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What Fine Print Should I Look Out For in a Car Loan?

Finance | 04/20/2023 23:42
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It seems obvious: of course you should read all of the fine print before you sign anything. In today’s world where you have to read a novel to simply log on to a web page, it’s easy to get in the habit of skipping through the crux of the details when you are signing something. But when you are taking out a loan for a large sum of money, it’s incredibly important to pay attention to everything. What may seem like a throw away line might actually have big implications for you financially. So today we are going to talk about what fine print you can’t ignore and what you should look out for in your car loan contract.


Let’s talk about car loan contracts and what you should look out for when signing one.

What types of fine print should you look out for in your car loan?


The Notorious Yo-Yo Financing

Yo-Yo financing means that you are offered one rate when you initially discuss the loan, only to have that rate not apply to you. This tactic is also referred to as spot delivery. The dealer will tell you that you are free to take the car home even though the paperwork is not finalized, only to call you several weeks later to tell you that the paperwork fell through and you need to renegotiate. When you come in to settle this they will change the terms, and you may be left with a less than desirable rate and car loan contract. 


You want to read the contract carefully to ensure that the rate that the dealer tells you is the rate that is actually listed in the contract AND that the financing paperwork is 100% complete before you leave with your new car. Yo-yo financing is illegal in some states, but not in all states so it is something you very much need to be aware of before you get a car loan. And remember: if a rate sounds too good to be true, it probably is.


Deal Only Available In…

It’s very common to see deals advertised as “only available in CA, NJ, FL” etc. And these deals usually exclude A LOT (as in most) states. So it’s important to ensure that the deal you are offered and the deal that you think you are getting are actually valid in the state you are in. You may be under the impression that you are agreeing to one rate or term, but the contract may have something else listed entirely.

Car Loan Add-Ons (and New Car Features)

One of the most common practices is for dealers to add on purchases and products to your car loan. These add ons commonly include:

  • GAP insurance

  • VIN etching

  • Tire and wheel protection

  • Paint and fabric protection

  • Key protection

  • Credit insurance

  • Extended warranties


While some of these items may be something you are interested in, you need to make sure that they are not listed in your contract without your knowledge. You can usually cancel these add-ons after you sign, but doing so can be complicated and annoying. Additionally, you should ensure that the car does not have unnecessary features added on without your knowledge. Car add-ons can very quickly cause your car loan to increase by thousands. These upgrades may include:

  • Upgraded trim level

  • All weather mats

  • High tech security features

  • Upgraded entertainment system


Again, some of these might be features that you want, but you need to be sure that the specific features you want are included on the contract.

Here are some tips to get the best contracts.

When you are looking to buy a new car, you want to be extra cautious when it comes to signing anything. Here are our top tips to ensure you don’t get roped into signing a bad contract.


  1. Get pre approved. The best thing that you can do before setting foot into a dealership is to get pre approved for a car loan. This will take a lot of unnecessary pressure off of you. Not only can you shop with the confidence of knowing what type of car you can afford, but you will already know what rate the dealership has to beat if they want to get you to finance with them.

  2. Bring a friend. It’s always a good idea to bring a friend or loved one along with you when you are looking to get a car. It’s great to have someone to bounce things off of, but more than that, it’s another set of ears to listen for any warning signs. This gives you another witness to what is being said to you. It’s also a good idea to have them read the contract as well. They may pick up on some fine print that you somehow missed.

  3. Don’t rush. It’s all too common for dealers to rush you into signing something. They want to get you in and get you out while making as much money as possible off of you. But if you rush you will most likely not read the contract fully, which can lead to issues down the road. Instead, be sure to take your time and tell the dealer you need time and space to review the contract before signing anything.

  4. Keep your bottom line in mind–and be prepared to leave. Before you set foot into the dealership you should know how much you can afford to pay for a new car. Keep that number in mind the whole time you are shopping and negotiating. It’s easy to get carried away with add on features and upgrades, but they can seriously mess up your finances. Remember that any add ons are included in your total loan balance, so you will have to pay interest on them. This can add up to a lot of money and throw a serious wrench in your monthly budget. You should aim to pay no more than 20% of your monthly income on transportation (this includes gas, parking, maintenance, tolls, insurance, etc) as well as your car loan payment. If the loan you are looking to sign will throw you out of your budgetary comfort zone, it’s best to walk away.


What can you do if you enter into a bad car loan contract?

There are a number of reasons your car loan contract might be less than ideal. Perhaps the rate you are offered is too high, or maybe there are add ons that you didn’t realize until after you signed on the dotted line. Either way there are some ways to amend your situation and get you out of the bad terms you are dealing with.


If you realize that your car loan contract has add ons that you did not agree to, you should contact the customer service department listed on the contract immediately. Your contract should have time limits and details on the cancellation procedure, so that should give you a good idea of what to expect. Calling the loan company and explaining the situation will be your best bet if you are trying to get an exception after the cancellation period has ended. If the loan company agrees to refund your money, be sure to keep an eye out for it to ensure that it is actually canceled. It may take weeks or even months, so it may easily fall off your radar. But make a note to follow up if more than two months pass without a resolution.


If there are other terms in your contract that you are unhappy with, such as the rate that is listed, your best bet is to refinance your car loan. When you refinance a car loan, you enter into a new loan that has new terms, including a new car loan interest rate. Preparing your personal finances and working to increase your credit score will help you to secure the best car loan rate possible when you refinance. When you enter into a new car loan, the new company will pay off your old car loan and you will be released from that contract (and from the terms that come with it). But be sure to read the new car loan contract carefully as well, or you may end up in the same situation all over again.


Refinancing your car loan with a company that specializes in car loan refinance, like Auto Approve, can help make this process super simple and easy. By streamlining the application process your car refinance agent can help you save time, money, and a whole lot of aggravation. And most importantly: they can help you get out of a bad contract.

That’s the fine print you should look out for when you are signing a car loan contract.

It’s incredibly important to read the fine print and pay attention to all of the details. But if you end up in a bad car loan contract, the best thing to do is to refinance your car loan and get a better car loan contract.


Contact Auto Approve today to see how they can help.


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