Auto Buying Guide: Read The Paperwork

by Aryn Plax

Aug 4, 2021

In our last post, we discussed car purchase pitfalls such as vehicles labeled “as-is,” gap insurance, extended warranty plans and yo-yo financing. To avoid that last trap, you have to read the paperwork carefully before taking your car home. However, that’s not the only reason you should read through the stack of papers given to you by your salesperson.

When reading these documents, check through all of the details with a fine-toothed comb. If there are parts of any paperwork that strike you as incorrect, resolve those items before you sign anything. If part of the contract makes you uncomfortable, cross that part out. It’s never too late to back out, at least until you sign the contract.

If you’re buying the car, you will be expected to sign a document called the Retail Installment Sales Contract (RISC). You will receive this regardless whether you pay the full price upfront or have a plan to pay for the vehicle in installments. This document should show the following:

  • Name and address of purchaser
  • Name and address of dealership
  • Year, make, model, mileage and VIN of vehicle
  • Purchase date
  • Vehicle purchase price
  • Down payment or deposit, if any was made
  • Vehicle trade-in credit, if any
  • Amounts for legally required fees, such as sales tax, registration, and title fees
  • Processing fees, if any
  • Net balance due, if any
A contract is laid out on a wooden table. A key fob rests atop the contract, to the side. A hand holds a pen and initials a part of the contract.

If you’re leasing the car, you will be expected to sign the lease agreement. Though the lease agreement should show many of the same things as the RISC, the lease agreement should also show the following:

  • Length or term of the lease
  • Mileage limits on the lease
  • Excessive wear and tear provisions
  • Monthly payments for the car
  • Penalties for limits on mileage or wear and tear
  • Acquisition fee or bank fee
  • Vehicle selling price
  • Total amount due at signing
  • Buyout price
  • Turn-in fee
  • Early termination fee
  • Money factor, and by extension, interest rates
  • Residual value of vehicle

Double-check the math. Carefully review all numbers listed in the paperwork, including but not limited to monthly payments, fees and other expenses. Compare the numbers listed in the offer sheet and the invoice. You should also try to keep all transactions separate to avoid confusion. This means keeping the price of the car separate from down payments, financing costs, trade-ins (if you plan to trade in your current car) and other expenses. Using a calculator is highly encouraged! If any of the listed numbers confuse you, start asking questions.

Some automotive purchase agreements may have an arbitration clause. This means if you later suspect your vehicle to be defective (or a “lemon”), you will be required to go to arbitration with the automaker before you can pursue a lemon law case in court. To learn more about California Lemon Law and other applicable laws, read our next post in our Auto Buying Guide about your basic legal rights as a consumer.