Buying a used car can leave you void of the protections enjoyed by individuals that purchase new cars. However, in an effort to respond to ramped up consumer protection efforts, more and more states are now offering some sort of legal protection for used car buyers that end up with a clunker.
Federal Used Car Law
Consumers that purchase used cars enjoy federal law protection. Federal law is applicable to any car dealer or seller who sells more than six used cars a year. Used cars are those that have been driven more than the limited mileage from moving the car from one site to the next, or that is added on during consumer test drives. Wisconsin and Maine are the only states exempt from federal law, because they offer their residents comprehensive used car purchaser protections. Dealers that don't comply with federal laws are subject to civil suit. The following are legal requirements for any used car sold within the U.S.
A buyer's guide must be displayed on every used car on the side window. This guide contains any warranty information offered by the state, in addition to any protections the consumer has under federal law. Consumers should note that what is included in the buyer's guide, overrides any sales contract, and that they should receive the same buyer guide displayed on the vehicle they are purchasing. Buyer guides must meet the following requirements:
The buyer's guide must include the following disclosures:
- The 14 major systems of a car along with the potential defects that can occur in each one
- A suggestion to the consumer regarding asking the dealer if pre-purchase inspections are allowed
- A warning that the buyer cannot rely on any spoken promises by the dealer that aren't confirmed in writing
The guide must include the vehicle, make, model, year the car was made, and VIN or the vehicle identification number.
Any warranty information must be displayed on the buyer's guide, including any warranties that you and the dealer agree upon during negotiations. If a used car is still under manufacturer warranty the buyer's guide must reflect this as well. In addition, the buyer's guide must include the following warranty information:
- Whether a warranty is full or limited
- Percentage of cost a seller will pay under the warranty
- Specific system covered by the warranty
- Duration of the warranty
- The name, address, and telephone number of the person that handles warranties for the seller.
- Language that informs buyer that they might have rights not shown on warranty
State Used Car Laws
One way states provide consumer protections is by legislating which types of warranties are available to used car purchasers. If a state allows a dealer to sell a used car without any warranty, then purchasers of any used cars will virtually have no protection if the vehicle they purchase stops working. Some states require used car dealers to provide consumers with a specific warranty that places a time/mileage limit on the warranties coverage. There are four main categories of warranties including:
This type of warranty is only found in states with no used car consumer protection laws (lemon laws). In effect, this is equal to having no warranty at all. After the paperwork is signed, your car could stop working, and you would have little to no recourse. There are a number of states that have outlawed "As Is" car sales altogether, due to the potential for consumer abuse. For the states that do allow "As Is" car sales, the seller must provide you with disclosure documents that state the lack of warranty provided with the vehicle.
Specific warranties can be full or partial. For both kinds, the warranty must set forth the duration of the warranty. Normal warranty language puts it in a number of miles or a number of days, whichever occurs first. Partial warranties will cover certain systems on the vehicle and exempt others. A full warranty covers everything, but you should still make sure to read the exact language so you are fully aware of coverage before you close the deal. Buyers living in states that require specific warranties will also be protected by implied warranties.
Specific warranties, whether full or partial, will also create two implied warranties that offer consumers additional protection. They are the warranty of merchantability and the warranty of fitness for a particular purpose:
- Warranty of Merchantability -This warranty simply means that the seller promises that the product for sale will do what it is supposed to do. For example, that a car purchased will run. In order to exercise this warranty, you must be able to prove that the car was defective when purchased.
- Warranty of Fitness for a Particular Purpose -This warranty means that the seller will ensure that the car is suitable for its particular use. For instance, a dealer selling a car alleging that it is able to tow a certain weight, must ensure that the vehicles is actually able to tow that weight.
Specific State Consumer Protection Laws
Unfortunately, consumer protection under state law varies from state to state and ranges from comprehensive to barely existent.
States that Do Not Allow 'As Is' Car Sales
The following states will not allow "As Is" car sales and have laws that require a dealer to provide a specific type of warranty:
- Rhode Island
- New Jersey
- New Mexico
- New York
- West Virginia
States with Lemon Laws
Lemon laws are usually only applicable to new cars; however, certain states have enacted lemon laws specifically for used cars. Lemon laws require the dealer to provide a specific type of warranty (i.e. 2 years, 20,000 miles), but also set limits on the number of times a dealer can work on a car under a warranty before a consumer has the right to turn in the car and select another one, or require both parties to go through mediation to determine the best solution to the faulty car issue. In short, these laws offer mandatory dispute resolution, the right to return the car, and often provide coverage for all major systems in the car. States with lemon laws include:
- New Jersey
- New Mexico
- New York
See the complete list of state lemon laws for used car purchases, so you can determine what laws your state has on the books.
Additional Consumer Protections
If for some reason you purchase a car and run into problems, you can contact the Better Business Bureau (BBB) to assist you in settling any customer service issues. It is also a good idea to consult their site to determine if a used car dealer has had any issues in the past. In addition to the BBB, there are other agencies that can help you should problems arise.
State Consumer Agencies
Also, there is a List of State and Local Consumer Agencies, which contains links to the proper agencies in your state to lodge a complaint if you feel that your used car dealer did not comply with state or federal law during your transaction.
There are resources available to ensure that a used car purchaser is not getting a car that has suffered serious damage or that has title/ownership issues. The National Highway Traffic Safety Administration and the National Motor Vehicle Title Information System are two such sites.
Insurance Crime Protection
In addition, potential purchasers can consult the National Insurance Crime Bureau and provide the VIN number to trace any negative reporting history on a car.
Common Used Car Scams
Unfortunately, there are those who make a living from cheating other people. Two of the most common used car scams that consumers should be aware of are curb stoning and title washing.
This occurs when a car dealer gives a salesperson an inferior or damaged car to sell as a private person. You can avoid this by making sure the seller's name is also the name reflected on the title. In addition, be wary of recent title changes. If you have any questions about a car's title, make sure to take the time to do proper research using the appropriate agencies.
A seller trying to sell a salvage vehicle by concealing prior damage is in effect, title washing. This is done by moving the vehicle through number of states, for the purposes of washing title. Falling victim to this scam can be avoided by making sure to buy used cars from dealers only, or if you are dealing with a private seller, make sure to get a title guarantee in writing.
One final consideration when purchasing a used car is the interest rate you are charged. Each state will have its own usury limits. Usury limits are the maximum amount of interest that a finance company can charge on a loan. To make sure you have the most reliable information, check out your state's usury laws, the various applicable exceptions to the law, and penalties for violations. If you feel that you are paying interest at a rate higher than normal, you should contact the Attorney General's office in your state.
Research Your Purchase
You are your own best protection. Taking the time to research any vehicle you want to purchase can save you a lot of time and money down the road. Here are some good pre-purchase steps to make on any used car purchase:
- Access a used car inspection checklist and adhere to it
- Try to test drive the car more than once
- Make sure to download the car's history via its VIN number
- Have car inspected by a mechanic
- Research year, make, and model of car on consumer guides to see if there are any common problems or defects
If you have any doubts or questions about the car you're thinking of buying, remember it's okay to walk away.