sell car still making paymentsIs it possible to sell a car if you are still making loan payments and the loan is not yet paid off?

This is a very common question with car buyers and owners.

The answer is yes, you can sell the car, but you must get enough money in the sale to pay off your loan, so that your bank can give you a “clear” title to give to the new buyer. This is where problems often arise. Let’s see how.

If you are upside down

If you are still paying on your loan, you still have an outstanding balance, which might be more than your car is actually worth. This means you are “upside down” and would need additional cash, after the sale, to fully pay off your loan. Loan companies want to be paid in full immediately after the sale. They won’t allow you to continue to make payments on a car you no longer have. Read the rest of this entry »

Car buyers are being cheated every day by a common scam that is usually associated with Craigslist, as well as other online car-for-sale web sites.

Craigslist even posts warnings on their site about it but many buyers are so focused on the “deal of a lifetime” they’ve found that they don’t read the warnings.

It all starts with a car-for-sale ad that seems almost too good to be true (you know what they say about these kinds of deals). There is a beautiful picture and an alluring description of the car, even a VIN number, and a price is that seems unusually low. Except for maybe the low price, there is nothing about the ad that suggests a scam. The ad looks like any other ad, even the legitimate ones.

You won’t find anything to indicate a scam until you contact the “seller” via email. That’s when suspicious details come out.

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lease deal calculatorIf you’re looking to lease a car and find a great deal, is it really a great deal?

Actually, it’s not easy to tell by simply looking at the numbers.

Sure, the payment seems low, especially when compared to a loan payment for the same car, but is the payment higher than it should be? Has the dealer made a mistake in his math or is he cheating you? Is the dealer basing the lease on a vehicle price that is too high — higher than sticker price? Is he charging too much interest (lease money factor)? Has he set the lease-end residual value too low?

All these factors contribute to the calculation of monthly lease payment amount. If any one of them is set too high (or too low in the case of residual value), it’s not a good deal. (If you are not familiar with how car lease payments are calculated, see Lease Payment Formula, at LeaseGuide.com.)

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Luxury car lease dealsLuxury cars have always had the highest lease rate among all vehicle types. Currently about 70% of all new luxury cars are leased, rather than purchased.

Why is that, you might ask?

There are essentially two kinds of luxury car leasing customers: 1) those who are wealthy and can afford to pay cash or could make large monthly loan payments, and 2) those that can’t but want to drive a better car than they could otherwise afford.

Customers of the first type, those who can afford cash or loan payments, usually have multiple vehicles, like to drive new cars every 3-4 years, don’t drive an excessive number of miles, and prefer to use their cash for more productive purposes, such as for investments. Leasing provides a good solution for them.

Customers of the second type typically lease as a way of being able to drive a much better car than they could drive with a loan. Since lease payments are approximately 50% of comparable loan payments, they can drive twice as much car for the same monthly cost. However, many of these people are so enamoured with the low payments that they overlook leasing’s restrictions, or simply don’t know how leasing works. They may drive too many miles and have to pay for the extra miles at lease-end, or pay for unrepaired damages. Or they sometimes want to end their lease early, not realizing that it can be very expensive.  Leasing is simply not right for everyone.

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buy used carUsed cars are for sale everywhere but many people find it difficult to find just the right car for the right price.  It can be frustrating and even overwhelming.

First-time buyers, in particular, often have difficulty with the various stages of the process: buying, pricing, negotiating, applying for loans, registering, and getting insurance.

What seems at first glance to be simple turns out to be series of not-so-simple steps.  Buying a car is not at all like buying a TV at Walmart.

The most common concerns when buying a used car are the following:

  • Where to find cars for sale
  • How to know if a car is reliable and in good condition
  • How many miles is too many
  • How to know what to pay
  • Should I pay cash
  • Where can I get a car loan
  • How to know what to look for and avoid mistakes

These are the questions we’ll answer here.

Where to find cars

Used cars can be found on the Internet, in used car lots, and for sale by individual sellers. There are small used car dealers, large used car dealers (such as Carmax), new-car dealers who also sell used cars, and barely legal buy-here-pay-here dealers than cater to people with credit problems.

On the Internet, look at Craigslist, Autotrader, eBay Motors, UsedCars.com, and Carmax.com, among others. When looking at online sites that advertise cars being sold by private parties (not dealers), watch out for a common scam in which the car has a very low price, the “seller” is not in the same location as his car, only communicates via email, promises to ship the car to buyers, and says the buyer’s money is “protected” by eBay, Amazon, PayPal or some other service. It’s a good and safe idea to always buy cars that you can see, drive, and test before buying.

