Vehicle Purchase Agreements
Vehicle Fees By State
Here’s the script for the “Vehicle Purchase Agreement” video above:
Now to this point, you’ve gone through the back office initial paperwork, gone through the pitch, and identified the products you want, if any. Now let’s get into the vehicle purchase agreement and final paperwork so that you can officially buy the car.
If you have agreed to buy any back-end products, like say, an extended service contract, and a credit life insurance package, the business manager will proceed to print out the contracts for those products. If you decline coverage, they’ll print something to sign saying you’re declining coverage, and potentially use it as another opportunity to upsell.
When you buy a back end product, you will always sign a separate agreement for each one and take a copy with you. If you’re receiving any rebates or incentives on a new car purchase, you will sign a separate form for those as well, so don’t worry about a dealer claiming rebates and not directly applying them to your purchase. To do so would be illegal and would require them to forge your signature.
Now let’s move on to the final document you’ll sign because this is the most important. When you sign and initial this document in multiple places, you will have bought a car. This document will be very distinctive because it’s a very long form, certainly a lot longer than any form you’ll ever encounter in normal day-to-day life. The document will either be a retail installment sale contract or a lease agreement.
Like I said back in the course introduction, I don’t think the first time you should see one of these agreements is when you’re excited about buying a car, so I’m including three different real-life examples in the shop so that you have time to familiarize yourself with the layout and contents. To cover basically all the bases, one is from a used car that I financed for one of my companies, another is a new car where I paid all cash, and finally, the third is a new truck that I leased.
All of the signing that the business manager had you do up to this point certainly had some important documents, but that process of signing signing signing was to condition you to just sign this vehicle purchase agreement without asking too many questions.
This is where you need to be the most careful because anything said by the dealer is irrelevant. The only thing that matters is what is printed and that you sign. Even the word “sign” has such a negative stigma attached to it that we were taught to not even use that word. We would tell you to put your autograph on the form or your “John Hancock” to lessen any potential negative response to the word “sign.”
*From Here You’re Better Served By Watching the Video Above To Follow Along*
Certainly, study the contracts provided, and we’re going to walk through one in particular because it’s where the dealer tried to put one over on me. Near the top is your information and a description of the vehicle, so make sure the VIN is correct. Next on any retail contract, you’ll find a Federal Truth-In-Lending Disclosure. By law, all of these disclosures have the same information relating to your total cost of credit. In this example, I’m paying cash, but you can see how this looks with financing in one of the other examples.
Now, this itemization box is the most important section and where you should triple check everything. Study this part on your vehicle purchase agreement, and if something doesn’t look right, ask. The dealer tried to get me on Section A. Originally, the sticker price of this car was $29,995, but it was a 2017 model year car purchased in 2018. There were already 2018 models of the same car on the lot, so the dealer advertised it at a significant discount to sticker price, not including the rebates.
What they did though to try and get one over on me was to put the sticker price in this box. Pay attention here. If you’re negotiating from the invoice price, then the invoice price should be what you see on this line. If you see the sticker price or above and aren’t buying a very rare car, then they’re probably trying to soak you for more money. Obviously, that isn’t always the case as dealers can make mistakes too. Just make sure you ask questions. If you don’t like the answer, walk away. This price is before rebates, trades, or down-payments as those are accounted for later in the contract.
Moving down, you’ll find additional fees that will increase your bottom line. Be careful on the Document Processing Charge. It’s a fee that the dealer charges to process your paperwork. Some states have it capped, like California, here at $80. Some states have different limits, and many states have no limits. There are no hard rules here. A dealer does have an administrative staff that processes paperwork. That staff has a salary and benefits. So it is a valid charge, just don’t let yourself get soaked. I’m definitely going to put up a fight if it’s more than a couple of hundred bucks, though. It is negotiable, but getting them to remove it entirely is highly unlikely unless they’re making up for it financially in other areas of the sale.
Continuing down, you’ll find other taxes and fees. These are normal and will definitely vary by state and sometimes even by city or county. Two important takeaways here.
Firstly, if you’re trying to drive to North Dakota just to save on T’s and Fees but live in South Dakota, save yourself a trip because it won’t work. Dealers are required to apply those charges based on where you live, not based on the tax structure that applies to residents of their state. Additionally, don’t worry about getting overcharged for any of these fees. I almost always get a refund check for a few dollars about a month after buying a car because the dealer overestimated actual taxes or fees. To make things easier, I’m going to include a spreadsheet above that will layout most of the fees that states charge as well as doc fee laws. It may not be perfect because laws change, but you’ll have a solid idea of what to expect based on where you reside.
Now everything will come up to a subtotal in total outlays before you get to the part about things that will reduce your price. In my case, the manufacturer’s rebates took an additional $3,350 off the total price. If you have a trade with net equity or are giving a down payment, that will be reflected here. In my case here, I’m paying cash, so this dealer showed it as though I was financing the balance, but as you can see above, my “financing” is only one payment.
So again, go through everything here carefully. This is the most important paper you’ll sign of the entire transaction. Read every clause and ask questions. Study the other contracts as well. If everything, including all of the numbers, looks logical and what you agreed to with the sales team, then finish signing.