acquiring a vehicle section 16.1. understanding business and personal law acquiring a vehicle...

Acquiring a Vehicle Acquiring a Vehicle Section 16.1Section 16.1

Understanding Business and Personal Law

Owning a Vehicle

Section 16.1Section 16.1Acquiring a Vehicle Acquiring a Vehicle

Section 16.2Section 16.2Motor Vehicle Insurance Motor Vehicle Insurance

1616ChapterChapter Owning a VehicleOwning a Vehicle

Owning a Vehicle

What You’ll Learn

How to identify important parts of a loan How to identify important parts of a loan agreement (p. 338)agreement (p. 338)

How to trade in a vehicle (p. 341)How to trade in a vehicle (p. 341)

How to identify the pros and cons of How to identify the pros and cons of leasing a vehicle (p. 342)leasing a vehicle (p. 342)

Owning a Vehicle

What You’ll Learn

How to compare options for buying a pre-How to compare options for buying a pre-owned vehicle (p. 342)owned vehicle (p. 342)

How to pursue legal remedies if you buy How to pursue legal remedies if you buy a defective vehicle (p. 347)a defective vehicle (p. 347)

Owning a Vehicle

What You’ll Learn

How to recognize some federal laws How to recognize some federal laws designed to protect you when you buy a designed to protect you when you buy a vehicle (p. 348)vehicle (p. 348)

How to summarize the legal aspects of How to summarize the legal aspects of repairing your vehicle (p. 350)repairing your vehicle (p. 350)

Owning a Vehicle

Why It’s Important

Knowing about financing, buying, and Knowing about financing, buying, and leasing a vehicle will enable you to make leasing a vehicle will enable you to make better purchase decisions.better purchase decisions.

Owning a Vehicle

Legal Terms

finance charge (p. 338)finance charge (p. 338)annual percentage rate (APR) (p. 338)annual percentage rate (APR) (p. 338)Used Car Rule (p. 344)Used Car Rule (p. 344)Buyer’s Guide (p. 344)Buyer’s Guide (p. 344)repossess (p. 346)repossess (p. 346)adhesion contract (p. 347)adhesion contract (p. 347)

Owning a Vehicle

Laws of Ownership

Financing a Vehicle

Buying a New Vehicle Trade-In

Section OutlineSection Outline

Owning a Vehicle

Leasing a New VehicleSection OutlineSection Outline

Consumer Leasing Act

Buying a Pre-Owned VehicleBuying from a DealerBuying from a Private PartyBuying from Rental Companies

Owning a Vehicle

The Contract to Buy a Vehicle Section OutlineSection Outline

What to Do if You Buy a Defective Car

Federal Consumer Protection Odometer Protection

Repairing a Vehicle

Owning a Vehicle

Pre-Learning Question Pre-Learning Question

What laws do you think apply to buying a vehicle?

Owning a Vehicle

16.116.1

Laws of Ownership Laws of Ownership

The Uniform The Uniform Commercial Commercial CodeCode

Consumer Consumer protection protection laws laws

Laws Laws regulating regulating creditcredit

The law that applies to the purchase of a The law that applies to the purchase of a vehicle comes from several sources. vehicle comes from several sources.

Owning a Vehicle

What information should you have before you buy a vehicle using credit?

Owning a Vehicle

One of the first steps in buying a car is One of the first steps in buying a car is to decide how much you can afford to to decide how much you can afford to pay. pay.

You can buy a carYou can buy a car

Financing a VehicleFinancing a Vehicle

with cashwith cashwith credit with credit

Owning a Vehicle

Federal law requires lenders to Federal law requires lenders to disclose the finance charge and disclose the finance charge and annual percentage rate (APR) to annual percentage rate (APR) to borrowers.borrowers.

Financing a Vehicle Financing a Vehicle

Owning a Vehicle

The The finance chargefinance charge is the cost of is the cost of the loan in dollars and cents.the loan in dollars and cents.The The annual percentage rate (APR)annual percentage rate (APR) is the true interest rate of the loan.is the true interest rate of the loan.

Financing a Vehicle Financing a Vehicle

Owning a Vehicle

1.1. The exact price you’re paying for The exact price you’re paying for the vehiclethe vehicle

2.2. The amount you’re financingThe amount you’re financing3.3. The finance chargeThe finance charge

What You Should Know What You Should Know Before You Buy Before You Buy

Owning a Vehicle

4.4. The APRThe APR5.5. The number and amount of The number and amount of

paymentspayments6.6. The total sales price (the sum of the The total sales price (the sum of the

monthly payments plus the down monthly payments plus the down payment)payment)

What You Should Know What You Should Know Before You Buy Before You Buy

Owning a Vehicle

What is the difference between the finance charge and annual percentage rate?

