Buying a Car Used or New

Whether you're buying a new car or a used car, a little research up front can help ensure that you get the best value for your money. You will want to shop around to become familiar with the full range of options available to you, not only in terms of the features available, but also the prices and deals available from different sellers.

Buying a car is a major purchase; it is also usually a complex transaction involving a contract, financing, and a warranty. You will want to think carefully about each of these aspects of your decision. You will also want to be aware of some specific protections are available to you under the law.

Shopping for a Car

First you must choose between buying a new car and buying a used car. A new car will come with a longer warranty and no history of abuse or neglect. It will cost more, other things being equal. On the other hand, new cars depreciate (lose value) almost immediately when they leave the new car lot...which means that if you can find a well cared-for used car, it might be a good bargain.

Consider the price of the car. This sounds obvious, but car dealers, new or used, may tempt you with a low monthly payment. You should be sure to look at the price of the car, everything included. The amount of the monthly payment depends on the price of the car as well as the terms of the financing. A low monthly payment may be tempting, but it is not necessarily a good deal. Suppose the car is over-priced, the interest is too high, and the loan is stretched out over too many years? That could be just about the worst possible deal!

Newspaper ads and the Internet can give you an idea of price ranges. And the public library has consumer publications such as the "Blue Books" used by dealers to determine price ranges for used cars. Many people sell their used cars themselves. Buying from the owner often means paying a lower price than you can get from a dealer. And buying from the owner means you can learn the car's complete repair history. Dealers, on the other hand, may offer services such as financing or warranties.

Whether you buy directly from the owner or from a dealer, never buy a used car without:

• taking it for a test drive;
• taking it to a mechanic of your choosing or having a mechanic visit the lot for a pre-sale inspection.

If the seller won't let you do either of these things, do not buy the car.

Closing the Deal

Make sure that the final price you base your decision on is the final price of the car, with all the features you want...and nothing else. The Attorney General sued 14 car dealerships in 2004 for requiring consumers to purchase fuel and maintenance discount coupons that they didn't want, adding in some cases hundreds of dollars to the purchase price of the cars.

You will have to sign a purchase contract. The contract protects you as well as the dealer, so do not skip this step or hurry through it.

• Do not sign the purchase contract until you have read and understood everything in it.
• Do not sign the contract if it has blank spaces.
• Do not sign the contract if it contains clauses or terms that are different from what the salesperson said to you.

If the salesperson takes the contract to a superior "for approval," do not sign it until you make sure they have made no changes. If they have made changes and you agree to them, make sure you and the seller both initial the new language.

If you are financing the car, make sure you understand:

• how much you will pay and how often;
• how many payments you must make in total;
• how much you will have paid in total;
• what the annual interest rate is.

Remember that the lowest possible monthly payment is not necessarily the best deal. If the interest is high and the term of the loan is quite long, you could end up parting with a lot more money in the long run. But it is certainly important to have an affordable monthly payment, because if you can't make it every month, you could lose your car and all the money you have already invested in it.

Don't just assume you will finance through the dealer. Check with your bank or credit union to see if the offer is as good. Even if you end up back with the dealer, by shopping around you may be able to negotiate a better deal. Note that Texas law sets maximum interest rates for financing used cars. The rates vary according to the age of the car and the amount owed on it.

Warranties and Insurance

Get all promises about service and guarantees in writing in the contract and in the final copy of the buyer's guide. If you were promised something but it is not in writing, do not sign. If the seller offers a warranty, it must be in writing for it to be valid.

All used car dealers are required by federal law to tell buyers whether a used car is being sold with or without a warranty. Dealers must clearly display this information on a side window of each used car. The buyer's guide, or window form, should state either:

• "AS IS" -- the vehicle does not have a warranty and the seller is under no obligation for repairs; or
• "WARRANTY" -- the vehicle has a warranty, and the window form must list exactly what parts and services are covered and for how long.

Federal law prohibits rolling back or changing the number of miles on an odometer. Texas law requires the seller of any used vehicle to state on the title assignment the total number of miles the vehicle has traveled. Make sure you get a copy of the odometer statement when you sign the contract.

Caution:
DO NOT leave with your new car before the contract has been finalized completely and signed by both parties. This goes double if you are financing through the dealer and/or leaving a trade-in vehicle behind.

It has been known to happen: the consumer leaves the old car as a trade-in and drives away in the new car with only a verbal agreement about the amount of the monthly payment. The contract just needs final approval - "a mere formality" - by a manager who is not immediately available.

What happens? The buyer's credit is not approved, the monthly payment will be significantly higher and the trade-in has already been sold. The buyer is stuck with the new car at the higher payment.

Texas law requires you to have liability insurance. Whoever finances your car might offer to include the cost of the insurance in the loan, but it is your responsibility to have it.

The financier might also require you to have collision insurance to cover the balance owed on the car. If it is required and you do not have it, the financier can repossess your car. Before agreeing to allow the financier to obtain insurance for you, shop around. Generally speaking, you will pay less for insurance you purchase yourself than you would for insurance purchased by your financier. Understand all of your insurance responsibilities before you sign.

The buyer's guide becomes part of the contract at the time of the sale, and any guarantees listed on it override any restrictions in the contract. If the sale is in Spanish, the buyer's guide and all required contract terms must be in Spanish. If you don't see the buyer's guide in the car window, ask to see it before you agree to buy a car.

After the Sale

Under Texas Law, the dealer is required to register and title the vehicle in your name within 20 working days, regardless of whether or not you owe money on the vehicle to the dealer or another financier. As soon as the vehicle is registered in your name, the dealer should provide you with the original receipt from the Tax Assessor-Collector's office.

If you owe money on the car, a non-negotiable duplicate original title will be mailed to you. The original will be mailed to your financier. If you pay in full for the car when you purchase it, you will be mailed the original title.

Keep all payment receipts and other documents in a safe place. Do not keep them in the glove compartment. If the car is stolen, or if a dishonest dealer illegally repossesses the car, you will have no records of ownership or payment.

Make your payments on time. If the dealer says that you can change the payment dates, or pay late, get it in writing. Get a receipt for each payment. If possible, pay by money order or check, and keep the stubs or carbon.

Texas dealerships have the legal right to repossess your car without prior notice, even in the middle of the night. Keep your records safe and up to date for your protection.