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Feature Articles: Financial Information & Tips


used car lotBuying a used car

Brenda Procter, M.S., state specialist and instructor, Personal Financial Planning, University of Missouri Extension


Before you shop for a car, do your homework. Spending the time now can save you serious money later. Think about your driving habits, your needs and your budget. You can learn some things about car models, options and prices by reading both display and classified newspaper ads.


There is a lot of information about used cars on the Internet. Enter “used car” in a search engine, and you’ll find information on how to buy a used car, instructions for a prepurchase inspection and ads for cars that are for sale. If you don’t have Internet service, a local librarian can probably help you.


Libraries and bookstores have books that compare car models, options and costs, and they tell you about frequency-of-repair records, safety tests and mileage. Many of these books have details on the do’s and don’ts of buying a used car.


Once you’ve narrowed your car choices, research the frequency of repair and maintenance costs on the models in auto-related consumer magazines. The U.S. Department of Transportation’s Vehicle Safety hot line (888-327-4236) and Web site ( gives information on recalls.



You have two choices — pay in full or pay over time. If you pay over time, the total cost you pay for the car is higher. That’s because you’re also paying for the cost of credit, which includes interest and other loan costs.


Decide how much you can put down up front, your monthly payment, the length of the loan and ask about the annual percentage rate (APR) of interest. Usually, APRs are higher and loan periods are shorter on used cars than on new ones.


Dealers and lenders offer a variety of loan terms and payment schedules. Shop around, compare offers and negotiate the best deal you can.


Be cautious about ads that offer financing to first-time buyers or people with bad credit. These offers often require a big down payment and a high APR. If you finance with a high APR, you may be taking a big risk. If you decide to sell the car before the loan expires, the amount you receive from the sale may be far less than the amount you need to pay off the loan.


With a high APR, if the car is repossessed or declared a total loss from an accident, you may still have to pay a large amount on the loan even after the proceeds from the sale of the car or the insurance payment are deducted. If your budget is tight, try to save cash for a less expensive car than you originally had in mind.


If you do finance a used car, make sure you understand the following terms of the loan agreement before you sign anything.


  • Exact price you’re paying for the vehicle.
  • Total amount of money you’re financing. 
  • Total finance charge (the dollar amount the credit will cost you).
  • APR (a measure of the cost of credit, expressed as a yearly rate).
  • Number and dollar amount of payments.
  • Total sales price (the sum of the monthly payments plus the down payment).


Dealer sales

There are several places to get used cars, including franchise and independent dealers, rental car companies, leasing companies, and used car superstores. You can even buy a used car on the Internet. Ask friends, relatives and co-workers for recommendations.


Call the Missouri attorney general’s consumer protection hot line at 800-392-8222 or your Better Business Bureau (BBB) to find out if any unresolved complaints are on file about a particular dealer.


Some dealers are attracting customers with no-haggle prices, factory-certified used cars and better warranties. Consider the dealer’s reputation, not just the ads.


The law does not require dealers 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.


The Federal Trade Commission’s (FTC) Used Car Rule requires dealers to post a buyer’s guide in every used car they offer for sale. This includes light-duty vans, light-duty trucks, demonstrators and program cars.


Demonstrators are new cars that have not been owned, leased or used as rentals, but have been driven by dealer staff. Program cars are low-mileage, current-model-year vehicles returned from short-term leases or rentals.


Buyer’s guides do not have to be posted on motorcycles and most recreational vehicles. Anyone who sells fewer than six cars a year doesn’t have to post a buyer’s guide. The buyer’s guide must tell you:


  • Whether the vehicle is being sold as is or with a warranty.
  • What percentage of the repair costs a dealer will pay under the warranty.
  • That spoken promises are difficult to enforce.
  • To get all promises in writing.
  • To keep the buyer’s guide for reference after the sale.
  • The major mechanical and electrical systems on the car, including some of the major problems you should know.
  • To ask to have the car inspected by an independent mechanic before you buy.


When you buy a used car from a dealer, get the original buyer’s guide that was posted in the vehicle or a copy. The guide must reflect any negotiated changes in warranty coverage. It also becomes part of your sales contract and overrides any other provisions. For example, if the buyer’s guide says the car comes with a warranty and the contract says the car is sold as is, the dealer must give you the warranty described in the guide.


As is - no warranty

When the dealer offers a vehicle as is, the box next to the “as is - no warranty” disclosure on the buyer’s guide must be checked. If the box is checked but the dealer promises to repair the vehicle or cancel the sale if you’re not satisfied, make sure the promise is written on the buyer’s guide. Otherwise, you may have a hard time getting the dealer to make good on his word.


Implied warranties

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. However, 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.


  • Merchantability
    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 does not 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.

  • Fitness for a particular purpose
    A warranty of fitness for a particular purpose applies when you buy a vehicle because the dealer says it is suitable for a particular use. For example, a dealer who suggests you buy a vehicle for hauling a trailer is promising that the vehicle can actually haul a trailer.


