A Guide to Buying a Used Car Before buying a car, it is wise to look at car magazines, newspapers, talk to friends and workmates and shop around. There are different places you can go to choose a used car. Each one is very different and there are specific tactics and approaches to adopt in each option. The choice of where to buy a car is a personal one and there is no one correct answer For everyone. Nevertheless, if you want to avoid the risk of possibly buying a 'lemon' and want to develop a relationship with the service department at a reputable dealership, then car dealers are recommended. On the other hand. if you want the best possible deal immediately and you are confident that you can find a well-maintained car, then you should try the open market. This could save you some money too. There are some pitfalls associated with buying a car, but they are all easily avoidable once you get a few things straight. . . Price of Car The advertised price of a car is not the only thing to note when buying a car. Some compulsory and standard charges to be aware of are: - Registration, which includes Compulsory Transport Injury Insurance Government stamp duty and transfer fee You may also have to budget for: - The cost of borrowing money Any optional extras that you might want, including extended warranty The cost of a mechanical inspection by the RACV or a VACC Member Insurance additional to Compulsory Transport Injury Insurance Fuel and car services, spare parts and repairs. Loans Most car dealers offer to arrange finance but it is often cheaper to find this elsewhere. Generally, finance deals vary considerably, so consider your options, and spend some time finding the best deal that suits you. Before you agree on a loan, make sure that you understand the type of loan that you have entered into. You should also note the following: - AII fees and interest rates The monthly repayment rates and due date The total amount you will have paid at the end of the loan period Insurance requirements Usually, if you fail to repay the loan, the car becomes the property of the lender. if the car itself is security, it can be repossessed, or sold for an amount less than what you owe and you can end up with no car and paying the lender the difference. With any credit arrangement, the credit providers must tell you what your rights and responsibilities are. All relevant informa1ion including interest rates, fees, commissions, and other important issues must be included in a written contract. Read the contract carefully, so that you know what you are liable for! Insurance Basically, motor car insurance protects you against costs if your car is stolen or vandalised or if you are involved in a car accident. When you register your car, part of the cost is for Compulsory Transport Injury Insurance, which covers you or anyone else for death or injury if your car is involved in an accident. However, it does not cover you for damage to your car or anyone else's. Do bear in mind that insurance will be more costly for cars bought on credit, modified cars or sports cars. The types of insurance are as follows: • Comprehensive Insurance This covers you against fire and theft as well as damage to your car, other cars and property. If you borrow money to buy your car, you will need this type of insurance as a requirement of the loan. • Third Party Property, Fire and Theft Insurance This covers you against accidental damage to other cars or property if you cause an accident. Your car is covered against fire or theft only and does not cover any damage you cause to it. However, some policies may cover your car to a limited amount if it is damaged in a collision that is not caused by fault on your part. Other conditions may also apply. • Third Party Property Insurance This covers you against damage caused to other cars and property only, and does not give you any protection For your car. Some policies may cover your car to a limited amount if it is damaged in a collision toot is not caused by fault on your part. Before you sign an insurance contract, you should consider the following: - drivers – who is allowed to drive your car under the policy? vehicle value - This is the amount that you will be paid if your vehicle is written off or stolen and never recovered policy excess - How much you have to pay every time you make a claim The excess may be related to the age of the driver or it may be a standard. amount. exclusions - What is excluded from the coverage? rating or no-claim discount - Insurers usually give customers a numerical rating with premiums charged according to that rating. When you first take out insurance, you will probably start at rating 6 and go down one rating each year if you do not make a claim. A rating 6 driver is charged the highest premium. 1. Buying a Used Car from a Licensed Trader It is the law that all traders in Victoria must be licensed. You can confirm this by ensuring traders display a licensed Motor Car Trader (LMCT) number. Contact the Motor Car Traders Licensing Authority on 0396276299 should you have any doubts. Advantages: 1. Extensive selection of used and mechanically sound cars – more choices and likely to find what you are looking for 2. Cars will all have Clear Title that guarantees that no one owes money on the car 3. Cooling-off period 4. If the car is not more than 10 years old and has travelled less than 160,OOOkm, it will be covered by a 3 month/ 5000km Statutory Warranty. 5. Can finance through the dealership Disadvantages: 1. Expect to pay above the market value 2. The interest charged through financing with car dealers is generally higher than getting it at the bank or credit union. 