Security Alerts | CU Email | Become A Member | Locations | Contact Us | Youth Services | 

Search

Home » Life Events » Buying A Car

Car-Buying Terms You Need To Know Before You Shop Around

Information is the key to a successful new car-buying experience. By understanding the following terms, you’ll be in a better negotiating position when you visit the dealer.

Invoice Price

The invoice price is how much the dealer paid the manufacturer for the vehicle. It is usually higher than the dealer's final cost. That's because dealers often receive rebates, allowances, discounts, and incentive awards. The invoice price always includes freight (also known as destination and delivery charges). If you are buying a car based on the invoice price (for example, "at invoice," "$100 below invoice," "two percent above invoice"), be sure freight is not added to the sales contract.

Base Price

The cost of the car without options, but does include standard equipment and factory warranty. This price is printed on the Monroney sticker (see below).

Monroney Sticker Price

This is the label attached to the vehicle's side window. It is required by federal law and may not be removed by anyone other than the purchaser. It lists the base price; the manufacturer's installed options with the manufacturer's suggested retail price, the manufacturer's transportation charge, and the fuel economy (mileage).

Dealer Sticker Price

It is usually on a separate sticker and includes the Monroney sticker price, plus the suggested retail price of dealer-installed options, such as Additional Dealer Mark-up (ADM) or Additional Dealer Profit (ADP), dealer preparation, and undercoating.

Buyer’s Guide

The Federal Trade Commission's (FTC) has a Used Car Rule that requires dealers to post a Buyers Guide on every used car they offer for sale. It is usually posted on the window. This includes light-duty vans, light-duty trucks, demonstrators, and program cars. The guide includes details about the vehicle, including whether or not it includes a warranty.

Other Tips

When negotiating, remember that the dealer's profit margin is generally between 10 to 20 percent. Don't discuss the possibility of a trade-in until you negotiate the best possible price for your new vehicle. And if the dealer tries to sell you a service contract, always compare it with the manufacturer's warranty. You don’t want to pay extra for coverage that's already included.

This information was compiled from Internet, credit union, government, or other sources.

All About Used Car Warranties

The Federal Trade Commission (FTC) has a Used Car Rule that requires dealers to post a Buyers 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 driven by dealer staff. Program cars are low-mileage, current-model-year vehicles returned from short-term leases or rentals. The Guide does not have to be posted on motorcycles and most recreational vehicles, nor is it required for anyone who sells less than six cars a year. Here’s what the Buyers 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;
• The 14 major mechanical and electrical systems on the car, including some of the major problems you should look out for; and
• That spoken promises are difficult to enforce;
• To get all promises in writing;
• To keep the Buyers Guide for reference after the sale;
• To ask to have the car inspected by an independent mechanic before you buy.

When you buy a used car from a dealer, be sure to get the original Buyers Guide that was posted in the vehicle or a copy. The Guide must include any warranty changes you’ve negotiated. It also 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," 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 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're not satisfied, make sure the promise is written on the Buyers Guide. Some states, including Connecticut, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Jersey, New York, Rhode Island, Vermont, West Virginia, and the District of Columbia, don't allow "as is" sales for many used vehicles.

Three states - Louisiana, New Hampshire, and Washington require different disclosures than those on the Buyers Guide. If the dealer fails to provide proper state disclosures, the sale is not "as is."

Implied Warranties – State laws hold dealers responsible if cars they sell don't meet reasonable quality standards. These obligations are called implied warranties – unspoken and 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 eliminate implied warranties. There is no specified time period for an implied warranty.

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 when you can prove that a defect existed at the time of sale. A problem 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.

Warranty of Fitness for a Particular Purpose – 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 is, in effect, 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 an implied warranty. 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.

The "Implied Warranties Only" disclosure should appear on the Buyers Guide if the dealer decides to sell a vehicle with implied warranties and no written warranty. Dealers who offer a written warranty must complete the warranty section of the Buyers Guide. Because terms and conditions vary, it may be useful to compare and negotiate coverage.

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. Some parts or systems may be covered by a full warranty and others by a limited warranty. 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.
• If after a reasonable number of tries, the dealer cannot repair the vehicle or a covered system, you have the choice of a replacement or a full refund.
• 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.
• Implied warranties have no time limits.
• If any of these statements don't apply, the warranty is limited.
• The dealer must check the appropriate box on the Buyers Guide to indicate whether the warranty is full or limited, and the dealer must include the following information in the "Warranty" section.
• Percentage of the repair cost that the dealer will pay.
• Specific parts and systems that are covered by the warranty.
• The warranty term for each covered system.

You also have the right to see a copy of the dealer's warranty before you buy. The warranty gives detailed information about what is covered. It also tells who is legally responsible to fulfill the terms of the warranty. Make sure you receive a copy of the warranty document if you buy the car.

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 Buyers Guide. To make sure you can take advantage of the coverage, ask the dealer for the warranty documents. Verify what's covered – expiration date/miles, necessary paperwork – by calling the manufacturer's zone office. Make sure you have the Vehicle Identification Number (VIN) handy.

Service Contract – The dealer must check the appropriate box on the Buyers Guide if a service contract is offered, except in states where service contracts are regulated by insurance laws.

If the Guide doesn't include a service contract reference and you're interested in buying one, ask the salesperson. Like a warranty, a service contract provides repair and/or maintenance for a specific period. However, warranties are included in the price of the vehicle, while service contracts cost extra and are sold separately.

If you buy a service contract 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. 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.

Remember that the Buyers Guide cautions you not to rely on spoken promises. They are difficult to enforce. Get all dealer promises written into the Buyers Guide.

The back of the Buyers Guide lists the name and address of the dealership. It also gives the name and telephone number of the person you should contact at the dealership if you have problems or complaints after the sale.

The dealer may include a buyer's signature line at the bottom of the Buyers Guide, but it’s optional. If it is included, the following statement must be written or printed close to it: "I hereby acknowledge receipt of the Buyers Guide at the closing of this sale." Your signature means you received the Buyers Guide at closing. It does not mean that the dealer complied with the Rule's other requirements, such as posting a Buyers Guide in all the vehicles offered for sale.

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 Buyers Guide.

Source: Federal Trade Commission. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261.