What should I know before I finalize a car or auto loan?
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Once you’ve finished negotiating with your lender or dealer, make sure to review all aspects of your loan agreement before you sign your paperwork and drive off the lot.
If you’ve shopped around for the right car and auto loan and negotiated the details with your lender or dealer, you’re at the point of closing the deal. Before you sign on the dotted line and drive off the lot, here are a few important things to know:
- Check the information to ensure it’s what you agreed to
- Finish the paperwork
- Watch for these details after you drive away
The federal Truth in Lending Act (TILA) requires lenders to provide you with written disclosures with all of the important details of your loan terms fully filled out before you sign the paperwork. Note: while TILA disclosures are typically presented to you just before you sign your loan contract, you can insist on receiving them earlier so you have time to review. You can also take those forms home with you to compare with other offers or to fully consider your options.
Check everything to ensure it’s what you agreed to
Under TILA, lenders must provide specific information that helps to ensure your loan terms align with what you agreed to. The form must include:
- Annual Percentage Rate (APR) – This is the cost you’ll pay each year to borrow money, which is your interest rate plus fees. Similar to an interest rate, it’s written as a percentage.
- Finance Charges – The total amount of interest and certain fees that you’ll pay over the life of your loan, if you make every payment when it’s due.
- Amount Financed – The amount of money you’re borrowing.
- Total of Payments – The sum of all of the payments you’ll have made by the end of your loan.
- Total Sale Price – The total cost of your purchase on credit, taking into consideration your down payment.
The TILA disclosures will also include other important terms such as the number of payments, the monthly payment, late fees, whether you can prepay your loan without a penalty, and other important terms.
Take time to review each detail of your contract. If you don’t understand any aspect of your loan, ask questions. And if you’re not comfortable with any aspect or process, walk away. No one can pressure you into a loan or vehicle you’re not comfortable with.
Finish your paperwork
Before you leave the lot, make sure you’ve finished all of the paperwork:
- All of the blanks have been filled in – some by you but most by the dealer
- The paperwork has been signed by you and the dealer
- You’ve received copies of all of your documents
If the dealer asks you to sign a blank or partially filled in form, you should decline. Also, you may receive printed or electronic copies of your documents. If you receive them electronically, make sure they’re in a format that’s easy to access and can be saved or printed.
Watch for these details after you drive away
After you’ve taken out a car loan, you should receive an introductory message from your lender. These communications will include information on where to send your payments and when they’re due.
Make sure your monthly payments are on time in order to avoid late fees or possible repossession, as well as negative impacts on your credit score.
Also – if you’re a servicemember, learn more about your special protections when paying back your auto loan and lease.