3. Will have to negotiate with tough, trained sales staff Statutory Warranty If the car is not more than 10 years old and has travelled less than 160.000km. then the trader must provide a Statutory Warranty on the car. The age of the car is taken from the 'build date' that is on the compliance plate. The plate is attached to the bulkhead between the engine and the passenger compartment of all cars manufactured for sales since 1970. Vehicles not covered by the Statutory Warranty include: - Used cars that are more than 10 years old or have travelled more than 160,OOO km Cars bought at public auction. The Statutory Warranty covers all faults during the warranty period so that the car is in a reasonable condition relative to its age. A car not eligible for Statutory Warranty must still be of merchantable quality. The time it takes to make repairs is added to your warranty period. Second hand parts can be used as long as they are suitable and serviceable. if the car is unable to be driven due to a warranty defect. the trader is responsible for any towing costs to take the vehicle to the place they nominate. Always check with your trader or repairer first before, having repairs carried out. As you may have to take it to an authorised repairer, or the warranty may become void and you will have to bear the costs. If a trader cannot be contacted to authorise repairs or refuses to fix a problem, contact the Office of Fair Trading and Business Affairs. The Statutory Warranty does not cover the following: - Any item listed on a Defect Notice Tyres Batteries Radios, cassette players, CD players and car aerials Telephones Non-standard body hardware Non-standard rear window demister Cigarette lighters Clocks Light globes Tools Sealed beam lights Extended Warranty Extended warranties protect your car against mechanical problems for periods longer than the Statutory or Factory backed warranties. However, they are conditional on you strictly observing service dates, using specified parts and so on. Check out extended warranties carefully, as they might not be worth the money. Factory-backed Warranty A used car covered by a factory-backed warranty is, slightly more expensive but it could be worth the peace of mind. Notice of Particulars This is the first thing you should look for and should be displayed on the left rear window of the car. The Notice details: - The car's year of manufacture and first registration - The engine number - The cash price - The name of the previous owner - The odometer reading When you buy the car, the Notice must be signed, with a copy given to you and a copy kept by the trader. Defect Notice The Defect Notice, often displayed next to the Notice of Particulars, lists the defective items, which the traders are not responsible for repairing and their estimate costs of repair. If defects are listed such as 'engine' or 'electrical' without explaining the specific problems, do NOT buy the car. You must remember to keep a signed copy of the Defect Notice when you buy the car. Trade-ins High trade-in offers should be viewed with suspicion. The price of the car you want may be increased to cover the difference. Try and keep the trade-in price and the cost of your new car separate and compare the different traders’ deals. Keep your old car until the new car is ready for delivery but note that the trade-in deal may depend on you handing over your old car immediately. See if you can negotiate this. Shop around for Finance and Insurance Check the banks, credit unions and finance companies to find out what rates and fees they charge for finance - you could end up saving a lot of money. Shop around for an insurance company - compare premiums and policies. Go for a Test Drive A test drive is important. However check with the trader first, on your liability before you go on a test drive as you may run the risk of substantial claims made against you if you are involved in an accident. Take your time - go for a good drive and not just around the block. (See the checklist) if you are not confident about checking the car, have a professional mechanical inspection carried out by the RACV or a VACC member. The Purchase Agreement You will need to sign a Purchase Agreement if you buy a used car from a licensed trader. Understand the Agreement before you sign, as it is a legally binding contract. You may be required to pay a deposit once you sign the Agreement. if you cancel the Agreement during the cooling-off period, the trader is entitled to keep some of the deposit that you have paid - usually about $100 or 1% of the purchase price, whichever is greater. The deposit should be refunded in full if: - It is paid conditional on the mechanical state of the car and you cancel the Agreement because the car is mechanically unsound The contract is conditional upon getting finance to your satisfaction, and finance is not approved The contract is conditional on specific approval, (eg. from spouse or parent) and approval is not obtained Any other contract conditions are not fulfilled or satisfied The Roadworthy Certificate It is the responsibility of the owner of a registered car to provide a roadworthy Certificate regardless of whether you are buying from a licensed trader or private seller. NEVER agree to arrange it yourself. The Roadworthy Certificate is only valid for 30 days after it is issued. It mainly deals with the car's safety. You should still get the car mechanically checked. Unregistered Cars If a car is unregistered or the registration has been cancelled, it will be sold without a Roadworthy Certificate. You will be responsible for arranging to pay the costs of a roadworthy certificate and registration. You need to contact Vic Roads on 13 11 71 to find out in what circumstances it can be driven on the road. Cooling-off Period After you sign the Purchase Agreement, you have 3 clear days (excluding Saturday, Sunday and public holidays) to change your mind. This is the cooling-off period. The trader must be notified in writing and you should confirm with a telephone call, that the trader has received it before the cooling-off period ends. If you want to take your car immediately or pick it up during the cooling-off period, you may be asked to sign a Waiver form. By signing the form, you lose the protection of the cooling-off