Chapter Overview
Chapter 28: Cars and the Consumer

An automobile is one of the most important purchases many people will make. Many legal issues are involved in buying, leasing, maintaining, and selling an automobile. Comparison shopping, contracts, warranties, and credit are important concepts related to automobiles.

When shopping for a car, you should consider at least five characteristics—safety, price, quality, warranty, and fuel economy. It is not enough to only compare vehicles in terms of price. The car's safety features, fuel economy, warranties, and dealer's capability to make repairs should all be compared in the same manner as price. Federal law now requires even used cars to show a "Buyer's Guide" in the window of every vehicle.

Most new-car buyers and many used-car buyers make their purchases on credit. Buyers may select the length of the repayment schedule—the longer the repayment period, the lower each monthly payment will be. However, the longer you are in debt, the more interest you end up paying. Interest rates are generally lower on new cars than on used cars. Car dealers, banks, credit unions, and finance companies all generally offer automobile financing.

Rather than buying a car, a person may choose to lease one. Under a lease agreement, the consumer does not own the car, but instead pays a monthly fee to drive the car for a certain period of time. Sometimes the consumer chooses to purchase the car at the end of the lease. More often, though, the consumer returns the car to the leasing company. The lease agreement usually includes restrictions on mileage and wear and tear. The leasing company imposes these restrictions because it wants to get the car back in a certain condition in order to re-sell or re-lease the vehicle to another consumer. Typically, monthly lease payments are lower than monthly finance payments. However, with leasing, you do not own the car at the end of the payment period.

When budgeting to purchase a car, you must remember to consider the cost of fuel, repairs, license and registration fees, taxes, and auto insurance, in addition to the purchase or leasing price of the vehicle. Insurance often can be a major cost—especially for young drivers, who tend to have higher rates because they are less experienced drivers and are usually involved in more accidents.