Car Handbook


A Car Buyer’s Checklist

What kind of engine, body, safety features, and options do you want in a vehicle? Use this checklist to help think these through.
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Car Pricing Comparison Worksheet

Print this worksheet and use it to compare prices of cars that are the same year, make, and model sold by different sellers; cars of different years, makes, and models; or both.
download iconDownload the Price Comparison Worksheet

Insurance Comparison Worksheet

Insurance rates always vary based on age, sex, marital status, driving record, where you live, the number of miles you drive to and from work, and the number of miles you drive annually, as well as your vehicle’s age and value. Call several insurance agents to ask for insurance price quotes and use this worksheet to compare them.
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Sample Leasing Form

This is a sample leasing form prepared by the Federal Reserve Board. Dealers may use a form very similar to this.
download iconDownload the Federal Consumer Leasing Act Disclosures Form

Top Ten Tips for Buying a Car

  1. Decide on your needs and wants in an automobile. Don’t be swayed by friends or salespeople to buy something that you don’t want.
  2. Comparison shop for makes and models by visiting the library and looking up objective car reports before you talk to sellers.
  3. Shop as diligently for a good seller as for a good car.
  4. Price is important, but it isn’t everything. Ask about the service a dealership will give you if you buy there.
  5. During a test drive, drive the car as you plan to drive it after you buy it: Merge into freeway traffic, stop quickly, stop on ice and snow if possible, make U-turns in a parking lot, and so on.
  6. Remember, a dealer’s highest markups are on the back end of the sale: options, extended warranties, rustproofing, credit life insurance, and the like—so be a firm negotiator and don’t pay for unnecessary services.
  7. If you’re planning to trade in your current car, don’t mention it to the dealer until you’ve agreed to a price for a new car.
  8. If you’re considering buying a used car, always review the car’s title history first, which will allow you to verify odometer readings before committing to the purchase. Check the past history through CarFax (www.carfax.comexternal link) or a similar company, which may give you information on accidents, past lemon law buybacks, etc.
  9. Have a mechanic and body shop inspect a used car thoroughly so you know the condition of the car and any repairs you may have to make if you buy it.
  10. Don’t sign the contract to purchase unless you’re absolutely sure you want to own the car and can make the necessary payments. Always read the fine print on any contract. The contract is binding: There is no three-day cooling-off period. You can’t return the car after you’ve bought it!

Car-Buying Glossary

Anti-Lock Brakes: Brakes that automatically pump for you when you slam your foot on the brakes in an emergency stop. They may keep you from skidding while you try to turn to avoid an accident.

“As is” Warranty: If you buy a car sold “as is,” you must pay for any and all car repairs. There is no warranty. “As is” must be checked in the buyer’s guide displayed in the car window at the dealership. In Minnesota, a car can only be sold “as is” if the used car warranty law doesn’t apply to it.

Auto Broker: Someone who you can hire to help you shop for a car. An auto broker may work for a handful of dealers or a single dealer.

Blue Book: The “National Auto Dealers’ Association’s Used Car Book,” listing estimated used car prices based on model, make, year, and mileage. The pocket-sized blue book is actually orange.

Buyer’s Guide: A double sided form that the dealer fills out to tell you whether the vehicle comes with a warranty, and, if so, what the warranty includes. The Federal Trade Commission requires all dealerships to display the buyer’s guide in the vehicle’s window.

Cooling-Off Period: While a “cooling-off” period sometimes applies to the sale of products, allowing you to return a product and get your money back, no such cooling off period law exists in car sales. Once you sign a contract to buy a car, the car is yours. Some dealers will offer a cooling off period as a marketing tool.

Credit Disability Insurance: Your finance company may require this along with credit life insurance. It ensures the finance company loaning you money to buy your car will be among the first creditors paid if you are disabled and unable to work to pay off your car loan.

Credit Life Insurance: Your finance company may require this. It ensures the finance company loaning you money to buy your car will be among the first creditors paid if you die before you pay for your car.

Curbstoner: An unlicensed professional used car seller who poses as a private individual selling his or her own car. Curbstoners sell used cars “at the curb,” not at a dealership. They specialize in taking advantage of unschooled buyers.

Dealer: A car dealer is anyone who sells more than five cars in a year. A dealer must be licensed and abide by all laws that apply to dealers, including the state’s used car warranty law.

Dealer Invoice: This is often represented as the price the dealer pays the manufacturer for the car. However, holdbacks and other incentives almost always reduce the dealer’s cost.

Deductible: A car warranty usually specifies a “deductible” amount, an amount you must pay whenever you have a warrantied part on your car repaired.

