The Dealership Finance Office: What to Expect and What Is Optional

After you agree on a price, you are walked to the finance and insurance office, usually called F&I. The person there, the finance manager, does three things: finalizes your loan or takes your payment, prepares the legal paperwork, and offers you optional products. The first two are administration. The third is sales, and a real source of income for the dealership.

So arrive knowing what is required, what is optional, and what to check before you sign.

What happens, in order

1. Verification. License, proof of insurance, and income details if you are financing.
2. Financing. The finance manager presents a rate and term, or processes your own loan or payment.
3. The product presentation. Often a menu of optional products, priced as an addition to your monthly payment.
4. Signing. The buyer's order, the finance contract, and title and registration forms.

Allow an hour.

What you will be offered

Every item below is optional. The Consumer Financial Protection Bureau (CFPB) states it plainly: add-on products and services are optional, and if you choose to buy them, the price is negotiable.

Some notes from the Federal Trade Commission (FTC):

• Add-ons are not free and, if financed, you pay interest on them.
• A service contract is not a warranty. It is a separate, optional product, and many are administered by independent companies that decide whether claims are paid. See extended warranties and service contracts.
• Credit insurance is not required by federal law. If a dealer requires it for a loan, its cost must be included in the APR.

Some of these products are useful to some buyers. GAP can make sense with a small down payment and a long loan. Decide on the merits, at a price you have compared, not in the last ten minutes of a long day. Many can be bought later, or from other sellers. See dealer add-ons: worth it?

How to say no

You do not need a reason. Any of these is enough:

"No, thank you. I'd like to buy just the car."

"I'm declining all the optional products today. If I change my mind, I'll come back."

If you are told a product is required for the loan, ask to see that requirement in writing from the lender. If you do want a product, ask for its full price in dollars, not as "only $18 a month," and negotiate it.

How rate markup works

When a dealer arranges your loan, it sends your application to one or more lenders. A lender responds with the rate at which it will fund the loan, often called the buy rate. The rate offered to you may be higher. The CFPB explains that dealer rates are generally higher because they include additional interest that compensates the dealer for handling your financing. The FTC says the same: the APR you negotiate with the dealer usually includes an amount that compensates the dealer.

So the dealer's first rate is an offer, not a verdict on your credit, and it can often be improved.

What a point costs

Example with round numbers: $30,000 financed for 60 months.

One percentage point is about $14 a month, which sounds trivial, and about $840 over the loan.

How to handle it

• Bring a preapproval. A rate from your own bank or credit union is the benchmark. See car loan preapproval.
• Ask them to beat it: "My credit union approved me at 6.4% for 60 months. If you can beat that with the same term and no added products, I'll finance with you."
• Compare like with like. Same term, same amount financed, no products folded in.
• Dealers can sometimes win honestly. Manufacturer lenders offer promotional rates that a bank cannot match. If the dealer's rate is lower, take it.

More in dealer financing vs. bank vs. credit union and APR and loan terms explained.

How to review the contract

Put your written out-the-door quote next to the documents. The CFPB notes that the Truth in Lending Act requires written disclosures with the important details of your loan terms fully filled out before you sign, and that you can insist on receiving them earlier so you have time to review.

Check, in this order:

The vehicle

• VIN matches the car you inspected and the quote
• Year, model, trim, mileage are correct

The price

• Selling price matches the quote
• Each fee matches the quote; no new ones
• No add-ons you did not agree to, anywhere on the page
• Rebates are applied
• Trade-in value and payoff amount are correct
• Down payment is credited

The loan (in the federal disclosure boxes on the contract)

• APR is the rate you agreed to
• Amount financed equals the out-the-door price, minus down payment and trade equity, plus only the products you chose
• Finance charge and total of payments make sense
• Number of payments and payment amount match the term you agreed to

The form itself

• No blank spaces. The CFPB says that if a dealer asks you to sign a blank or partially filled-in form, you should decline.
• You have read what each signature is for, including on an electronic pad. The FTC specifically cautions against feeling rushed with electronic signing devices. Ask to see full documents on a screen or on paper.
• You receive signed copies. The FTC advises not leaving without a signed copy of the completed credit contract.

For a walk through the buyer's order line by line, see how to read a buyer's order.

Is the financing final?

Ask directly: "Is this financing fully approved, or is it conditional?"

Sometimes a buyer takes the car home before a lender has finally approved the loan, and is later called back to sign a new contract with a higher rate or larger down payment. The FTC advises confirming the deal is final before leaving with the car, and keeping your current car until financing is fully approved. If you are called back and do not want the changed deal, the FTC says you can tell the dealer you want to cancel and ask for your down payment and trade-in back.

After you sign

Federal law does not give you three days to cancel a car purchase. Some states and some dealers offer return rights; check your paperwork and your state attorney general's site. If you regret an optional product, read its cancellation terms.

If something is wrong

Point to the line and ask for it to be corrected. If a number will not be corrected to match what you agreed in writing, you can stop before signing. When to walk away from a car deal covers how.