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Consumer Protections

Buying a Used Car Introduction

Before purchasing a used car, do your homework. It will save you time and money in the long run. Consider your budget. There are free resources online for researching models, options, costs, repair records, safety tests, and mileages.

What to Do Before you Purchase

You should always test drive the car under various road conditions—on hills and highways and in stop-and-go traffic—and do the following:

  1. Determine its Value: Before you negotiate the purchase, check the National Automobile Dealers Association's (NADA) Guides, Edmunds, Kelley Blue Book, and Consumer Reports. They may charge for their information.
  2. Check for Unrepaired Recalls:  Ask the dealer if the vehicle has a recall, or check by entering the vehicle identification number (VIN) at safercar.gov or by calling the National Highway Traffic Safety Administration (NHTSA) Vehicle Safety Hotline at 1-888-327-4236. If there is a recall, ask the dealer to fix it or to give you information showing it was fixed. Keep in mind federal law does not require dealers to fix recalls on used cars, so you might need to get the repair done yourself.
  3. Read History Reports: Check a trusted, independent database service that gathers information from state and local authorities, salvage yards, and insurance companies—for example, the National Motor Vehicle Title Information System (NMVTIS), given by the United States Department of Justice, offers information about a vehicle’s title, odometer data, and gives certain damage history. Expect to pay a small fee for each report. The National Insurance Crime Bureau (NICB) maintains a free database that includes flood damage information. If a report is not recent or you suspect that it has missing or fabricated information, verify it with the reporting company. The information in reports may not be complete, so you may want to get a second report from a different reporting company. Some dealer Websites have links to free reports.
  4. Read the Reviews About the Dealer: Contact the Arkansas Attorney General Consumer Protection Division to find out if any unresolved complaints are on file about the dealer. Also, search online: enter the name of the seller and the word “review” or “complaint” into a search engine.
  5. Perform an Inspection: Consider hiring a mechanic to inspect the car.

The Right to Cancel

Dealers are not required by either state or federal law to give used car buyers a three-day right to cancel. Before you buy from a dealer, ask about the dealer's return policy, get it in writing, and read it carefully. Dealers may describe the right to cancel as a "cooling-off" period, a money-back guarantee, or a "no questions asked" return policy.

Warranties

When you buy a used car from a dealer, the Buyers Guide must reflect any negotiated changes in warranty coverage. It becomes part of your sales contract and overrides any contrary provisions. For example, if the Buyers Guide says the car comes with a warranty and the contract says the car is sold "as is” (which means it has no dealer warranty), the dealer must give you the warranty described in the Guide.

 

When the dealer offers a vehicle "as is," the box next to the disclosure "As Is—No Dealer Warranty" on the Buyers Guide must be checked. If the box is checked but the dealer promises to repair the vehicle or cancel the sale if you are not satisfied, make sure the promise is written on the Buyers Guide. Otherwise, you may have a hard time getting the dealer to make good on his word.

Financing

You have two choices: pay in full or finance over time. Financing increases the total cost of the car because you are also paying the cost of credit, including interest and other costs. Consider how much you can put down, the monthly payment, the financing term (such as 48 months), and the annual percentage rate (APR). Usually, rates are higher and financing periods shorter on used cars than new ones.

If you decide to finance, make sure you understand the financing agreement before you sign any documents.

  • Compare and Negotiate
    • Dealers and other financial sources (like companies, credit unions, and banks) offer a variety of financing terms. Shop around, compare offers, and negotiate the best deal you can. If you are a first-time buyer or your credit is not great, be cautious about special financing offers. They can require a big down payment and a high APR. If you agree to financing that carries a high APR, you may be taking a big risk.
  • Selling the Car
    • If you decide to sell the car before the end of the financing period, the amount you get from the sale may be less than the amount you need to pay off the financing agreement.

  • Repossession or Total Loss

    • If the car is repossessed or declared a total loss because of an accident, you may have to pay a considerable amount to repay the loan, even after the proceeds from the sale of the car or the insurance payment have been deducted.

Sales Tax

With a gross purchase price of $4,000 or greater, the state sales and use tax rate is 6.5% (7% for Texarkana residents) of the taxable price of motor vehicles, trailers, and semi-trailers. Remember each year you must assess your vehicle with the county assessor’s office, and you must pay personal property tax each year to renew your registration and tags.

Important Questions

  • What is the exact price you are paying for the vehicle?
  • How much are you financing?
  • What is the finance charge? (the dollar amount the credit will cost you)
  • What is the APR? (a measure of the cost of credit, expressed as a yearly rate)
  • How many payments will you make?
  • How much is each payment?
  • What is the total sales price? (the sum of the monthly payments plus the down payment)