Paying for a Car Repair Without Overpaying for the Credit

Pin down the repair before you price the loan

The Federal Trade Commission's auto repair advice starts with paper. A written estimate should identify the condition to be repaired, the parts needed and the expected labor charge, and you should keep a signed copy. The FTC also suggests telling the shop that it must get your permission before doing work that goes past a set amount of time or money; some states require that by law, and the rules differ from state to state.

• Ask about diagnostic fees. Find out whether the shop charges to diagnose the problem if you take the work somewhere else.
• Ask how labor is billed: a flat rate for the job or the hours actually worked.
• Get a second opinion for a large or complicated repair. The amount you borrow follows the estimate, so a second estimate can change the loan.
• Ask for the old parts back. The FTC notes that state law may require the shop to return them.

The FTC publishes no typical price for repairs, and this page does not guess one. The estimates in your hand are the numbers to plan around.

Check what a warranty already covers

A warranty can turn a loan-sized bill into a small one. The FTC says there is no standard warranty on repairs, so read what yours covers and get it in writing. Warranties can be limited by time, mileage, a deductible, the shops allowed to do the work, or the steps for getting reimbursed. Many manufacturers cover a replacement part but not the labor to install it.

Cheaper ways to cover the bill

• The shop's own terms. Ask whether the shop will split the bill into two or three payments; get any such arrangement in writing with its fees.
• Savings for the part you can cover. Every dollar you pay up front is a dollar that does not carry interest.
• A credit union loan. Many credit unions make small loans to members; federal credit unions also offer payday alternative loans with capped rates. See where to borrow.
• A card you can repay quickly. If you can clear the charge within a billing cycle or two, a card may cost less than a loan with a fee. Carried for months at a typical card rate, it usually costs more.

Be careful with a title loan or a payday loan for a repair. Both are built for short terms at high prices, and a title loan puts the car itself at risk. Lendmira explains the alternatives to payday loans.

When a personal loan fits a repair

A personal loan makes sense when you need the car to keep earning, the repair is larger than your savings, and a fixed payment over a year or two fits your budget. It is unsecured, so the car is not collateral, and the payment does not change.

Think twice when the repair costs close to what the car is worth, or when the car has other large problems coming. Borrowing for a repair and then for a replacement car leaves you paying for both. If replacing the car is the better choice, Lendmira covers auto loans.

If the car sits at the shop while you decide, ask how long the shop will hold it and whether storage fees start after a few days. Many lenders let you see an estimated rate through a soft credit check, which does not affect your score, so you can compare two or three offers in a day before you commit. Read soft and hard credit checks for the difference.

A worked example: a $2,500 repair

Suppose the written estimate is $2,500 and you borrow the full amount at 18% with no origination fee. The figures below are worked examples computed with the standard amortization formula, not offers from any lender.

The longer term lowers the payment by $34.70 a month and adds $124.26 in interest. A small loan with a flat fee can carry a much higher APR than its rate, so compare the APR on each Truth in Lending disclosure, not only the payment.

What to watch for at the counter

• Financing offered at the shop. Read the terms before you sign at the counter. If it is a promotional card with deferred interest, interest can be charged back to the purchase date if the balance is not paid in full in time.
• Work you did not approve. Compare the final bill with the signed estimate before you pay.
• A missing repair order. The FTC suggests getting a completed order that lists each repair, the parts and their cost, the labor and the odometer readings.
• A dispute you cannot settle. Start with the manager or owner; then contact your state attorney general or local consumer protection office. Small claims court is another route, and you do not need a lawyer there.

Questions people ask