Buying a car can be confusing, especially if you don’t have good credit due to a short credit history, or financial difficulties.
When you’ve picked out a car that’s a great fit for your lifestyle, and agreed on a price with the salesperson that is reasonable, you may think that the worst is over – but you’d be wrong.
In some cases, a bad car loan can make even the most reasonably-priced car unaffordable, and lead you to further financial difficulties. In this guide, we’ll discuss 3 key warning signs of a bad car loan.
1. You See Extra Charges Packed Into The Loan (That You Didn’t Agree To)
“Loan packing” occurs when the auto dealer begins to add additional surcharges, fees, and extras onto the sale of your car, often without your consent. They’re pretty much just hoping that you don’t notice these extra fees and don’t question them.
There are some fees that are legitimate when you’re buying a car. These can include:
- Sales tax
- Documentation fees
- Destination charges
- Title and registration fee
- Advertising fees
Most of these are non-negotiable – though it doesn’t hurt to ask. “Loan Packing” occurs when other fees and items that are unnecessary are added to your contract without your consent.
This could include:
- Upgrades such as alloy wheels
- Floor mats and cargo mats
- VIN etching
- Extended warranties
- Gap insurance
- Rust proofing and undercoating
- Fabric protection
- Security systems
- Paint sealant
If you notice that your sales contract is full of these line items – and you weren’t asked if you wanted them – there’s a good chance you’re working with a predatory lender. You may want to walk away from the sale entirely.
2. The Price Of The Car Isn’t What You Agreed To
So, you agreed on a $13,000 purchase price with your car salesman, and you walked into the finance office. They’ve got to give you that price, right?
Well, not in every case. Some dealers may try to claim that they can’t offer you an agreed-upon price due to factual inaccuracies on the part of the salesperson, or expired deals – they’ll try every excuse in the book, hoping that you’ll still sign anyway.
Don’t. If the price of the car is not as advertised, chances are the dealer is just trying to make a bigger profit from you. If they can’t even be bothered to give you the price they agreed upon, it’s not worth entering into a loan contract with them.
3. Your Contract Is A Conditional Sales Agreement
Here’s one great tip. Never enter into a conditional sales agreement. In a traditional car sales contract, the dealer is responsible for getting the borrower approved for financing. The car is sold with the assumption that it will be financed by the dealer.
But with a conditional sales agreement, the borrower is responsible for securing financing. If you drive off of the lot, the dealer may call and tell you that your financing terms fell through – and that you need to come back, and re-sign your loan.
Usually, they will try to get you to sign a loan agreement with a higher interest rate, so that you can keep the vehicle. In addition, they may claim that your down payment is “non-refundable”, or that your trade-in has already been sold – so they can’t unroll the deal.
This is called “Yo-Yo” financing. The dealer pulls you in with a good interest rate, makes you sign a conditional contract, and then claims the deal fell through – forcing you to re-sign, often at a ridiculously high APR.
Ensure that, even if financing does fall through, you are not responsible for securing financing – and that you can simply return the vehicle, if there is no alternative way for you to finance the car.
Come To Ride Time For Honest, Professional Used Car Sales!
At Ride Time, we do not engage in any predatory lending practices. Whether you have good or bad credit, we can help you get a reasonable rate on your auto loan.
We pride ourselves in helping Canadians with bad credit – and good credit – get great rates on auto loans for high-quality used vehicles. So don’t trust a shady “Buy Here, Pay Here” dealer. Even if you have bad credit, you can get the transportation you need from Ride Time! Browse our vehicles now, and get started today!