period. It is your right to choose not to sign the waiver. if you take the car within the coolingoff period without signing the Waiver Form and then cancel the Agreement, you will have to pay for any damage you cause. The trader cannot sell your trade-in until after the cooling-off period, or unless you have signed the Waiver Form. 2. Buying from a Private Seller Although it may be cheaper to buy privately, nevertheless you have less protection under the law. Listed below are some of the advantages and disadvantages of buying privately: Advantages - You do not have to deal with trained professional salespersons who work at commercial dealerships - if you negotiate effectively, you can get a good deal Disadvantages - Variability is great and you are likely to come across 'shady characters' who will sell untitled cars - You need to run all over town in search of a suitable car - The price can be too high as most people do not know what their car is really worth and will try to get an unreasonable amount for it If you buy privately, you must keep the following in mind: - It is your responsibility to check the car has a clear title - There is no statutory cooling-off period - The car is not covered by the Statutory Warranty You should also ensure that: - The person selling the car is the true owner - The owner's name, the licence plate number, the vehicle identification number (VIN), the engine number and other details correspond exactly with the information on the Registration Certificate - The car has a Roadworthy Certificate before you take possession - You receive a receipt when you purchase the car - You check with VIC Roads at 13 11 71 to find out if the registration is still current. As a buyer, you must send Vic Roads: - Notice of acquisition - Registration Certificate - Roadworthy Certificate - Transfer fee and stamp duty Clear Title If you decide to buy privately, you should protect yourself by checking that the car has clear title by getting a certificate from the Vehicle Securities Register (VSR) which will inform you if there is money owing on the car. If money is still owing, don't buy the car. You can make a preliminary check with the VSR on 13 11 71. If the certificate states that there is a clear title and you later find that money is actually still owing, you can apply to the Small Claims List of VCAT for compensation. A Certificate of Clear Title may not show if there is a warrant of seizure pending from the Sheriffs Office or if the car is stolen. In this situation, the car could be recovered and you may not be entitled to compensation. If the car you are interested in has interstate registration, you can check if it has Clear Title. Test Drive the Car A test drive is important. If you do not know much about cars, take someone with you who does know about them or arrange for a mechanical inspection by the RACV or VACC member when you go for a test drive. - Try the brakes in a quick stop - check how hard it is to change the gears (listen for whining noises from an automatic car) - find a hill to stop and start on and check for possible clutch or gearbox problems - get someone to check for smoke from the exhaust pipe - check the engine after the test drive for oil leaks, etc. Dealing with Private Sellers When speaking with the seller over the phone: - find out as much about the car as possible - Often dealers will place advertisements in newspapers masquerading as private sellers. This is outright deception and you should not deal with these people. 3.Buying a Used Car at Auction Advantages: - For a fair commission, you can contract a dealer to buy a car on your behalf at an auction - You are able to choose from a large selection - Suitable if you know about cars - You are assured that car has Clear Title Disadvantages: - You will be expected to make a down payment of approximately 10% or $500 (in cash or bank cheque at the fall of the hammer) - You have to pay the dealer a fee - you can avoid this by buying the car yourself - Car may not be covered by the Statutory Warranty - No cooling-off period Car does not have to have a Roadworthy Certificate Usually a test drive of the car is not allowed but you can give the car a reasonable inspection including starting the engine. However, if you buy a car from an auction house "off the house" (ie. not during an auction), you may be entitled to some benefits such as the Statutory Warranty, Roadworthy Certificate and cooling-off period, particularly if the auction house owned the car you bought. At the time of purchase, you should be given a receipt and the completed transfer of registration form It is your responsibility to get a Roadworthy Certificate for the car, and then give it to Vic Roads with the transfer of registration form. CHECK LIST This basic checklist is prepared by the joint venture of Office of Fair Trading and Business Affairs, RACV and VACC. It will assist you in determining the car's condition and whether the car is worth the asking price. Check out the car's documentation, and then get a full mechanical test done on the car. Always insist on a mechanical inspection by an RACV member. Do NOT buy the car if the trader or private seller refuses to agree to this. The inspection should be arranged before signing the Purchase Agreement and paying your deposit. This written report is an invaluable tool in helping you to determine whether or not to proceed with the purchase of this particular car. If this is not possible, make sure you write into the agreement the following clause "the sale is conditional on the purchasers satisfaction with an independent mechanical inspection report". Private sellers will usually agree to an RACV inspection if you pay a small deposit. Make sure this arrangement is in writing and that you get a receipt for the deposit. which includes a written note that it will be refunded in full. If you are not satisfied with the mechanical inspection report. This will save the cost of a mechanical report if the car