New California Auto Law

Used Car Protections Offered to Customers

" Two day return option on used cars.

o It is recommended that you buy a two-day return option on used vehicles that cost less than $40,000.

o In case you feel that you are being pressured to seal the deal, you should probably give it a second thought. If you do choose to buy a used car at a dealership, you can protect yourself by securing a return option. The dealer however will usually charge you to provide you with this option.

o If you have the return option, you can return the vehicle before the deadline lapses for almost any reason. A few good valid reasons that you can quote to do so are that you have not gotten the car checked yet by your own trusted technician as yet or else that you are unhappy with the present condition of the vehicle.

Returning a Car

" Dealers usually charge buyers who would like to avail of the return option along with a restocking fee in case you return the car.

" The maximum price covered by this law is $40,000 and any charge must be deducted from the restocking fee since this is the highest that the dealer can charge. The balance payable is the Restocking fee deducted from the Return option charge.

o For a vehicle priced $5,000 or less, a return charge of $75 and a restocking fee of $175 is chargeable; the balance due would thus be $100.

o If the cost of the vehicle is between $5000 and $10,000, the return charge is $150and restocking fee is $350, what would be due on return would therefore be $200.

o Similarly, for a vehicle costing between $10,000 and $30,000, return fee is $250 while restocking charge is $500, leaving a balance due of $250.

o For a vehicle costing from $30,000 to $40,000, a return fee of 1% of purchase price ($300 to $400) is chargeable while restocking fee should be $500 leaving a balance due of $100 to $200.

In order to be able to return the car, there are a few conditions that are to be fulfilled that you need to keep in mind:

" The vehicle should be driven for less than 250 miles after you have purchased it, with the only exception in the event that the dealer has given you permission  (which you must be able to prove with a communication in writing) to drive the vehicle for longer.

" The vehicle must be returned within two days by all means with the only exception that you have special permission from the dealer; again, a written communication to this effect is required should a dispute arise.

" The vehicle must necessarily be in the same condition it was when it was bought by you. Reasonable amounts of wear and tear (which will surely not be too much after 2 days' use) and other defects or problems that it had right from the time it was bought or the damages you didn't cause are permissible though.

" Ensure you make copies of all documentation and store them in a safe place for future reference. This is because you are required to return the originals of all paper-work to the dealer.

" Ensure you return the vehicle and the original paperwork in person preferably and ahead of the date and time noted on your contract.

" Make sure you counter sign the written notice of cancellation that the dealer will provide you with and keep your copy for future reference.

" Ensure you take very good care of the car and avoid over speeding or abusing it in any other manner. It is a good idea to photograph the car inside and out before you drive it away. This is because the dealer is liable to charge you for damage you caused to the vehicle when you return the car and photographic evidence can go a long way in protecting yourself from any false claims they might make. On the contrary, if any damage is caused by you to the vehicle knowingly or unknowingly, graciously accept it to avoid unnecessary unpleasantness.

" If the dealer refuses to accept the vehicle when you return it within two days for some reason, you can seek legal advice. Before doing so, it is important to make a note of the date, time and mileage on the vehicle.

" Make sure you have shopped around and negotiated with almost every dealer available before you decide on one. This is because there are certain auto dealers who offer the return option and restocking fee for a much lower price, or even for free; this way you can get the best protection for the same price or lower.

About Trade-ins

In case what you have decided upon is a trade-in where you decide to give your current vehicle and take another one in exchange, if you do get the return option, the dealer is obliged to keep your trade-in till such time that your return option expires. In case your trade-in is sold early, the dealer should ideally give you the car's fair market value or the price listed in the cancellation agreement, whichever is higher. However, the dealer need not give you your old car until two days after you return the car you just bought, if you do decide to do so.

Here are the important implications of such a deal:

o In case you decide to buy your next car from the same dealership, the dealer need not offer you the return option for this deal.

o Whenever possible, take a witness with you when you go back to return the car.

o Try and organize a ride back home from the dealership, or if this fails, take a taxi.

o After all your effort, ensure you don't get sweet talked into buying a car that's worse than the one you've just turned in, from the same dealer.

'Certified' Used Cars

Dealers use the term 'certified pre-owned vehicles' to refer to used cars that have been inspected by a mechanic. Chances of being landed with a faulty product if it has this tag attached to it are few since dealers can not advertise or sell certain problem cars as 'certified' for fear of legal implications. However, these so called 'certified' cars could still have a variety of serious and often expensive problems, so you must ensure that you have even such a used car inspected by your trusted mechanic before you close the deal.

