Consumer Financial

Protection Bureau

Take control of your 

auto loan

A step-by-step guide
How can this guide help you?

While many people shop around for the best deal they can get on their vehicle, not 

everyone shops for the best auto loan. This guide will help you focus on the total 

cost of the loan, and not just the monthly payment. Preparing ahead of time and 

knowing how to navigate the process can help you save money, reduce stress, and 

get the auto loan that's right for you.

This guide will walk you through:

§ Budgeting for your auto loan . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1: Page 2

§ Understanding your auto financing choices . . . . . . . . . . . . . . . Section 2: Page 4

§ Shopping for your auto loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3: Page 7

§ Negotiating your auto loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4: Page 13

§ Closing the deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5: Page 18

How to use this guide

The location symbol orients you to where you are in the auto loan process

The magnifying glass highlights tips to help you research further and defines

 important terms

The auto loan worksheet at the end of this guide can help you compare

loan choices

About the CFPB

The Consumer Financial Protection Bureau is a federal agency that helps 

consumer finance markets work by making rules more effective, by consistently 

and fairly enforcing those rules, and by empowering consumers to take more 

control over their economic lives. 
TAKE CONTROL OF YOUR AUTO LOAN BUDGETING FOR YOUR AUTO LOAN 2

Budgeting for your 

auto loan

You've decided it's time to purchase a new 

or used vehicle. Now it's time to figure out 

how much you can afford.

Make sure you have a realistic budget before shopping for an 

auto loan. If you have a realistic budget, you have a better chance 

of ending up with a loan you can afford and pay on time. You will 

also be more likely to account for ongoing costs, such as vehicle 

maintenance and insurance.

You will want to be sure that your budget will support both the 

loan and the other costs of ownership. If you are having trouble 

coming up with a budget that works for you, think about ways 

that you can reduce the cost of your auto loan, such as:

§ Saving for a larger down payment

§ Buying a less expensive vehicle

§ Getting fewer features or options

1. Determine how much loan you can you afford

Before you start the process of getting a loan, see how much you can afford. Make 

sure you have a realistic budget before shopping for an auto loan. The Federal 

Trade Commission's "Make a Budget" worksheet is a good place to get started 

consumer.ftc.gov/articles/pdf-1020-make-budget-worksheet.pdf. For helpful 

information on making a budget visit consumer.gov/articles/1002-making-budget.

IN THIS SECTION

1. Determine how much 

loan you can afford

2. Look beyond the 

monthly payment

3. Factor in the costs 

of ownership

4. Consider the resale value 

of your new vehicle
TAKE CONTROL OF YOUR AUTO LOAN BUDGETING FOR YOUR AUTO LOAN 3

While this consumer guide is focused on auto loans, you can also research what 

type of vehicle fits into your budget. There are numerous publications and 

websites that discuss features and prices. Consumer Reports, Edmunds, Kelley 

Blue Book, and NADA Guides are just a few examples. These sources may 

provide information on prices for specific models and options. The Federal Trade 

Commission (FTC) also provides helpful information on buying and owning an 

automobile at consumer.ftc.gov/topics/buying-owning-car.

2. Look beyond the monthly payment

Many people think about a loan in terms of the monthly payment. Be careful here. 

The total cost of the vehicle financing matters. If you lower the monthly payment by 

taking out a longer loan, you pay more in interest. A longer loan also puts you at 

risk for negative equity over a longer period of time, which is when you owe more 

on the vehicle than the vehicle is worth. To learn more about auto trade-ins and 

negative equity check out the Federal Trade Commission's article at 

consumer.ftc.gov/articles/0257-auto-trade-ins-and-negative-equity.

3. Factor in all the costs of ownership

Remember to factor in the other costs of ownership, such as:

§ Additional costs at the time of purchase (state taxes, title fees, and dealer fees)

§ Ongoing costs throughout the time you own the vehicle (insurance, gas, annual 

registration fees, maintenance, and repairs) 

4. Consider the resale value of your new vehicle

Another factor in your budgeting is the resale value of the vehicle that you are 

considering purchasing. A vehicle loses value over time. If you sell or trade in this 

vehicle in the future, the value of the vehicle and whether you have paid off the 

loan before you want to sell it or trade it in will be an important factor in what you 

can afford. 
TAKE CONTROL OF YOUR AUTO LOAN UNDERSTANDING YOUR AUTO FINANCING CHOICES 4

Understanding your 

auto financing choices

You've determined how much you can 

afford to spend. Now it's time to explore 

your loan choices.

