First-Time Buyer: Understanding The Purchase Contract
These days, just about every car sale involves a purchase contract. It’s essentially an agreement between you and the dealer that says you agree to pay off the vehicle over time. As a first time buyer, there’s no need to be intimidated, because these contracts are fairly straightforward.
Key Takeaways
- A purchase contract identifies the buyer, seller, and vehicle involved in the sale. It also includes all of the finance information, including what you agree to pay overall.
- Used car contracts will also include the number of miles currently on the odometer.
- Before you sign, it’s important to check for mistakes and hidden fees. Once you do sign, you’re locked into the agreement.
What’s Involved
The contract will include your personal information, such as your name and address, as well as that of the seller. The contract will also identify the vehicle by its VIN (or vehicle identification number), which is unique to every vehicle
You’ll also find a truth-in-lending disclosure section and the details of your car purchase. These include the total payment (the sum total of the payments you’ll make) and total sales price. Other details include the amount you financed, any finance charges, and the annual percentage rate (APR) of your loan.
Finally, a contract should include service information, such as which warranties are included in your purchase and how long they’ll last.
Used Car Contracts
A used car contract is still the same essential agreement — you’re agreeing to purchase the car from the dealer and make all the necessary payments until it’s officially yours — even if it looks slightly different. But there’s one added detail: it will include the number of miles on the odometer at the time of the sale.
However, if you’re paying for your used car outright, without any financing, the only agreement needed between buyer and seller is a simple bill of sale. It will also contain your personal info, the seller’s info, the vehicle’s VIN, mileage, and the sales amount.
Check for Mistakes
Before you sign, go over the document to ensure everything is correct. You’ll want to look for typos in your personal information, of course. More importantly, though, you’ll want to make sure you agree with the amount of money you’re being asked to pay.
The contract will list all of the fees included in your purchase. If you’re unsure about any of them, ask for details. If you were promised certain add-on features for a reduced rate, make sure that’s how they’re listed in the contract. Once you sign the contract, you agree to pay all of the fees listed.
Finally, ensure that all of your financing information — especially your interest rate and down payment amount — are correct. If you’re trading in your old car to help offset the cost of a new one, make sure the contract includes the agreed-upon value of that trade.
