Be prepared before spending your tax refund on a used car

The Better Business Bureau of Eastern Michigan fields hundreds of complaints each year from consumers who buy used cars with their tax refunds only to be disappointed later .
February 03, 2014

There are a few things to know about buying a car in Michigan:

Used or brand-new, a car is not a returnable item.

Anything promised by a salesperson must be included in the purchase agreement, or the seller is not obligated to comply.

If you buy an “as-is” vehicle, the dealer or car lot where it is purchased is under no obligation to do anything free of charge if there are issues with the car once you have signed the purchase agreement. With an “as-is” purchase, buyers have no recourse — even if the engine or other essential parts immediately stops functioning after you’ve bought the vehicle.

You’ve worked hard all year, so follow these tips before driving away from your tax return:

Set a price limit. Before you start your search, decide the maximum amount you can spend or the maximum monthly payment, if you finance the car through a loan. Be sure to include the price of the tax, title, registration and insurance. Together these costs are estimated to be 10 percent of the purchase price. Any used car is likely to require maintenance and repair even in the first year and every year thereafter. Consider setting aside part of your total budget for those repairs.

Determine where to buy the used car. There are three common venues to purchase used cars: private parties, dealerships and independent lots.

Private parties tend to have more reasonable prices, but the risk of getting a car with problems is higher.

Buying a used car from a dealership can provide you with carefully inspected vehicles and short-term warranties or extended warranties you can purchase. You should review any warranty or service contract carefully so that you are aware of any exclusions.

The Federal Trade Commission’s Used Car Rule states dealers must post a Buyer’s Guide for every used car that will inform you if the car is being sold with a warranty, the percentage of repair costs the dealer pays while under warranty and any major problems of the mechanical and electrical systems.

Independent operators might offer attractive deals, but some of these car lots might not be properly licensed with the state.

Do the research. Visit websites such as

Get a history report and inspection. The Vehicle Identification Number is located on the driver’s side dashboard near the window or on the driver’s side door. Make sure all VINs are identical.

You can use the VIN to obtain an AutoCheck Vehicle History Report or a Carfax report. Regardless where the used car is being purchased from, ask the seller for a copy of the service records and bring the car to a dependable mechanic to inspect before you decide whether you’ll buy the the vehicle.

Melanie Duquesnel is president and chief executive officer of the Better Business Bureau Serving Eastern Michigan and the Upper Peninsula.