After the paperwork has been signed and you've taken your new car home, you may think that the terms of the loan you agreed to are locked in – at least from your side of the deal. But in some circumstances, the car dealer will call and tell you that the terms have changed and that you must go sign new paperwork. You may also want to refinance your loan to make the payments more affordable or change the interest rate.
A car loan's terms are typically set and approved once you sign the paperwork. However, you may make changes if the dealer calls back about adjustments to the financing terms or if you choose to refinance your loan at a later time.
Signing and Approving the Contract
When you buy a car, signing the paperwork – including the finance contract – and driving away in the new vehicle finalizes the purchase. The time to adjust any terms of the purchase and loan is during the negotiation process. After you've bought the car, the terms of the loan are locked in, including the interest rate and monthly payment.
Getting the Dealer Callback
When you get a car loan through the dealer, the dealership then sends your application to the lender to get approval for the financing. Sometimes, the dealer isn't able to get approved financing at the terms agreed to during the negotiation with the customer. He must then ask the car buyer to sign a new loan contract with the new terms. The adjusted approval will almost always be for a higher rate and payment. If this happens, the car buyer has the right to either accept the new loan terms or give the car back to the dealer.
Refinancing a Car Loan
It may be possible to replace a car loan through a refinance with another lender. If you started with a loan at a high interest rate and later find out you can qualify for a lower rate, refinancing the loan will reduce your monthly car payment. The only way to find out of an existing vehicle loan can be replaced is to apply for a loan with a lender that offers car loan refinancing. Sometimes a new car buyer needs to pay on the first loan for a period of time to show a different lender that she's able and willing to continue to make payments.
Since it's either impossible or very difficult to change car loan terms after buying a car, the secret to getting an affordable rate and payment is to plan ahead. Determine what you can afford to pay and check on car loan rates before going into the dealership. To avoid the dealer callback nightmare, don't take a car home unless the dealer's finance office can confirm you're approved for the rate and payments you agreed to. If not, go home without the car, wait for the dealer to get an approval and then go sign the final paperwork and take your new vehicle home.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.