Owning a Vehicle

ANSWERANSWER

The finance charge is the dollar amount of the interest, and the APR is an interest rate.

Owning a Vehicle

What steps should you take before buying a new vehicle?

Owning a Vehicle

After deciding how much you can After deciding how much you can afford to pay for a car, when buying a afford to pay for a car, when buying a new car you should new car you should

Buying a New Vehicle Buying a New Vehicle

learn about the cars you may be learn about the cars you may be interested ininterested inresearch pricingresearch pricing

Owning a Vehicle

When buying a new car, do not When buying a new car, do not discuss a trade-in with the dealer until discuss a trade-in with the dealer until you have negotiated the best price for you have negotiated the best price for your new car. your new car.

Trade-In Trade-In

Owning a Vehicle

You should also know the value of You should also know the value of your trade-in, which can be found on your trade-in, which can be found on the Internet or in the library.the Internet or in the library.

Trade-In Trade-In

Owning a Vehicle

How is leasing a vehicle different from buying one?

Owning a Vehicle

The advantages to leasing a new The advantages to leasing a new vehicle are:vehicle are:

Leasing a New Vehicle Leasing a New Vehicle

low down paymentlow down paymentsmaller monthly payments smaller monthly payments

Owning a Vehicle

The disadvantages to leasing a new The disadvantages to leasing a new vehicle are:vehicle are:

most expensive way to acquire a most expensive way to acquire a carcarafter making a lot of payments, you after making a lot of payments, you end up with nothing to trade in end up with nothing to trade in toward your next vehicle toward your next vehicle

Owning a Vehicle

The Consumer Leasing Act is a The Consumer Leasing Act is a federal law requiring businesses to tell federal law requiring businesses to tell you about all of the terms of a lease of you about all of the terms of a lease of personal property. personal property.

Consumer Leasing Act Consumer Leasing Act

Owning a Vehicle

This information can be used to This information can be used to compare different leases or to compare different leases or to compare the cost of leasing with the compare the cost of leasing with the cost of buying.cost of buying.

Consumer Leasing Act Consumer Leasing Act

Owning a Vehicle

Where can you buy a pre-owned car?

Owning a Vehicle

A pre-owned vehicle may be A pre-owned vehicle may be purchased from purchased from

a new car dealera new car dealera used car dealera used car dealera car rental companya car rental companya private partya private party

Owning a Vehicle

Sometimes banks and loan Sometimes banks and loan companiescompanies

Owning a Vehicle

A used car dealer may have a large A used car dealer may have a large selection of cars, but often does not selection of cars, but often does not maintain facilities to service the car maintain facilities to service the car after you buy it.after you buy it.

Buying from a Dealer Buying from a Dealer

Owning a Vehicle

New car dealers often sell used cars New car dealers often sell used cars that they have taken in for trade and that they have taken in for trade and have service facilities. have service facilities.

Buying from a Dealer Buying from a Dealer

Owning a Vehicle

When selling a vehicle, a dealer When selling a vehicle, a dealer

Warranties Warranties

gives an implied warranty that the gives an implied warranty that the vehicle is merchantable, unless this vehicle is merchantable, unless this warranty is excluded.warranty is excluded.often gives a 30-, 60-, or 90-day often gives a 30-, 60-, or 90-day guarantee.guarantee.

Owning a Vehicle

The FTC’s The FTC’s Used Car RuleUsed Car Rule requires all requires all used car dealers to place a large used car dealers to place a large sticker, called a sticker, called a Buyer’s GuideBuyer’s Guide, in the , in the window of each used vehicle they window of each used vehicle they offer for sale. offer for sale.

The Used Car Rule The Used Car Rule

Owning a Vehicle

The guide explains any specific The guide explains any specific warranty protection that is provided warranty protection that is provided and also states whether there is and also states whether there is

The Used Car Rule The Used Car Rule

no warranty,no warranty,an “as is” warranty, oran “as is” warranty, oran implied warranty. an implied warranty.

Owning a Vehicle

The advantage to buying from a The advantage to buying from a private party is that the prices are private party is that the prices are lower, but there are disadvantages, as lower, but there are disadvantages, as well.well.

Buying from a Private Party Buying from a Private Party

no implied warranty of no implied warranty of merchantabilitymerchantabilityno recourse if something goes wrong no recourse if something goes wrong

Owning a Vehicle

Another disadvantage is that the car Another disadvantage is that the car might be stolen. might be stolen.

