Connecticut Car Loan Laws

How much interest a Connecticut car loan can carry

Section 36a-772 of the Connecticut General Statutes sets the ceiling on a motor vehicle retail installment contract, the contract you sign when a dealer arranges your financing. Unlike some states, Connecticut states the limits as annual percentage rates, so you can compare them directly with your contract.

A ceiling is not a typical rate: buyers with good credit usually pay far less. A late payment can cost a delinquency charge only after it is 10 days overdue, and the charge is the lesser of 5% of the overdue amount or $10 (§36a-778). The holder may not add other fees for collecting a late payment, such as a fee for paying by phone. Test your offer with the car payment calculator.

Conveyance fees and sales tax in Connecticut

• Conveyance fee. Connecticut sets no cap on the dealer's conveyance fee, the state's name for a doc fee. Under §14-62, it is negotiable, must appear separately in any quoted price and cannot be added when you sign the order.
• Disclosure. The order and invoice must say in bold type that the fee is not payable to the State of Connecticut. The dealer must post a sign with the amount and the services it covers, and must lower the fee proportionally if you file the registration paperwork with the DMV yourself.
• Sales tax. The rate is 6.35%. Passenger vehicles priced over $50,000 are taxed at 7.75%, and the $50,000 test uses the price before the trade-in. Conveyance fees are taxable; service contracts stay at 6.35%.
• Trade-in. The value of your trade-in is not taxed, so it reduces the amount you pay tax on.

Falling behind and repossession in Connecticut

Section 36a-785 gives Connecticut buyers more room than most states. A holder may send a notice of intent to repossess at least 10 days ahead, stating the exact amount and deadline to cure. If it skips that notice, it must hold the car for 15 days after taking it, and you can get it back by paying the past-due amount, not the whole balance. Either way, you get a chance to catch up.

1. 1 Repossession. The holder may take the car without a breach of the peace or through a court. A Chapter 7 bankruptcy filing is not a default on its own.
2. 2 Notice within 3 days. The holder must mail you, by registered or certified mail, the past-due amount and its retaking and storage costs, plus how to collect your personal belongings, which must stay available for at least 60 days.
3. 3 15 days to reinstate. Pay the unaccelerated amount due, interest and reasonable costs, and cure any other breach, and the contract continues as if you had not defaulted.
4. 4 Sale. If you do not reinstate, the holder must sell the car 15 to 180 days after taking it, with at least 10 days' written notice, and send you an itemized statement within 30 days of the sale. Any surplus is yours.
5. 5 The deficiency. No deficiency may be collected if the cash price was $4,000 or less. Above that, the sale counts as at least the car's fair market value, measured from the NADA used car guide, and only the shortfall below that value can be charged to you.

If the holder breaks these rules, you can recover your actual damages and never less than one-fourth of what you paid under the contract. Our guides to repossession and the balance left after a sale explain how to use them.

Where to check a lender and complain

A company in the business of a sales finance company, such as one that buys dealer contracts, needs a license under §36a-536, issued by the Department of Banking. The department also oversees state banks and credit unions. Consumer loan rate caps are covered on our sister site's Connecticut lending laws page.

Questions people ask