Buying a used car: what you should know and do before purchasing
- Do not buy a car before doing research
- Make sure you take your time to look over all the terms of your contract before you sign it
- Don't let anyone push you into buying a car
Where can I buy a used car?
There are many places that you can buy a used car. Places you can buy a used car include: a new car dealership, a used car dealership, a private party, used car superstores such as CarMax, and rental car lots such as Enterprise or Hertz. You may want to visit more than one dealer.
You are usually better off buying a used car from a new car dealer rather than a used car dealer. Most new car dealers only keep the better cars that they take as trade-ins, they give better warranties, and they have better service facilities. The exception is used car superstores like CarMax—they sell reliable used cars, offer warranties, and have good service centers.
You can also find used cars in the newspaper or on the internet. Popular used car websites include: Ebay Motors, Cars.com, AutoTrader.com, and Autobytel.com. You can also read the advertisements in newspapers or visit local dealers.
What kind of research should I do before buying a car? How can I find more information on cars?
The moreknowledge you have about the car you want to purchase, the less likely a dealer can take advantage of you. Have the information with you so you can make the right choices on the car you have in mind without getting taken advantage of.
Before you start to research cars, ask yourself some questions:
- Which cars do I like best?
- What are the different options that are available?
- What is a fair price for the car? Can I afford it?
- What safety features does the car have?
- Is the car right for my lifestyle?
- What is the car's history of maintenance, problems, and accidents?
- What are the pros and cons of a particular make and model of car?
There are many different ways you can research cars:
- Talk to other individuals who have purchased a used car.
- Look in magazines like Consumer Reports that provide basic price figures and repair records for various car models. Every year, the April issue of Consumer Reports feature articles on used cars. The reports include fair prices and repair records of most used cars. Your local library will have copies of Consumer Reports.
You should also consult the Car Book. The Car Book provides information on safety, reliability, fuel economy and other important features.
Another great source to use would be the Kelley Blue Book. The Kelley Blue Book is used to determine the fair market value of the car. You can get a copy of this book at a bookstore, the library, or the Kelley Blue Book website.
How should I "test" the seller to make sure I'm getting a good deal?
Prior to test-driving the actual car, learn about the seller over the phone. You should do this for two reasons:
- To find out as much as possible about a car before you go and see it.
- To get a sense of the seller as this will prevent you from making the mistake of buying a bad car.
The phone interview can give you information on the car before you see it and can help you rule out certain dealers and sellers.
Questions to ask when calling the dealer or seller:
- Why are you selling the car? (If it's a private seller)
- How many miles does the car have?
- What is the condition of the car?
- What special features does it have?
- How many people have owned the car?
- Has the car ever been in an accident?
- Can I see the service records for the car?
- How much are you asking for the car?
Tip: The "Odometer" is the gauge that says how many miles the car has traveled. Check to see if the odometer reading on the car is the same reading that the seller told you; If not, that is a warning sign that he or she is not telling you the important facts about the car.
How do I make sure a car is in good condition?
You will not be able to tell the condition of a car just by looking at it. You need to test-drive it and have it inspected by a mechanic. A reputable dealer or an honest private seller will be okay with you having a mechanic inspect the car.
There are Automobile Inspection Service companies that will inspect the car for you. You can find companies on the internet or in the telephone yellow pages by searching for "Automobile Inspection" or "Automobile Diagnostics Service."
These companies will check the major systems of the car (engine, brakes, drive train, etc.) and write you a report on their findings. The inspection might cost you $50 to $100. You can also ask a friend who is an auto mechanic or any other reputable mechanic.
Another way to inspect a car that you are interested in is to get its vehicle identification number (VIN) and visit Carfax on the internet. At the Carfax website, you can get a vehicle history report about the car for about $30. This report will show if the vehicle has been involved in a serious accident or other disasters like a flood.
What financial issues should I think about when buying a car?
There are two ways to pay for your car:
- You can pay the entire amount of the car in full.
- You can finance the car.
When financing a car, you make monthly payments until the car is paid in full. If you choose to finance the car, the total cost of the car increases because you are also paying for the cost of credit.
You have to consider how much money you can afford to pay as a down payment and monthly payments. If you fail to make monthly payments, the car might get repossessed.
If you finance the car, the two most important numbers are the finance charge and the annual percentage rate (APR). The finance charge tells you in dollars how much you are paying for credit. The APR tells you the interest rate of the loan. It is a fee that is charged by the lender to the borrower for the use of the borrowed money. Check out APRs among different dealers to compare credit rates. If one dealer is charging 9% APR and another is charging 14% APR, you will save some money by buying the car at the lower APR.
