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Buying Tips
How to Buy a Used Car
Step 6: Closing the Deal
By Philip Reed, Senior Consumer Advice Editor
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When you reach an agreement on the purchase price of a used car, you may be tempted
to think you're home free. In fact, there are several crucial steps that need
to be done correctly, or all your hard work up to this point could be for naught.
If you are at a dealership, you still have to go through the Finance and Insurance
process (also called "F&I"). If you are buying a car from a private party, you
have to make sure that payment is made and the title and registration are properly
transferred.
In both cases, you also need to make sure you have insurance for the car you just
bought before you drive it away.
At the Dealership: The F&I Room
The deal you made with the salesperson needs to be put into a contract for you
to sign. Before that's done, the F&I person will need some information from you.
For example, she will ask how you are paying for the car. If you say you are financing
it through a bank or credit union, the F&I person will probably offer to beat
their interest rate. Why not see if they can? But make sure you are quoted not
just the interest rate but the monthly payment and the length of the loan.
Also, the F&I person will probably try to sell you a number of additional items
such as:
- An extended warranty
- Alarms and other anti-theft services such as Lo-Jack
- Prepaid service plans
- Fabric protection
- Rust proofing
- Emergency roadside kits
Some people swear by extended warranties, so this is something you might want
to consider (unless your used car is certified or still under the manufacturer's
warranty). However, the other items typically sold in the F&I room are expensive
and hold little value for you. Don't be misled by the offer that the extra expense
will be wrapped into the monthly contract; it is still costing too much.
The F&I person may seem like a financial advisor, but he or she is really an experienced
salesperson. Some F&I people can become very persistent trying to sell these items.
Be firm. Say, "I'm not interested in any aftermarket extras, thank you. I just
want the car."
Once the contract is ready, review it thoroughly. In most states, it will contain
the cost of the vehicle, a documentation fee, a smog fee, a small charge for a
smog certificate, sales tax and license fees (also known as DMV fees). Make sure
you understand the charges and question the appearance of any significant, sudden
additions to the contract.
You will also be asked to provide proof of insurance before you drive away in
your used car. Call your insurance agent before leaving for the dealership to
advise him you will need coverage if you make a deal. All you need to provide
is the VIN number to activate the policy. The insurance agent can fax a temporary
policy to the dealership before you hit the road.
Finally, you should inspect the car before you take possession of it. If any work
is required, and has been promised by the dealer, get it in writing in what is
known as a "Due Bill." Make sure the temporary registration has been put in the
proper place and -- you're finally on your way.
Private Party Sales
When you buy a car from a private party, you will probably be asked to pay with
a cashier's check or in cash. But before money changes hands, make sure you will
be able to register the car in your name. Request the title (sometimes called
the "pink slip") and have it signed over to you. In most states, you will then
mail the title to the Department of Motor Vehicles and a new title will be issued
to you. In some cases, you will need to get a temporary operating permit until
your new registration arrives.
Rules governing vehicle registration and licensing vary from state to state. Make
sure you check with the DMV in your state (much of this information is now available
on DMV Web sites). When in doubt, contact the DMV; some registration can be handled
by the American Automobile Association (AAA).
But what if the seller still owes money on the car and the bank is holding the
title? One way to deal with this is to conclude the sale at the bank where the
title is held. Have the seller call ahead and make sure the title is ready. Once
money has changed hands and the bank has been paid the balance of the loan, the
seller can sign the title over to you.
In some cases, however, an out-of-state bank might hold the title. If so, go to
the DMV and get a temporary operating permit by showing your bill of sale (in
some states the bill of sale might have to be notarized). Then, after the seller
pays off the balance of the loan with the proceeds of the sale, the title will
be mailed to you.
Once all of the paperwork is complete, it is finally time to relax and begin enjoying
your new purchase: a good used car.
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