Getting Out of a Car Purchase: Is There a Cooling-Off Period?

If you want to cancel a car purchase, your first thought may be to invoke the federal "cooling-off rule." But this rule, which allows consumers to cancel certain sales transactions within three days to protect against high-pressure sales tactics, does not cover car purchases.

While negotiating with a car dealer can be a high-pressure situation, a new motor vehicle loses tremendous value the moment you drive it off the lot. Allowing a cooling-off period would force dealers to sell virtually new cars at sharply reduced resale prices.

Car Purchase Contracts and Cancellation Agreements

Instead, car buyers should fully understand the contract terms before signing a purchase agreement. This includes optional fee-based cancellation agreements.

Some state laws require dealers to offer extra protections for used car buyers. These protections serve as incentives to buy.

For example, California car dealers must inform you about contract cancellation option agreements for used cars costing less than $40,000. These agreements, which cost between $75 and $400 depending on the purchase price, allow you to return the vehicle within two days if you wish to cancel the sale.

Defective Motor Vehicles and Illegal Sales Tactics

Most other protections for car purchases apply only to defective automobiles or illegal sales tactics.

In Massachusetts, the Failed Inspection Lemon Law allows you to cancel a vehicle purchase contract if it fails an inspection within seven days from the date of sale. To be eligible for a refund, the repair cost must exceed 10% of the purchase price.

Lemon Law Protections for Vehicle Defects

Lemon laws cover new vehicles (and some used vehicles) with substantial defects that remain unresolved after a reasonable number of repair attempts. While they don't offer a way for buyers who simply change their minds, these laws do offer protections against defective vehicles.

The Magnuson-Moss Warranty Act is a federal law protecting most consumer purchases under a written warranty—including new vehicle warranties. States also have individual lemon laws applying specifically to vehicle purchases.

For example, Florida lemon law requires consumers to first report a defect to the dealer or manufacturer within 24 months of taking delivery. If the dealer is unable to fix the car after three attempts, the consumer must contact the manufacturer. The manufacturer then has 10 days to direct the consumer to an independent repair facility. If the car is not fixed by the third-party repair facility within 30 days, the consumer may seek a refund or a replacement vehicle.

Lemon vehicle refunds vary by state but usually include the full purchase price in addition to:

• Registration fees
• Towing or rental costs
• Sales tax
• Attorney fees

Many states also offer arbitration programs to help mediate lemon disputes between buyers and dealers.

See "Lemon Law Basics" for more information, including a state-specific lemon law guide.

Auto Dealer Fraud

If you believe the dealership engaged in fraud or failed to meet its contractual obligations, then you may consider filing a formal complaint with your state's attorney general's office. You can also file a consumer complaint with the Better Business Bureau (BBB).

Never assume your car is covered by a warranty. Make sure any such guarantee is in writing in the sales contract.

It's very difficult to get out of an auto sale contract if:

• You weren't subject to fraud
• The car isn't defective
• You didn't purchase an option to cancel the sale

But you still may have options to cancel the sale. For example, some dealerships will make exceptions or allow a trade-in for a different vehicle. Contact the dealership as soon as possible after the sale to explain your situation.

Dealerships are more likely to refund add-on services like extended warranties and service contracts. Getting these additional charges refunded can lower your monthly car payment.

Avoiding Buyer's Remorse for Your Vehicle Purchase

Do extensive research and comparison shopping on the vehicle you're interested in before signing a purchase agreement. This includes the vehicle's:

• Reliability and safety ratings
• Fuel efficiency
• Customer reviews

The same is true for financing options. Compare loan rates and terms from different lenders to the dealership financing offered. Also, evaluate your needs and budget carefully. Account for your entire monthly payment, including car insurance premiums. Your monthly car payment shouldn't be more than 15% of your total net income.

You can also consider leasing a car instead of buying one. While a car lease is still a legally binding contract, it requires less of a commitment than a vehicle purchase. Still, lease agreements are for a specific time period. Canceling early will result in a costly penalty.

Avoid impulse buys and trust your intuition. Be prepared to walk away from a dealership if you're uncomfortable with the sale.

Issue With a New Vehicle Purchase? Get Legal Help

Car owners can resolve most vehicle issues on their own. But there are times when you may want professional help.

For example, if your vehicle problem remains unresolved despite multiple repair attempts or you suspect auto dealer fraud, you should consult an attorney for legal advice.

A consumer protection attorney in your area can review your vehicle purchase and help protect your consumer rights. They can determine if the contract you signed was unfair. Or they can determine your vehicle's eligibility for a refund or repurchase under lemon laws. Contact a local attorney today to learn how they can help you.