Should I pay the price the dealer first asks?
No. Almost all used car dealers expect you to bargain about the price. Dealers may be willing to drop their prices between 10 and 20 percent, sometimes more.
- Shop around to get the best possible price by comparing models and prices in ads and at dealerships.
- Check publications at a library, bookstore, or Internet that discuss used car prices
- Tell the dealer you want to know the "best price" he can give you on the car so that you can compare it to other sellers' prices.
- Never tell the dealer the price another car dealer has given you
- Leave any dealership that does not give you a fair price, that treats you rudely, or that puts pressure on you to sign a contract before you are sure.
What should I know about warranties?
A warranty is usually a written promise that the dealer will fix the car for a certain period of time, like 30 days or 60 days. Some dealers charge for a warranty. It is better to have a written warranty than to not have one. You should always ask about the warranty on the car.
Ask the dealer questions like:
- How long is the warranty?
- What does it cover?
- What is not covered?
- If the contract says the car is being sold "As Is" this means there is no warranty.
Be careful of some warranties, like so-called "50-50" warranties, where the dealer agrees to pay 50% of parts and labor charges if the car breaks down in the first 30 days. Sometimes the dealer just charges twice the normal cost of repair so the 50-50 warranty ends up with the buyer actually paying 100% of the repair costs!
The law sometimes gives you an "implied warranty." That's a warranty that your car should work for a reasonable period of time. There is an implied warranty in any car sale unless the seller sells the car "As is" or if the contract clearly states there are no implied warranties.
If a vehicle has a limited warranty, make sure to get the dealer to put all the terms of the warranty in writing. Make sure the written warranty states everything that is covered as well as how long the warranty lasts.
The safest rule to follow on warranties is to get everything in writing.
What is a service contract?
This agreement states that a service contract company, not the dealer, will fix the car for a set period of time for specified problems. Think twice before you buy a service contract. Service contracts are usually expensive and only cover problems with major items. It is often hard to get the service contract company to follow the agreement.
What should I do if I want to trade in my car when I buy my used car?
If you are considering trading in your old car:
- Research the value of your car. You can use the Kelley Blue Book Website;
- Bring a copy of the title with you when you visit the dealer;
- If the dealer offers you too little on your old car, you can sell it yourself; and
- Talk about a trade-in with the dealer only after you've reached the best possible price for the car you're buying.
Myths about buying a car
- I have a ‘Three-Day Right to cancel' a used car purchase. Not true.
- The ‘Lemon Law' will help me if my used car needs repairs after purchase. Not true. The Lemon Law is a law that protects consumers who buy new cars.
- All cars come with a warranty. Not true. Many used cars are sold without any warranties.
Problems that may arise during sale
What do I do if the salesman pressures me to buy a car?
If a salesman tries to put pressure on you to buy, tell them that you are not going to make a decision that day. Explain that you will have to check out other dealers before you decide which car to buy. Sometimes the salesperson will say the car might not be there tomorrow but that's just to get you to buy it faster. If you are uncomfortable with the salesman, ask for another one. If they won't give you a different salesperson, leave.
What if a dealer or salesman makes a promise about a car but doesn't keep the promise?
- You can sue the dealer who lies or breaks their promise.
- For example, if the salesman says that the car has a six-cylinder engine but it turns out the car has a four-cylinder engine, the buyer could sue the dealer.
How do I protect myself from a dealer who makes false promises?
If the dealer makes a promise that is important to you, have them put it in writing in the contract. If you have the promise in the written contract, you can take the dealer to court if they don't keep the promise.
Financing the car
How do I finance the car?
Usually, the dealer offers to get financing for you. You don't have to use the finance company that the dealer recommends. You may be able to find a better deal from a different dealer.
- Compare the financing that other lenders offer you with the financing the dealer offers you.
- Compare the APR (interest rate)
- Compare the length of the loan. This can range from 12 months up to 72 months.
- Find out how much the monthly payments will be. The will be based off the price of the car and APR.
Check the current interest rates for used car loans at banks, credit unions, or lending referral companies like LendingTree on the internet.
What does it cost to finance a car?
When you buy a car on credit, the lender must give you information about the cost of financing the car. You have a right to receive this information in writing before you sign the contract to finance the car.
If the loan is for a longer time period, the monthly payment will be lower. But the longer the loan, the more total interest you will have to pay.
Will my car payment be the same every month?
Not necessarily, the contract must tell you the amount of each of your payments, the number of payments, and when payments are due.
For most contracts, you make a payment of the same amount each month and a final payment of about the same amount. But some contracts make you pay a regular monthly payment and then a much larger amount, a "balloon payment," for your last payment.
