Understanding How Car Buying Contracts Work

March 18, 2013

Generally speaking, the last step in the car buying process will always be the signing of the car purchase contract or the vehicle purchase agreement. This is the document used to define all of the important information regarding a car deal entered into by you as the buyer and the dealership as the seller. Therefore, it is always important that you understand the information that is included in a vehicle purchase agreement.

Understanding the Car Contract - The Basics

On all vehicle purchase agreements or car purchase contracts, the beginning section of the contract will usually include information regarding the buyer and seller. You will see information such as the dealership name being referred to as the seller and you referred to as the buyer. Following that, will be listed information about the vehicle such as the manufacturer, make, year model and VIN as well as actual mileage on the vehicle. You should carefully review this information and make sure that it matches the information on the vehicle you're buying.

Contract Finance Clauses

If you're using a car loan to purchase your vehicle, there will also be a section that relates to the financing of your new car or truck. If you choose to use the financing options offered by the dealership, you should see information regarding the interest rate that you're offered, the amount that the loan will cost you over time, as well as any other included finance related fees and costs.

You should also always make sure that the interest rate as a percentage, or APR, matches that which was quoted to you. Furthermore, you should also check the amount of money that the loan will cost you; typically, this is the amount of finance charges that will accrue and be paid over the life of the loan--once you have completed making all payments on the vehicle. This part of the contract is particularly important, because it will tell you how much borrowing money to buy the vehicle actually costs you.

Miscellaneous Costs and Agreements

If the dealership has promised to perform extra services before you accept delivery of the vehicle or even after you take delivery, you should make sure that they are included in this section of the contract. If the dealership has promised you something, make sure that contract does not include simple language such as "vehicle sold as is" or "all warranties and extra protection negotiated away in a lower selling price." If the dealership tells you not to worry about it and that they will still perform the service, simply refuse to sign the contract until the required language is also included.

Also, you should review this section of the contract very carefully and make sure that there are no additional listed costs or fees that you're not aware of. If the dealership is charging you for certain services such as such as fabric protection, rust proofing, detailing or any other type of service, make sure that the fees or costs are accurately reflected in the contract.

As you can see, there are many important parts of information included in the car purchase contract, and you should make sure that you understand all of them. Also, you should never sign a vehicle purchase agreement or car purchase contract until you understand every part of the contract. If you have any problem understanding the contract, ask for a copy of the contract and take it to someone that can explain it to you thoroughly and in more detail. Don't ever sign a car purchase contract simply because the dealership tells you to do so.

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