What Does A Good Auto Loan Contract Look Like Anyway?

January 7th, 2016 by

If you’ve never negotiated the car buying process before, it can be overwhelming and a bit confusing. There is a lot to consider – even narrowing down to the model you want is hard enough, let alone doing thorough research to determine exactly the right price once you do. For the new car buyer, the process of buying from a dealer and negotiating a loan can seem like a daunting challenge.

If you’re thinking of heading over to one of the buy here pay here dealers in Ohio to secure a bad credit car loan, you should really know what goes into a good loan agreement – and what to avoid – before you do. With these simple guidelines in mind, you’ll be signing and driving away in a new vehicle in no time.

Everything Should Match Your Expectations

The worst thing you can find on an auto loan contract is a surprise – whether it be an unforeseen expense, and unannounced fee, or some other issue that crops up last minute. These can actually do a bit of damage price-wise and may go overlooked; in fact, some dealers purposefully slip in extra fees right at the end with hopes they’ll go unnoticed. Watch out for these, and try to negotiate a better price if you can’t get them removed completely.

Phillip Reed, a Senior Consumer Advice Editor for Edmunds.com, suggests asking for an “out-the-door” price from the dealer early on, which can include all of the basic costs, taxes, and registration fees you should expect to pay. Anything over this that seems a bit too high might be questionable, and should be discussed with the dealer.

Make Sure Everything Adds Up

It’s important to really poke through your loan agreement with a fine-toothed comb, as it were. Since this is a legally binding financial agreement, you want to make sure there are no math mistakes or wording errors that could work against you, or that distort the original deal.

Until you physically sign the agreement you are under no obligation to the lender, so it’s important to be very careful about what you get into and only sign when you are secure in the deal at hand.

Financing Should Be Manageable

It’s important to remember an auto loan is different from other investments, being that the primary investment (your car) can actually depreciate in value faster than you pay off the interest on your loan. In the interest of keeping your loan above water, it’s a good idea to keep financing to a short term with low interest rates. Try to negotiate a larger down payment or higher monthly payments for a smaller interest rate – this can end up saving you thousands by allowing you to pay more into the principle and less into interest.


Some auto loan contracts will include gap insurance, which covers the difference between what an insurance company values the vehicle at and the amount you still owe on the loan in the event the car is totalled. This can save you a lot of money in the event of a major accident by mitigating depreciation losses.

These are just some of the elements of a good auto loan agreement. Next time you’re negotiating over an auto loan, keep these tips in mind and be smart about what you’re signing – and then drive off in your new car.