How much will my car payments be?

What will my car payment be for a particular car at a particular price?

If you are buying a car with a loan, you may wonder how much you’ll pay each month for that loan. It’s not quite as simple as dividing the loan amount by the number of months of the loan. That’s because there are finance charges included as well.

Sometimes, novice buyers are shocked to see in their purchase loan contract that the total amount that will have been paid by the end of the loan will be an amount considerably higher than expected — because the amount includes the total of all interest.  All loan contracts are required by law to disclose this amount.

It depends on a number of things

The amount of your monthly car payment will depend on several factors in combination:

Continue reading How much will my car payments be?

Car Seller Scam – Is This a Car Scam?

Online car buyers exposed to common car scam by criminal sellers

car scamUsers of online car buying sites such as AutoTrader, Craigslist, online newspaper classified auto ads, and other non-dealer car sites often find unbelievable good deals, only to find it was no deal at all, but a common car seller scam.

We often hear the question, “Is this a scam?” from car buyers who have found a “great deal” online. Buyers become suspicious because the price is “too good” and the payment and pickup arrangements seem a little fishy.

Cheap cars advertised on Internet sites can be scams, and it is relatively easy to spot them after the seller has been contacted, but not before. A car-for-sale ad placed by a scammer looks like any other ad — except the price is much lower than normal. They even provide pictures and VIN numbers of real cars (snagged somewhere on the Internet) to make the ads seem more believable. In short, you can’t determine if a car ad is a scam by the information in the ad itself.

Continue reading Car Seller Scam – Is This a Car Scam?

How to Find Cheap Auto Insurance

Is Cheap Car Insurance Possible?

Auto insurance is one of those irritating expenses of car ownership that has no immediately obvious benefit. We pay and pay, and may never get anything in return. Teenage first car buyers are always a bit startled by the high cost of insurance.

Car insurance is one of the most expensive costs of owning and driving a car, especially for teenagers and other new drivers who can least afford it.

In this article we’ll show you how and where to find the car insurance company for your first car that has the best rates and provides the best service.

We frequently hear the question, “Which auto insurance company is best?” or “Where can I find the cheapest car insurance?” or “What is the cheapest insurance for a 16 year old?” It would be nice if there were a quick simple answer to those questions.

Continue reading How to Find Cheap Auto Insurance

Fix My Old Car or Buy A New Car?

fix old car or buy newShould I keep my old car and fix it up, or buy a new car?

Expressed another way, the question is this: Is it smarter, more practical, and more economical for me to keep and fix my old car than to buy another car, new or used?

This is always a tough one to answer. Generally, it’s going to be better to fix up an old car than buy a new car every five years or so.

However, the real answer depends on your particular circumstances. Here are some tips that will help you make a decision

How old is your vehicle?

Older, high-mileage vehicles are more likely than newer vehicles to have problems. There are exceptions, of course. Older vehicles also tend to have more serious problems, such as engine and transmission failures, that are expensive to repair.

Continue reading Fix My Old Car or Buy A New Car?

What Car Should I Buy?

What Are the Best Cars to Buy?

which car should I buy?There are literally thousands of combinations of different automobile types, makes, models, styles, and prices, which can make it difficult to choose which to buy. However, we will help you determine the perfect car for your needs.

What is a good first car?  Which car is the best buy? Which is more reliable?

Which gets the best gas mileage? Should I buy a SUV or pickup? Which car is safer? Which is more economical?

Which is cheaper to insure?

What car should I buy as my first car?

If you were to ask this question and you gave no other information about yourself or what you wanted, we would suggest you buy either a Honda Accord or Toyota Camry, two of the most popular and most purchased cars in America. Both cars come in either a sporty 2-door coupe version or a 4-door sedan, and with a variety of engines, luxury features, and safety options. Both also offer gas-saving hybrid versions.

Continue reading What Car Should I Buy?

How to Buy a Car with Bad Credit

buy car with bad creditBuying a car with a low credit score?

Having bad credit means that sometime in your past, possibly as far back as seven or ten years, you have had missed or late loan payments, repossessed property or cars, or have declared bankruptcy. You may also have an excessive number of credit cards with high balances. These factors are included in your credit history reports that come from three credit reporting agencies: Transunion, Experian, and Equifax.

Your entire credit history is summarized in a single number, called your credit score.

Your credit score determines if you’ll get approved for a car loan, how much you’ll in interest, how much down payment you’ll pay, and even how much you’ll pay for auto insurance.

Continue reading How to Buy a Car with Bad Credit

How Car Loan Payments Work

how car loans workAbout principal and interest

If you purchase a new or used car with a loan, you agree to pay off the loan amount (principal) over a specified number of months. But you also agree to pay a finance charge, or interest, for the privilege of using the bank’s (or finance company’s) money for your purchase.

