Buying and Insuring a Car Chapter 16 Buying and Insuring a Car

16.1 Acquiring a Vehicle After finishing this section, you will know how to: Identify important parts of a loan agreement Trade in a vehicle Identify the pros and cons of leasing Compare buying options for buying a pre-owned vehicle Pursue legal remedies if you buy a defective vehicle

Your taste and how much you can afford determine what car you can buy. Laws that apply to car purchases: UCC Federal and State Consumer Protection Laws Laws regulating credit Insurance Laws

Financing Cars 1st Step- how much can you afford This depends largely on the amount of money you: Have saved Earn Already owe to others Living expenses Cash customers are in a better bargaining position.

Truth in Lending Act- Regulation Z- a federal law requiring lenders to disclose the finance charge and the APR Finance charge- the actual cost of the loan in dollars and cents APR- the true interest rate of the loan

Some dealers offer very low financing rates for specific models. The dealers may not be willing to negotiate on the price of these cars. A large down payment is usually required. May be asked to purchase credit insurance- pays off your loan if you die or become disabled Monthly payments are the most expensive form of credit Example 1

FTC- when getting credit through a dealer, any defense you could use against the dealer, you can use against the finance company Example 2 The above rule does not apply if: you borrow money to buy a car from a lending company that as no arrangement with the seller Example 3

Where to Buy a Used Car 1. Used car dealer- larger selection, lower prices, poor service, not sure where the car came from 2. New car dealer- taken in from trade, have good service facilities Implied warranties- when a car dealer sells a car they give an implied warranty that the car is merchantable, meaning that the car is fit for ordinary purposes Example 4

Express warranties- 30, 60, or 90-day warranties are given by dealers that cover parts and labor or labor only The Used Car Rule- 1985- rule requires all used car dealers to place a large sticker called a “Buyer’s Guide” in the window of each used vehicle they offer for sale Buyer’s Guide- sticker placed in the window of all used cars

The Buyer’s Guide includes: Whether the vehicle comes with a warranty and what the warranty covers Whether the vehicle comes with no warranty—“as is” – or with implied warranties only That you should ask to have the car inspected by your own mechanic That you should get all promises in writing What some of the major problems are that may occur in any car The buyer’s guide becomes part of the sales contract

Used car- one that is driven more than to the dealer and for a test drive motorcycles are NOT covered

3. Private Party- caveat emptor Advantage- lower cost Risks- no implied warranty of merchantability, could be stolen, bank loan (bank has the right to repossess) Repossessed cars are a source for used cars.

4. Car Rental Company- buy fleets of cars Advantages- low cost, well maintained, warranties Disadvantage- high mileage

Buying a Car—New or Used 2 steps- contract to sell and taking possession Usually over $500, should be written Private party- could be done on the deposit check Dealer- buyer is at a disadvantage—printed form, agree to front and back of the form, back usually favors the seller Example 5

Adhesion Contract- standard form made by the seller to bind the contract. You may cross out parts you don’t agree with.

Buyers Remedies for a defective car: breach of express warranty merchantability warranty fraud state consumer protection laws

UCC- buyer may revoke the acceptance even after the acceptance if there is a serious defect within a reasonable time must notify the seller of any defect State Lemon Laws- PA- new cars that have been to the dealer at least 3 times (same or different defects) no older than 1 year or 15,000 miles

Federal Consumer Protection- the labels on a new car must show: fuel economy for each vehicle, estimated annual fuel cost of operating the automobile, and range of fuel economy of comparable automobiles

Odometer Protection- everyone who transfers under 25 years old—written mileage disclosure Disclosure must be given when: sold or given away merchant or non-merchant mileage must be noted if ever turned back to 0 Car buyers may sue people who violate this law and may recover three times the amount of the damages they suffered or $1,500 whichever is greater

Theft Protection-1984- cars are given ID numbers in order to reduce theft and major replacement parts Leasing a Car- least expensive way to obtain a car Advantage- low down payment and smaller monthly payments Disadvantage- own nothing at the end of the lease

Having the Car Repaired- repair shops must be licensed in order to get insured

Automobile Insurance Financial Responsibility Laws- owner of the car involved in an accident is financially able to pay for any damage deposit money deposit bonds and or securities liability insurance most people carry insurance

Types of Insurance 1. Bodily injury liability insurance- protects policyholder from claims or lawsuits for injuries or death caused by his or her negligent operation of a motor vehicle 2. Property damage liability insurance- provides protection when other people bring claims or lawsuits against the insured for damaging property of theirs, such as a car, a fence, or a tree. PA-must have!

3. Collision insurance- pays for damage to the insured’s own car when it collides with another car or object or when it turns over Doesn’t matter who is at fault Only collect the actual damage- market value Deductible clause- $250 -$500—insured agrees to pay the first 250-500

4. Comprehensive insurance- covers damage to the insured’s car from a variety of sources other than collision Includes: fire, lightening, flood, hail, riot, or vandalism Example 6

5. Medical payments insurance- pays for medical expenses resulting from bodily injuries to anyone occupying the policy holder’s car 6. Uninsured motorist insurance- protection when the insured is injured in an automobile accident caused by another driver who is at fault and has no insurance also covers hit and run only covers bodily injuries, not automobile

No-Fault Insurance- person is compensated fully and quickly regardless of who is at fault Old- only could collect if you proved fault Many lawsuits- PA limit is $750