Five Ways to Avoid Bad Car Loans

Don’t sign for a bad car loan.

Many of us need cars, and as a result, the auto loan sector is growing surprisingly quickly. We’re taking out more car loans and borrowing more when we finance a car. And it’s inevitable that as more car loans are being written, some bad ones are being pushed on consumers. So how to avoid them in the first place?

Ask Around

The best place to start is with the people you know and trust, your friends and family. Ask them who they got financing through, and whether they’d go back. That last is important; most lenders are on the up-and-up, it must be said, so customer service should be a factor in your decisions. But this is also a good way to learn about the companies it’s better to avoid.

Don’t Get Financing Through A Dealership

Few dealerships are as unethical or as sleazy as sitcoms would have you believe, but they’re also not banks. Often dealerships go through just one lender, often the financing arm of the automaker they represent, when issuing car loans. As a result, the sales team at a dealership just can’t offer you the best possible rates or the best terms, no matter how hard they try; they’re limited by how they secure that money.

Keep An Ear Out For Weasel Words

If a salesperson puts a great loan in front of you, and glibly mentions that it’s “conditional” or relies on a credit check coming back, hand it right back to them. They’re trying to set up a “yo-yo” sale, where you leave with the car and then, a few days or weeks later, they call you to insist the loan was rejected and you’ll have to sign a new loan with, often, terrible terms.This is usually a bald-faced lie, but it gives you a useful opportunity. Namely, one to return the car and leave the dealership completely. Similarly, if they insist your contract wasn’t one, contact your state’s attorney general and the Federal Trade Commission.

Know The Tactics Unethical Salespeople Use

If you’re being sold a bad auto loan, there are a few red flags that stand out rather clearly. The largest one, by far, is high pressure sales tactics. You have to sign for the loan right now, right away, right here because otherwise it’s gone and you’ll never get it again. If the salesman uses that, put down the pen and walk away. Similarly, if they ask you to lie on an application, leave and don’t come back.

Check Your Charges

Another way car loans can be wrecked is by charges added onto your bill without your approval. Always ask for an itemized list and ask what each charge is for. If it’s something you didn’t ask for, you’re within your rights to demand it be removed. And if a salesperson won’t remove any charges for rustproofing, you’re also within your rights to refuse the sale.

The best defense is knowledge, in the end. Before buying a car, research your rights, do your homework on lenders and dealerships, and above all, trust your instincts. If a deal looks too good to be true, the old adage is right: It probably is.

Comments are closed.