The amount of finance charge that you pay is the interest rate, which is set by the bank or finance company based generally on national lending rates and more specifically on your credit score. Interest rate is expressed as a annual percentage rate (APR), such as 5.5%.

Interest rates can be different for the same loan amount

Wholesale lending rates are lower now than in recent years but banks and finance companies, as well as dealers, can boost these rates (called reserve) for their customers. You can check current national average auto loan rates at Bankrate.com. At the time of this writing, the average 36 month new-car loan rate was 3.93% — very low. But automotive consumers may pay higher rates depending on the lender, dealer reserve, and the customer’s credit score.

Auto buyers should always know their most recent credit score before going car shopping. Otherwise, dealers know more about you than you know about yourself, which could lead to some unpleasant surprises. Getting your credit score is easy enough online. What’s your FICO score? Find out now when you check your credit report for $1 at Experian.com!

Continue reading How Car Loan Payments Work

How Is a Car Payment Determined?

How Are Car Payments Calculated?

Car payments are based on how much you borrow, the interest rate, and the length of the loan.

The more you borrow, the higher the payments. The higher the interest rate, the higher the payments. The longer the loan, the lower the payments.

Unfortunately, the formula for calculating monthly car payments is not a simple one and can’t be easily done by hand or by a simple calculator.

It’s necessary to use an electronic business calculator, or by using an online Car Loan Calculator.

Simply plug in the numbers and get your answer.

Continue reading How Is a Car Payment Determined?

Can I Buy a Car if I Am Upside Down on Another Loan?

If you still owe more on your loan than your car is worth, you are upside down.

You may still be able to buy another car if you are upside down on your previous loan.

There are two ways to go about it.

One way to buy with an upside down loan
You could sell your old car but you will have to add extra cash to fully pay off your old loan. You’ll need to pay off your loan so that you can give a clear title to your buyer. However, coming up with extra cash might be a problem, especially if you are upside down by a large amount. For many people, this solution is not possible.

Let’s look at some other ways. Continue reading Can I Buy a Car if I Am Upside Down on Another Loan?

Teen Auto Insurance – Questions and Answers

auto insurance for teensOne of the most bewildering aspects of car ownership for teenagers is that of auto insurance.  It raises questions about why it’s needed, why it costs so much, how it works, and what happens when accidents happen.

We have noticed certain questions come up frequently on online question-and-answer boards used by teen drivers. So we have compiled a “top 10″ list of those questions, with answers, that may help teen drivers better understand car insurance.

1. Q. Why do I need car insurance?

A. Two reasons: 1) It’s the law in most states. In order to drive, you must have at least minimum-coverage liability car insurance to protect others whose lives and vehicles you might damage or destroy in an accident that is your fault — even though you might be a good driver and know that you’ll never have an accident, and  2) To protect yourself and your family against financial disaster should you be sued for an accident you might cause.

2. Q. Why does car insurance cost so much for teen drivers?

A. Simple. Insurance statistics and police reports show that teens have more accidents than any other age group. Therefore, insurance companies are at greater risk of having to pay out claims for teenagers — which means higher rates to help compensate for that risk. The highest rates are paid by teen males driving sporty cars in highly populated areas. Rates can vary by state and city, and by insurance company. That’s why it is so important for teens who need insurance to shop around and get quotes from multiple companies.

Continue reading Teen Auto Insurance – Questions and Answers

Auto Insurance Basics Explained

Understanding the basics of auto insurance

You may go through your entire life and never have a car accident. But the odds are against you. Auto insurance protects you from potentially disasterous costs of such accidents. If you are buying your first car, you must understand how car insurance works and why you need it.

Laws in most states require that drivers have at least a minimum level of liability insurance – repeat, liability insurance – not collision or comprehensive, although lenders and lease companies may require full coverage, including liability, collision, and comprehensive.

Types of insurance
An auto insurance policy might include one or more of the following types of coverage: Continue reading Auto Insurance Basics Explained

Lease or Buy – Which is Better?

Lease vs Buy? What’s the Difference?

One of the best ways to decide between car leasing and buying with a loan is to directly compare the attributes of each, which we will show you in this article. We’ll tell you about how payments compare, about how fees are different, about advantages, and disadvantages.

Another way to help make a decision between leasing and buying is to compare the cost of each for a specific lease vs. buy situation. For this, you’ll need a special Lease vs. Buy Calculator.

Now, let’s take a look at how car leasing compares with buying with a loan. Continue reading Lease or Buy – Which is Better?

What’s Wrong With Car Leasing?

car leasingIs it smart to lease a car? Is leasing a good idea? What’s wrong with it, if anything?

The answer is that there’s nothing inherently “wrong” with leasing a car. It’s a perfectly valid and popular form of automobile financing.

