Dealer add-ons in a car loan: what to review before you sign
Optional products can raise your loan balance and total cost if you don't review the details.
When you finance a vehicle, the dealer may offer optional products or services—commonly called dealer add ons car loan packages.
If you agree to purchase an add-on and include it in the amount you borrow, it will be financed as part of the loan.
Examples of these products include GAP coverage, extended warranties or service contracts, window etching, and vehicle protection products.
If you choose to finance an add-on, the amount financed increases, and you may pay interest on that additional amount over the life of the loan.
Dealer add-ons are optional, and financing them increases what you pay.
Before you sign, review each product’s written terms, price, and effect on your total repayment—not just the monthly payment.
What dealer add-ons are and how they affect your loan
Dealer add-ons are optional products or services that may be offered for purchase when you buy a vehicle.
Examples include GAP coverage, service contracts, window etching, and vehicle-protection products.
If you agree to include an add-on in your loan, you borrow more and may pay interest on that additional amount over the term.
The cost you repay over time may be higher than the product’s upfront price, because interest accrues on the financed amount.
Why the monthly payment alone is not enough
You may be offered a monthly payment that fits your budget.
In some cases, extending the loan term can reduce the monthly amount but increase the total you pay over time.
Before you agree, review your financing documents to check the vehicle price, the price of each add-on, the amount financed, the annual percentage rate, the term, the finance charge, and the total of payments.
The monthly payment is only one piece of the picture.
Questions to ask before you agree
Before you accept any dealer add-on, ask for the written terms and review them carefully.
Key questions include:
- What exactly does this product cover, and what is excluded?
- How long does the coverage last?
- Is there a deductible or waiting period?
- Can I cancel the product, and how is any refund calculated?
- What is the standalone price of this product, and how much interest will I pay if I finance it?
If the dealer cannot provide clear answers or written documentation, consider taking more time to review the offer.
How preapproval can help you compare
Getting financing options from a bank, credit union, or other lender before you visit the dealer may provide a comparison point.
Preapproval terms can vary and may be subject to conditions, but having an offer in hand can help you evaluate the dealer’s financing proposal.
Ask the dealer for the full price breakdown—including the vehicle cost and any optional products—in writing before you finalize financing.
This approach can help you identify which charges are for the vehicle and which are for optional add-ons.
When GAP coverage makes sense
GAP coverage is designed to address the difference between your loan balance and the vehicle’s value after a covered total loss.
It is not automatically necessary for every buyer.
Whether GAP may be useful depends on factors such as your down payment, the vehicle’s depreciation, and your loan balance.
Review the specific GAP contract to understand what is covered, what is excluded, and how long the coverage lasts.
Check whether the contract allows you to cancel and, if so, how any refund is calculated.
Cancellation and refund terms vary by contract and may also be subject to applicable law.
What to check in the contract before you sign
Before you sign, check the final contract for unauthorized products or charges.
Read every page before you sign.
Verify the vehicle price, the price of each add-on, the amount financed, the annual percentage rate, the term, the finance charge, and the total of payments.
If any number or product does not match what you agreed to, ask for an explanation and a corrected document.
Do not sign documents you have not read or do not understand.
The signed documents generally govern the transaction, subject to applicable law and any contract rights you may have.
Taking the time to review everything before you sign can help you identify or challenge unwanted charges before they become part of your contract.
If you have questions about a specific add-on or financing term, ask the dealer to explain it in writing.
If the explanation is not clear or does not match the contract, consider getting more information before you move forward.
* Dealer practices, product terms, and state requirements can change. For current federal consumer guidance, visit FTC.gov and CFPB.gov.