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used car dealersThere essentially five kinds of used car dealers from which you might buy. There are advantages and disadvantages to each type. Let’s take a closer look now.

Large Chain Used Car Dealers

Carmax is the best known of all the large used car dealer chains. They have stores all around the U.S. and typically have hundreds of high-quality vehicles to choose from. They have a no-haggle price policy, which means the buying process is easy and stress-free, although you may pay a little higher price than you might elsewhere. But for the price, you get a good car that has been inspected, comes with a warranty, and a return policy — all things that you won’t get elsewhere.

Some Carmax locations also sell brand new cars of a particular brand.

There are other large chain dealers such as AutoNation that are similar to Carmax.

Read the rest of this entry »

Cheap cars can be found in many places — if you know where to look. Following are just some of the places you might find cheap cars:

Independent Used-Car Dealers – Independent used-car lots are a potential source of affordable cheap second hand cars. Many lots have older vehicles that can be real bargains, but might require a little work. You should take care to determine if the price is fair and that the vehicle has no hidden problems. Most used cars are sold “as-is” and come without any kind of warranty or return policy. Check out local used-car lots in your area but also consider large national or regional used-car dealers such as CarMax.

New-Car Dealer Used Car Lots – Many new-car dealers also sell pre-owned cars. Most new-car dealers only offer relatively late model used vehicles that have been taken in trade or are off-lease, and are in good condition — and are relatively expensive. But bargains can be found. Therefore, it doesn’t hurt to check out local new-car dealers but also look at other sources listed below. Some new-car dealers sell “certified” used cars — at a higher price. These cars have been inspected thoroughly and come with a short guarantee.

Buy-Here-Pay-Here (BHPH) Dealers – BHPH dealers are a different kind of used-car dealer that provides in-house financing, usually with no credit check, to people who are unable to get a conventional car loan. Most BHPH dealers are local and can be recognized by their “we finance anyone” or “no credit check” banners. Be aware that interest rates are usually very high and payment terms are strict. See “Should I Buy From a Buy-Here-Pay-Dealer Car Dealer” for more details.

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Your First Car – Making Your Decision

first carMost of us get our first car as teenagers. It’s the car we’ll always remember.

Let’s take a look at some of the important questions you’ll want to consider when deciding about what you’ll buy as your first car, how you’ll pay for it, and how to go about the purchase.

How much can you spend?

If cost is not important and you can choose practically any car you want, we’ll get to you later. However, most teens have restrictions on how much they can spend. It might be that your parents are buying and have set a price limit, or that you have your own budget and a limited income.

Since most teens start driving before they become of legal age to sign a car loan contract, it’s typical to pay cash for their first car. The cash can come from savings, gifts from relatives, or a loan from parents — or a combination. Usually, it’s not enough money for a brand new car, but possibly sufficient for a good used car.

The amount of money you have to spend on your first car will directly affect your choices. Lots of money, lots of choices. Little money, fewer choices. In general, the more money you spend, the better the car — better condition, better mileage, better performance, better safety, and better reliability.

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This is the kind of question we see posted on question-and-answer web sites every day. The details might vary but the basic question is always the same.

The askers of the question seem to understand that $3000 (or $1000, or $2500) is not a lot of money for a car and they are asking how to best spend it.

For a car to be priced in the $3000 range, there are a number of potential issues that buyers should be aware of:

1) The car would ordinarily be a $5000 car, but it has problems that will require at least $2000 to fix.

2) The car is fairly priced at $3000 because it is old and has high mileage, which doesn’t mean it’s a bad car, but it has a high potential for having problems.

3) The car is only worth $2000 because it definitely has problems, but the seller is hoping potential buyers won’t notice until after the sale when it’s too late.

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teen car safetyFirst-time car buyers are often first-time drivers as well. Many are teens buying their first car after gaining full driving privileges. Others are young adults who’ve never needed a car before, and never learned to drive until recently.

In each case, these people have followed the licensing requirements in their state and had the help of family, friends, or driving schools to get actual on-road driving experience. Finally, they took the required state tests and received their precious driver’s license.

Unfortunately, passing a driving test doesn’t mean that the state has certified a driver to be a safe driver. It simply means the driver knows fundamental traffic rules, can identify signs, knows laws of the road, and can handle basic driving skills. A new driver has only about 10% of the skills and experience he needs to be a safe competent driver.

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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:

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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.

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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.

Read the rest of this entry »

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.

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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.

Read the rest of this entry »

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. Read the rest of this entry »

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.

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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. Read the rest of this entry »

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.

Read the rest of this entry »

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.

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