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How to Review Your New Car Sales Contract

Cut Through the Fine Print and Find the Essentials

Buying a new computer, couch or Crock-Pot in person at a brick-and-mortar retailer is a pretty simple affair. You pick out the product that works best for you, a clerk or salesperson rings it up, you get a receipt and go on your way.

Other than tax, most everyday purchases don't include any extra fees, charges or unfamiliar language. And if you pay cash, you can get away without signing anything at all.

Car shopping, however, is a much more involved transaction. For most of us, getting that new (or new-to-you) car includes more fees than just tax. And even if you're paying cash, you may have to sign as many as 40 different forms, depending on where you live, how you pay for the vehicle, and the dealership involved.

If the key numbers in a car sales contract are correct, then it's time to sign.

If the key numbers in a car sales contract are correct, then it's time to sign.

The good news is that not all of these are equally important, although a dealership may insist that you sign them. One Southern California car dealer, for example, requires that its customers sign a note saying they understand it is their responsibility to do their own research to determine if the new car they've purchased is capable of driving in the snow and to not rely solely on the salesperson's statements. Forms such as these have no real effect on the dollars-and-cents aspect of the deal.

Because of all the paper that confronts you when you're buying a car, it can be challenging to sort through what demands your full attention and what can be skimmed over. Here are six of the most important documents you'll be asked to sign when you're making a deal on a car. We'll also point out which section matters most. Note that, depending on your region, document names may vary slightly. Also, some of these forms may be combined.

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1. The sales contract

Although the car sales contract (or vehicle purchase agreement) is the most important of all the items you will sign, it will be one of the last ones you'll see. It details your financing and payment information. It should also have a listing of each item that will be included in the total purchase price, including all taxes, fees and additional products, if any, for which you must pay. It can be long, and it will present lots of information.

Budget time to review the contract. The chances are slim you'll be able to alter any of the terms after you have signed.

What to look for:

1. Vehicle sale price
2. Trade-in credit
3. Interest rate
4. Loan length
5. Add-ons, such as service contracts (extended warranties), theft-deterrent systems or additional insurance products
6. Amount financed
7. Rebates
8. Total down payment
9. Monthly payment
10. The federally required Truth-in-Lending disclosure

This section of the vehicle purchase agreement breaks down the total cost of the sale, including the vehicle sale price, all taxes, fees and associated costs. If your purchase includes financing, your interest rate, interest charges, and length of the loan will be spelled out in this disclosure. Be sure the figures match up with your expectations.

2. The Used-Car Buyers Guide

This form, required by law, should be stuck to the window of any used vehicle that is up for sale on a dealer lot. The Buyers Guide should have the car's year, make, model and vehicle identification number (VIN) clearly displayed, along with the name of the dealership.

What to look for:

Warranty information. The Buyers Guide will tell you what type of warranty, if any, is left on the vehicle. This form will also detail what systems the warranty covers, along with a description of what percentage of warranty costs the selling dealer will cover in the event a repair is needed, and the length of the warranty. On the back of a Buyers Guide form, you'll find the name and phone number of the dealership employee to contact if you have complaints about the vehicle after the purchase. If you and the financing officer agree to warranty coverage that exceeds what is on the Buyers Guide, get the new agreement in writing.

3. Vehicle/vessel reassignment form and report of sale

This form describes the vehicle being sold, including the year, make, VIN and license plate number (if the car is used). It also details the mileage on the odometer at the time of purchase. It notes the selling price of the vehicle. Finally, it transfers ownership.

What to look for:

The selling price. Make sure it matches what you've negotiated. Be sure your name, address and other information are correct. Catching a mistake now can save you the time and hassle of fixing the mistake with the Department of Motor Vehicles or the lender later.

4. Credit application

This form is required to run your credit and apply for financing. A dealership must have your OK to do a credit check, and you usually give this approval on the credit application.

What to look for:

Accurate information. If someone other than you filled out the credit application — your spouse or a dealership employee at your request, for example — make sure all the information on it is correct. Otherwise, it could hurt your likelihood of getting approved for financing.

5. Credit score disclosure

Not all credit approvals are handled the same. If you were looking to rent an apartment, for example, you'd likely be subject to a credit check, and you'd either be approved or declined. If approved for the apartment, your monthly rent payment would not vary based on your credit score.

Getting approved for an auto loan is different. With an auto loan, your credit score will affect the monthly payment and overall cost. Federal law requires that the dealer completing your deal tells you your score, offers you a credit report, and takes note that the conversation took place. Basing a loan on a credit score is called risk-based pricing, which means that your score reflects your history as a user of credit. That risk level determines the price you pay for credit.

What to look for:

Your score and the range in which it puts you. If the disclosure says you have a high credit score and you rank well nationally but the dealership is quoting you a high interest rate, ask why you're not getting a better one. It may not be that the rate the dealer is offering is inflated. In some cases, the best rate available just may not be stellar, even for someone with an excellent credit profile.

6. Any paperwork that has a dollar amount

Unfortunately, some shoppers get charged for products or services they didn't authorize. To minimize the risk of this happening in your deal, inspect any figure that resembles a payment or dollar amount. Often, car dealers will offer extra products or services on a form explicitly referring to the product they are trying to sell. To avoid confusion, some car buyers who do not want the product will draw a thick line or an "X" through the form and write the word "Refused" on it. These shoppers know that their dealer will keep all signed paperwork on file, sometimes for years. A dealer will occasionally use this information as a reference later to confirm if a shopper did or did not opt for the extra product.

Invest Time Now to Avoid Problems Later

It's true that taking your time to focus on the crucial forms will slow down the sales process. But this information matters and the time you spend is worth it, especially if your diligence saves you from a mistake that could end up costing you thousands of dollars. Unlike that Crock-Pot, you can't easily return the new car you've just bought because you feel you've overpaid or you don't like the warranty.