While some consumers are able to pay cash for their new vehicle, 

most consumers use financing. Understanding the loan process 

and knowing your choices will help you save money.

For example, bringing a loan quote from a bank, credit union, or 

other lender to the dealer can place you in a stronger bargaining 

position to negotiate good financing terms with the dealer. Then 

you can choose whether you stick with the offer you brought in or 

accept the dealer’s financing.

1. Know the sources of auto financing

You can shop around for auto financing even before you shop for a vehicle. Banks, 

credit unions, and dealerships are the most common places to finance an auto loan. 

While shopping for auto loans is complicated, finding and comparing your choices 

can help you improve the deal that you will get. Consider getting one or more loan 

quotes from a bank, credit union or other lender before going to the dealership. It 

will put you in a better bargaining position and could save you hundreds or even 

thousands of dollars over the life of your loan.

IN THIS SECTION

1. Know the sources 

of auto financing

2. Understand how 

leasing works
TAKE CONTROL OF YOUR AUTO LOAN UNDERSTANDING YOUR AUTO FINANCING CHOICES 5

Auto loans from a bank, credit union, or nonbank auto 

finance companies

You can obtain a quote or preapproval on an auto loan from a bank, credit union, 

or other lender before selecting a vehicle. You can also check out nonbank 

lenders and online lenders as potential lenders. Although it might be helpful if you 

already have an established relationship with a lender, you don’t have to have an 

account with these lenders in order to apply for an auto loan. These lenders can 

“preapprove” you. The preapproval will give you a loan quote with an interest rate, 

loan length, and maximum loan amount based on your creditworthiness, the terms 

of the loan, and the type of vehicle you have in mind. The rate and terms you are 

offered may be negotiable.

Dealer-arranged financing

Here you obtain financing from a lender through a dealership. With dealerarranged financing, the dealer collects information from you and forwards that 

information to one or more prospective auto lenders. If the lender(s) agrees to 

finance your loan, they may authorize or quote a rate to the dealer to finance the 

loan, referred to as the buy rate.

The interest rate that you negotiate with the dealer may be higher than the buy 

rate because it may include an amount that compensates the dealer for handling 

the financing. Dealers may have discretion to charge you more than the buy rate 

they receive from a lender, so you may be able to negotiate the interest rate the 

dealer quotes to you. Ask or negotiate for a loan with better terms. After the auto 

purchase is finalized, a dealer-arranged loan may then be sold to a lender who has 

already indicated a willingness to extend the credit. That lender may own your loan 

and collect the monthly payments, or transfer those responsibilities and rights to 

other companies. Learn more about buy rate at consumerfinance.gov/askcfpb/727.

"Buy Here Pay Here" dealership financing

Some types of dealerships finance auto loans “in-house” to borrowers with no 

credit or poor credit. At “Buy Here Pay Here” dealerships, you might see signs 

with messages like “No Credit, No Problem!” The interest rate on loans from these 

dealerships can be higher than loans from a bank, credit union, or other type of 

lender. You may want to consider whether the cost of the loan outweighs the benefit 

of buying the vehicle. Even if you have poor or no credit, it may be worth it to see if 

there is a bank, credit union, other lender, or another dealer that is willing to make 

a loan to you. A feature of this type of dealership is that your monthly payment is 

made to the dealership. Some “Buy Here Pay Here” dealerships, and some other 
TAKE CONTROL OF YOUR AUTO LOAN UNDERSTANDING YOUR AUTO FINANCING CHOICES 6

lenders that lend to people with no credit or poor credit, may put devices in the 

vehicle that help them repossess or disable the vehicle if you miss a payment. 

Negotiate interest rates

In general, lenders and dealers are not required to offer the best interest 

rates available. You may be able to save a lot of money over the life of the 

loan by negotiating the interest rate with the lender or dealer.

2. Understand how leasing works

Leasing is an alternative that some people choose. A lease is an agreement to 

pay to use a vehicle for an agreed number of months and/or miles. If you lease a 

vehicle, you do not own it and you will be required to return the vehicle after the 

lease ends, unless your contract includes a purchase option and you choose to pay 

to exercise that option.

