Things to watch out for on car loans

July 12, 2011 12:00 AM

The world of car finance can be a bit confusing, so drivers need to be aware of what they're getting themselves into. According to Consumer Affairs, there are a number of questionable tactics that dealers pull to try and stick buyers with unfavorable loans.

A good example is what's known as a "yo-yo loan." This can happen to buyers who agree to a "conditional sale." Essentially, this is a loan deal that isn't final. The buyer will drive home thinking they got a great deal, only for the dealer to call them back a few days later and say there was a problem with the paperwork or financing. They'll then attempt to present less favorable terms. Drivers can prevent this practice by making sure the deal is locked in and final before they leave - signing a conditional sale agreement is typically bad news.

Another common practice is inflating the loan with junk add-ons. Some drivers don't even notice these things added to a loan. Extra expenses for things like disability insurance, rust proofing and window etching is almost always unnecessary, but the dealer will try to make a little extra money on the side with these products. Be sure to read your loan agreement thoroughly and opt out of all of these extra costs.

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