When it comes to getting a car loan, there's usually more to the price than meets the eye. At first glance, you might only look at the sticker price on a vehicle, but that's only the tip of the iceberg when it comes to financing – especially if you're dealing with poor credit.
What Goes Into Auto Loan Pricing?
Car loans start with a vehicle's manufacturer's suggested retail price (MSRP) for new cars, and a dealer price for used ones. There are a number of other charges added to them depending on the options you choose and your financing situation. All auto loans have some fees that are required, a few charges that are negotiable, and a couple that are completely optional.
Additional charges that you're likely to find on most car loans typically include:
- Interest charges
- Sales tax
- Title and license fee
- Document fees
Some of these can be negotiated, but for the most part, these charges are going to show up in your total cost of financing. The exact amount you pay is unique to you and your auto loan contract. Fees can vary by state, dealership, and lender, and some of them, such as your interest charges are dependent on your credit score.
Optional Services and Charges You Can Avoid
There is a wide range of services and optional items that may be included when you're shopping for a car. Fees can range in price from a few dollars to a few hundred dollars depending on your situation and the vehicle you're buying.
Some of these charges can be expected when you upgrade to a higher trim level or add additional aftermarket items to your car at the time of sale. Some aftermarket packages get automatically added to your auto loan contract but aren't always things you have to accept. Many of these extras are considered dealer add-ons.
Remember, it's very important to read your contract carefully to make sure that everything is spelled out and exactly matches what you and the dealer talked about.
Here are some of the most common fees you should look for before you sign on the dotted line for your next car loan:
- Floor plan fees – The cost of maintaining an unsold vehicle on the dealer’s lot.
- Advertising fees – Dealership costs for advertising.
- Interest rate markup fees – Dealerships may pad the interest rate assigned to you from the lender, but not all dealerships do this.
- Destination and delivery charges – The cost to ship a car from the manufacturer to the dealership.
- Extended warranties – Optional insurance coverage typically offered on used vehicles which covers a variety of repairs and services.
- Paint and fabric protection – Basic stain guard, optional and may not be worth the cost.
- Rustproofing – This may be worth it in states where it snows in winter or in coastal states where salt can rust cars quickly.
- Credit insurance – Optional insurance that ensures your loan is paid in the event of death.
- Anti-theft protection – Additional service that, in theory, makes your car less desirable to thieves. May include identity theft protection, too.
- VIN etching – Etches the vehicle identification number on your windshield.
Keep the Ball in Your Court
You can't combat additional fees and charges on your auto loan if you don't know where you stand going into your car-buying experience. It's important to start out your journey by looking into your credit score, and finding out what is in your credit reports. If you don't know what a lender is seeing, then you don't have a leg to stand on when it comes to negotiating your loan contract.
After you find out where you stand credit-wise, do your homework on current averages such as vehicle prices, average interest rates for people in different credit score ranges, and what the standard tax, title, and license fees are where you live. This way, you aren’t caught off guard when additional costs show up on your contract.
Last but not least, make sure to plan and stick to a budget for your auto loan. If you're not sure what to expect, you can use our car loan estimator and payment calculator to see where you might end up when it comes to getting financing. If you don't know what you can afford, or don't stick to your budget, it can make staying current with a car loan difficult – this can lead to default and eventual repossession. You can avoid these dire consequences by building a car buying budget that you can stick to.
Ready to Take on A Car Loan?
If you're ready to start shopping for your next auto loan look no further than CarsDirect. You can research new and used cars right here, and find financing tips and tricks right in our auto financing blog.
Not all lenders work with every borrower, so when you've got all your ducks in a row, and are ready to take a step toward financing, make sure you're on the right track by finding a dealer with the lenders for your credit situation.
We've gathered a nationwide network of special finance dealerships that are signed up with subprime lenders that offer financing solutions for credit-challenged consumers. To get started on your way to the car you need, fill out our easy auto loan request form, and we'll match you to a dealership in your area.
