Purchasing a vehicle is a significant financial decision, and the Auto Purchase Agreement is the cornerstone of this transaction. It’s crucial for every car buyer to thoroughly understand this document to protect their interests and ensure a transparent and fair deal. This guide breaks down key aspects of an auto purchase agreement, highlighting your rights and the disclosures you should expect from dealerships.
Credit Score Disclosure: Know Your Score
Dealers are obligated to provide you with a “Notice to Vehicle Credit Applicant,” a separate document written in clear, 10-point type, detailing important credit information. This disclosure must include:
- Credit Scores Obtained: Every credit score the dealer accessed and utilized in the transaction must be disclosed.
- Credit Report Explanation: A clear statement explaining that a credit report is a record of your credit history, reflecting your payment habits and debts.
- Credit Score Fluctuation: An explanation that credit scores are derived from credit report information and can change over time as your credit history evolves.
- Credit Score Impact: A statement clarifying that your credit score can influence both your ability to secure credit and the cost of that credit (interest rates, loan terms).
- Credit Score Range: The possible range of credit scores for the scoring model used to generate your score must be provided.
- Credit Score Distribution Graph: You should receive a bar graph (with at least six bars) or another understandable visual representation showing how your credit score compares to other consumers. This helps you understand where your score falls within the broader credit landscape.
- Credit Score Date: The date your credit score was created must be included.
- Reporting Agency Information: The name of the consumer reporting agency or entity that provided each credit score used by the dealer.
- Right to Verify Accuracy: You are encouraged to check the accuracy of your credit report information and have the right to dispute any inaccuracies.
- Access to Free Credit Reports: Federal law entitles you to obtain free copies of your credit reports directly from consumer reporting agencies annually.
- Contact Information for Free Reports: Contact details for the centralized source where you can obtain your free annual credit reports.
This disclosure ensures transparency regarding how your credit score is used in the auto purchase agreement process and empowers you to understand your credit standing.
Auto Financing Fee Caps: Limits on Dealer Compensation
If a dealer assists in securing financing for your vehicle purchase, their compensation from the financing institution is legally capped. This protects consumers from excessive dealer markups on financing. The limits are:
- 2% for Long-Term Contracts: For contracts exceeding 60 months, dealer compensation is limited to 2% of the purchase amount.
- 2.5% for Short-Term Contracts: For contracts of 60 months or less, the limit is 2.5% of the purchase amount.
These limits do not apply in specific situations where the dealer assumes significant financial risk or when the financing assignment occurs more than six months after the initial conditional sale contract date. Understanding these caps is vital when reviewing the financing terms within your auto purchase agreement.
Purchase Price Disclosure: Transparency in Monthly Payments
California law mandates dealers to provide a written document detailing the prices of specific add-on items and their impact on your monthly installment payments. This ensures you are fully aware of what you are paying for beyond the vehicle itself. This disclosure within the auto purchase agreement process must include:
- Disclosed Items: Items requiring price disclosure include service contracts, insurance products, debt cancellation agreements (GAP insurance), theft deterrent devices, surface protection products, and contract cancellation option agreements.
- Consent and Full Disclosure: No charges for these items can be added to your contract without complete disclosure and your explicit consent.
- Payment Comparison: The document must clearly show the difference in monthly installment payments with and without these add-on items, allowing you to make informed decisions about what you truly need and want.
This requirement prevents hidden fees and ensures you have a clear picture of the total cost of your auto purchase agreement, including any extras.
Prohibited “Certified” Used Vehicles: Ensuring Quality and Disclosure
When considering a used vehicle advertised as “certified,” be aware that specific regulations apply to protect consumers. Dealers must conduct a thorough inspection and provide you with a copy of the inspection report. However, dealers are prohibited from advertising a vehicle as “certified” under certain conditions:
- Mileage Discrepancies: If the odometer doesn’t reflect the vehicle’s actual mileage.
- Lemon Law Buybacks: If the vehicle was repurchased by the manufacturer or dealer under state or federal warranty laws (lemon law).
- Significant Damage: If the vehicle suffered damage from collision, fire, or flood and was not repaired to a safe operational condition prior to sale.
- Branded Titles: If the title is branded as a lemon law buyback, manufacturer repurchase, salvage, junk, nonrepairable, flood, or similar designation.