Depreciation: The reduced value of a car after you buy it. A brand new car can lose or “depreciate” between several hundred and several thousand dollars in value the minute you drive off the dealer’s lot.

Extended Warranty: This is also referred to as a service contract. It is an option you may purchase on new, and some used, cars. The extended warranty should cover car repairs over a longer period than the manufacturer’s warranty, which comes with the car. Be aware that it is a high-profit item for a dealer. Check to see exactly what it includes, and remember that you can negotiate the price.

Fabric Protection: This is one of the extras you may choose to have when you buy a new car, and may be expensive because of high dealer mark-ups.

Holdback: An amount the manufacturer pays the dealer each time the dealer sells its make. Also referred to as a “kickback.”

Leasing: This is like long-term car rental. You make monthly payments for the opportunity to drive a car, but the leasing company owns it.

Lemon Law: Minnesota’s lemon law requires that a car seller repair or replace a motor vehicle with defects or problems covered under the warranty, which the vehicle owner reports within the warranty period or within two years after delivery of the vehicle, whichever comes first.

Options: These are extras you can have added to a standard vehicle, and usually come in packages. They often include air bags, anti-lock brakes, power locks and windows, rear wiper, rear defroster, and such comfort items as velour or leather seat coverings.

Paint Sealant: This is one of the extras you may choose to have when you buy a new car, and may be expensive because of high dealer mark-ups. Whether it actually makes the new paint shine longer is unknown.

Prior Salvage: If a car was totaled and then rebuilt anytime after June 1993, the car’s title must be marked “prior salvage.” It may not be structurally as sound as another car after being rebuilt.

Recall: If a car model has a defect, a manufacturer may issue a “recall” notice, meaning that the defect will be fixed at the manufacturer’s expense.

Repossession: If you don’t make your car loan payments, you risk having your car “repossessed” or taken back by the finance company that gave you the loan. Always contact the finance company immediately if you aren’t going to make a monthly payment. The company may be willing to work with you to set up a payment plan.

Rustproofing: Meant to hold off body erosion, rustproofing is a popular extra on new cars. A type of rustproofing called galvanizing is used by manufacturers and comes with a new car. You’ll pay extra for aftermarket rustproofing, and there is controversy about its worth.

Service Contract: Also called an “extended warranty,” it supplements the manufacturer’s warranty, which comes with a vehicle you purchase. A service contract is a high-profit item for the dealer. Make sure it offers substantially more than the standard warranty.

Title: The title shows a vehicle’s ownership history. It is important to check the title of a used car and to contact past owners listed to verify the mileage and inquire about the car’s maintenance.

Used Car Warranty Law: A state law that protects used car buyers. It says that used car dealers must provide basic warranty coverage for most used cars and small trucks sold to Minnesota buyers.

Warranty: All new and many used cars come with warranties. A warranty offers a guarantee that certain mechanical and body parts will be repaired if they aren’t in proper working condition. The warranty is typically limited, so find out what the limitations are.

Top Ten Tips for Leasing a Car

  1. Most importantly—be sure leasing is right for you before you sign a leasing contract. Remember—there is no three-day cooling off law that allows you to return a car once you have signed a contract!
  2. Don’t just look at the monthly payment. Most of the time the payment will be lower when you lease than when you buy a car, but remember: you won’t own anything at the end of your lease, whereas when you buy a car it’s really yours when you make the final payment.
  3. Negotiate the price of the car as if you were buying it. If, during negotiations, you switch from buying the car to leasing it, the dealer should still base your lease payments on the same negotiated price. Some don’t. Some revert to the sticker price, which is usually much higher.
  4. Examine all of the fees you’ll pay in addition to the monthly payment. This helps you compare “apples” to “apples” and figure out your total financial obligation.
  5. Shop around. Visit several dealers and compare their offers.
  6. Understand the up-front costs. If a dealer offers a “zero down” lease, you should not have to pay anything up front other than tax and license fees. Otherwise, you might have to pay the security deposit, a down payment, and the first month’s payment at the beginning of the lease.
  7. Choose a make and model that traditionally holds its value. Lease payments should be lower on a popular model that will have a good re-sale value.
  8. Make sure that your trade-in and any other credits you should receive are listed on your leasing contract so that you are getting full credit for them.
  9. Learn the jargon involved in leasing and brush up on the math involved. That way you’ll be confident that you’re getting the best possible deal.
  10. Be careful with extras. Does the lease include a charge of hundreds of dollars for rustproofing or an extended warranty? You’re only going to drive the car for a couple of years, so think about whether you really want to pay for these items.