San Diego Financial Literacy Center

Five Things to Look at When Looking to Purchase a Vehicle

By: Sharon Glassey, Glassey-Smith, California Consumer Attorneys

CarFax Vehicle History Reports Do Not Always Tell the Whole Story about a Car

Some dealers specialize in selling accident-damaged vehicles. The dealer will run a CarFax on an obviously damaged vehicle. If it is clean, they will buy it, because they know that they can show consumers the clean CarFax to “prove” it has never been in an accident. However, CarFax Vehicle History Reports don’t always show the whole story. CarFax can only report history that has been reported to it. If a vehicle is repaired at an auto repair shop that does not report to CarFax, the accident will not be shown on the CarFax.

“Salvage,” Junk,” and “Rebuilt” Vehicles

A dealer must inform you that a vehicle is Salvage/ Junk/ Rebuilt before you purchase. A vehicle with a “Salvage,” “Junk,” or “Rebuilt” title (“Salvage certificate” in California) means an insurance company deemed the vehicle a “total loss.” Usually, this means that the vehicle was in a serious accident and sustained damage that would cost more to repair than the value of the vehicle. Dealers will purchase such vehicles at a Salvage Auction and repair them as cheaply as possible. Salvage vehicles usually have shoddy cosmetic repairs with hidden unrepaired damage or missing parts. Examples of multiple salvage vehicles sold are when the cars have missing airbags and sensors or suspension parts. One salvage vehicle had large chunks missing from its frame hidden by plastic trim pieces.

Never buy a Salvage/ Junk/ Rebuilt vehicle. Many insurance companies will refuse to insure a Salvage/ Junk/ Rebuilt vehicle. Many banks will refuse to finance loans to buy those vehicles as well.

Deferred Down Payments or “Pick-Up Payments”

Auto dealerships fraudulently fail to disclose deferred down payments so banks will finance consumers for loans for which they would otherwise not qualify. In addition, dealers who honestly attempt to obtain financing for their customers are at a competitive disadvantage when their finance terms are not as attractive as those of a dishonest dealer.

It is not illegal to charge and collect a deferred down payment; however, under the Automobile Sales Finance Act, it is illegal to fail to disclose it. If you agreed to pay a deferred payment, or gave the dealer a “hold” check, or signed a promissory note, and the dealer failed to disclose the payment arrangement correctly, the dealer broke the law.

Buying a Car When You Have Bad or Poor Credit

A dealer cannot legally raise the price of a vehicle because you have bad credit. A dealer must charge you the same price for a vehicle, whether you pay with cash, a check, or finance the vehicle. If the dealer raises the price because you are financing, it is considered a finance charge, and is illegal.

Consumers Right to Return a Vehicle

In California, you do not have a cooling-off period or the right to return a vehicle. However, you can buy a cooling-off period, but it only lasts two days, and you have to buy it before you leave the dealership with the vehicle! Unsurprisingly, no one suspects that the shiny car on the lot will have problems within the first few days – if they did, would they buy it? We have looked at literally thousands of consumer vehicle purchases, and have never seen a deal where the consumer purchased the overpriced two-day cooling-off period. Many dealers will tell you that you are not allowed to return the vehicle because you signed a form declining to purchase the expensive cooling-off period. This is a lie. Even if you did not buy the two-day cooling off period, you can still return your vehicle if the dealership did something wrong.

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