Extras at the finance desk

Once you agree on a price, you are usually walked to the finance office to sign. That is where extras get offered: a service contract, GAP coverage, credit insurance, paint and fabric protection, window etching. Some of them can be worth having for some people. All of them are optional, and the prices are often negotiable.

What extras cost you

Two things to keep in mind. Anything you add goes into the loan, so you pay interest on it. And none of it makes the car worth more, so it pushes you toward being upside down.

Service contracts

Often sold as an extended warranty. The FTC points out that a service contract is not a warranty under federal law, and it always costs extra. You can often buy one later, not only on the day you buy the car. It may come from the carmaker, the dealer or another company. Before you buy one, find out:

• What it covers and what it leaves out, part by part.
• The deductible, and whether it is charged per visit or per repair.
• Who pays the repair shop, and whether you can use the shop you trust.
• Whether it overlaps a warranty the car already has.
• How to cancel it, and what refund you get if you do.

On a used car from a dealer, the Buyers Guide sticker in the window says whether the car comes with a warranty or is sold as is. Read it before you talk about service contracts.

GAP coverage

If the car is totaled or stolen, insurance pays what the car is worth. GAP covers some or all of the gap between that and what you still owe on the loan. It can help most when you are likely to be upside down: a small down payment, a long loan, or old debt rolled in from your last car. With a big down payment and a short loan, you may never be upside down, and GAP may pay nothing.

Prices vary, and the dealer is not the only place to buy it. Some car insurance companies and lenders sell it too, so compare. Read what it leaves out; some contracts do not cover your insurance deductible. If you pay the loan off early or sell the car, ask whether you are owed a refund for the unused part. Many leases already include GAP, so check before you buy it on a lease.

Credit insurance

Credit life insurance pays off the loan if you die. Credit disability insurance makes payments if you cannot work because of illness or injury. Both are optional. If you already have life or disability insurance, you may be paying twice for the same protection. Look for it on the contract and ask what it costs on its own.

Paint and fabric protection, and etching

Paint and fabric protection is a coating meant to guard against stains and fading. Etching puts the car’s VIN on the windows, which may make the car less attractive to thieves. Ask exactly what you get and what it costs. Some cars already have etching done, and kits to do it yourself exist. Ask your insurer whether etching changes your premium before paying for it.

If you are told an extra is required

The FTC’s consumer advice treats these as optional products you can turn down. If a dealer says one is required to get the loan or the price, ask to see that in writing from the lender. If it is not required, ask for it to be taken off. If they will not, you can walk away.

Then read the contract line by line before you sign. Extras can show up in the paperwork even after you said no to them. Check the amount financed against the price you agreed to, and ask what every line is.

What to do next

1. Decide before you go which extras, if any, you want, and what you will pay for them.
2. Ask for a list of every extra with its price, separate from the car.
3. Compare GAP and service contract prices from your insurer, your lender or another seller.
4. If you hear that an extra is required, ask to see it in writing from the lender.
5. Before you sign, check the contract for extras you did not agree to.
6. Know whether you are likely to be upside down. The lesson on being upside down shows how to check.

Sources

• FTC consumer advice: Financing or leasing a car (opens in a new tab)
• FTC consumer advice: Auto warranties and auto service contracts (opens in a new tab)
• FTC consumer advice: Buying a used car from a dealer (opens in a new tab)
• Consumer Financial Protection Bureau: Auto loans (opens in a new tab)