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Can car dealers force loan insurance on a car loan?
I went to a dealer to shop for a car and planned on financing through them. When I looked through the paperwork, I noticed a $900 charge for loan insurance. The salesman told me that this was a requirement to get the promo APR. Can car dealers force this loan insurance on you?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“Unless your
car loan
or the promo explicitly states that you have to have loan insurance to qualify, it’s probably a predatory lending practice. It’s highly unlikely that an automaker would force you to have otherwise optional insurance; it’s similar to forcing you to have
gap insurance
even if you don’t need it or want it. You should consider walking away from this loan or at least ask to talk to a manager. Sometimes, salespeople will blow hot air to get their commission. Take this situation as an example and learn from it.
That said, lenders do require car insurance to protect their asset, so don’t be surprised if you see a requirement for full coverage car insurance. This is as much for your safety as it is for theirs. They want to protect the car that they still have a stake in.
Full coverage can be pricey, especially if you use the lender’s insurance, but you can save money by comparing rates.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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