Reading Between the Lines — What Auto Loan Documents Really Say


You’ve negotiated all that you need to negotiate. The purchase price is right. The trade has been successfully negotiated. All that is left is the loan document itself. Read and sign, and you’re on your way, with keys in hand and the salesperson and finance person beaming as you drive away in your new vehicle. The question is — what did you really sign?

Finance professionals within auto dealerships are well trained to walk you through the paperwork as quickly as possible, allowing for little discussion and few questions. Most finance documents contain much more than just the base price of the car, the trade in value of your car, your down payment, and the interest fee negotiated (in advance) by the bank. The true cost of your car lies between the lines.

For example, many car dealers “offer” etching as part of the new car buying experience. Etching is a vehicle identification system that requires the dealership to “etch” a number on the glass of the window on your new vehicle. If your car is lost or stolen, the etching number can help track the car and identify it more readily than just a license plate or the color and make of the car. However, that little etching can run anywhere from $400-600, depending on the dealer, and it is often hidden in the fine print of the document.

Second, make sure the document reflects the actual down payment you agreed to with the salesperson. Often when the salesperson is trying to make their quota, they will agree to one thing with the car buyer, but tell the finance dealer something completely different. Once you are in the “finance” seat, the finance manager will have the documents ready to review with the down payment as told to them by the salesperson.

Finally, watch the interest rate. Dealers will often throw different low interest rates your way to see which one appears to catch your attention most readily. 0% financing on an auto for a short period of time sounds great on paper, but it also means higher payments for you, which could be financially constraining if you’re not prepared to make the higher payments. Ensure the interest rate and the length of time you will be paying back the loan meet your expectations.

When sitting down to sign the final paperwork, make sure you read it carefully and ask as many questions as you need to feel comfortable about your purchase. Don’t worry if the finance manager doesn’t like to answer your questions—you will save yourself money in the long run by knowing exactly what you are agreeing to buy.

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