5 minute read


Sale, Lease, And Rental

When shopping for a car, consumers generally receive their first information through advertising. States regulate automobile ads in different ways. In some states, an ad must state

the number of advertised vehicles available for sale, the price, the dealer, and the factory-installed options and WARRANTY terms. Car buyers should beware of bait-and-switch advertising, in which a dealer advertises a specific car for sale without the intention of actually selling it. The ad lures the customer into the showroom so that she or he may be persuaded to buy a higher-priced, unadvertised vehicle. When buyers encounter this type of FRAUD, or any other type of CONSUMER FRAUD, they should contact the CONSUMER PROTECTION division of their state attorney general's office.

The STATUTE OF FRAUDS of the UNIFORM COMMERCIAL CODE (UCC) governs the sale of autos in every state except Louisiana. According to the UCC, an auto contract must be in writing in order to be considered valid in court. The purchaser and an agent of the seller—an authorized salesperson, supervisor, or manager—must sign the contract. Buyers should read all terms of the contract before signing. The contract should specify whether the car is new or used and include a description of the car, the car's vehicle identification number (VIN) (on the driver's side of the dashboard near the window), details of any trade-in, and the terms of financing, including the annual percentage rate.

In most states, the title for a new or used car passes to the buyer when the seller endorses the certificate of title. If the buyer does not maintain payments according to the finance agreement, the creditor can repossess the car as collateral for the loan. The debtor has the right to buy back the car (redeem the collateral) and can do so by paying the entire balance due plus repossession costs. Eventually, the creditor may sell the car to another party. If the profit from the sale does not satisfy the debt, the debtor is liable for the difference. If the profit from the sale is greater than the debt, the creditor must pay the difference to the debtor. In some states, the creditor is required by the UCC to notify the debtor of the time, place, and manner of any sale of the car.

All used-car dealers must attach a buyer's guide to the side window of any car they are selling. It must state whether the car comes with a warranty; outline the specific coverage of any warranty; recommend that an independent mechanic inspect the car; state that all promises should be put in writing; and provide a list of potential problems with the car. The buyer's guide becomes part of any contract with the seller. The seller must be truthful about the car and should provide the buyer with the car's complete service records and a signed, written statement of the odometer reading and its accuracy. If the car does not perform as promised, a breach of warranty may have occurred. If an individual pays more than $500 for a used car, he or she should have a written contract and a bill of sale. The latter is required in many states to register a car and should include the date of sale; the year, make, and model of the car; the VIN; the odometer reading; the amount paid for the car and what form it took; the buyer's and seller's names, addresses, and phone numbers; and the seller's signature.

The sale of new automobiles is subject to what are popularly called LEMON LAWS. Lemon is the slang term for a car that just does not work right. Lemon laws, in force in all states as of 2003, entitle a car buyer to a replacement car or a refund if the purchased car cannot be satisfactorily repaired by the dealer. States vary in their requirements for determining whether a car is a lemon. Most define a lemon as a vehicle that has been taken in at least four times for the same repair or is out of service for a total of 30 days during the coverage period. The coverage period is usually one year from delivery or the duration of the written warranty, whichever is shorter. The owner must keep careful records of repairs and submit a written notice to the manufacturer stating the problems with the car and an intention to declare it unfit for use. Many states require that the buyer and the manufacturer or dealer submit to private ARBITRATION, a system of negotiating differences out of court. Increasingly, states are passing lemon laws for used as well as new cars.

A popular method of purchasing the use of a car is leasing. Leasing is essentially long-term rental. For persons who drive few miles a year, like to change cars often, or use their cars for business, leasing is an attractive option. A lease contract may or may not include other expenses such as sales tax, license fee, and insurance. In a closed-end, or "walkaway," lease contract, the car is returned at the end of the contract period and the lessee is free to "walk away" regardless of the value of the car. In an open-end lease, the lessee gambles that the car will be worth a stated price at the end of the lease. If the car is worth more than that price, the lessee may owe nothing or may be refunded the difference; if the car is worth less, the lessee will pay some or all of the difference. Payments are usually higher under a closed-end lease than under an open-end lease. Open-end leases more commonly have a purchase option at the end of the lease term.

To lease or rent an auto, an individual must show a valid driver's license and, usually, a major credit card. A rental business may require that a customer have a good driving record and be of a certain age, sometimes 25 years old or older. An auto rental, as opposed to a lease, may be as short as one day. A rental company may offer a collision damage waiver (CDW) option, which provides insurance coverage for damages to the rented car. The CDW option does not cover personal injuries or personal property damage.

Additional topics

Law Library - American Law and Legal InformationFree Legal Encyclopedia: Approximation of laws to AutopsyAutomobiles - Brief History Of The Automobile, What To Do If You Are In An Auto Accident, Unsafe At Any Speed