- Frame Damage or “As Is” Sales: If the vehicle has frame damage or is sold “as is,” indicating no warranty.
- Incomplete Inspection Reports: If the dealer fails to provide a complete inspection report detailing all inspected components.
Note: Always ask the dealer to explain why a vehicle cannot be certified if you have concerns. Before finalizing your auto purchase agreement, check www.safercar.gov to see if the vehicle has any unrepaired safety recalls.
Used Car Buyers: Two-Day Contract Cancellation Option
For used cars priced under $40,000, California law offers consumers a valuable protection: the option to purchase a two-day contract cancellation agreement.
Important: There is no automatic “cooling off” period for car purchases unless you specifically buy a contract cancellation option agreement.
Exceptions: This cancellation option does not apply to used cars priced at $40,000 or more, new cars, private party sales, motorcycles, off-highway vehicles, recreational vehicles, or vehicles sold for business or commercial use (excluding personal-use pickup trucks).
Cancellation Option Costs: The cost for this option varies based on the vehicle price:
- $75 for vehicles $5,000 or less.
- $150 for vehicles $5,001–$10,000.
- $250 for vehicles $10,001–$30,000.
- One percent of the purchase price for vehicles $30,001–$39,999.
Restocking Fees: If you return the vehicle, the dealer may charge a restocking fee, with maximum amounts also based on vehicle price:
- $175 for vehicles $5,000 or less.
- $350 for vehicles $5,001–$10,000.
- $500 for vehicles $10,001–$39,999.
Note: The contract cancellation option fee itself is nonrefundable. However, if a restocking fee is charged, the cancellation option fee must be deducted from it. If the dealer didn’t charge for the option and has already sold your trade-in vehicle, you are entitled to a refund of its fair market value or the value stated in the sales contract, whichever is higher.
Vehicle Return Conditions: To exercise the cancellation option, you must return the vehicle:
- To the purchasing dealer by the close of business within two days (or the timeframe specified in the agreement).
- Without exceeding the mileage limit set in the contract.
- With all original receipts for the sale and cancellation option agreement.
- In the same condition as received, except for normal wear and tear and any issues that arose after you took possession.
- Free of any new liens or encumbrances created after the purchase.
Upon proper return, the dealer must provide a full refund of sales tax, registration fees, and any deposit or trade-in vehicle. If the return doesn’t meet these conditions, the dealer can refuse the return, but they must provide written notice explaining why. Carefully review the contract cancellation option details within your auto purchase agreement if you choose this protection.
Record of Complaint Form: Your Recourse
If you believe a dealer has violated the Car Buyer’s Bill of Rights, you have avenues for complaint. You can file a complaint online or obtain a form by calling 1-800-777-0133.
Verifying a Dealer’s License Status: Ensure Legitimacy
Before signing an auto purchase agreement, you can verify a dealer’s license status through the Occupational Licensing Status Information System or by contacting your local DMV Inspector Office.
Civil Disputes and Consumer Alternatives: Seeking Resolution
If you encounter issues, first attempt to resolve them directly with the dealer. If unsuccessful, consider consulting a private attorney, utilizing the small claims court in your county, or seeking assistance from a legal aid group. Your local county government directory can provide county court information.
Many consumers also contact the Better Business Bureau (BBB) to register complaints. The BBB business section of your local directory can provide contact information.
For broader consumer complaint assistance, you can reach out to:
- California Attorney General: www.oag.ca.gov, 1-800-952-5225
- Bureau of Automotive Repair: www.smogcheck.ca.gov, 1-800-952-5210
- Arbitration Certification Program: www.dca.ca.gov/acp/, 916-574-7350
- Consumer Motor Vehicle Recovery Corporation: http://www.cmvrc.org/, 1-800-961-6175
- California Department of Consumer Affairs: www.dca.ca.gov, 1-800-952-5210 (for help finding the right agency)
Disclaimer: A Summary, Not Legal Advice
This guide provides a summary of key aspects of California law related to auto purchase agreements and car buyer rights. It is not a substitute for legal advice. For the complete and exact legal language, refer to the California Vehicle Code and California Civil Code at www.leginfo.ca.gov. Always read your auto purchase agreement carefully and seek professional legal counsel if you have specific questions or concerns.