If you are considering leasing, carefully compare the costs of leasing and buying. 

Complete information about leasing a vehicle is outside the scope of this consumer 

guide on auto loans. Learn more about leasing at consumerfinance.gov/askcfpb

or check out the Federal Reserve's consumer guide, "Keys to Vehicle Leasing," at 

federalreserve.gov/pubs/leasing.
TAKE CONTROL OF YOUR AUTO LOAN SHOPPING FOR YOUR AUTO LOAN 7

Shopping for your 

auto loan

You know your loan options. Now it's time 

to shop for your auto loan.

Shopping for loans and trying to get the best rates and other 

terms, while complicated, is like other types of comparison 

shopping. Shopping ahead of time will get you ready for 

negotiating your auto loan and make the process less stressful.

1. Prepare before you apply for an auto loan

You will be in a better position to shop and bargain for an auto 

loan if you follow these steps before you apply for a loan.

Check your credit report

The information in your credit report determines your credit scores. Your credit 

score plays a large part in determining what kind of auto loan you can get, and 

how much interest you will pay for the loan. Here are some helpful resources:

§ To get a free copy of your credit report annually from each of the three 

nationwide credit reporting agencies visit annualcreditreport.com

§ To learn how to check your credit report for errors and dispute any errors that 

you find visit consumerfinance.gov/askcfpb/314

§ To learn about credit reports and credit scores, visit consumerfinance.gov/

askcfpb/search/?selected_facets=category_exact:credit-reporting

IN THIS SECTION

1. Prepare before you 

apply for an auto loan

2. Shop for your auto loan 
TAKE CONTROL OF YOUR AUTO LOAN SHOPPING FOR YOUR AUTO LOAN 8

Do you need a co-signer?

A co-signer is a person – such as a parent, family member, or friend – who 

is contractually obligated to pay back the loan just as you are. If your 

credit history is limited or needs improvement, and you have a low credit 

score (or no credit score), your interest rate could be significantly lower 

if you have a co-signer with good or excellent credit. That is because the 

lender will rely on the co-signer’s credit history and score in deciding to 

make the loan.

If you are considering having a co-signer, you and the potential co-signer 

should think carefully about this decision. If you do not repay your loan, 

you and your co-signer will be responsible for repayment. The co-signer is 

responsible for the loan even though he or she has no right to possession 

of the vehicle. In addition, any late payments made on the loan would 

affect both your credit record and score and your co-signer’s credit 

record and score. Federal law generally prohibits a lender from requiring 

you to have a co-signer if you apply for a loan individually and you qualify 

under the lender’s standards for creditworthiness for the loan. For more 

information on co-signing visit consumerfinance.gov/askcfpb/811.

Check current auto loan interest rates

You can research rates by contacting several banks, credit unions, or other lenders. 

You can also look online at many commercial sites which may give you an estimate 

of interest rates nationwide and by your zip code. Some commercial sites will link 

you to specific lenders and dealers for estimates, so you may want to be careful 

about entering your personal information.

Consider a down payment

A down payment will reduce the total amount that you finance because you will 

have to borrow less money. The larger the down payment, the lower the total cost 

of the loan.

Decide if you want to trade in your current vehicle 

If you already own a vehicle, research its value to see how much you might get 

from a trade-in or private sale. You can look up the approximate value using online 

commercial websites such as Consumer Reports, Edmunds, Kelley Blue Book, 
TAKE CONTROL OF YOUR AUTO LOAN SHOPPING FOR YOUR AUTO LOAN 9

NADA Guides, and online classifieds. These resources may also be available at 

your local library. Finding examples of similar vehicles that have sold recently in 

your area will help you know a fair price.

Once you know approximately how much your current vehicle is worth, you can 

decide whether to trade it in or sell it yourself. If you trade it in at a dealership, you 

and the dealer will decide on the value that will be credited towards the purchase 

price of your next vehicle. If you sell it yourself, you can use the money you get as a 

down payment.

If you have an existing auto loan on your trade-in, consider your 

situation carefully

Carefully consider whether to take on new debt in addition to your existing debt. 

Here are some considerations and steps:

§ Get the payoff amount, which is the amount to pay off the existing loan, from 

your current lender before going to the dealership.