It’s not renting (often confused with apartment leasing). And because it’s a bit more complicated than buying a car with a loan, it’s very often misunderstood.

We often see advice from uninformed people on automotive question-and-answer forums advising other people against leasing. The reasons they offer are things such as, “it’s a dealer scam,” “it’s stupid,” “you pay all that money and don’t own the car,” “you’ll get hit with surprise charges and fees,”  or “it costs more to lease.”

There is some truth in all of those responses but it’s not as simple as that. These are oversimplified answers that create false impressions about leasing.

Let’s take a look at the real answers.

Continue reading What’s Wrong With Car Leasing?

First Car – Lease a Car?

Should I Lease my First Car?

lease a car first carMany people who are looking for an economical way to drive a new car, perhaps their first car, will look at leasing as a possible solution.

The consideration of leasing is often based on a mistaken belief that leasing is like renting and doesn’t require good credit as does buying with a loan. It isn’t renting and it does require good credit.

But is leasing a car a good solution for first-time car buyers?

The answer is — it depends.

If the first-time buyer is a teenager, less than 18 years old, leasing is not an answer.

Since leasing is a form of financing, similar to a loan, it requires that the customer be of legal age and have a good credit history. Furthermore, even if the teen’s parent leases a car to be driven by the teen, it’s still not a good idea.

A teen may not be able to stick with the requirements of a lease — an annual mileage limit of 10,000-12,000 miles, no customization of the vehicle, and minimal wear-and-tear. Insurance may be more expensive than anticipated due to the higher coverage requirements of a lease.

Continue reading First Car – Lease a Car?

Do I Need Credit Insurance When I Buy a Car?

Don’t Buy Dealer Products and Services You Don’t Need

credit life insurance from car dealersOnce you’ve made a deal on a new car, dealers have more products to try to sell you once you get into the F&I (Finance and Insurance) manager’s office to sign papers.

Backend products offered by car dealers

You may be offered security systems, corrosion protection, paint sealant, window etchings, fabric guard, extended warranties, and credit life insurance.

These are called “backend” products and are designed to make dealers extra profit on car deals. In fact, some dealers make as much or more money on backend sales as on vehicle sales.

The products are all high-priced and are generally poor values for customers. In most cases, the products are not needed or can be acquired elsewhere for much less cost. For example, fabric guard is nothing more than Scotchguard™ in a spray can. And VIN (Vehicle Identification Number) etchings on windows provide no more security protection than the VIN plates that are already in several locations on your vehicle, including on the dash and on the engine block.

Continue reading Do I Need Credit Insurance When I Buy a Car?

Cars for Teens – Top 10 Questions

We have been an expert participant on the Yahoo! Answers web site for many years, particularly in the Cars and Transportation section, Buying & Selling sub-section. We answer questions and provide advice about a wide variety of topics related to automobile buying, selling, insurance, maintenance, and car brands.

Although the Answers site is open to anyone, we have found that most visitors and questioners are teenagers and young adults who have had little or no experience in buying, selling, or owning cars. Their questions are natural and appropriate for someone who is doing some of these things for the first time.

The web site is quite popular and is very active. Thousands of questions are asked — and answered — each day. However, in our years of participation we have seen many of the same questions being asked over and over — and over — and over again.

We have compiled what we think are the top 10 questions that teens and young adults want to know about cars. Here they are.

Continue reading Cars for Teens – Top 10 Questions

Your First Car – New or Used?

Better to Buy Pre-Owned Car, or New Car?

First time car buyers have a choice of buying a brand new car, or buying a used car. Which is better?

There are advantages and disadvantages to either choice. Most people would rather have a brand new car with its new-car smell and latest style, but there are reasons that a new car might not be the best choice. Let’s take a look at the pros and cons of buying new and buying used.

Advantages of Buying New Car

  • You get a brand new car with new-car feel and smell
  • You get the latest style and technology
  • You get the latest safety equipment
  • You get a full manufacturer’s warranty
  • You get Lemon Law protection
  • You get lowest loan interest rates, if you qualify
  • You get the option to lease
  • You may get special manufacturer-sponsored pricing and financing Continue reading Your First Car – New or Used?

Your Car and the Law

Owning and Driving a Car is a Legal Thing

Licensing

In the U.S., drivers must be licensed to legally operate motor vehicles. Each state has its own licensing laws that set requirements, terms, and procedures. Minimum age is typically 16 years old, but can vary by state. Most states have special learner driving permits that serve as temporary licenses. Young drivers have have restrictions that restrict time of day for driving, who must be in the car with the driver, how many passengers can be in the car, and certain other conditions. Failure to follow the laws can result in license suspension.