Buyer Disclosures

As per the new law, auto dealers must necessarily give you the following details in writing:

o The exact price of the vehicle excluding extra options and / or add-ons

o Specific prices for add-ons like anti-theft devices, protection of interiors, service contracts and insurance cover. These extras are usually overpriced and redundant.

o A copy of your credit rating in case you are availing of a loan. This score is based on the way you handle your loans and credit in general and can be considered a financial 'report card' of sorts. A good credit score usually implies that you can get the best deals.

Limit on Interest Rate Markups

There is a common practice of auto lenders paying dealers a hidden fee to con you into taking up an offer on a higher interest rate than what you actually deserve based on your credit score. This extra interest is termed a 'markup' or in other words is extra profit that is shared by the dealer and the lender.

The new law puts a limit on the maximum markup amount that dealers can get. They should not receive more than 2.5% by this means from lenders for arranging financing in case your car loan is up to 60 months long, and this reduces to 2% if the repayment period is longer.

In order to get the best interest rate on a car loan, it is recommended that you check with banks, credit unions or online lenders before you shop for a car; this way you can get to know if the rate being offered is far too high as compared to the average rate you have learnt about as part of your investigations. Here are a few other aspects to watch out for:

o Dealers often advertise '0% financing' but often end up charging consumers a much higher rate of interest.

o Even a small reduction in the interest rate can give you savings of $2,000-$10,000 or more in terms of finance charges over the whole life of the loan. It hence is worth the effort to try and bring the rate down though even by a small amount.

Importance of a Second Opinion

o Before you buy a used car, avail of the services of a trusted mechanic and get it thoroughly inspected.

o It takes a professional technician to spot serious problems that amateurs might overlook since the modern day cars are full of sophisticated electronics.

o Take help you find a qualified technician even if it costs over $100 for an inspection. This can prove to be a good investment since it can save you further expense and trauma if you do end up with a faulty car.

o In case the seller seems reluctant to let your mechanic check the vehicle up, you can quite simply suspect something wrong and it is best to avoid any future dealings with this agent thereafter.

Existing Consumer Protection Clauses

There already exist many rights that consumers can exercise, some of which are:

o There exists a state 'lemon law', which gives consumers the right to a refund or replacement in the event that your new or used car has a factory warranty and has brought with it serious defects.

o Car buyers have the right to have a copy of the contract detailing all the terms and conditions duly filled in, in the language that was used to negotiate the purchase, before it is signed.

o Consumers have the right to legal relief if you were cheated, deceived, or defrauded by the dealer or agency. A consumer attorney can be consulted and the problem can thereafter be reported to the district attorney or other relevant authorities.

In summary, incorporating all of the above mentioned aspects, we shall now consider a hypothetical instance of the ideal way to conduct business with a car dealer:

A car buyer buys a good-looking used car in an 'as is where is' condition. He decides to pay $30 and avail of the return option.

The following day, he takes the car to his long standing and trusted mechanic who tells him the car requires expensive repairs.

Subsequently he decides to return the car to the dealership before his return option would expire. He prudently asks his sister to follow him in another car.

This wise car buyer ensures he gets a receipt showing that he has returned the car before the two-day period expired. He pays a $300 restocking fee and takes a ride back home with her sister who was there in time for it. After two days, he takes a taxi to the dealership and gets his down payment returned and the loan voided.

This buyer knows that he does not have the right to another return option if he chooses to deal with the same agency. So he finds another used car in very good condition at a different dealership for a lower price and this time, ensures he gets it checked by his own mechanic before closing the deal so as to be saved of the trouble of availing the return option. In case he suspected that the dealer salesperson had lied about the car's condition in the first place, he could see an attorney; but he didn't have to in this case.

Though this buyer pays $500 in all for the return option, restocking fee, inspection and taxi ride, he still ends up saving over $3,000 in terms of repair costs.

In this respect, we conclude that this is indeed a really smart car buyer. He took the time out to learn about his rights and thereby protect his investment.

Useful Links and Further Information

Consumers for Auto Reliability and Safety or CARS, is a leading consumer watchdog group working to improve rights of car buyers in California. Contact CARS at 1303 J Street, Suite 270, Sacramento, CA 95814 or visit their website at http://www.carconsumers.com

Consumer Action is a consumer watchdog group that strives to educate the general public about their rights as consumers. Website http://www.consumer-action.org

California Attorney General provides assistance and guidance in filing consumer complaints and can be contacted at www.ag.ca.gov or 800-952-5225

California Dept. of Consumer Affairs helps you find the right government agency to assist with your problem and can be contacted at www.dca.ca.gov or 800-952-5210