If you have a written warranty that doesn’t cover your problems, you may still 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 deny this protection. Any limit on an implied warranty’s time must be included on the written warranty.


For as is sales, the “implied warranties only” disclosure should appear on the buyer’s guide. A copy of the buyer’s guide with the “implied warranties only” disclosure is available at


Dealers who offer a written warranty must complete the warranty section of the buyer’s guide. Dealers may offer a full or limited warranty on all or some of a vehicle’s systems or components. Most used car warranties are limited and their coverage varies, so compare and negotiate coverage.


Warranty terms and conditions

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 will be 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 cannot 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 is reasonable to require you to do more.


If any of these statements don’t apply, the warranty is limited. Full or limited warranties don’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 and others covered by a limited warranty.


The dealer must check the appropriate box on the buyer’s guide to show whether the warranty is full or limited. The dealer must include the following information in the warranty section:


  • The percentage of the repair cost that the dealer will pay. For example, “the dealer will pay 100 percent of the labor and 100 percent of the parts...”
  • The specific parts and systems — such as the frame, body or brake system — that are covered by the warranty. The back of the buyer’s guide lists the major systems where problems may occur.
  • The warranty term for each covered system. For example, “30 days or 1,000 miles, whichever comes first.”
  • Whether there’s a deductible and, if so, how much. A deductible is the part you must pay first before the warranty pays.


You have the right to see a copy of the dealer’s warranty before you buy. Review it carefully to find out what is covered. The warranty gives detailed information, such as how to get repairs for a covered system or part. It also tells who is legally responsible for fulfilling the terms of the warranty. If it’s a third party, investigate their reputation and whether they’re insured. Find out the name of the insurer and call to verify the information. Then check out the third-party company with your local Better Business Bureau. Make sure you take home a copy of the dealer’s warranty document.


Unexpired manufacturer’s warranties

If the manufacturer’s warranty is still in effect, the dealer may include it in the “systems covered/duration” section of the buyer’s guide. To be sure the coverage transfers to you, ask the dealer for the car’s warranty documents. Verify the information (e.g., what’s covered, expiration date/miles and necessary paperwork) by calling the manufacturer’s zone office, which the dealer can give you. Make sure you have the vehicle identification number (VIN) when you call.


Service contracts

Like a warranty, a service contract provides repair and/or maintenance for a specific period. But warranties are included in the price of a product, while service contracts cost extra and are sold separately. To decide if you need a service contract, consider whether:


  • The service contract duplicates warranty coverage or offers protection that begins after the warranty runs out. Does the service contract extend beyond the time you expect to own the car? If so, is the service contract transferable or is a shorter contract available?
  • The vehicle is likely to need repairs and their potential costs. You can determine the value of a service contract by figuring whether the cost of repairs is likely to exceed the price of the contract.
  • The service contract covers all parts and systems. Check out all claims carefully. For example, bumper to bumper coverage may not mean what you think.
  • A deductible is required and, if so, the amount and terms.
  • The contract covers incidental expenses, such as towing and rental car charges while your car is being serviced.
  • Repairs and routine maintenance, such as oil changes, have to be done at the dealer.
  • There’s a cancellation and refund policy for the service contract, and whether there are cancellation fees.
  • The dealer or company offering the service contract is reputable. Read the contract carefully to determine who is legally responsible for fulfilling the terms of the contract. Some dealers sell third-party service contracts.


The dealer must check the appropriate box on the buyer’s guide if they offer a service contract. If the guide doesn’t include a service contract reference and you’re interested in buying one, ask the salesperson about it.


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 is not covered by implied warranties. But if you buy a service contract covering the engine, you automatically get implied warranties on the engine. Make sure you get written confirmation that your service contract is in effect.


Spoken promises

The buyer’s guide cautions you not to rely on spoken promises. They are difficult to enforce because there may be no way a court can verify what was said. Get all promises written into the guide.


Prepurchase independent inspection

It’s best to have any used car inspected by an independent mechanic before you buy it. For $100 or less, you’ll get a general indication of the mechanical condition of the vehicle. An inspection is a good idea even if the car has been certified and inspected by the dealer, and is being sold with a warranty or service contract.


A mechanical inspection is different from a safety inspection. Safety inspections focus on conditions that make a car unsafe to drive. They are not designed to determine the overall reliability or mechanical condition of a vehicle.


To find a prepurchase inspection facility, check your Yellow Pages under “automotive diagnostic service” or ask friends, relatives and co-workers for referrals. Look for facilities that display certifications like an Automotive Service Excellence (ASE) seal, which means that some or all of the technicians meet basic standards of knowledge and competence in specific areas.


Make sure the certifications are up-to-date and remember that certification alone doesn’t guarantee good or honest work. Check with the Missouri attorney general’s office at 800-392-8222 to find out whether there’s a record of complaints about particular facilities.


There are no standard operating procedures for prepurchase inspections. Ask what the inspection includes, how long it takes and how much it costs — get that in writing.


