Closing the deal… You’ve now negotiated your auto loan. Before you drive away, make sure everything matches what you agreed to. You are almost finished! The hard part is done and now comes an important final step. You have to review the paperwork, check the final terms and numbers against the auto loan worksheet, and be fully satisfied that the written deal is what you want.
1. Verify that you get what you agreed to… Before you are legally obligated under the loan, lenders are required to give you specific disclosures in writing about important terms. This requirement is contained in the federal Truth in Lending Act (T.I.L.A.). One purpose of T.I.L.A. is to help consumers make apples-to-apples comparisons between loans. The important terms include:
Term 1. Annual Percentage Rate (APR): The APR is the cost of credit expressed as a yearly rate in a percentage.
Term 2. Finance charge: Cost of credit expressed as a dollar amount (this is the total amount of interest and certain fees you will pay over the life of the loan if you make every payment when due).
Term 3. Amount financed: The dollar amount of credit provided to you (this is normally the amount you are borrowing).
Term 4. Total of payments: The sum of all the payments that you will have made at the end of the loan (this includes repayment of the principal amount of the loan plus all of the finance charges).
You can always learn more at consumerfinance.gov.
The T.I.L.A. disclosure will also include other important terms such as the number of payments, the monthly payment, late fees, whether the loan has a variable rate, and whether you can prepay your loan without a penalty.
It’s ok to walk away if you feel uncomfortable… If you are not comfortable with any aspects of the loan or the process, you can always leave without completing the deal. Take time to think it over and come back another time. No one can make you accept financing or a vehicle that you are not satisfied with.
Check the paperwork… Once you have finalized the negotiations, examine all of the paperwork before signing the loan documents. Make sure all the loan costs and terms are what you agreed to during the negotiations.
Ask questions…, lots of questions. If there are things you don’t understand, ask. There are no dumb questions when your hard earned money is involved. Don’t sign until you are completely satisfied. Since you are signing a contract, and this is a major purchase, it’s important that you understand what you are signing.
Make sure you have a copy of all the documents… Before you drive off with your new vehicle, make sure that you have a copy of all documents that both you and the dealer have signed and that all blanks are filled in. Some dealers will allow the customer to take possession of the new vehicle before the loan is approved by the lender. This practice, called spot delivery, could put the deal that you thought you had at risk. By having a signed contract with all terms finalized, you can avoid potential problems.
Nail down the financing before you sign the contract… Make sure that the financing is nailed down before you sign the contract. If you don’t have the financing nailed down, the dealer may ask you to come back in and sign for a higher interest rate, add a co-signer, or make some other change different from what was agreed. You don’t have to agree to a second deal. If this happens and you don’t agree to a second deal, the dealer will have to unwind the sale and give you back your trade-in and down payment. In some cases you may want to seek legal assistance and file a complaint with your state attorney general or consumer protection office. To file a complaint with your state attorney general visit naag.org. To file a complaint with your state consumer protection office visit usa.gov/state-consumer.
Lastly, pay attention to the details after you drive away… After you take out a loan, you should receive an introductory letter from the lender that provided the financing. This letter will include important information related to your loan such as where to send your payments and payment due dates. Make sure to make your monthly payments on time to avoid the cost of late fees and the possible repossession of your vehicle, as well as negative entries on your credit report.
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