Auto Loan Finance

Unit 4: Review the Contract

Buying a car is a serious commitment and you should understand every document involved.  Remember, once you have signed the contract you cannot take the car back. Make sure the numbers match the negotiated price and that no additional charges or fees have been inserted.

Bring Your Purchase/Buyer’s Order to Your Financial Representative BEFORE Signing Anything

Your financial representative will support you in understanding your purchase/buyer’s order. He or she will review with you which add-on items or warranties (discussed in the next sections) are truly worth investing in, and which aren’t, based on your personal circumstances.

Extended Warranties

Don't let the dealer pressure you into a quick decision.  Dealers will present you a contract with a dizzying array of forms to sign. If you are in the F&I office, the finance manager—who is actually an expert salesperson—will try to sell you additional items such as extended warranty contracts, fabric protection, alarms or a LoJack vehicle locator.  You may not need an extended warranty. And even if you do, you'll get a much better deal later by shopping around. Should you purchase an extended service contract? Answering these questions might help you decide:

  • Do you have money saved in an emergency fund for car expenses?
  • How long do you plan on keeping the car after the original warranty expires?
  • What repairs are covered under an extended service contract? Or would you rather risk it and pay for repairs when and if they are needed?

Let's say you plan on keeping your car for several years and an extended service contract appeals to you. There's still no need to buy it at the moment of your new-car purchase. You can buy an extended warranty a week, a month, even years after you purchase a new car if you want. Ask questions if you don't understand, and don't ever feel like you have to hurry.

Avoid Dealer Add-Ons

If you're in the market for a new car, and you're looking for a dealership, let the "rip-off sticker" be a red flag of warning to you. The "rip-off sticker" is the sticker in a new car's window that lists the aftermarket extras installed by the dealer. These dealer add-ons make it harder for the average buyer to get a fair deal on a new car by charging king-size prices for low-value items. These add-ons complicate the deal and give dealers extra profit for items you might not want.

Here are a few recommendations when reviewing dealer add-ons:

  • Ask ahead of time if dealer add-ons are included on the car you want. Find out specifically what the items are and the related costs.
  • Avoid dealers who install lots of add-ons unless you really want the extra items. You can always have this work done after you buy the car — at a reasonable price.
  • Ask the salesman to show you a car without the add-ons. Make it clear you don't want the extras and don't want to pay for them.
  • Tell the salesman you will buy the car if the add-ons are removed. They probably won't do this, but you will have a stronger negotiating position since you've made it clear the item has no value to you.
  • If you have to negotiate on a car that's loaded with dealer add-ons, evaluate the bottom-line cost of each item. Don't be afraid to completely ignore pin-striping, paint protection and window tinting. The cost of other items should probably be cut in half, assuming a 50 percent mark-up.

If You Need Additional Help

If you have been denied a loan or need help with improving your credit history, your credit union has partnered with Trinity Debt Management, a nonprofit credit counseling agency.  Credit counselors are available to review your credit report.  Request How to Build Stronger Credit, Bigger Savings and a Better Life, a book about rebuilding credit at 800.785.3844 or download a copy at 

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