§ Decide if you are going to pay off your existing loan now, wait until you pay off 

your old auto loan before you borrow for another vehicle, or include the amount 

that you still owe on your current vehicle in your new auto loan.

§ If you owe more on your current vehicle than it is worth — referred to as being 

upside down — then you have negative equity. If you roll the balance of your 

existing auto loan into your new auto loan, this could make the new auto loan 

much more expensive. Your total loan cost will be higher because you will be 

borrowing more than just the price of your new vehicle.

§ After you research your trade-in’s value, if the amount you still owe on your 

trade-in is less than it is worth, make sure during any negotiations that you 

consider whether you are getting fair value for your trade-in and you are able to 

fully pay off the old auto loan.
TAKE CONTROL OF YOUR AUTO LOAN SHOPPING FOR YOUR AUTO LOAN 10

Do you still owe money on your trade-in?

 If you are considering rolling the balance of the old loan into your new 

loan, make sure you understand how this will affect the total cost of your 

new loan. Carefully look at the total cost of the new loan including the 

amount borrowed, the annual percentage rate (APR), the interest rate, the 

loan term (in months), and the monthly payment – before you agree to 

anything. If you don’t roll the amount you still owe on your old vehicle into 

the new loan, and keep your current vehicle while buying a new one, then 

you will have two loans and two monthly payments to make. Either way, 

you may want to consider whether it makes sense to go through with the 

transaction and purchase the next vehicle if you still owe money on your 

trade-in. For more information visit consumerfinance.gov/askcfpb/779. 

Think about optional add-ons ahead of time

When you go to an auto dealer, you will likely be offered add-on products and 

services for the vehicle or for the loan. It’s a good idea to think about these add-ons 

ahead of time, so that you have less to worry about at the dealership, and have your 

answers ready when you are asked to buy these extras. Common add-ons include:

§ Service contracts or extended warranties

(consumerfinance.gov/askcfpb/825)

§ Guaranteed Auto Protection (GAP) insurance

(consumerfinance.gov/askcfpb/797)

§ Credit insurance

(consumerfinance.gov/askcfpb/799)

§ Additional features for the vehicle, such as alarm systems, window tinting, tire 

and wheel protection, and other products

These products and services, which you may finance, are optional. If you buy them 

the price is negotiable. If you think you want to buy these products or services, 

shop around. For example, your own auto insurance company may offer GAP 

insurance, credit insurance, or other alternatives. If you finance optional add-ons as 

part of your loan, the amount you borrow and pay will increase.

Now that you’ve done your homework, you’re ready to take the next step: 

shopping for your auto loan. Use the auto loan worksheet at the end of this guide 
TAKE CONTROL OF YOUR AUTO LOAN SHOPPING FOR YOUR AUTO LOAN 11

to keep track of the loan terms and compare your choices. Take the worksheet with 

you to the bank, credit union, other lender, and dealership so you can compare 

your loan choices and get the best deal for you.

2. Shop for an auto loan

Now you are ready to start shopping for a loan. Before you head to the dealership, 

gather your personal information and consider getting preapproved for a loan. 

Shopping ahead of time will get you ready for negotiating your auto loan and make 

the process less stressful.

Gather your personal information

When you’re heading over to a bank, credit union, or dealership make sure 

to gather all the information you will need. Lenders will generally ask for this 

information in a loan application:

§ Name

§ Social Security Number or ITIN

§ Date of birth

§ Current and previous address(es) and length of stay

§ Current and previous employer(s) and length of employment

§ Occupation

§ Sources of income

§ Total gross monthly income

§ Financial information on current credit accounts, including other debts

Get preapproved for a loan

Getting a preapproved loan offer or quote with a maximum loan amount and rate 

from a bank, credit union, or other lender is a good place to start. If you bring 

a loan quote from a lender to the dealer, you may be in a stronger bargaining 

position to get a better deal, whether you stick with the offer you brought in or you 

decide to accept the dealer’s financing offer.

Preapproval also helps you stay within your budget and allows you to compare 

interest rates without the time pressure you may feel once you are at the 
TAKE CONTROL OF YOUR AUTO LOAN SHOPPING FOR YOUR AUTO LOAN 12

dealership. Then at the dealership you can focus more on the actual price of the 

vehicle and your trade-in because you will already know about the loan terms 

that you could get. You will still have the choice to negotiate a better loan at the 

dealership and not use your preapproval.