In this case, a bank or loan company In this case, a bank or loan company may have the right to may have the right to repossessrepossess, or , or take back, the car, regardless of who take back, the car, regardless of who presently owns it.presently owns it.

Owning a Vehicle

Before you buy from a private party, Before you buy from a private party, be sure to:be sure to:

test-drive the vehicletest-drive the vehicleask for the vehicle’s maintenance ask for the vehicle’s maintenance recordrecordtalk to previous ownerstalk to previous ownersask to see the certificate of titleask to see the certificate of title

Owning a Vehicle

Advantages:Advantages:

Buying from Rental Companies Buying from Rental Companies

are usually only a year or two oldare usually only a year or two oldcan be good buyscan be good buysusually have had regular usually have had regular maintenancemaintenancecome with warranties come with warranties

Owning a Vehicle

Disadvantages:Disadvantages:

Buying from Rental Companies Buying from Rental Companies

have probably had heavy usehave probably had heavy usehave high mileage have high mileage

Owning a Vehicle

What form should a contract to buy a vehicle take?

Owning a Vehicle

Under the UCC, a contract for the sale Under the UCC, a contract for the sale of goods valued at $500 or more must of goods valued at $500 or more must be in writing to be enforceable. be in writing to be enforceable.

The Contract to Buy a Vehicle The Contract to Buy a Vehicle

Owning a Vehicle

When private parties enter into a When private parties enter into a contract, they can simply write on a contract, they can simply write on a piece of paper that one party agrees piece of paper that one party agrees to sell and the other party agrees to to sell and the other party agrees to buy the vehicle. buy the vehicle.

Owning a Vehicle

The contract between private parties The contract between private parties must also identify the vehicle and be must also identify the vehicle and be signed by the seller.signed by the seller.

Owning a Vehicle

When a contract is entered into When a contract is entered into between a private party and a dealer, between a private party and a dealer, the private party is usually at a the private party is usually at a disadvantage. disadvantage.

The dealer asks the buyer to sign a The dealer asks the buyer to sign a printed form.printed form.

Owning a Vehicle

A sentence on the front of the form A sentence on the front of the form says that the buyer agrees to the says that the buyer agrees to the terms on the reverse side. terms on the reverse side.

The back of the form contains a full The back of the form contains a full page of small-print terms that favor page of small-print terms that favor the seller.the seller.

Owning a Vehicle

Such a standard-form contract is Such a standard-form contract is called an called an adhesion contractadhesion contract. .

Smart buyers read the small print and Smart buyers read the small print and cross out items with which they cross out items with which they disagree.disagree.

Owning a Vehicle

If you buy a car that continuously has If you buy a car that continuously has mechanical problems, you should mechanical problems, you should notify the seller immediately.notify the seller immediately.

What to Do if You Buy What to Do if You Buy a Defective Car a Defective Car

Owning a Vehicle

The seller can be asked to The seller can be asked to

What to Do if You Buy What to Do if You Buy a Defective Car a Defective Car

fix the problemfix the problempay to have the vehicle fixedpay to have the vehicle fixedgive you your money back give you your money back

Owning a Vehicle

Revoking the Acceptance Revoking the Acceptance

If you buy a car that doesn’t conform If you buy a car that doesn’t conform to the contract, you may be able to to the contract, you may be able to revoke your acceptance, even after revoke your acceptance, even after taking possession of the vehicle. taking possession of the vehicle.

Owning a Vehicle

Revoking the Acceptance Revoking the Acceptance

This revocation is allowed under the This revocation is allowed under the UCC if the defect is serious and UCC if the defect is serious and undetectable. undetectable.

It must be made within a reasonable It must be made within a reasonable time after the defect is discovered.time after the defect is discovered.

Owning a Vehicle

Notifying the Seller about Defects Notifying the Seller about Defects

Buyers must notify sellers of defects in Buyers must notify sellers of defects in vehicles within a reasonable time after vehicles within a reasonable time after the purchase. the purchase.

If you fail to do so, you may lose the If you fail to do so, you may lose the right to recover.right to recover.

Owning a Vehicle

State Lemon Laws State Lemon Laws

Many states have passed “lemon Many states have passed “lemon laws” to protect consumers when they laws” to protect consumers when they buy defective vehicles, either new or buy defective vehicles, either new or used. used.

Owning a Vehicle

State Lemon Laws State Lemon Laws

A “lemon” is defined in one state as “a A “lemon” is defined in one state as “a substantially defective new car that substantially defective new car that has been at a dealer’s three times for has been at a dealer’s three times for the repair of the same defect or any the repair of the same defect or any combination of defects.”combination of defects.”

