How To Evaluate Your Auto Loan Contract

Dec 29, 2022 By Susan Kelly

The complexity of a problem lies in its finer points. It's a cliché for a reason; making a mistake in your auto loan contract may be pretty expensive. Based on Outside Financial's 2018 Markup Index data, the average markup for a car loan via a dealership is over $1,700. According to firm co-founder Jon Friedland, overcharges arise from things like marked-up interest rates and added items in the loan contract. Furthermore, Oren Weintraub, president of the car-buying booking system Authority Auto in Tarzana, California, claims that, while checking contracts for customers, he discovers an error, either deliberate or not, around three times out of ten. Review auto loan agreement carefully to ensure you aren't overpaying and are protected from misunderstandings or tricks.

Check The Car And The Information On You

Simply put, you want to ensure you're purchasing the correct automobile, as Weintraub puts it. Make sure that everything from the VIN to your name, address, and driver's license number is accurate on the paperwork associated with the automobile you're purchasing.

Smoke Out Fees

Most car loan companies will claim they are fee-free. Still, there may be initiation fees associated with the loan." Please help me understand precisely what I will have to spend to make this money . this means, including any fees imposed by you or the, and therefore any taxes," suggests Sonia Steinway, co-founder, and head of state of Outside Financial. The automotive website Edmunds suggests another option: asking the dealer for an "out-the-door" price upfront. By doing so, as Edmunds points out, "you will smoke out these excesses and deal with them long before the contract process." It might be difficult to tell the difference between an actual charge and a scam fee. That is just a way for the dealer to make more money. Look at Edmunds' breakdown of state-by-state usual costs.

Keep An Eye Out For Add-Ons

Lenders can tack on extra goods like gap insurance and extended warranties to a loan without asking whether you want them. Alternatively, auto dealerships may install optional but undisclosed accessories on customer vehicles, such as specialized wheels, running boards, or anti-theft gadgets. They want you to sign the contract without seeing the increase in your monthly payment so that they may continue collecting it from you indefinitely. Many purchasers merely sign the contract after seeing the higher price, figuring it's too late to back out. However, be aware that you can ask the dealer to renegotiate the contract without the optional features and at a lesser price. A variety of "ancillary items" might be added, says Steinway. You may get good use out of some of these things if you take the time to learn about them and pay a fair price.

Check That The Numbers Match

Most loans start with the borrower conversing with a loan officer or dealer about the conditions. For this reason, as Steinway points out, it's crucial to compare the figures in your vehicle loan agreement with what the lender said over the phone. A car loan calculator may help you determine whether the terms of the loan align with what you were led to believe you agreed to. There's an issue if they don't. The loan's terms may have been altered by the lender or dealer, who may also have tacked on fees or increased the interest rate.

Talk To The Lender About Any Problems

Get a pencil and mark any unfamiliar jargon or expenses that weren't covered before as you review your loan documentation. Steinway recommends allowing the lender or dealer to clarify whatever you bring up in the contract. But rather than an evasive non-answer, you should insist on a thorough explanation. Only sign things you are comfortable with, whether sitting in a dealership's back office or on the phone with a loan officer who is irritated with you. Weintraub thinks the figures are the most crucial part of the transaction while reading the loan agreement is also essential. Verify that you have a thorough comprehension of all fees.


You did an excellent job of bargaining for your new car. Congratulations! Many people in the United States see owning a car as a sign of independence and accomplishment. Having a car may sometimes be necessary for areas lacking reliable public transportation. However, the tiny print of your vehicle loan may need to be clarified. Avoid being surprised by additional costs by comparing the final tally to the estimate made during the sales presentation. The nuances of an issue are what makes it so difficult to solve. There's truth to the cliche: signing a car loan deal without reading it thoroughly may cost you a lot of money. Markups for dealership auto loans average over $1,700, according to research from Outside Financial's 2018 Markup Index. Firm co-founder Jon Friedland claims that overcharges result from inflated interest rates and extraneous material added to the loan agreement.

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