New Jersey Car Loan Laws

How much interest a New Jersey car contract can carry

When a dealer arranges your loan, you sign a retail installment contract governed by the Retail Installment Sales Act, N.J.S.A. 17:16C. Section 17:16C-41 lets the seller charge a time price differential in an amount the seller and buyer agree to. It names no percentage.

In Perez v. Rent-A-Center (March 15, 2006), a case about rent-to-own contracts that the court treated as retail installment sales, the New Jersey Supreme Court held that the act takes in the 30% yearly cap from the criminal usury statute, N.J.S.A. 2C:21-19. Applied to car contracts under the same act, that makes 30% the outer limit on a contract with an individual buyer. It is a ceiling, not a typical price: compare offers using the APR on the disclosure box.

• Variable rates. If a contract allows the rate to rise, it may not rise during the first three years, by more than 3 points in any 12 months, or by more than 6 points over the life of the contract.
• Early payoff. If you prepay within 12 months after the first payment is due, the penalty is capped: $100 at most on a contract over $5,000.
• Notice of increases. You must get written notice at least 90 days before the first rate increase and 30 days before any later one.

Dealer fees and tax on a New Jersey purchase

• Documentary fee. No dollar cap applies. Under N.J.A.C. 13:45A-26B.3 a dealer may charge only for services it actually performs, must itemize each one with its price in writing, and may not claim the state requires them.
• Doc fees and financing. The Department of Banking and Insurance has warned that a fee tied to the financing itself is barred by N.J.S.A. 17:16C-50, and suggests dealers charge the same fee on cash and credit deals.
• Sales tax. New Jersey taxes the sale at 6.625%. The tax applies to the doc fee too, since it is part of the sales price.
• Trade-in credit. The value of a trade-in comes off the taxable price only if it is stated separately on the invoice or bill of sale, so check that line.

What happens if you fall behind in New Jersey

New Jersey has no statute that gives car buyers a set period to catch up before repossession. Once your contract treats you as in default, the lender may take the car without a court order, provided it does not breach the peace (N.J.S.A. 12A:9-609). Your contract defines default, so read the late-payment terms.

1. 1 Repossession. The agent may tow the car without warning but may not breach the peace, for example by using force or threats.
2. 2 Notice before the sale. The lender must send a written notice before selling the car, saying when or after what date it will be sold.
3. 3 Redemption. Until the sale, you may get the car back by paying the full amount owed plus the lender's reasonable expenses.
4. 4 The deficiency. If the sale brings less than you owe, you can be sued for the rest. If it brings more, the surplus is yours.

Read our guides to repossession and the balance left after a sale before you talk to the lender.

Where to check a lender and complain

Dealers and finance companies that write or buy car contracts answer to the Department of Banking and Insurance. Dealer sales practices fall under the Consumer Fraud Act and the Division of Consumer Affairs. Payday and title-loan rules are on Lendmira's New Jersey page.

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