Can car dealers force loan insurance on a car loan?

I went to a dealer to shop for a car and planned on financing through them. When I looked through the paperwork, I noticed a $900 charge for loan insurance. The salesman told me that this was a requirement to get the promo APR. Can car dealers force this loan insurance on you?

Answer
“Unless your car loan or the promo explicitly states that you have to have loan insurance to qualify, it’s probably a predatory lending practice.
It’s highly unlikely that an automaker would force you to have otherwise optional insurance; it’s similar to forcing you to have gap insurance even if you don’t need it or want it.
You should consider walking away from this loan or at least ask to talk to a manager. Sometimes, salespeople will blow hot air to get their commission. Take this situation as an example and learn from it.
That said, lenders do require car insurance to protect their asset, so don’t be surprised if you see a requirement for full coverage car insurance. This is as much for your safety as it is for theirs. They want to protect the car that they still have a stake in.
Full coverage can be pricey, especially if you use the lender’s insurance, but you can save money by comparing rates. Jerry does all the hard work for you, pulling quotes from the top 50 companies and delivering the best deals to your phone in minutes. Jerry even does all the paperwork for you so you can just relax and enjoy your new car.”
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Eric Schad
Answered on Aug 10, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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