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How to navigate a vehicle financing contract

Before you buy a car, you spend hours figuring out your budget, comparing makes and models, and researching reviews. After all that, you’re excited to sign on the dotted line and get behind the wheel! But before you part with your hard-earned cash, there’s usually a stack of paperwork to sign, at least if you wind up buying a car the old way opposed to the new way with Carvana [1], where a person can avoid bogus fees and complete the entire vehicle purchase process online – including the signing of important contracts.

However, if you bought a car the old way, it can be tempting to skim over these documents and sign them as quickly as possible. After all, if you negotiated the price and financing terms ahead of time, these documents just formalize the deal you’ve already made, right? In a perfect world, the paperwork will be in line with your expectations. But mistakes and misunderstandings sometimes happen. And once you’ve signed your vehicle financing contract, you’re legally bound to adhere to its terms. That’s why it’s so important to pay attention to what you’re signing.

While the title and format of your contract might vary, the contents are pretty standard. Here are some things to look out for.

Buyer information

The top of your form will have your name, address, phone number, and other identifying information. Double check this information is correct. You want to make sure the lender sends loan statements and other correspondence to the right address.

Sales and pricing information

Another section of your contract will include information on the vehicle you’re buying and overall sales price. The contract will break down the sales price to show exactly what you’re paying, including:

Financing information

Once all taxes, fees, and other options have been taken into account, your contract should show your total cash sales price. Now your contract addresses how you’ll pay for it. There are typically three components:

Carefully reviewing and asking questions about your contract will take more time, but it’s arguably one of the most critical steps in the car buying process. If you notice mistakes in the financing contract, now is the time to get them corrected. And whatever you do, never take possession of the car before finalizing your paperwork. You don’t want to find out later that your financing fell through and you’re forced to return the vehicle or sign new paperwork with less favorable terms.

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