Key questions to ask
Here are some questions that you should ask when discussing your loan (the section on leasing has its own questions to ask). Write them down or print them out before you talk to anyone. Make sure you get answers that you fully understand. If anything is not making sense, walk away and come back after you've had time to think about it. If the sales or finance person makes a claim you think is too good to be true, have them write it on the finance contract and get a manager to sign off.
- What's the interest rate I'm really paying? The APR (annual percentage rate) is the best way to know what interest you are really paying. It is the actual interest rate you pay annually on the unpaid balance of the loan. The rate you are offered will depend on your credit score.
- Are there any possible penalties in my loan? Are there any penalties for paying the loan off early? Are there any other possible extra charges that could occur during the term of my loan? Will the interest rate change if I am late with a payment?
- What is the precise (down to the penny) price I'm paying for the vehicle?
- What is the total amount being financed?
- What's the dollar amount of the interest (finance charge) I will pay on the loan?
- What's the exact amount of each payment?
- What is the total number of payments?
- Is this deal contingent on getting subsequent approval of the financing from a third party? Some dealers will send you out the door with a car and then call a day or two later to say they couldn't get you financed at the rate they quoted, but they have found a lender who will cover the loan at a higher payment. Don't fall for this. Make sure you know who the lender is and that the deal is sealed before leaving the lot. If there's any question, tell the dealer you'll come back and get the car when everything is settled.
- What about credit insurance? Your lender may offer, or even demand, credit insurance. First, find out exactly what it will cost you. If you have an existing insurance policy that covers the same thing, make a thorough comparison. It's not required by federal law, and check your state's requirement (through the office of your attorney general or insurance commissioner) if your lender requires it. It's very rare that any do. But if you must pay, make sure it is included in the cost of your credit and see where it is reflected in the APR you are paying.