Buying a car is a major decision, whether it's a brand new model or a used vehicle. While new cars come with manufacturer warranties, used cars often represent much more of a risk. There are several laws that buyers and sellers must follow for a used car sale to protect both parties and meet state guidelines.
Sellers are not responsible for extending any type of warranty on a used car. This means that used vehicles sold in private sale are entirely unprotected. However, many car dealers, including those who deal exclusively in used cars, may offer a limited warranty to gain buyer confidence and establish a positive reputation. In addition, a used car with an existing factory warranty will retain its warranty when it is sold as used, with the balance of the original warranty passing to the new buyer.
Most states have a lemon law, which entitles used car buyers to compensation if they buy a vehicle that experiences major mechanical failure while still under warranty. This includes both existing new car warranties on models sold as used, or limited warranties offered by the used car sellers. Cars bought without a warranty do not fall under the provisions of a lemon law.
While the lemon law specifics vary from state to state, in general it applies only to vehicles with major problems. In California for example, drivers cannot apply for a refund or exchange under the lemon law unless the used car has been inoperable for 30 days or has been taken to an authorised dealer for repair at least four times for the same problem. If the manufacturer and used car dealer both refuse to refund the customer, the state can become involved, acting first as a mediator and eventually mandating a refund for the customer.
Titles and Registration
Buyers of new cars must apply for a new title in their own name. For private sales, the seller is usually required to sign the back of the original title certificate, which the new owner can then take to the DMV to apply for a new title.
Registration laws vary by state. In some states, the new owner must apply for a new registration, complete with new number plates. Other states such as California, mandate that the plates stay with the car and that the new owner renew the vehicle's registration after the sale.
Used car buyers must also pay state and local income taxes on their purchase. Used car dealers will automatically charge sales tax on the sale price, including it in the cash or long-term financed price. In private sales, the buyer is required to report the purchase and pay the necessary taxes before applying for a new title or registration documents.