If your application is preapproved, the lender will give you documents to take to 

the dealership. Once you are ready to buy, the dealer will make final arrangements 

with your lender.

Understand how shopping for a loan impacts your credit score

Shopping for the best deal on an auto loan will generally have little to no impact 

on your credit score(s). The benefit of shopping will far outweigh any impact on your 

credit. In some cases, applying for multiple loans over a long period of time can 

lower your credit score(s). Depending on the credit scoring model used, generally 

any requests or inquiries by these lenders for your credit score(s) that took place 

within a time span ranging from 14 days to 45 days will only count as a single inquiry. 

This means shopping around for an auto loan during that time span will count the 

same as applying for just one loan. You can minimize any negative impact on your 

credit score by doing all your rate shopping in a short amount of time.

Know your rights

A lender cannot discourage or deny your application for credit, or offer different 

prices or other terms and conditions of the loan, based on your race, color, religion, 

national origin, sex, marital status, age, receipt of public assistance income, or 

good faith exercise of any right under the Consumer Credit Protection Act.

You can submit a complaint online with the Federal Trade Commission (FTC) at 

ftccomplaintassistant.gov or with the Consumer Financial Protection Bureau 

(CFPB) at consumerfinance.gov/complaint or by calling toll-free at 1-855-411-CFPB 

(2372). You can also tell us about your experience without submitting a formal 

complaint.
TAKE CONTROL OF YOUR AUTO LOAN NEGOTIATING YOUR AUTO LOAN 13

Negotiating your 

auto loan

You've shopped for your auto loan. Now 

it's time to negotiate your loan terms.

When you look for a vehicle, you may know that you can 

negotiate the vehicle’s price, but did you know that you can 

also shop around for and negotiate the terms of your auto loan? 

Shopping for loans and trying to get the best rates and terms, 

while complicated, is like other types of comparison shopping. 

Shopping and negotiating can save you hundreds or even 

thousands of dollars over the life of your loan.

1. Know what is negotiable

While you may know that you can negotiate over the price of the vehicle and the 

interest rate, it’s also important to know all the factors that you can negotiate over 

that may impact the cost of your auto loan. You should consider all these factors 

when you buy and finance a vehicle. In addition to the price of the vehicle, here are 

some other terms or costs that you can negotiate:

§ Trade-in value (if you trade in your vehicle) and down payment amount

§ Annual Percentage Rate (APR) and interest rate

§ Length of loan

§ Whether or not there will be a prepayment penalty

IN THIS SECTION

1. Know what is negotiable

2. Negotiate to lower the 

cost, not just the monthly 

payment 

3. Keep track of multiple 

factors while negotiating
TAKE CONTROL OF YOUR AUTO LOAN NEGOTIATING YOUR AUTO LOAN 14

§ Price of optional features and services for the vehicle or the loan such as 

extended warranties, credit life insurance, GAP insurance, alarm systems, tire 

and wheel protection, window tinting, and other products

§ Fees charged by the dealer such as dealer preparation fees, delivery charges, 

and document fees

You cannot negotiate taxes, vehicle title, and registration fees. These fees are set 

by your local or state government.

Be cautious of some biweekly payment plans

It is possible to be offered an auto loan with biweekly (every 2 weeks) 

payments instead of monthly payments. This may make the loan look more 

affordable than it really is because of the smaller payment. There also may 

be additional fees charged for enrolling in a biweekly payment plan.

If your loan has biweekly payments, there will be some months when 

you will have three payments instead of two. This is because there are 26 

biweekly payment periods every year, the same as if you were making 13 

monthly payments instead of 12. Make sure that you know whether your 

loan payments are monthly or biweekly, and factor the extra biweekly 

payments into your budgeting if you make this choice.

2. Negotiate to lower the total cost, not just the 

monthly payment

When you are looking for a loan, you may find it easy to focus just on the monthly 

payment or the price of the vehicle. But looking at just one factor doesn’t give you 

the whole picture. A lower payment doesn’t necessarily mean a lower interest rate; 

it might just mean that you are paying for a longer time. The best way to compare 

auto loans is by using the total cost of the loan. Use the auto loan worksheet at the 

end of this guide to help you calculate and compare the total cost.

