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Auto Loan Provisions I Check First

Dealer and online auto financing hide costs in the fine print. Don't drive off without understanding these.

High Risk

Dealers can mark up your approved rate by 1-3%. You qualified for 5%? They might charge you 7% and pocket the difference.

Look for: Your pre-approval rate vs. the actual contract rate.

High Risk

GAP insurance, extended warranties, and paint protection bundled into the loan at 2-3x market price. Often non-refundable.

Look for: "GAP coverage required" or add-ons buried in the loan amount.

High Risk

Drive the car home, then get called back because "financing fell through." Forced to accept worse terms or return the car.

Look for: "Subject to final approval" or "financing contingent on..."

High Risk

Subprime lenders install GPS trackers and starter interrupt devices. Miss one payment? They can disable your car remotely.

Look for: "GPS device" or "starter interrupt" or "payment assurance device."

Medium Risk

Rule of 78s front-loads interest, so early payoff doesn't save as much. Some loans have explicit prepayment penalties.

Look for: "Rule of 78s" or "prepayment penalty" or "precomputed interest."

Medium Risk

If car is repossessed and sold for less than you owe, you still owe the difference plus repo fees, storage, and legal costs.

Look for: "Deficiency balance" or "remaining balance after sale."