March 4-10, 2018 is the Federal Trade Commission’s National Consumer Protection Week! In honor of such, we’ve come up with several consumer-related topics of interest.  After all, we are all consumers.


CC BY-SA 3.0 Nick Youngson / Alpha Stock Images


Whether you got a loan from your bank or you plan on executing a retail installment contract with your dealer, you must know to look for or learn to ask for a Truth-in-Lending disclosure when you finance a car.

What is the difference between a loan and a retail installment contract?

A loan is a transaction between you and a bank (or another lender) for money, where you use the money to purchase a vehicle and agree to repay the loan balance plus interest.

A retail installment contract is a transaction between you and the auto dealer to purchase a vehicle where you agree to pay the dealer over time, paying both the value of the vehicle plus interest. A dealer could sell the retail installment sales contract to a lender or other party.

What is a Truth-in-Lending disclosure?

The federal Truth-in-Lending Act or “TILA” requires that borrowers receive written disclosures about important terms of credit BEFORE they are legally bound to pay a loan or retail installment contract.

These terms include:

  1. APR (Annual Percentage Rate): The APR is the cost/ the amount (in percentage form) that you are paying for the credit you are taking to purchase your vehicle.
  2. Finance Charge: This is the cost of credit expressed in a dollar amount over the life of the loan/retail installment contract.  Basically, this is your APR multiplied by the number of years of our loan (term of your loan).
  3. Amount Financed: This is the dollar amount of credit you are accepting.  (The amount you are borrowing to purchase your vehicle.)
  4. Total Number of Payments: The sum of all payments that you will make by the end of the loan/retail installment contract term.  (Principal + finance charges + other fees)

TILA disclosures also tell you the amount of your monthly payment, late fees and when they are accessed, rules regarding prepayment of the loan/retail installment contract, as well as other important things.

Where can I find this TILA disclosure?

It is often provided as part of your loan contract.  If/when you ask for it, you may be handed a large stack of paper, the entire sales contract. YOU SHOULD REVIEW ALL OF IT.  You should always ask to see your TILA disclosure BEFORE you sign your loan/retail installment contract.
