How do I Know if a Car Loan Is a Rip Off?

Car loan rip offs are more common than some borrowers may believe. These scams are created by the very establishments that offer automobiles to drivers, various auto loan providers and others who work in the financial departments of car showrooms nationwide. In order to steer clear of being ripped off, smart consumers need to understand the common traps that they may encounter and read the fine print that is contained on the loan paperwork with which they are presented.

Instructions

1

Work through the numbers. Know the total amount that you are paying for the car and the interest rate for the loan, and ensure that you are approved before leaving the dealership, advises CarBuyingTips.com. Sometimes sales associates and managers will hide the interest rate by giving you just the amount of the monthly payment. Insist that all of the loan terms and agreements are clarified on the documents that you are signing, including firm approval, before leaving the dealership with a new car.

2

Do not agree to extra fees at a later point in time. Once you seem to fully understand what you are signing, do not agree to pay any extra charges that could cause your monthly payment to rise. These additional service fees may include items such as repair coverage for a longer period, rental car fees in the event that your car breaks down and other charges that increase your payment amount every month.

3

Use all options at your disposal. For example, the auto dealership may offer you a lower purchase price on the car that you want to buy for trading in your present car or better terms on your loan because you are paying a sizable sum of money for your down payment. Weigh all of the options that are given to you and decide which choices allow you the most leverage when you are dealing with the salesperson.

4

Pay for your purchase with cash. If you are fortunate enough to have the money to pay for your car, rather than taking out a loan on the vehicle, realize that you may be better off in this situation. You may be short of cash for a few months afterward, but, once you get over the initial hurdles of paying a lump sum for your vehicle, you will own your car on a free and clear basis. Remember, owning a car with no monthly payment will mean that you will have more money in the end because you will not have paid any interest.