An auto loan finances a vehicle purchase and commonly uses that vehicle as security. The car price, financing terms, trade-in and optional extras are separate parts of the transaction. Keep each visible when comparing an offer.

How the borrowing arrangement works

Compare financing from more than one source where practical. Write down the vehicle's out-the-door price before focusing on a monthly payment. Ask whether optional products are included and how financing them changes the loan balance.

Costs and repayment

A longer term may lower the monthly payment while adding interest and leaving debt for longer. Allow room for insurance, registration, maintenance and repairs. For a refinance, compare the remaining cost of the old loan with the full cost of the replacement.

Preparing to compare offers

• Bring a written vehicle price, down-payment amount and any current loan payoff.
• Ask whether the financing quote assumes specific add-ons or a particular term.
• Compare lender offers for the same car and amount; allow room for insurance, fuel, maintenance and registration.

Questions worth asking

• What is the total financed amount?
• Which add-ons are optional?
• How much is still owed if I sell the car early?

A trade-in does not make old debt disappear

If the payoff is $12,000 and the trade-in allowance is $9,000, the $3,000 difference must be paid or financed. Check the final agreement for that amount and verify that the previous lender receives its payoff.

Is an auto loan the same as a title loan?

No. An auto loan normally finances a vehicle purchase. A title loan uses an already owned vehicle to secure other borrowing.

Should I compare only monthly payments?

No. Also compare the price, down payment, APR, term, fees and total cost.

BorrowCompass provides a guide to this topic at how to choose a car loan. Review current provider terms before making a borrowing decision. BorrowCompass does not issue loans or guarantee approval.