any implied warranties.
If the dealer makes verbal promises that aren't in the Buyer's Guide, make sure to get those promises in writing. If the dealer refuses to put the promises in writing, go somewhere else to buy a car. After you buy the car you must be given a copy of the Buyer's Guide. If you and the dealer agreed to make changes to the terms of the purchase and/or the warranty, the Buyer's Guide must be revised to state these changes. The Buyer's Guide is part of your contract with the dealer and overrides contract provisions that conflict with it. For example, if the Buyer's Guide says you get a warranty with the car but the contract says you don't, then you get a warranty because the Buyer's Guide controls.
Used car dealers may also offer a service contract for an extra fee. Such a contract, also called an extended warranty, usually covers more repairs for a longer period of time. It's still important to know what is and isn't covered because many times extended warranties cover too little to be worth their cost. A used car extended warranty usually isn't as good as a new car extended warranty the manufacturer offers. Before buying an extended warranty, find out the following:
- If the extended warranty covers all parts and systems of the vehicle;
- If a deductible is required;
- If routine maintenance has to be done at the dealership;
- If the extended warranty can be cancelled; and
- If the extended warranty covers towing and rental car charges while your car is being repaired