What is a Car Dealer Purchase Agreement?
A car dealer purchase agreement form is a contract between the buyer and the seller of a car. The seller is the car dealership, while the buyer is the individual or individuals purchasing the vehicle. These forms can take many different names based on the exact policy of the dealer, but the designated name does not change the content requirements or the legal terms of the document.
The purchase agreement serves to demonstrate the legality of the sale. It outlines the terms of the agreement between the buyer and the seller, including the agreed price and payment policy. Once signed, the document denotes an agreement of sale has been entered into between the buyer and the seller. States may have different requirements with respect to their car dealer purchase agreement forms, including whether they must be certified by a notary public.
The most basic aspects of the car dealer purchase agreement provide enough information to determine the registered title owner of the vehicle. The buyer’s information should contain the legal name of the buyer, along with any information regarding spouses, partners, or co-signers. Under the seller’s information, the full business name of the buyer should be listed , as well as the full physical address of their place of business. Some of the more complex car dealer purchase agreement forms might contain tax and warranty information as well.
The cost of the car, the method of payment, and any provisions for installment plans should also be included in the purchase agreement. Additional forms may detail trade-in allowances for old vehicles against the price of the buyer’s next vehicle obtained through the seller. Car dealerships often use purchase agreements to enforce their own contractual terms regarding the conditions of the sale. For instance, a car dealer purchase agreement might include information regarding the standard installation of add-ons on every vehicle sold.
These agreements can also include contracts for insurance of the vehicle, including the specific type of insurance the dealer requires for the vehicle. For most buyers, this is a simple form that details the transaction completed with the seller. Certain types of transaction details and provisions may be subject to other legal requirements and state laws. A car buyer should always examine their dealer’s version of a purchase agreement to ensure it contains any other provisions that are specific to the deal offered.
The Elements of the Agreement
The buyer and seller information is the first element to be properly completed on a dealer purchase agreement, but I have noticed, even in recent months, that various car dealerships still regularly omit to complete both the seller and buyer addresses. Can you imagine if you went home after purchasing your used car only to realize you were unable to review your agreement after a dispute occurred because the seller failed to fill in important information?
Next to be properly completed is the vehicle information. This section includes the Vehicle Identification Number, the year, make, and model, and the approximate value of the vehicle. It is important for the dealer to include the approximate value for two reasons. First, the dealer must pay a sales tax on the purchase price of the car when they buy the car for resale. That sales tax amount should be deducted from the purchase price on the purchase agreement. The dealer then gives the consumer a bill of sale, which includes the title, and any applicable sales tax or fee. Second, many leases have a corresponding vehicle value at the time of the lease term and that value of the vehicle may impact the payment terms of the lease and the eventual balloon payment the consumer will owe at the end of the lease term. The purchase agreement should include language to reflect that and should also include what that residual value will be during the car leasing process.
Another element the purchase agreement must include is the purchase price. This is very important to reflect the total purchase amount to include any applicable interest. Any factual mistakes with the purchase price can create a liability for discrimination and an unequal bargaining position with respect to the purchase price.
The payment form must include any kind of financing agreement. Although many people do not read their dealer purchase agreements before signing, it can be a dispute waiting to happen if the consumer assumed something different than the written agreement. In cases of fraud, the dealer must be able to justify what amount the consumer will pay, especially in a lease. If all parts of the transaction are documented, the dealer can be very confident it will prevail.
Another important element of the purchase agreement is to make sure that there are no oral modifications that were made during the sale and that the purchase agreement will govern all aspects of the transaction. The smaller the print, the more difficult it will be for a judge or jury to read. Be careful that any changes to the agreement are initialed and that any amendments to a printed agreement make clear, both with words and graphics, what the amendment is intended to be. For example, if the dealer indicates on the purchase agreement that the total purchase price is $ .00, the dealer is essentially attempting to mislead the consumer.
The final element of the purchase agreement relates to any warranties or guarantees that the dealer might provide. For example, when a dealer sells an extended warranty, the buyer is taking on a higher level of risk than anticipated. The dealer must ensure that the business name, address and phone number of any company guaranteeing the deal be clearly readable on the dealer purchase agreement.
Legal Implications and Consumer Rights
The purchase agreement form is the formal contract of sale between the dealer and consumer. Typically within this form are the latitudes with all forms of conditional sales involving the financing of repairs incorporating various contingencies including factors that affect financing approval and spare parts availability. Because it is a legal contract, the obligations of both parties are explicitly stated and protections, enforced by law, are specifically outlined.
There are also rights afforded the buyer under consumer protection laws for the protection of consumers in all transactions involving the retails of goods and services. Primarily, it requires "full disclosure" or "full transparency" of the complete deal including any additional costs involved. The law in most cases requires that the buyer be made aware of anything that might be added including "disposable income", "available credit limit" or "additional charges" such as overtime, storage, handling, freight, packing, removal, reconditioning, rust protection, "third party" financing arrangements or "additional services". Consumers should ensure that they are competently made aware of all these costs which are enabled by the legal requirement for full disclosure and transparency before they sign.
Common Terms and Conditions
Car dealer purchase agreement forms contain a number of clauses and conditions that are frequently found in such documents. While there may be variations among agreements, the following are some of the most common.
Return policy:
Many dealers offer a return policy within a certain time period following the sale. Such policies may provide for the return of the vehicle, subject to certain conditions, if the buyer is unhappy with the vehicle or has experienced a change in circumstances. One such popular return policy provides for the vehicle to be returned, along with a $50 fee, within 3 days of the end of the applicable three-day period; such fee will be returned if such fee has been paid to the original purchaser.
