What should I ask before signing a car finance agreement?
A checklist of questions that make an agreement legible, what your right to withdraw actually is, what commission disclosure means, and the things people find out too late.
- Difficulty
- beginner
- Time
- 20 min
- Read
- 5 min
- Safety
- caution
Short answer
Ask for the APR and the total amount payable, in writing, and check them against the monthly payment multiplied by the term. Ask who owns the car and when it becomes yours. Ask what the mileage limit and the excess rate are, and what standard the condition will be judged against. Ask what happens if you want out early. Ask how the person arranging the finance is paid. And take the pre-contract information away and read it somewhere that is not a showroom.
Nobody makes a good decision about a five-year financial commitment in a room designed to sell them a car, at the end of a long afternoon, with someone waiting. That is not a criticism of anyone in particular; it is simply the environment. The purpose of this list is to convert an emotional situation into a documentary one, because everything on it is a matter of written fact that a regulated firm must be able to produce. If any question here produces reluctance rather than a document, that in itself is the most useful information you will get all day.
Safety
Step by step
- Ask for the APR and the total amount payable in writing.Both must be disclosed in the pre-contract credit information. Check the arithmetic yourself: monthly payment times the number of months, plus the deposit, plus any final payment and fees. If it does not match the stated total, ask why.
- Ask which product this actually is.Hire purchase, conditional sale, PCP or personal contract hire. They have different rights attached — voluntary termination applies to the first three and not the fourth, and only the credit agreements make the finance company liable for a faulty car.
- Ask who owns the vehicle and when it becomes yours.On a lease, never. On the others, at the end, on the final payment and any option fee. Get the answer explicitly, because it determines whether you can sell it and what happens if it is written off.
- Ask what the mileage limit and the excess rate are.And be honest with yourself about your real annual mileage. Understating it to get a lower monthly payment is the single most expensive small decision in this process.
- Ask what condition standard applies at the end.Usually the BVRLA fair wear and tear standard. Ask for a copy or a summary now, not at hand-back, and note that a pre-return appraisal is normally available.
- Ask what happens if you need to end it early.The settlement figure process, voluntary termination if it is a credit agreement, and the early termination charge if it is a lease. Ask specifically what a lease's early termination charge would be based on, because there is no statutory cap.
- Ask how the person arranging it is paid.FCA rules require firms to disclose the existence and nature of commission arrangements where they may affect you. You are entitled to ask, and a clear answer is a reasonable expectation from a regulated firm.
- Ask what is conditional on taking their finance.Deposit contributions and some discounts are commonly conditional on using a particular finance product. That is legitimate, and it means you must compare the total cost both ways rather than the headline discount.
- Ask about the right to withdraw.A regulated credit agreement carries a statutory right to withdraw from the credit within a short period of signing — you then have to repay the credit plus interest for the days you had it, and it does not by itself unwind the vehicle purchase. Ask them to explain exactly how it would work in your case.
- Take the paperwork away and read it.The pre-contract credit information exists to be read before signing. A regulated firm should be entirely relaxed about you leaving with it. Read it somewhere quiet, and if anything is unclear, MoneyHelper is free and impartial and has no interest in the outcome.
Common mistakes
- Deciding on the monthly payment — It is the one number that can be manipulated by term, deposit and balloon without the borrowing becoming cheaper. APR and total amount payable are the figures that compare, and both must be disclosed.
- Signing in the showroom on the day — The pre-contract information exists so you can read it before committing. Taking it home costs nothing, and any reluctance to let you is itself informative.
If it doesn't work
Being pressed to sign today for a deal that expires tonight
Cause: A sales technique — Fix: Genuine manufacturer offers run for defined periods and are published. Ask when the offer ends in writing. Nothing about a five-year commitment needs deciding in an hour.
Cannot get the APR, only a monthly payment
Cause: Reluctance, or a quote that is not yet a regulated offer — Fix: Regulated firms must disclose APR and total amount payable in the pre-contract information. If you cannot get them before signing, you are not in a position to sign.
Add-ons appearing in the paperwork you did not ask for
Cause: Paint protection, warranties, insurance products bundled in — Fix: Ask for each one to be itemised and for the price of the agreement without it. Optional means optional, and each add-on financed also accrues interest for the whole term.
Signed and immediately regret it
Cause: Buyer's remorse or new information — Fix: Ask the lender in writing about your right to withdraw from the credit agreement, which applies for a short period after signing. Note that withdrawing from the credit does not automatically unwind the vehicle purchase — you need to understand both parts.
The figures in the agreement differ from what you were told
Cause: Error, or a changed quote — Fix: Do not sign. Ask for it to be corrected and reissued. A signed agreement is what governs, not what was said.
Guarantor or joint applicant being suggested
Cause: The application is marginal — Fix: A guarantor takes on real legal liability for the whole debt. Nobody should agree to this without independent understanding of what it means, and free advice from MoneyHelper before, not after.
Questions people ask
Can I change my mind after signing?
A regulated credit agreement carries a statutory right to withdraw from the credit within a short period of signing. You must then repay the credit plus interest for the days you had it. Withdrawing from the credit does not automatically cancel the purchase of the vehicle, so ask the lender and the dealer to explain how both would work together.
Do dealers earn commission on finance?
Commonly yes. FCA rules require firms to disclose the existence and nature of commission arrangements where they may affect the customer, and you are entitled to ask how the arranger is paid. A clear answer is a reasonable expectation.
Where can I get free impartial help?
MoneyHelper is the government-backed free and impartial money guidance service and covers car finance in detail. For a complaint about a regulated firm you cannot resolve directly, the Financial Ombudsman Service considers complaints free of charge. Neither sells anything.