Tips When Buying a Car

BEFORE VISITING THE DEALERSHIP:

Evaluate your financial situation and determine how much you can afford to pay each month. A longer-term finance contract may mean smaller monthly payments than a shorter-term finance contract (if all other terms are the same) - but will result in more money paid over time on your contract.

Determine the price range of the vehicle you're thinking of buying. Check newspaper ads, the Internet, and other publications.

Understand the value and cost of optional credit insurance if you agree to purchase.

Know the difference between buying and leasing a vehicle.

Be aware that your credit history may affect the finance rate you are able to negotiate. Generally, you'll be able to get a lower rate if you've paid your monthly credit obligations on time.

Compare annual percentage rates and financing terms from multiple finance sources such as a bank, finance company and credit union. This information may also be available from the finance sources' and vehicle manufacturers' Web sites.

WHEN VISITING THE DEALERSHIP:

Stay within the price range that you can afford.

Negotiate your finance or lease arrangements and terms.

Consider carefully whether the transaction is best for your budget and transportation needs.

Understand the value and cost of optional products such as an extended service contract, credit insurance or guaranteed auto protection, if you agree to purchase. If you don't want these products, don't sign for them.

Read the contract carefully before you sign. You are obligated once you have signed a contract.

AFTER COMPLETING THE VEHICLE PURCHASE OR LEASE:

Be aware that if you financed the vehicle, the assignee (bank, finance company or credit union that purchases the contract) holds a lien on the vehicle's title (and in some cases the actual title) until you have paid the contract in full.

Make your payments on time. Late or missed payments incur late fees, appear on your credit report and impact your ability to get credit in the future.

IF YOU ENCOUNTER FINANCIAL DIFFICULTY:

Talk to your creditors if you experience difficulties making your monthly payments. Explain your situation and the reason your payment will be late. Work out a repayment schedule with your creditors and, if necessary, seek the services of a non-profit credit counseling agency.

Know your obligations. A creditor or assignee may take the vehicle in full satisfaction of the credit agreement or may sell the vehicle and apply the proceeds from the sale to the outstanding balance on the credit agreement. This second option is more common. If the vehicle is sold for less than what is owed, you may be responsible for the difference.

Be aware that repossession can occur if you fail to make timely payments. It does not relieve you of your obligation to pay for the vehicle. The law in some states allows the creditor or assignee to repossess your vehicle without going to court.

FEDERAL LAWS

Familiarize yourself with laws that authorize and regulate vehicle dealership financing and leasing.

TRUTH IN LENDING ACT - requires that, before you sign the agreement, creditors give you written disclosure of important terms of the credit agreement such as APR, total finance charges, monthly payment amount, payment due dates, total amount being financed, length of the credit agreement and any charges for late payment.

FEDERAL CONSUMER LEASING ACT (FCLA) - requires the leasing company (dealership, for example) to disclose certain information before a lease is signed, including: the total amount of the initial payment; the number and amounts of monthly payments; all fees charged, including license fees and taxes; and the charges for default or late payments. For an automobile lease, the lessor must additionally disclose the annual mileage allowance and charges for excessive mileage; whether the lease can be terminated early; whether the leased automobile can be purchased at the end of the lease; the price to buy at the end of the lease; and any extra payments that may be required at the end of the lease.

CREDIT PRACTICES RULE - requires creditors to provide a written notice to potential co-signers about their liability if the other person fails to pay; prohibits late charges in some situations; and prohibits creditors from using certain contract provisions that the government found to be unfair to consumers.

EQUAL CREDIT OPPORTUNITY ACT -prohibits discrimination related to credit because of your gender, race, color, marital status, religion, national origin or age. It also prohibits discrimination related to credit based on the fact that you are receiving public assistance or that you have exercised your rights under the federal Consumer Credit Protection Act.