Service and warranty agreement:
Service agreements may provide for the dealership to perform service and maintenance on the vehicle for a specified period of time. The agreement may further specify that the customer will pay a specified consideration for additional services and/or that tax and miscellaneous charges will be applied to the purchase of parts. The parties may agree on a limit within which the customer has to perform all necessary service and repairs, which are not covered under the service agreement, or the specific repairs which the customer may undertake at the dealership for a specified charge or free of charge.
Conditions for vehicle delivery:
The agreement may further require the delivery of the vehicle to be in accordance with the following conditions:
- The vehicle must include all accessories for its equipment;
- The vehicle must be free and clear of any transfer and redemption liens;
- The vehicle must have a clear and unencumbered title;
- The vehicle must be delivered as described in or conforming to the specifications of the agreement;
- The vehicle must be free and clear of all encumbrances and liens to the maximum extent permitted by applicable law; and
- The dealership must have proper authority to sell the vehicle.
The dealer may also undertake to provide the customer with copies of the existing receipt records for the vehicle and may further assume responsibility for providing the required registration and license forms, which must be filed with the DMV or the applicable governmental body, at the dealership’s place of business. The dealership may also agree to procure and/or pay for the vehicle delivery to the customer’s home or business within a certain distance from the dealership.
The agreement may further provide for an inspection of the vehicle following its sale to the customer and prior to delivery, and the dealer assumes the responsibility for undertaking and/or paying for the inspection and paying any applicable inspection fees.
These, and other provisions, can be found in many standard form car dealer purchase agreements.
How to Negotiate Terms in Your Favor
Once you’re sure the purchase agreement form is in order, it’s time to focus on the terms. Although the dealer will likely quote you a price from the start, if you’ve decided on a number and negotiated the purchase agreement form properly, then try to choose the most effective strategy for negotiating the price of the vehicle you want. If you’re buying the vehicle the old-fashioned way (without a trade-in), then simply take your lowest figure and try to work toward it. If you’re trading in your current vehicle, you’ll have to find a figure for that, too. You can use Kelley Blue Book and Edmunds.com to find out the worth of your used car.
Which brings us to the trade-in. Many dealers will ask for a trade-in , since this is a great way to get rid of old inventory. Don’t accept the dealer’s first offer; come up with a number from KBB or Edmunds and counter the dealer’s offer by upwards of $500.
One of the most negotiable aspects of a car deal is the loan period, or term. Extended loan periods are very popular right now and many dealers will offer them by default, even if your payment will be slightly higher. However, if you extend the term, you’re going to pay more interest, and if you enjoy keeping your car for a long time, you’ll be paying for that loan for a long time before you can sell the vehicle. Try to limit the term to 48 months, and hold fast to this.
The Process of Finalizing Your Car Purchase Agreement
If you are purchasing a new vehicle, a major step in the process is completing and signing a dealer purchase agreement form. Once this task is accomplished, the dealer submits the form to the manufacturer. For some cars, you will receive specific factory rebates, available only during the month of purchase.
As with financing, it is extremely important that you fully understand the agreement before signing. Even if a trusted family member or friend actively participates in the process, make sure they summarize the salient points to your satisfaction. Whatever you do, do not sign without reading the contract. You may find terms contrary to what you believed you agreed upon. If this occurs, ask for clarification and correction.
When you complete the form, verify:
In addition, confirm that the following items are present on the form:
Because there are many different dealer purchase contract forms, consult with an attorney to ensure that your rights are appropriately protected under the law. This is especially important if you are purchasing a classic or special edition car. Mark up your agreement and ask your attorney to review after making your corrections. Then refer any questions to your attorney.
The bottom line is that you still have the right to overcome any objection you have in writing. Promptly send this correspondence by certified mail, return receipt requested. You may also want to send a copy of the certified letter to the Division of Motor Vehicles (DMV) in the state in which the car was purchased.
Ensure that the contract is signed and all blanks filled in your presence prior to signing. If someone else signs an agreement in your name, it is fraudulent. You legally cannot buy an automobile for someone else and then have them take possession as the true owner. Also, do not sign any blank spaces on the form.
Finalize the process by making sure your filing system (paper and electronic) contains copies of the following:
Take care of this now; you will need it later.
Common Pitfalls
Most purchase agreement mistakes occur in the finance office because that’s where most of the paperwork gets generated. Careful attention is vital when it comes to reviewing the documents presented and making sure that all surprise fees, costs, and other stipulations are disclosed. A common mistake occurs when car dealers and salespeople bury documents within other contracts. This means that a form very similar to what was already viewed is signed without actually knowing that it’s a new document. Also, not having a full understanding of what a specific fee or form means can lead to additional mistakes and oversights that the consumer usually has to take the blame for. Consumers must be cautious about how the dealership represents (or misrepresents) a particular fee , rebate, or condition.
Finance managers will try to make forms look very familiar in attempts to hide a new purchase agreement contract, including sections that consumers have already signed on previous papers. Trying to get down to what exactly is new is challenging to say the least, but being thorough in reviewing paperwork is vital to ensure the deal adheres to the original terms. The temptation to sign the current form just so the buyers can have their new vehicle is hard to resist, but if a consumer doesn’t know the full details and stipulations of what they’re signing, they could face serious problems and liabilities once they find out that the terms are not quite what they originally went over with the salesperson.