Consumer Law

Consumer Law Car Purchase FAQ

Q: Do I have to purchase credit insurance to get a car loan?

  • A:Possibly. Some dealers and lenders may ask you to buy credit insurance to pay off your loan if you die or become disabled. Before you buy credit insurance, consider the cost, and whether it's worthwhile. Check your existing policies to avoid duplicating benefits.

    Credit insurance isn't required by federal law. If your dealer requires you to buy credit insurance for car financing, it must be included in the cost of credit. That is, it must be reflected in the APR. Your state Attorney General also may have requirements about credit insurance. Check with your state Insurance Commissioner or state consumer protection agency.

Q: Doesn't a service contract cover the same items as a warranty?

  • A:Service contracts cover the repair of certain car parts or problems. These contracts are offered by manufacturers, dealers, or independent companies. They may or may not provide coverage beyond the manufacturer's warranty.

    Remember that a warranty is included in the price of the car. A service contract costs extra.

    If you buy a service contract from the dealer within 90 days of buying a used vehicle, federal law prohibits the dealer from eliminating implied warranties on the systems covered in the contract.

    For example, if you buy a car "as is," the car normally isn't covered by implied warranties. But if you buy a service contract covering the engine, you automatically get implied warranties on the engine. These may give you protection beyond the scope of the service contract.

    Make sure you get written confirmation that your service contract is in effect.

Q: I drove the car off the lot and just a few days and miles down the road, the car just quit running. Can I do anything?

  • A:State laws hold dealers responsible if cars they sell don't meet reasonable quality standards. These obligations are called implied warranties - unspoken, unwritten promises from the seller to the buyer. But dealers in most states can use the words "as is" or "with all faults" in a written notice to buyers to eliminate implied warranties. There is no specified time period for implied warranties.

    The most common type of implied warranty is the warranty of merchantability. The seller promises that the product offered for sale will do what it's supposed to. That a car will run is an example of a warranty of merchantability. This promise applies to the basic functions of a car. It doesn't cover everything that could go wrong.

    Breakdowns and other problems after the sale don't prove the seller breached the warranty of merchantability. A breach occurs only if the buyer can prove that a defect existed at the time of sale. A problem that occurs after the sale may be the result of a defect that existed at the time of sale or not. As a result, a dealer's liability is judged case-by-case.

    A warranty of fitness for a particular purpose applies when you buy a vehicle based on the dealer's advice that it is suitable for a particular use. For example, a dealer who suggests you buy a specific vehicle for hauling a trailer in effect is promising that the vehicle will be suitable for that purpose.

    If you have a written warranty that doesn't cover your problems, you still may have coverage through implied warranties. That's because when a dealer sells a vehicle with a written warranty or service contract, implied warranties are included automatically. The dealer can't delete this protection. Any limit on an implied warranty's time must be included on the written warranty.

Q: Is there a "cooling off period" where I can return a car I purchased?

  • A:Dealers aren't required by law to give used car buyers a three-day right to cancel. The right to return the car in a few days for a refund exists only if the dealer grants this privilege to buyers. Dealers may describe the right to cancel as a "cooling-off" period, a money-back guarantee or a "no questions asked" return policy. Before you purchase from a dealer, ask about the dealer's return policy, get it in writing and read it carefully.

Q: What can I do if I'm VERY unsatisfied with the car I purchased?

  • A:Try to work it out with the dealer. Talk with the salesperson or the owner of the dealership. Many problems can be resolved at this level. However, if you believe you're entitled to service but the dealer disagrees, you can take other steps.

    If your warranty is backed by a car manufacturer, contact the manufacturer's local representative. The local or zone representative can provide warranty service and repairs to satisfy customers. Also, some car makers will repair certain problems in specific models for free, even if a warranty doesn't cover the problem. Ask the manufacturer's zone representative or the service department of a franchised dealership whether there is such a policy for your car.

    Contact your local Better Business Bureau, state Attorney General or the Department of Motor Vehicles. You also might consider using a dispute resolution organization to arbitrate your disagreement. Under the terms of many warranties, this may be a required first step before you can sue the dealer or manufacturer. Check your warranty to see if this is the case.

    If you bought your car from a franchised dealer, you may be able to seek mediation through the Automotive Consumer Action Program ("AUTOCAP"). This is a dispute resolution program coordinated nationally by the National Automobile Dealers Association and sponsored through state and local dealer associations in many cities. Check with the dealer association in your area to see if they operate a mediation program.

    If none of these steps is successful, small claims court is an option. Here, you can resolve disputes involving small amounts of money, often without an attorney. The clerk of your local small claims court can tell you how to file a suit and what the dollar limit is in your state.

    The Magnuson-Moss Warranty Act also may be helpful. Under this federal law, you can sue based on breach of express warranties, implied warranties or a service contract. If successful, you can recover reasonable attorneys' fees and other court costs. A lawyer can tell you if this law applies.

Q: What does a full warranty cover?

  • A:A full warranty includes the following terms and conditions:
    • Anyone who owns the vehicle during the warranty period is entitled to warranty service
    • Warranty service is provided free of charge, including such costs as removing and reinstalling a covered system
    • You have the choice of a replacement or a full refund if, after a reasonable number of tries, the dealer can't repair the vehicle or a covered system
    • You only have to tell the dealer that warranty service is needed in order to get it, unless the dealer can prove that it's reasonable to require you to do more
    • Implied warranties have no time limits

    If any of these statements doesn't apply, the warranty is limited.

    A full or limited warranty doesn't have to cover the entire vehicle. The dealer may specify that only certain systems are covered. Some parts or systems may be covered by a full warranty; others by a limited warranty.

Q: What guarantees does a private seller have to provide? A warranty? Anything?

  • A:The Federal Trade Commission's Used Car Rule requires professional dealers to post a Buyers Guide before offering a used car for sale. The Buyers Guide gives warranty and other information about the vehicle.

    Private sellers generally aren't covered by the Used Car Rule. However, you can use the Guide's list of an auto's major systems as a shopping tool. You can also ask the seller if you can have the vehicle inspected by your mechanic.

    Private sales usually aren't covered by the "implied warranties" of state law. That means a private sale will probably be on an "as is" basis, unless your purchase agreement with the seller specifically states otherwise.

    If you have a written contract, the seller must live up to the promises stated in the contract. The car also may be covered by a manufacturer's warranty or a separately purchased service contract. However, warranties and service contracts may not be transferable, and other limits or costs may apply. Before you buy the car, ask to review the warranty or service contract.

    Many states don't require individuals to ensure that their vehicles will pass state inspection or carry a minimum warranty before they offer them for sale. Ask your state Attorney General's office or local consumer protection agency about the requirements in your state.

Q: What should I look out for if I'm considering a car loan?

  • A:If you decide to finance, make sure you understand the following aspects of the loan agreement before you sign any documents:

    • The exact price you're paying for the vehicle
    • The amount you're financing
    • The finance charge (the dollar amount the credit will cost you)
    • The APR (a measure of the cost of credit, expressed as a yearly rate)
    • The number and amount of payments
    • The total sales price (the sum of the monthly payments plus the down payment)

Q: What's the difference between the MSRP and Dealer Sticker Price?

  • A:Monroney Sticker Price ("MSRP") shows the:

    • Base price
    • Manufacturer's installed options with the manufacturer's suggested retail price
    • Manufacturer's transportation charge
    • Fuel economy (mileage)

    Affixed to the car window, this label is required by federal law, and may be removed only by the purchaser.

    Dealer Sticker Price, usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, such as additional dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating.

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