What goes into the total cost of a car loan



A car loan is more than the price of the sticker on a vehicle. When you finance a car, there are a lot of other costs to be aware of, especially if you are looking to get the lowest possible exterior price.

Know the costs of your car loans

The price you will pay for a vehicle after all the taxes and fees associated with it is known as the exterior price of a car. This is different from the Manufacturer’s Suggested Retail Price, or MSRP, that you see on a vehicle’s window sticker. And we’re still only talking about the cost of the car itself.

If you are looking for the true cost that you are going to pay, you should also consider the interest that most borrowers face when they take out car financing. It is usually not free to borrow money with a car loan, unless you qualify for 0% financing, which is rare, especially when you have credit problems.

The amount you owe on your auto loan depends on the interest rate you are given when you get a loan. The better your credit score, the lower the rate you are likely to see because your credit score is one of the most important factors in determining your interest rate.

Generally, you should see all of the things that go into your car loan and the purchase price of your car when you receive the order from your buyer at the dealership. This lists all the costs associated with your purchase. Make sure you read this carefully and know what you can negotiate on a car loan before signing your purchase order. Once it is signed you agree to pay for whatever is stated.

What can I negotiate?

To get the lowest possible price for your next auto loan, you need to know what is negotiable. You don’t always have to pay all of the costs shown as is on your buyer’s order, and you don’t always have to accept whatever the dealership is trying to sell you.

These items can usually be negotiated before you accept the price you are looking for:

  • The selling price of the vehicle – MSRP is the starting price for a specific vehicle, as suggested by the automaker. Once you’ve added dealer options or increased your trim level, this is the car’s final selling price (before taxes and fees). This is called the negotiated selling price of a vehicle.
  • Documentation costs – Doc fees, as they’re called, can range from under a hundred dollars to a few hundred dollars or more. This is the cost charged by the dealer for preparing the paperwork and sending all of your title and registration information to file with the state. These fees are capped in some states, but others can charge whatever they want. You can negotiate this cost, but whether or not the dealership is moving depends on who you are working with.
  • Reseller add-ons – These could be additional features such as paint and fabric protection, weather resistant floor mats, or cargo packaging. Some extra features are added when you select a certain trim level, so if something is added that you don’t want or aren’t interested in paying the franchise fee for, you can request to have it removed.
  • Interest rate – While your credit score largely determines your interest rate, there are several ways you can negotiate it, adjusting the amount you borrow using a larger down payment, opting for a different loan term, and having a co-signer are all ways to try to lower the interest rate you are granted.

ACE advice: When requesting that something be removed or changed in your negotiations, have the dealer initial it and request a completely edited blank copy of the buyer’s order before signing it (keep the original for comparison).

Non-negotiable auto loan fees

There are parts of the auto loan process that cannot be negotiated with your lender or a dealership’s CFO. These things have to be paid for, no matter what:

  • Taxes – Sales tax is required on vehicles in almost all states. This can usually be paid to your lender in a lump sum, and is best done early in the process. In fact, we recommend that you pay the cost of your taxes, title, and registration up front with your down payment. This way you avoid paying interest on these fees.
  • Title Fee – The fees charged to you for a copy of the vehicle title vary by state. Some charge a few hundred dollars, while others charge a nominal fixed fee.
  • Registration fees – These fees cover plating your vehicle and registering with your state as a licensed vehicle to drive. These fees also vary from state to state and are billed in very different ways across the country.
  • Destination fees – These charges apply only to new vehicle sales and are the cost of shipping the car from the factory after it is built to your specifications. It is non-negotiable and the price may vary.

Ready to take the plunge?

Now that you know what to expect on your auto loan, make sure you choose your vehicle as well. If you are dealing with bad credit, focus on getting a reliable used car or a certified used vehicle can be a good way to save money and get a good deal on a car loan.

Whichever route you choose, make sure you have a vehicle that meets your needs and fits your budget. And don’t forget to factor in the costs of owning the vehicle such as insurance, fuel, and maintenance.

Also, if you are considering a bad credit car loan, make sure that you are prepared to prove your ability to take out a car loan. Subprime lenders can work with difficult credit situations, but they need documentation to prove that you have the ability, stability, and willingness to take out a car loan. You can read more about bad credit auto loan qualifications here.

Ready to hit the road?

If you’re ready to jump into another car but don’t know where to turn due to credit issues, we want to help. Here has Auto Express Credit, we’ve assembled a nationwide network of special finance dealers who are registered with bad credit auto lenders. To be matched with a dealership near you, simply complete our quick and free auto loan application form, and we’ll help you find a hassle-free dealership.


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