Section 16.1
Acquiring a Vehicle
Section
16.1
Acquiring
a Vehicle
Owning
a Vehicle
Chapter 16
Section 16.1
Acquiring a Vehicle
Section 16.2
Motor Vehicle Insurance
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
What You’ll Learn
How to identify important parts of a loan
agreement (p. 338)
How to trade in a vehicle (p. 341)
How to identify the pros and cons of
leasing a vehicle (p. 342)
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
What You’ll Learn
How to compare options for buying a preowned vehicle (p. 342)
How to pursue legal remedies if you buy
a defective vehicle (p. 347)
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
What You’ll Learn
How to recognize some federal laws
designed to protect you when you buy a
vehicle (p. 348)
How to summarize the legal aspects of
repairing your vehicle (p. 350)
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Why It’s Important
Knowing about financing, buying, and
leasing a vehicle will enable you to make
better purchase decisions.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Legal Terms
finance charge (p. 338)
annual percentage rate (APR) (p. 338)
Used Car Rule (p. 344)
Buyer’s Guide (p. 344)
repossess (p. 346)
adhesion contract (p. 347)
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section Outline
Laws of Ownership
Financing a Vehicle
Buying a New Vehicle
Trade-In
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section Outline
Leasing a New Vehicle
Consumer Leasing Act
Buying a Pre-Owned Vehicle
Buying from a Dealer
Buying from a Private Party
Buying from Rental Companies
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section Outline
The Contract to Buy a Vehicle
What to Do if You Buy a Defective Car
Federal Consumer Protection
Odometer Protection
Repairing a Vehicle
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Pre-Learning Question
What laws do you think apply to
buying a vehicle?
Understanding Business and Personal Law
Owning a Vehicle
16.1 16.1 Acquiring a Vehicle
Section
Laws of Ownership
The law that applies to the purchase of a
vehicle comes from several sources.
The Uniform
Commercial
Code
Understanding Business and Personal Law
Consumer
protection
laws
Laws
regulating
credit
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Pre-Learning Question
What information should you have
before you buy a vehicle using credit?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Financing a Vehicle
One of the first steps in buying a car is
to decide how much you can afford to
pay.
You can buy a car
with cash
with credit
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Financing a Vehicle
Federal law requires lenders to
disclose the finance charge and
annual percentage rate (APR) to
borrowers.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Financing a Vehicle
The finance charge is the cost of
the loan in dollars and cents.
The annual percentage rate (APR)
is the true interest rate of the loan.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
What You Should Know
Before You Buy
1. The exact price you’re paying for
the vehicle
2. The amount you’re financing
3. The finance charge
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
What You Should Know
Before You Buy
4. The APR
5. The number and amount of
payments
6. The total sales price (the sum of the
monthly payments plus the down
payment)
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
What is the difference between the
finance charge and annual percentage
rate?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
ANSWER
The finance charge is the dollar
amount of the interest, and the APR is
an interest rate.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Pre-Learning Question
What steps should you take before
buying a new vehicle?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Buying a New Vehicle
After deciding how much you can
afford to pay for a car, when buying a
new car you should
learn about the cars you may be
interested in
research pricing
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Trade-In
When buying a new car, do not
discuss a trade-in with the dealer until
you have negotiated the best price for
your new car.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Trade-In
You should also know the value of
your trade-in, which can be found on
the Internet or in the library.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Pre-Learning Question
How is leasing a vehicle different from
buying one?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Leasing a New Vehicle
The advantages to leasing a new
vehicle are:
low down payment
smaller monthly payments
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Leasing a New Vehicle
The disadvantages to leasing a new
vehicle are:
most expensive way to acquire a
car
after making a lot of payments, you
end up with nothing to trade in
toward your next vehicle
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Consumer Leasing Act
The Consumer Leasing Act is a
federal law requiring businesses to tell
you about all of the terms of a lease of
personal property.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Consumer Leasing Act
This information can be used to
compare different leases or to
compare the cost of leasing with the
cost of buying.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Pre-Learning Question
Where can you buy a pre-owned car?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Leasing a New Vehicle
A pre-owned vehicle may be
purchased from
a new car dealer
a used car dealer
a car rental company
a private party
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Leasing a New Vehicle
Sometimes banks and loan
companies
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Buying from a Dealer
A used car dealer may have a large
selection of cars, but often does not
maintain facilities to service the car
after you buy it.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Buying from a Dealer
New car dealers often sell used cars
that they have taken in for trade and
have service facilities.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Warranties
When selling a vehicle, a dealer
gives an implied warranty that the
vehicle is merchantable, unless this
warranty is excluded.
often gives a 30-, 60-, or 90-day
guarantee.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
The Used Car Rule
The FTC’s Used Car Rule requires all
used car dealers to place a large
sticker, called a Buyer’s Guide, in the
window of each used vehicle they
offer for sale.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
The Used Car Rule
The guide explains any specific
warranty protection that is provided
and also states whether there is
no warranty,
an “as is” warranty, or
an implied warranty.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Buying from a Private Party
The advantage to buying from a
private party is that the prices are
lower, but there are disadvantages, as
well.
no implied warranty of
merchantability
no recourse if something goes wrong
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Buying from a Private Party
Another disadvantage is that the car
might be stolen.