Owning a Vehicle

Name two places to buy a pre-owned vehicle.

Owning a Vehicle

ANSWERANSWER

Answers include a new car dealer, a used car dealer, a car rental company, or a private party.

Owning a Vehicle

What federal laws help protect vehicle consumers?

Owning a Vehicle

The federal Motor Vehicle Information The federal Motor Vehicle Information and Cost Savings Act has established and Cost Savings Act has established bumper standards for passenger bumper standards for passenger vehicles. vehicles.

The act also establishes average fuel The act also establishes average fuel economy standards.economy standards.

Federal Consumer Protection Federal Consumer Protection

Owning a Vehicle

It is illegal for a vehicle owner to turn It is illegal for a vehicle owner to turn back or disconnect the odometer, or back or disconnect the odometer, or mileage indicator, of a vehicle. mileage indicator, of a vehicle.

Odometer Protection Odometer Protection

Owning a Vehicle

The federal odometer law requires The federal odometer law requires everyone who transfers a vehicle, everyone who transfers a vehicle, unless it is more than 25 years old, to unless it is more than 25 years old, to provide a written mileage disclosure provide a written mileage disclosure statement.statement.

Odometer Protection Odometer Protection

Owning a Vehicle

What state laws can help protect vehicle consumers?

Owning a Vehicle

Many state laws require motor vehicle Many state laws require motor vehicle repair shops to be licensed and repair shops to be licensed and registered. Laws are being adopted in registered. Laws are being adopted in many states requiring:many states requiring:

Repairing a Vehicle Repairing a Vehicle

repair estimatesrepair estimatesadvanced disclosure of pricesadvanced disclosure of pricesspecific training for mechanics specific training for mechanics

Owning a Vehicle

Some states require automobile repair Some states require automobile repair shops to be bonded. shops to be bonded.

The bonding company is an insurer The bonding company is an insurer who must pay the consumer for losses who must pay the consumer for losses suffered as a result of wrongdoing on suffered as a result of wrongdoing on the part of the repair shop.the part of the repair shop.

Repairing a Vehicle Repairing a Vehicle

Owning a Vehicle

Reviewing What You Learned

1. What six aspects of the loan agreement should you be sure you understand before you sign the loan documents?

Section 16.1 Assessment

Owning a Vehicle

(1) exact price (2) amount financed (3) finance charge (4) APR (5) number and amount of payments (6) total sales price

Answer

Owning a Vehicle

2. What should you do before you buy a new car?

Owning a Vehicle

Determine how much you can afford; decide what car model/options you want; conduct research on pricing.

Answer

Owning a Vehicle

3. Discuss the advantages and disadvantages of leasing a car.

Owning a Vehicle

Advantages: low down payment, smaller monthly payments. Disadvantages: most expensive way to obtain a new car; after making payments, you own nothing and have nothing to trade in on your next vehicle.

Answer

Owning a Vehicle

4. Why might it be risky to purchase a pre-owned vehicle from a private party?

Owning a Vehicle

Private parties do not give the implied warranty of merchantability. There is no recourse if something is wrong with it.

Answer

Owning a Vehicle

5. What should you do if you buy a defective car?

Owning a Vehicle

Notify the seller at once.

Answer

Owning a Vehicle

6. What is the purpose of the federal odometer law?

Owning a Vehicle

It requires everyone who transfers a vehicle, unless it is over 25 years old, to give the transferee a written mileage disclosure statement.

Answer

Owning a Vehicle

7. Why do some states require auto repair shops to be bonded?

Owning a Vehicle

The bonding company acts as an insurer who must pay the consumer for losses if the repair shop causes damage.

Answer

Owning a Vehicle

Critical Thinking ActivityBuyer’s Guide Visit a used car dealer and read the Buyer’s Guides displayed on several of the cars. Decide whether you would be willing to purchase the cars based on the information provided in the Buyer’s Guides.

Owning a Vehicle

Critical Thinking Activity AnswerBuyer’s Guide Answers will vary depending on the Buyer’s Guides the students inspect.

Owning a Vehicle

Legal Skills in ActionAutomobile Warranties In teams of four, contact three automobile dealerships or car rental companies that sell used cars. Ask about the warranties they provide on the used cars they sell.

Owning a Vehicle

Legal Skills in ActionAutomobile Warranties Make sure you find out if the warranties cover both parts and labor. Next, as a group, come to consensus as to which warranty is best.

Owning a Vehicle

Legal Skills in Action AnswerAutomobile Warranties Answers will vary but should include a comparison of the different warranties located by the groups.

Acquiring a Vehicle Acquiring a Vehicle End of Section 16.1End of Section 16.1

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