Your total loan cost starts with the amount financed. The amount financed is the 

amount of money you are borrowing. It includes the price of the vehicle, taxes and 

other government fees, as well as any optional add-ons like extended warranties 

and optional credit insurance, minus your down payment and any trade-in amount. 

The amount financed does not include the cost to borrow the money. That cost is 
TAKE CONTROL OF YOUR AUTO LOAN NEGOTIATING YOUR AUTO LOAN 15

known as the finance charge and includes interest and certain fees over the life 

of the loan. Your total loan cost is the amount financed plus the finance charge. 

By negotiating for better terms on your loan, you can reduce the total amount of 

money you pay over time. For example:

§ Getting a lower interest rate means you will pay less to borrow money. The total 

cost of your loan will be lower.

§ A shorter loan term (in which you make monthly payments for fewer months) will 

lower your total loan cost. A longer loan can reduce your monthly payment, but 

you pay more interest over the life of the loan.

§ A higher down payment, or a higher price for your trade-in, will reduce the total 

amount financed because you will have to borrow less money.

§ Optional add-on products like extended warranties, GAP insurance or credit 

insurance that are added into your loan amount will increase your total cost 

because you will be borrowing more money.

How the length of your loan term affects what you pay

Below is a sample comparison to illustrate how you will pay less in the long run 

if you have a shorter loan term. The table below assumes a $20,000 loan and an 

interest rate of 4.75%.

Loan term Monthly payment Total interest paid

36 months

(3 years)

$597 $1,498 

48 months

(4 years)

$458 $1,999 

60 months

(5 years)

$375 $2,508 

72 months

(6 years)

$320 $3,024 
TAKE CONTROL OF YOUR AUTO LOAN NEGOTIATING YOUR AUTO LOAN 16

While the lower monthly payment for a longer period of time may look like the 

way to go, consider the total interest cost over the term of the loan. If you paid 

off a $20,000 loan in 3 years, you will pay $1,498 in interest. For a 6 year loan, you 

will pay $3,024 in interest--more than twice as much. Some financial advisers 

recommend keeping the length of your auto loan to 5 years or less, reasoning that 

the longer the loan, the more likely you will owe more than the vehicle is worth.

On the auto loan worksheet enter the amounts on several loans you are 

comparing to see your estimated monthly payments, total interest cost, and the 

total cost that you will pay over the life of the loan. For additional help, there 

are a number of auto loan calculators available online. For example, Consumer 

Reports (consumerreports.org/static/0_percent.html) and the NADA Guides 

(nadaguides.com/Cars/Payment-Calculator) provide online auto loan calculators 

that may be helpful in evaluating and comparing the costs and terms of various 

auto loans.

3. Keep track of multiple factors while negotiating

When you are negotiating for financing with a lender or at a dealership, make sure 

you are keeping track of all the factors that go into the total cost of the loan. If you 

are negotiating the interest rate, make sure that you also know the length of the 

loan and other terms. Comparing total loan cost will help you keep an eye on 

these multiple factors. Use the auto loan worksheet to help keep track of the 

different factors.

Ask the dealer to tell you the price, trade-in amount, interest rate, term of loan, 

estimated monthly payments, and write these numbers down on the auto loan 

worksheet. It’s best to get these numbers early in the process, so you can better 

compare and negotiate.

Just as the first price you are offered for the vehicle may not be the lowest price 

available to you, the first rate for a loan the lender or dealer offers you may not 

be the lowest rate you qualify for. If the lender or dealer agrees to a better loan 

feature (such as a lower APR or interest rate), check to make sure that the other 

factors like the length of the loan or the amount financed haven’t changed. A lower 

monthly payment doesn’t necessarily mean a lower interest rate; it might just mean 

that you are paying for a longer time.

After you’ve agreed on the price of the vehicle, here are some additional tips to 

help you negotiate the best loan:
TAKE CONTROL OF YOUR AUTO LOAN NEGOTIATING YOUR AUTO LOAN 17

§ Know what your trade-in is worth and bargain over the amount you will get for 

your trade-in. This will reduce the amount you borrow.

§ Negotiate over the interest rate for your loan, comparing interest rates obtained 

from your bank, credit union, or other lender with the rate you are offered by 

the dealer.