If the dealer won’t let you take the car off the lot because of insurance restrictions, look for a mobile inspection service to go to the dealer. If you cannot find one, ask the dealer to have the car inspected at a facility you choose. You will have to pay the inspection fee, but it’s probably worth it for peace of mind.


Ask the mechanic doing the prepurchase inspection for a written report with cost estimates for all necessary repairs. Be sure the report includes the vehicle’s make, model and VIN. Be sure you understand every item and ask the mechanic if you don’t. If you make a purchase offer to the dealer after the inspection, you can use the estimated repair costs to negotiate the price of the vehicle.


Vehicle systems

The buyer’s guide lists a vehicle’s 14 major systems and some serious problems that each one could have. This list can help you and your mechanic assess the mechanical condition of the vehicle. The list may also help you compare warranties offered on different cars or by different dealers.


Dealer identification and consumer complaint information

The back of the buyer’s guide lists the name and address of the dealership. It also gives the name and telephone number of the person to contact if you have problems or complaints after the sale.


Optional signature line

The dealer may include a buyer’s signature line at the bottom of the buyer’s guide. If so, the following statement must be written or printed close to it: “I hereby acknowledge receipt of the buyer’s guide at the closing of this sale.” Your signature means you received the buyer’s guide at closing. It does not mean the dealer complied with the rule’s other requirements, such as posting a buyer’s guide in all the vehicles they offer for sale.


Spanish-language sales

If you buy a used car and the sales discussion is conducted in Spanish, you are entitled to see and keep a Spanish-language version of the buyer’s guide with all the items described above.


Private sales

Instead of buying from a dealer, you can buy from an individual. You can find ads in newspapers, on bulletin boards or on a car. Buying from a private party is very different from buying a car from a dealer.


Private sellers generally are not covered by the Used Car Rule and don’t have to use the buyer’s guide. However, you can use the guide’s list of a vehicle’s major systems as a shopping tool. You also can ask the seller if you can have the vehicle inspected by your mechanic.


Private sales are not usually covered by implied warranties. That means a private sale probably will be on an as is basis, unless you get a purchase agreement with the seller that specifies terms. 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 separate service contract. Warranties and service contracts do not always transfer to buyers and other limits or costs may apply. Be sure to review any warranty or service contract to be sure it covers you. You may want to get a written agreement with the seller that the car must pass state inspections or you get your money back.


Before you buy a used car

Whether you buy a used car from a dealer, co-worker or neighbor, follow these tips to learn as much as you can about the car:


  • Examine the car yourself using an inspection checklist. You can find a checklist in many of the magazine articles, books and Web sites that deal with buying a used car.
  • Test drive the car under various road conditions — on hills, highways and in stop-and-go traffic.
  • Ask for the car’s maintenance and repair record. If the owner doesn’t have copies, contact the dealership or repair shop where most of the work was done. They may share their files with you.
  • Talk to any previous owner, especially if the present owner is unfamiliar with the car’s history.
  • Have the car inspected by a mechanic you hire.


Carfax maintains a nationwide database and can provide a detailed vehicle history report in seconds. Carfax is online at All you have to do is enter a VIN. There is a charge for the report, but many dealers will provide a report on a particular car free of charge. You can also ask individual sellers to provide a Carfax report, but neither a dealer nor an individual is obligated to do so.


If you have problems

If you have a problem that you think is covered by a warranty or service contract, follow the instructions to get service. If you have a dispute with the seller, these are steps you can take to resolve it:


  • Try to work it out. Talk with the salesperson or, if necessary, the owner of the dealership. Many problems can be resolved at this level. If you believe you’re entitled to service but the dealer disagrees, don’t stop there.
  • If your warranty is backed by a manufacturer, contact the manufacturer’s local representative. The local or zone representative is authorized to adjust and decide about warranty service and repairs to satisfy customers. Some manufacturers are willing to repair certain problems in specific models for free, even if the manufacturer’s warranty does not cover the problem. Ask the manufacturer’s zone representative or the service department of a dealership that sells your car model if your repair is covered.
  • Contact the Missouri attorney general’s consumer protection hot line at 800-392-8222.
  • 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 the dollar limit.
  • The Magnuson-Moss Warranty Act can be helpful. Under this federal law, you can sue based on breach of express warranties, implied warranties or a service contract. If successful, consumers can recover reasonable attorney fees and other court costs. A lawyer can advise you if this law applies.


If you would like more information about buying a used car, the Missouri attorney general’s office has an excellent publication called All About Autos. It is available online at Call the Missouri attorney general’s consumer protection hot line at 800-392-8222 to request a copy.


You can also check out these publications from the FTC (available at Auto Service Contracts, Buying a New Car, Car Ads: Reading Between the Lines and Taking the Scare Out of Auto Repair.


The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace, and helps consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, visit or call toll-free, 877-FTC-HELP (877-382-4357); TTY: 866-653- 4261. The FTC enters consumer complaints into a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.



Adapted from Buying A Used Car (Federal Trade Commission, June 2008), (accessed November 12, 2008).



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