When it comes to customizing your car loan, there are numerous options to consider. Yes, some dealership add-ons are worth the cost. Others, however, may be cheaper elsewhere. There are a few options you should consider in most auto loan situations, especially if you have a weaker credit score.
Dealer Add-Ons That Are Worth Their Cost
What you're willing to spend your money on in a car loan is ultimately up to you, but if you're taking on an auto loan with poor credit, there are two dealer add-ons you should consider: guaranteed asset protection (GAP) insurance, and an extended warranty.
GAP insurance covers the difference between your vehicle's value and what you owe on an auto loan in the event something happens to your car before you pay it off. Whether your vehicle is totaled in an accident or stolen, GAP insurance can usually cover what your regular insurance doesn't – the full amount of your auto loan.
Cost for GAP insurance policies vary by dealership and insurance company. If you don't want to take advantage of GAP insurance as a dealer add-on, you can typically get it through your car insurance provider as well. The average cost for a GAP insurance policy isn't much more than a few dollars extra a month – it usually runs around $20 to $40 a year.
An extended warranty is a product that can also be worth the extra cost on your loan when you're purchasing a used vehicle. Also known as an extended service contract, this is sometimes offered by a dealership to cover the cost of certain services and repairs that could come up.
Consider an extended warranty extra peace of mind when it comes to driving a used car. Adding one to your contract at signing could help you cover unexpected costs you'd otherwise have to pay for out of pocket.
Be sure you know the details of the service contract you purchase, there's not one standard blanket warranty. Your extended warranty could include whatever is left from the original manufacturer warranty, a powertrain warranty, or bumper-to-bumper coverage, but the details for each vary. The requirements for where you can have your vehicle serviced under contract vary, as well.
Bad Credit and Dealership Add-Ons
GAP insurance and service contracts can be especially important if you're a credit-challenged consumer because higher interest rates and longer loan terms are typical of bad credit auto loans.
These things can drive up the overall cost of your loan, and make it harder to keep equity in your car. The benefits of the additional coverage from either a GAP insurance policy or an extended warranty can ease your burdens.
If you're driving a new vehicle, a higher interest rate could mean being in a negative equity position if something happens to your car early on in the loan. With negative equity, the value of your vehicle isn't enough to cover what you owe, but GAP insurance can help you combat this, and may be the difference between being stuck paying for a car you can't drive or not.
For a used vehicle, an extended warranty can give you peace of knowing you're saving on out-of-pocket costs if something happens.
Skip These Additional Costs
If you're trying to cut down the overall cost of your next auto loan, you can skip a lot of unnecessary add-ons that often turn up at dealers. Things like VIN etching, fabric protection, paint sealing, and rust proofing can rack up charges that aren't really worth it. You can likely get many of these more affordably outside the dealership.
Add-ons aren't the only extra fees you have to be aware of when you're signing paperwork at a dealer, though.
Dealerships also tend to charge a lot of fees for doing paperwork and filing documents – you typically can't get around all of them, like the documentation fee, but some are definitely worth negotiating with the dealer about. Excess, as well as excessive, fees should be watched for. Things such as dealership fees, advertising fees, and market adjustment fees aren't things you need to be paying for.
If you see a lot of charges like this on a car loan contract, or the fees are unusually high, ask for them to be removed before you sign the final contract. If the dealer won't negotiate on them, consider walking away.
Start Off on the Right Foot
Before heading to a dealership to find the perfect vehicle, do a little research on makes and models you're interested in. and know which packages and trim levels are available. This way, you know what you want, what to watch out for when you're considering dealer add-ons, and which ones are worth the cost.
However, in order to get to that point, you need to find a dealership that can work with your credit situation. Not all dealers are signed up with lenders that can assist all types of consumer credit situations. You're in luck though, as The Car Connection has cultivated a nationwide network of special finance dealerships that have the lenders you need.
The process of connecting to a dealer in your area is fast, free, and never comes with an obligation to buy. You can get started right now by filling out our auto loan request form.