§ If the dealer is arranging your financing, make sure you understand how the 

interest rate was determined and ask if your credit score qualifies you for a loan 

with better terms.

Strengthening your position at the bargaining table

You are not required to get a loan from a dealer or trade in a vehicle in 

order to purchase a car from a dealer. A bank, credit union, or other lender 

may offer you better loan terms than the dealer. Bringing a loan quote or 

preapproval from another lender to the dealer can place you in a stronger 

bargaining position to negotiate good financing terms with the dealer. Then 

you can decide which loan to accept.
TAKE CONTROL OF YOUR AUTO LOAN CLOSING THE DEAL 18

IN THIS SECTION

1. Verify that you get what 

you agreed to

2. Check the paperwork

3. Pay attention to the details 

after you drive away 

Closing the deal

You’ve now negotiated your auto loan. 

Before you drive away, make sure 

everything matches what you agreed to.

You are almost finished! The hard part is done and now comes an 

important final step. You have to review the paperwork, check the 

final terms and numbers against the auto loan worksheet, and be 

fully satisfied that the written deal is what you want.

1. Verify that you get what you agreed to

Before you are legally obligated under the loan, lenders are required to give 

you specific disclosures in writing about important terms. This requirement is 

contained in the federal Truth in Lending Act (TILA). One purpose of TILA is to help 

consumers make apples-to-apples comparisons between loans. The important 

terms include:

§ Annual Percentage Rate (APR): The APR is the cost of credit expressed as a 

yearly rate in a percentage (Learn more at consumerfinance.gov/askcfpb/733)

§ Finance charge: Cost of credit expressed as a dollar amount (this is the total 

amount of interest and certain fees you will pay over the life of the loan if you 

make every payment when due)

§ Amount financed: The dollar amount of credit provided to you (this is normally 

the amount you are borrowing)

§ Total of payments: The sum of all the payments that you will have made at the 

end of the loan (this includes repayment of the principal amount of the loan plus 

all of the finance charges)
TAKE CONTROL OF YOUR AUTO LOAN CLOSING THE DEAL 19

The TILA disclosure will also include other important terms such as the number of 

payments, the monthly payment, late fees, whether the loan has a variable rate, 

and whether you can prepay your loan without a penalty. 

It's ok to walk away if you feel uncomfortable

If you are not comfortable with any aspects of the loan or the process, you 

can always leave without completing the deal. Take time to think it over 

and come back another time. No one can make you accept financing or a 

vehicle that you are not satisfied with.

2. Check the paperwork

Once you have finalized the negotiations, examine all of the paperwork before 

signing the loan documents. Make sure all the loan costs and terms are what you 

agreed to during the negotiations.

Ask questions

If there are things you don’t understand, ask questions. Don’t sign until you 

are satisfied. Since you are signing a contract and this is a major purchase, it’s 

important that you understand what you are signing.

Make sure you have a copy of all the documents

Before you drive off with your new vehicle, make sure that you have a copy of all 

documents that both you and the dealer have signed and that all blanks are filled 

in. Some dealers will allow the customer to take possession of the new vehicle 

before the loan is approved by the lender. This practice, called spot delivery, could 

put the deal that you thought you had at risk. By having a signed contract with all 

terms finalized, you can avoid potential problems. 

Nail down the financing before you sign the contract

Make sure that the financing is nailed down before you sign the contract. If you 

don’t have the financing nailed down, the dealer may ask you to come back in 

and sign for a higher interest rate, add a co-signer, or make some other change 

different from what was agreed. You don’t have to agree to a second deal. If this 
TAKE CONTROL OF YOUR AUTO LOAN CLOSING THE DEAL 20

happens and you don’t agree to a second deal, the dealer will have to unwind 

the sale and give you back your trade-in and down payment.

In some cases you may want to seek legal assistance and file a complaint with 

your state attorney general or consumer protection office. To file a complaint 

with your state attorney general visit naag.org. To file a complaint with your 

state consumer protection office visit usa.gov/state-consumer.

3. Pay attention to the details after you drive away

After you take out a loan, you should receive an introductory letter from the 

lender that provided the financing. This letter will include important information 

related to your loan such as where to send your payments and payment due 

dates. Make sure to make your monthly payments on time to avoid the cost 

of late fees and the possible repossession of your vehicle, as well as negative 

entries on your credit report.
Directions: Bring this sheet with you to show you are serious about getting the best 

loan. The factors you can negotiate are indicated with an icon . 

