Purchasing a car can evoke excitement for an individual. For some it is a rite of passage; it might be your first big purchase or the first time you take out finance.
You might be so thrilled by the prospect of a first or new car and this new experience to test your wings, that you just cannot listen to any naysayers who only wish to warn you of potential pitfalls.
People can become so fixated on an ideal that they ignore the warning signs, even when they are staring you in the face like a bright neon sign. Sometimes you just need that one person in your life to slap your face and snap you out of your buyer’s trance.
At this point, you might be willing to agree to just about anything because someone, who knows exactly what they are doing, is dangling a shiny set of keys to a new car right under your nose.
It is perfectly understandable to be ecstatic and in the moment, so before you get to that moment, while you are still functioning as a normal person, do some research, seek some sage advice from your parents (or someone you listen to), and figure out what you want and what you are willing to pay for it.
General Contracts/Sales Agreements
Here are some things you might want to know and think about before blindly signing a contractual agreement.
There is very little difference between what constitutes a contract and a sales/purchase agreement. But before entering into any contract or agreement, you might want to seek legal advice.
A contract, simply put, is an agreement between two or more parties of a trade (an obligation) for payment (exchange for something of value). There are four key elements of a valid contract: agreement, capacity, consideration, and intention.
Within the agreement is both a communicated offer and acceptance. Capacity concerns the ability to understand all the terms and be eligible to enter into a legally binding contract.
Consideration involves the exchange of something of value between parties, and the agreement cannot include anything illegal. And there must be clarity that both parties intend to enter into a legally binding contract.
All Sales Agreements
In actuality, once a sales agreement is offered and agreed by respective parties it becomes a contract. You may not think, depending at your stage of life, that you have entered into one before. But you might be surprised to read that you have, probably many to hundreds of times. ‘When,’ you ask? When purchasing an item at a retail store or even buying a can of soda/fizzy drink at your local convenience store — that’s a sales agreement; that’s a contract.
You may be bored by the Laws of Contracts and Torts, but as a frequent consumer and customer you might need to know something about them someday. Your introduction may be as simple as finding a product to be faulty and needing even the most basic remedy. In that case, you would start with the Consumer Rights Act 2015 (UK).
Specific Contracts/Sales Agreements
But when it comes to specific sales agreements and contracts with greater risk and liability, it will pay for you to know what you are getting yourself into. The first thing to do is research your options before entering into any such agreements where responsibility and liability carry greater personal financial risk.
Next, learn what are the standard terms you are agreeing to, and know your statutory rights. Also, shop around to know what favourable terms and conditions may be offered elsewhere. Getting the right deal for you will ensure longevity of satisfaction with your agreement and your purchase. This is true no matter the type of contract, e.g. house purchase, car purchase, etc.
There are a couple of things to consider when you are choosing how to buy your car. You might be able to pay for it outright, but it might be more beneficial for you to purchase a big item on finance in order to establish or build a healthy credit rating. If you choose to finance your new car with a personal loan, you can always put that cash you have saved into the bank to pay off your car.
Of course, you are going to shop around for the best deals (we talked about that), but you also have a choice to make about what type of loan you will take out, i.e. personal car purchase (PCP), and hire purchase (HP).
The Dos and Don’ts
Remember, if you go into a car dealership and speak to a sophisticated salesperson, they might dazzle you with their savvy sales skills.
Don’t: think you are well-prepared if you know how much you can afford per month as a car payment. You will find yourself being coaxed into that newer, more expensive model.
Do: know what your car options are and what they are worth.
Don’t: negotiate a price based on the sale sticker price, but rather base it on your research.
Do: be prepared to walk away if you are going to wheel-and-deal the salesperson.
Don’t: imagine yourself driving the car away from the lot until you know how much you can get it for.
Do: agree to the add-on GAP (guaranteed auto protection) insurance. It might be a life-saver.
Don’t: fall for the golden handshake.
Do: research. Does this sound repetitive? Good, then do it!
The Bottom Line
When it comes to contracts, always, always, always read the fine print. Read the big print too. Don’t just let the finance broker explain ‘in a nut shell’ what you are signing, otherwise the only nut in the shell will be you.
Car finance can be your best option, and there are good lenders out there to help you. But you must research the before-and-after potential risks of purchasing a car on finance or anything on finance.
Author’s Disclaimer: This article is meant as an unofficial guide to avoiding nasty surprises when agreeing to a contract/agreement and claims no authority of Law, Contracts or legal Agreements. It is simply meant to introduce certain terminology for the reader’s awareness, and to point said reader toward their own research and understanding. This article is not intended to be an authority on any legal definitions and legally binding parameters/ramifications discussed within it. The information is meant as a simple guide to terminology and gives way to all authority on the subjects of Law, Contracts and binding Agreements.