The state agency that provides driver’s licenses is the Department of Motor Vehicles (DMV). In some states, the agency may have a different name, such as Department of Driver Services (DDS). Licensing laws and procedures for each state can be found at DMV.org.

In order to obtain a driver’s license, certain tests must be passed — a vision test, a written test, and a driving test. Some states provide sample test questions either in a license test study manual or on the state’s DMV web site.

License holders are provided with a photo ID card that serves as legal proof of being licensed. The license must be in the driver’s possession when driving.

Driving Responsibly

Your car exposes you to laws that you wouldn’t otherwise be concerned with.  At the low end are parking laws and speed limits. Some laws determine who is at fault in accidents. and how you should conduct yourself on the road. Other laws are more serious, such as those dealing with DUI and vehiclular homicide. Breaking driving laws can result in not only criminal charges but also personal liability charges.

Driving Laws

All states have rules of the road, the laws that determine what you can and cannot do while driving. Speed limits can vary, turn-right-on-red laws can be different. Since each state sets its own laws, the laws can differ considerably between states. If you move from one state to another, or travel to another state, you should become familiar with the new state’s laws.

Insurance

Most states have laws requiring automobile insurance. A minimum level of liability insuance is usually required, although comprehensive and collision coverage is not. Other states have financial responsibility laws that may not require insurance but you must prove you have the ability to pay in at-fault accidents. It is financially and legally irresponsible to drive without insurance.

Vehicle Registration and Tags

Motor vehicles must be registered to establish legal ownership and responsibility. Registration is typically handled at the state or county level. Metal tags are issued to be displayed on the vehicle. Registrations must be renewed each year. Fees and taxes are collected at the time of renewal. States have varying laws regarding how tags may be transfered between vehicles. Sales tax is usually paid at the time of vehicle registration.

Emissions Standards and Laws

State and Federal laws require that automobiles meet certain standards. California is particularly strict. All new cars must be built to meet Federal and state requirements. Many states and counties have annual inspection procedures to test emmissions and safety compliance.

Vehicle Sales Laws

When a vehicle is sold, it’s title must be signed by the owner and given to the buyer, who signs the title and takes it to his local DMV office to apply for a new title and new registration and tags. In some states, a notarized Bill of Sale is also required. If a vehicle is purchased without a title, the purchaser is not the legal owner even if money is exchanged.

Sales Tax

In most states, sales tax must be paid for new and used vehicle purchases. Vehicles moved from another state may also be taxed. Tax laws vary considerably between different states, especially regarding credits and refunds for taxes paid in another state. Some states also allow for sales tax credit on trade-ins at dealers.

Property Tax

Many states and counties impose an annual property tax on motor vehicles. The tax is generally based on the value and age of the vehicle. The owner of the vehicle is responsible for the tax. For leased vehicles, the tax is paid by the lessee (the party who is leasing and driving the vehicle).

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How Does a Car Loan Work?

There are essentially two ways to buy a car. You can pay cash, or if you don’t have the necessary cash, you can get a loan. Actually there’s another way — leasing — that we won’t discuss here, but is discussed in a number of other articles on this web site.

When you get a loan, you are borrowing money from a bank, credit union, or finance company and promising to repay that money, with interest, over a specified period of time. You use that money to pay the dealer for your car. Although car buyers can arrange their own car loans with local banks or credit unions, many choose to let their car dealer arrange the loan for them.  Dealers don’t provide loans themselves but work with banks or finance companies on customers’ behalf.

So if you buy a brand new Ford, and need a loan, the Ford dealer will send our loan application to Ford Credit Corporation, who will provide the loan (assuming you are approved). Ford Credit pays the dealer for the car and begins sending you bills for each monthly payment. From now on, until the loan has been paid off, you will be dealing with Ford Credit, not the car dealer. It often takes a few days for the approval to come through.

Continue reading How Does a Car Loan Work?

How Are Car Leasing and Renting Different?

Uninformed automotive consumers often confuse car leasing and car renting. They sometimes think the two are the same. They would be very wrong.

The confusion is somewhat understandable because of the similarity of terms to that of apartment leasing and renting. Many of us can remember our parents telling us that renting or leasing an apartment was “throwing our money away” and that we should buy a house instead. Until the recent recession, it was true that you could invest in a house and get all your money back, plus more, when you decided to sell the house later. The house “appreciated” in value and was a smart use of your money.

Cars are not houses or apartments, and don’t act the same. All cars, unlike houses, “depreciate” in value over time and miles. They never appreciate in value — except possibly if they turn out to be classics 30 years from now. You always lose money with a car, whether you buy with cash, finance, lease, or rent. Cars are never good investments (except for some old classics). The average new car will lose half its value in three years, and even more in the following years, regardless of what was paid for it.

Continue reading How Are Car Leasing and Renting Different?

For First Car Buyers and Other Car Buyers