As a dealership owner or finance officer, you’ve probably sold hundreds of cars through a finance program offered at your dealership. But your customers have probably wondered, “What are finance charges on a car loan, and can I reduce the additional charges on my loan?” Learning more about financing for car dealers can help you answer important questions from your customers.



Borrowing money from a lender to finance a car can be intimidating for many of your dealership customers. They’ll have questions about the fees, interest rates, and additional charges appearing on their loan offer. But what are finance charges on a car loan?

The total finance charge includes the real costs paid over the life of the loan. This can include several contributing fees and expenses, such as:

• The principal of the loan
• The customer’s down payment or trade-in value
• A balloon payment at the end of the life of the loan
• Interest based on the principal, the customer’s credit score, and the length of the loan
• The loan application or origination fee
• The Personal Property Securities Register (PPSR) fee
• Loan maintenance fees
• Early repayment charges
• Late fees for late or missed payments
• Paper statement fees if the customer doesn’t sign up for paperless services

If you were a customer at your dealership, would you have questions about what some of these terms mean? Would you also try negotiating some of those fees to reduce your total finance charge? The answer is probably “yes” to both. What can you do as a salesperson, financial officer, or dealership owner to help customers make financing decisions when purchasing a new car?

Generating an Estimate To Calculate Your Finance Charges

Your customer may still have difficulty understanding the difference between the total loan offer and the principal. Show your customers the following formula to help them estimate how much they still owe in finance charges:

Amount owed – (life of the loan in months x monthly payment amount) = remaining finance charges

So, if your customer still owes $25,000 and originally signed up for a 36-month loan with a $580 monthly payment, the formula would be:

$25,000 – (36 x $580) = $4,120

The formula shows your customer still owes an estimated $4,120 in finance charges. Your customer can review their loan paperwork to determine whether they can pay off the loan faster without incurring additional fees if they want to reduce their total finance charge.

Can Your Dealership Customers Reduce Their Total Finance Charges?

Where can your customers save on their finance charges? Here are some ways you can help customers negotiate with lenders:

• Shorter-term loans, which often have lower interest rates
• Reducing or eliminating extraneous fees based on customers’ credit or income
• Comparing promotional rates between different lenders
• Helping customers compare rates from different lenders at a glance

As a professional in car sales and lending, helping customers get great rates on their purchases can help you make customers for life. Your dealership will be their first pick the next time they need a new vehicle.

How Many Car Shoppers Have or Will Get a Car Loan?

Many car shoppers will purchase a new vehicle using a loan. Between 2012 and 2022, the number of people with car loans increased by 29%, and approximately 31% of American adults have a car loan as of 2022.



Millennials and Gen Z are the most likely to need a car loan when purchasing a vehicle, making it important for your finance officers to know how to teach younger customers about paying for a car loan through financing.

Offer Financing for Your Dealership Customers

If you’re ready to offer car financing for your dealership customers, contact us today at Edge Financial Services. Call us at (866) 890-2415 or contact us online to ask about our Auto Dealer Partner Program today.