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Home » Auto » Buying a Car » What you need to know about contracts and warranties

Details to know

• Signing a contract
• Refunds and exchanges
• Warranties
• Warranty checklist
• Extended warranties
• Bait and switch

Signing a contract

Just as you would negotiate the financing of a car, almost everything in a lease is also negotiable including:

• Asking price
• Residual value
• Excess mileage charges
• Purchase option price

A written contract is a legally binding agreement signed by the buyer and seller. It spells out the obligations each party has to the other. This can be a formal and official-looking document, or it can be a handwritten on a sheet of paper.

Once all parties have signed the contract, it generally cannot be changed or broken unless both parties agree. That said, it is very important that you are sure the product or service you are signing the contract for, meets your needs. Before you sign, make sure you have read the contract fully and understand every word and clause contained in the contract. If there is anything you do not understand, ask questions or seek a lawyer's advice.

Regardless of what a contract is for, always follow these rules:

• Get a copy of the contract.
• Only deal with reputable individuals or companies. If you have any doubts, do not sign.
• Find out if there is a cancellation policy and what it is.
• If the product or service comes with a warranty, make sure the contract states this and clearly states the terms and conditions. A verbal warranty means very little.
• Ensure all promises made by the seller are included in the contract, including the conditions of sale. These should include:
  • price, type and model number of every item
  • quality and condition of materials
  • service obligations
  • time of delivery or completion, if applicable
• Make sure all goods, services or obligations you do not want, are crossed off from all copies of the contract and initialed by all parties. Or, even better, rewrite the contract.
• All blank spaces must be filled in.
• Be prepared to live up to all provisions in the contract, regardless of what the salesperson says.
• Never let anybody pressure you into signing anything. Take your time.

Refunds and exchanges

Although many stores will allow you to return or exchange goods, keep in mind that return policies are voluntary. Stores are not obligated by law to accept an item for refund, exchange or credit unless it is defective or misrepresented.

Generally, return policies will be one of three basic types. All of these policies require you to return the goods within a specified time, in new condition and with original proof of purchase.

• A return for credit offers a credit note, which may be applied to the purchase of any other item in the store. A credit note should have an expiry date.
• A refund policy allows you to get your money back.
• An exchange policy will allow you to return any item and take another of the same kind in its place.

Warranties

A warranty is a seller's promise to the buyer that a product fulfills specified conditions and is free of hidden defects. It is considered part of the sales agreement. Be aware that warranties can be complex. Find out precisely what is covered by a warranty before accepting it. For example, some warranties may cover all parts and labour for 90 days, parts only for a year, and specific parts for additional years. Be aware of meaningless statements such as "lifetime warranty." These don't usually refer to the life of the buyer. More likely, they refer to the life of the product, or the length of time the original purchaser is likely to own a particular item.

Warranty checklist

Before you accept a warranty, answer these key questions:

• Who is providing the warranty?
• Is the entire product covered or only certain parts?
• Are both parts and labour covered? What is not covered?
• What is the product warranted against?
• What will the warrantor do if problems arise?
• Is the warranty valid only for the original owner?
• Who provides service and repairs on the warranty?
• When does the warranty run out?

Under the provincial government's Consumer Protection Act, consumers are protected against false or misleading statements in verbal or written warranties. However, the consumer may have problems proving that a salesperson made a particular promise. Get all warranties in writing. Watch out for disclaimers. A warranty may contain a disclaimer clause which removes rights the buyer otherwise would have under this Act.

Some warranties may not be valid unless registered. You may have to fill out and mail a form to the manufacturer. Manufacturers sometimes limit warranty coverage to the original purchaser. They may also declare a warranty invalid if anyone but an authorized serviceman repairs the product. Check this out before you attempt a repair job yourself.

Store all receipts carefully, in case you have to make a claim on the warranty.

Extended warranties

There are two basic kinds of extended warranties:

1. The manufacturer of a product extends the original warranty for an extra charge.
2. "Third party extended warranties" provided by warranty firms to cover future repair costs. Third party extended warranties cause the most trouble for consumers, especially when they apply to vehicles. The three most common problems with firms that sell third party extended warranties are bankruptcy, closure of the business and fraud.

If you have trouble with an extended warranty, you may have to seek redress through expensive and lengthy legal action. Protect yourself by treating all extended warranties with caution.

Bait and switch

This is an unfair practice that occurs when an item is advertised at a price so low that you are lured into the store. Once in the store, the advertised item is either not for sale, sold out or a salesperson says the item is of inferior quality and carries no warranty. At this point the salesperson may offer a more expensive product.

If a deal seems too good to be true, it probably is.

• Beware of ads that offer an astonishingly low price and salespeople who try to switch you from the advertised special.
• Deal with reputable firms.
• Give yourself time to think about what you are getting for your money. Compare prices elsewhere and don't let anybody pressure you.
• Ask about the after-sales service and be sure you understand the warranty. Pay special attention to who will honour it, what it covers and for how long.
• Learn how to protect yourself as a consumer, by visiting the Federal Government website to learn more about unfair business practices. The site also provides a number of tip sheets to help you become a better consumer.