Watch out for large balloon payments. Illinois law allows auto sales contracts to use a balloon payment, as long as it is stated within the contract.
The contract must give you three options when the balloon payment is due:
- You can pay off the balance you owe.
- You can refinance the balance on terms like those when you signed the contract.
- You may return the car to the seller
Do I get my down payment back if my credit application is rejected?
Yes, the dealer can't charge you anything if you cooperated when the credit companies rejected your application to finance the car. Many dealers will try to keep your down payment or otherwise charge you when the credit application is rejected. See the bottom of this article to find out where you can get help if this happens.
What can I do if I have bad credit and can't get financed?
The first step to take is to find out if your credit report is accurate.
You may obtain your credit report from a credit bureau. The three major consumer reporting companies are Equifax, Experian, and Trans Union. You have a right to a free credit report every year from each of the major agencies and can receive these reports through Annual Credit Reporting Request Services. Do not contact the companies individually because the free reports are only available through the Annual Credit Reporting Request Services.
If you find an error in the report, you have the right to let the credit bureau know that you disagree with the information, and to ask for an investigation. The credit bureau has 30 days to investigate and, if a mistake is found, they must fix the mistake. To contact a credit bureau, call: Equifax (800) 685-1111; Experian (888) 397-3742; Trans Union (800) 916-8800.
What if I don't like the decision of the credit bureau?
If you are not happy with the investigation of the credit bureau, you have the right to send a statement (100 words or less) to the credit bureau giving your side of the story. The credit bureau must put your statement in your credit report. That statement will be sent to creditors who ask for your report.
Can I remove information on my credit report that I don't like?
No. If the information in your report is correct, you cannot have that information removed. Negative information usually can stay in your report for up to seven years.
To get more information about credit reports, check the Federal Trade Commission publication, "Building a Better Credit Report," by calling 1-877-FTC-HELP or by seeing the Federal Trade Commission Facts for Consumers on their website.
What about insurance on my car?
Illinois requires drivers to have car insurance to cover injuries to other people and their cars. This is called liability coverage.
MYTH: I have liability insurance that is required by the State of Illinois so my car is covered if I am in an accident. Not true. Liability insurance required by the state only covers the other cars in an accident--not the driver's car. Collision or comprehensive insurance covers the driver's auto.
Other options for insurance would be:
- Collision coverage covers damaged to your own vehicle in an accident.
- Comprehensive coverage covers theft and fire damage to your car
The different categories of insurance are as follows:
What is covered?
|Liability||Medical, rehabilitation, funeral bills, pain and suffering, legal costs for you and your passengers, and replacement of other person's car||Yes|
|Uninsured/Underinsured Motorist||Medical, rehabilitation, and funeral bills for you and your passengers from an accident by a motorist with no or insufficient insurance||Yes|
|Collision and Comprehensive||Repair or replacement of your car in case of an accident or if it is stolen||Maybe, if you have leased or financed your car|
|Personal Injury/medical||Lost wages, medical bills for you and your passengers||Optional|
|Rental Reimbursement||Rental-car payment while your car is in the repair shop||Optional|
You can also use the Internet to search for free insurance quotes from reputable insurance companies. Some sites you can visit are InsWeb and NetQuote. Major insurance companies such as Allstate, Progressive, State Farm and Geico would also be useful websites.
What is credit insurance?
Credit Life Insurance will pay off the contract if you die. Credit Accident and Health Insurance will pay off the contract if you become sick or are injured and unable to work.
Credit insurance might be a good idea for people who are over 50 years old and have dependents. This type of insurance is expensive for the coverage it provides, so don't buy it unless you need it.
Problems with the car after purchase
What do you do if your car needs repair?
- Find out if the car has a written warranty or service contract.
- Follow the guidelines on how to use the warranty or service contract.
- It may require that you bring it to the dealer where you bought the car for repairs.
What if the dealer does not want to repair the car?
First, find out why the dealer will not repair the car.
Write a certified letter to the dealer outlining when you bought the car, the car problems that require repair, when they began, and why you believe that the dealer must make the repairs.
If you bought the car "As Is" the dealer does not have to repair your car. The dealer may still have made promises to you during the sale that might amount to a warranty. Consult an attorney to determine your rights.
If a dealer refuses to fix the car as required by either the service contract or warranty, there are other legal options that are available. You will probably need a lawyer to do this. See the end of this article for where to find a lawyer.
Where to Get Help
In addition, you can try the Illinois Attorney General, Consumer Protection Division, or call toll-free: (800) 386-5438; Spanish: (866) 310-8398; TTY:(800) 964-3013.
There are many consumer websites that offer advice in car purchasing.