How Many Different Fees Come With Car Loans?
Auto loans are a common way for consumers to finance the purchase of a new or used vehicle. While they can be a convenient and affordable option, it’s important to understand the fees associated with auto loans before signing on the dotted line.
Here are some of the fees you may encounter when taking out an auto loan:
Origination fee
This is a fee that is charged by the lender to cover the cost of processing your loan application. It is typically a percentage of the loan amount and can range from 0.5% to 2%.
Application auto loan fee
This is a fee that is charged by the lender to cover the cost of evaluating your creditworthiness and determining whether you are eligible for the loan. This fee is usually a one-time charge and can range from $50 to $100.
Credit report fee
This is a fee that is charged by the lender to cover the cost of obtaining your credit report. This fee is usually a one-time charge and can range from $10 to $30.
Appraisal fee
If you are borrowing money to purchase a new or used vehicle, the lender may require an appraisal to determine the value of the vehicle. This fee is usually a one-time charge and can range from $50 to $100.
Title and registration auto loan fees
These are fees that are charged by the state or local government to register your vehicle and issue a title. These fees can vary depending on the state you live in and the type of vehicle you are purchasing.
Prepayment penalty
Some lenders charge a penalty if you pay off your loan early. This fee is designed to compensate the lender for the interest that would have been earned if you had made all of your scheduled payments.
Late payment fee
If you fail to make a payment on your auto loan, you may be charged a late payment fee. This fee is usually a percentage of the unpaid balance and can range from 4% to 5%.
Default fee
If you default on your auto loan, you may be charged a default fee. This fee is designed to compensate the lender for the costs associated with collecting the unpaid balance. However, this fee could be waved in a grace period.
Extended warranty fee
Lastly, some lenders offer an extended warranty on the vehicle as part of the loan package. This fee is usually a percentage of the loan amount and can range from 0.5% to 1%.
GAP insurance
GAP insurance is a type of insurance that covers the difference between the value of the vehicle and the unpaid balance on the loan in the event that the vehicle is totaled or stolen. This fee is usually a percentage of the loan amount and can range from 0.5% to 1%.
It’s important to understand all of the fees associated with an auto loan before you agree to borrow money. Be sure to ask your lender about any fees that may not be listed in the loan agreement. You should also shop around to compare the fees and interest rates offered by different lenders to ensure that you are getting the best deal.
What Are Average Costs of Auto Loan Fees?
Firstly, it is difficult to provide an average total for the fees associated with an auto loan, as the amount can vary widely depending on the specific lender and loan terms. Some common fees, such as application and origination fees, may be a percentage of the loan amount, while others, such as documentation and late payment fees, may be a fixed amount. To get an idea of the total cost of the fees associated with an auto loan, you can ask the lender for a breakdown of the fees and their amounts.
However, origination fees can vary from 0.5% to 2%, so if we consider a loan amount for a new car of $25,000 as an example, the fee would be anywhere from $125 to $500 depending on what the lender charges. If choosing the option to lease, the dealer fixes a fee and that usually runs from $400 to $700.
Lastly, the good news about origination fees is that they can generally be negotiated or removed entirely depending on your credit and where you are getting the loan. If you go to a local credit union, you will usually find a better deal and being pre-approved gives leverage when negotiating the price and fees with the dealer.
Curious about what fees associated with auto loans you may run into? Learn more about the ins and outs of fees & auto loans with Max Cash® today!