In this case, a bank or loan company
may have the right to repossess, or
take back, the car, regardless of who
presently owns it.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Buying from a Private Party
Before you buy from a private party,
be sure to:
test-drive the vehicle
ask for the vehicle’s maintenance
record
talk to previous owners
ask to see the certificate of title
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Buying from Rental Companies
Advantages:
are usually only a year or two old
can be good buys
usually have had regular
maintenance
come with warranties
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Buying from Rental Companies
Disadvantages:
have probably had heavy use
have high mileage
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Pre-Learning Question
What form should a contract to buy a
vehicle take?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
The Contract to Buy a Vehicle
Under the UCC, a contract for the sale
of goods valued at $500 or more must
be in writing to be enforceable.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
The Contract to Buy a Vehicle
When private parties enter into a
contract, they can simply write on a
piece of paper that one party agrees
to sell and the other party agrees to
buy the vehicle.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
The Contract to Buy a Vehicle
The contract between private parties
must also identify the vehicle and be
signed by the seller.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
The Contract to Buy a Vehicle
When a contract is entered into
between a private party and a dealer,
the private party is usually at a
disadvantage.
The dealer asks the buyer to sign a
printed form.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
The Contract to Buy a Vehicle
A sentence on the front of the form
says that the buyer agrees to the
terms on the reverse side.
The back of the form contains a full
page of small-print terms that favor
the seller.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
The Contract to Buy a Vehicle
Such a standard-form contract is
called an adhesion contract.
Smart buyers read the small print and
cross out items with which they
disagree.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
What to Do if You Buy
a Defective Car
If you buy a car that continuously has
mechanical problems, you should
notify the seller immediately.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
What to Do if You Buy
a Defective Car
The seller can be asked to
fix the problem
pay to have the vehicle fixed
give you your money back
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Revoking the Acceptance
If you buy a car that doesn’t conform
to the contract, you may be able to
revoke your acceptance, even after
taking possession of the vehicle.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Revoking the Acceptance
This revocation is allowed under the
UCC if the defect is serious and
undetectable.
It must be made within a reasonable
time after the defect is discovered.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Notifying the Seller about Defects
Buyers must notify sellers of defects in
vehicles within a reasonable time after
the purchase.
If you fail to do so, you may lose the
right to recover.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
State Lemon Laws
Many states have passed “lemon
laws” to protect consumers when they
buy defective vehicles, either new or
used.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
State Lemon Laws
A “lemon” is defined in one state as “a
substantially defective new car that
has been at a dealer’s three times for
the repair of the same defect or any
combination of defects.”
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Name two places to buy a pre-owned
vehicle.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
ANSWER
Answers include a new car dealer, a
used car dealer, a car rental company,
or a private party.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Pre-Learning Question
What federal laws help protect vehicle
consumers?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Federal Consumer Protection
The federal Motor Vehicle Information
and Cost Savings Act has established
bumper standards for passenger
vehicles.
The act also establishes average fuel
economy standards.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Odometer Protection
It is illegal for a vehicle owner to turn
back or disconnect the odometer, or
mileage indicator, of a vehicle.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Odometer Protection
The federal odometer law requires
everyone who transfers a vehicle,
unless it is more than 25 years old, to
provide a written mileage disclosure
statement.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Pre-Learning Question
What state laws can help protect
vehicle consumers?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Repairing a Vehicle
Many state laws require motor vehicle
repair shops to be licensed and
registered. Laws are being adopted in
many states requiring:
repair estimates
advanced disclosure of prices
specific training for mechanics
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Repairing a Vehicle
Some states require automobile repair
shops to be bonded.
The bonding company is an insurer
who must pay the consumer for losses
suffered as a result of wrongdoing on
the part of the repair shop.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
1. What six aspects of the loan
agreement should you be sure you
understand before you sign the loan
documents?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
Answer
(1) exact price (2) amount financed (3)
finance charge (4) APR (5) number and
amount of payments (6) total sales price
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
2. What should you do before you buy
a new car?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
Answer
Determine how much you can afford;
decide what car model/options you want;
conduct research on pricing.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
3. Discuss the advantages and
disadvantages of leasing a car.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
Answer
Advantages: low down payment, smaller
monthly payments. Disadvantages: most
expensive way to obtain a new car; after
making payments, you own nothing and
have nothing to trade in on your next
vehicle.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
4. Why might it be risky to purchase a
pre-owned vehicle from a private
party?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
Answer
Private parties do not give the implied
warranty of merchantability. There is no
recourse if something is wrong with it.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
5. What should you do if you buy a
defective car?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
Answer
Notify the seller at once.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
6. What is the purpose of the federal
odometer law?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
Answer
It requires everyone who transfers a
vehicle, unless it is over 25 years old, to
give the transferee a written mileage
disclosure statement.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
7. Why do some states require auto
repair shops to be bonded?
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Reviewing What You Learned
Answer
The bonding company acts as an insurer
who must pay the consumer for losses if
the repair shop causes damage.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Critical Thinking Activity
Buyer’s Guide
Visit a used car dealer and read the
Buyer’s Guides displayed on several of the
cars. Decide whether you would be willing
to purchase the cars based on the
information provided in the Buyer’s Guides.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Critical Thinking Activity Answer
Buyer’s Guide
Answers will vary depending on the
Buyer’s Guides the students inspect.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Legal Skills in Action
Automobile Warranties
In teams of four, contact three automobile
dealerships or car rental companies that
sell used cars. Ask about the warranties
they provide on the used cars they sell.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Legal Skills in Action
Automobile Warranties
Make sure you find out if the warranties
cover both parts and labor. Next, as a
group, come to consensus as to which
warranty is best.
Understanding Business and Personal Law
Owning a Vehicle
Section 16.1 Acquiring a Vehicle
Section 16.1 Assessment
Legal Skills in Action Answer
Automobile Warranties
Answers will vary but should include a
comparison of the different warranties
located by the groups.
Understanding Business and Personal Law
Owning a Vehicle
End of Section 16.1
Acquiring a Vehicle