is not worth it. Bodywork - Does the car's paintwork show ripples or unevenness when you view it against the light? If it does, it may mean the car has been in an accident. - Don't buy a car at night or when it is raining - this will hide any defects - Holes drilled in the car's roof or instrument panel may mean that it could have - been a taxi or police car and subject to heavy wear and tear. Check the doors, door sills, body and boot for signs of rust. Be sure to lift the floor and body mats as corrosion here can be expensive or impossible to repair. Windows and Doors - Wind windows up and down – check whether doors sag or drop on opening. - Check that the locking facilities work - Make sure you don't have to slam the doors to close them. Doors that don't close properly can mean the car has been in an accident. Electrics Check the following to make sure they work properly: - Parking lights - Indicators - Tail lights - Hazard lights - Horn - Dashboard light - Number plate lights - Brake lights - Headlights on low and high beam - Windscreen wipers Interior - Do the seats spring satisfactorily? - Are the seatbelts in good condition and do the retractors work smoothly? - Do all the accessories work? Tyres - Are the tyres worn unevenly? This could mean unbalanced wheels, uneven brake action or incorrect wheel alignment - Is the spare tyre in good condition? - Does the car have a wheel jack and associated tools? Steering - If the car does not have power steering, check its free play - When you drive the car, can you hear knocking sounds? This could be a sign of bad wear in the wheel bearings, or other suspension parts Gearbox and Clutch - Make sure the gears engage smoothly - Listen for whining noises when you change into lower gear. This could mean the gearbox is worn - If you notice that the gears seem to slip, this is a sign of bad wear - Check that the clutch takes up gradually and smoothly. Engine - Check the oil on the dipstick before starting the car, if it is thick or contains water, there may be engine problems - After starting the engine, accelerate moderately a few times. Blue exhaust smoke indicates engine wear. - Oily scum in the radiator may indicate a faulty cylinder head gasket - Take note if there are pools of water under the car after it has been run. These are costly to repair. Suspension - Loud thumps over the bumps or on a rough road usually mean worn suspension. - Rock the car up and down. If it continues to rock after you let go, there may be problems with the shock absorbers. Compliance Plate - Check the compliance plate. You will find it attached td the bulkhead between the engine and the passenger compartment on all cars manufactured for sale since 1970. If the plate has been tampered with, don't buy the car. Test drive - Take the car for a 20 minute or 10 km test drive. Make sure it is insured before you drive it - If there are two regular drivers, let both test drive the car - Do an emergency stop to check the brakes - checking if it is slow to stop or veers - Check the gears - if it takes force to put in first gear or reverse – there could be serious problems - Listen for the bumps, squeaks and knocking - they may mean expensive repairs - Stop and start on a hill, checking for shudders - this may be clutch or gear box problems - Check for coloured smoke from the exhaust- there may be future problems - When finished, check the engine for oil leaks NOTE Don't feel pressured to decide right there and then. A hasty or ill-informed decision could cost you dearly in the long run. Value for money is the objective here, so keep track of costs and a clear head. WORKSHEET Name of seller: Address of seller: Seller's phone number: Make and year of car: Model type: Colour: Mileage: Number of doors: Engine size: Type of transmission: Power brakes? Power steering? Features: Air Conditioning? Radio/Cassette? Power features (windows etc)? Cruise control? Safety Equipment: Air Bags? Anti Lock Brakes? Some important questions that should be asked: - Is the seller the original owner? - Does the owner have service records? - Is the seller the title holder? - Has the car ever been in an accident? - Asking price? - Will the seller negotiate? - Why is the seller selling the car? - How long has the seller owned the car? - Has the car been driven off-road before? GETTING HELP Read this guide carefully before you buy. If you need further information or have any problems. you can contact the Office of Fair Trading and Business Affairs, RACV or VACC. When you suffer a loss in dealing with a licensed motor car trader, the Office of Fair Trading and Business Affairs may recommend that you apply to the Motor Car Traders Guarantee Fund for compensation. This includes situations where the trader: - Sells a car without clear title - Has not paid registration fees, transport accident charges, or stamp duty where they promised to do so - Have closed down and a purchaser is unable in have warranty repairs undertaken under the Statutory Warranty - Has not paid insurance policy fees where they promised to do so - Has not met: (i) a court order (ii) an order of a Tribunal or (iii) an order made by the Motor Car Traders Licensing Authority. Useful Telephone Numbers and Contacts Office of Fair Trading and Business Affairs Level 2, 452 Flinders Street Melbourne Vic 3000 Tel (03) 9627 6000 Freecall: 1800 678 328 RACV 550 Princes Highway Noble Park Vic 3174 Tel: 13 11 11 VACC 464 St Kilda Road Melbourne Vic 3004 Tel: (03) 9868 0269 VACC Pre Purchase Inspection Service Freecall: 1800 044 555 VicRoads Registration and Licensing Enquiries: 13 11 71 Freecall: 1800 814 762 Numbers to call to check whether a car with an interstate registration has clear title: NSW – 1800 424 988 Qld – (07) 3246 1599 SA – 131 084 WA – 1300 304 024 Tas – (03) 6233501 The information provided in this pamphlet is a general guide only. To be sure of your rights and responsibilities, you should get advice from a solicitor or a community legal service.