If I was approved for a different loan after signing an initial contract at the dealership, do I have to sign it?

I recently purchased a car, and the dealership told me that I would be paying $658 a month for 85 months and my interest would lower as the loan matures. However, they called me two days later to tell me the bank approved something different, and I would have to sign a new contract where my monthly payments would be higher but I would pay over a shorter time frame. Do I have to sign this contract, or would it be more convenient to stick to what they first told me?

Answer
Car loans can undoubtedly be confusing, and knowing what’s best for your situation can be challenging, but in general, it’s good to have a shorter loan term if you can afford it.
By having a longer loan term, you are:
  • More likely to have an upside-down car loan, meaning you owe more than your car is worth
  • Going to pay more in interest, especially if the interest rate is subject to change
  • More likely to default on the loan because you’ll still be making monthly payments when the vehicle is older and requires more visits to the mechanic
However, you need to understand your options before making a decision and should contact the dealership to find out if you’re required to sign this new loan agreement. Additionally, if you aren’t locked into a loan agreement, you should shop around and compare offers from multiple lenders to find a repayment plan that better meets your needs.
If you do find yourself locked into a car loan that you’re not happy with or can’t afford, you should consider refinancing or discussing options with your lender. Additionally, saving money on other expenses, like your car insurance, can help ensure you never miss a payment.
If you want to save money on car insurance, the Jerry app is a good place to start. A licensed broker, Jerry does all the hard work of finding cheap quotes from the top name-brand insurance companies and buying new car insurance. Jerry will even help you cancel your old policy, and if you ever have any questions, agents are just a text away!
Jack Walsh
Answered on Dec 03, 2021
Jack is an insurance specialist and writer living in Buffalo, New York. He has a BA from Union College and worked as an insurance agent with Jerry before joining our content team. He enjoys using data and research to break down complex subjects and convey a story. In his spare time, Jack enjoys cycling, cooking, and exploring Buffalo’s beautiful waterfront.
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