CFPB AUTO LOAN SHOPPING SHEET

Comparing auto loans

Consumer Financial

Protection Bureau Finish finding the total cost on page 2 

Determine your upfront costs Example Choice 1 Choice 2

A. Price of the vehicle $20,000

B. Additional features, services or add-ons 

These are optional and will increase the total cost 

of the loan. 

+ $300 + + 

C. Taxes, title and non-negotiable fees

State and local taxes, and title fees. 

+ $1,400 + + 

D. Negotiable fees 

You can negotiate fees such as delivery charges, 

origination fees, document fees, and preparation fees.

+ $100 + + 

E. Cost of the vehicle before interest (add rows A, B, C & D) = $21,800 = = 

Calculate how much you will need to borrow

F. Down payment 

A larger down payment will lower the total cost 

of your loan. 

— $3,000 — — 

G. Trade-in value (if you already have a vehicle)

A higher trade-in value will lower the total cost 

of your loan. 

— $3,000 — — 

H. Total amount to finance (subtract rows F & G from row E) = $15,800 = =
page 2 of 2

COMPARING AUTO LOANS (CONTINUED)

Know how much money you’ll pay over the life of the loan

Before deciding on loan length and payment options, calculate the total cost to see which choices work 

best for you. This will help you see how much you will pay in total for your auto loan.

I. Interest rate 

Negotiating a lower interest 

rate will lower your total cost.

3.5% % % % %

J. Length of loan in months 

A longer loan term will 

increase the total cost.

48 months 

(4 years) 

 months

( years)

 months

( years)

 months

( years)

 months

( years)

K. Monthly payment

Use a loan calculator or ask 

your lender or dealer.

x $353.22 x x x x 

L. Total of payments over life of 

the loan (multiply rows J x K) = $16,955 = = = = 

Find the total cost of your purchase

Choose your two best offers from row L, then compare your total cost.

M. Add in down payment and trade-in (add rows F + G) + $6,000 + + 

N. Total cost of your purchase (add rows L + M)

This is how much you will pay to buy your vehicle, 

including all of the interest, over the life of the loan. = $22,955 = = 

O. Cost of vehicle before interest (row E from page 1) — $21,800 — — 

P. Total interest paid over life of the loan

(subtract row O from N) = $1,155 = = 

Learn more at cfpb.gov/auto-loan
TAKE CONTROL OF YOUR AUTO LOAN ADDITIONAL RESOURCES 23

We hope that you found this guide helpful in navigating the process of financing a 

vehicle. To learn more about the Consumer Financial Protection Bureau, visit our 

website at consumerfinance.gov. 

Additional resources on auto loan financing

§ For online resources about shopping for an auto loan, visit 

consumerfinance.gov/auto-loans

§ Learn what we heard from consumers about their experiences in financing 

an automobile in our report available at files.consumerfinance.gov/f/

documents/201606_cfpb_consumer-voices-on-automobile-financing.pdf

§ Find answers to consumer questions about auto loans on the "Ask CFPB" 

website at consumerfinance.gov/askcfpb

§ Submit a complaint about vehicle loans at consumerfinance.gov complaint or 

call (855) 411-2372

A note for financial educators and other organizations

Share this guide and the accompanying resources with the people you serve to 

provide a roadmap to the auto financing process. You can also use this guide to 

familiarize yourself with the auto finance process and the potential pitfalls, so that 

you can provide helpful guidance to those you assist.
Last updated June 2016

 Online tools

CFPB website

consumerfinance.gov

 Answers to common questions

consumerfinance.gov/askcfpb

Tools and resources for auto loans

consumerfinance.gov/consumer-tools/auto-loans

General inquiries

Consumer Financial Protection Bureau

1700 G Street NW

Washington DC 20552

Submit a complaint

Visit consumerfinance.gov/complaint

 By phone 

855-411-CFPB (2372) 

TTY/TDD 855-729-CFPB (2372) 

8 a.m. to 8 p.m. Eastern Time, Monday-Friday

 By fax

855-237-2392

 By mail

Consumer Financial Protection Bureau

P.O. Box 4503

Iowa City, Iowa 52244

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