Category Archives: finance

How Do I Sell a Car That I Am Still Making Payments On?

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. Continue reading How Do I Sell a Car That I Am Still Making Payments On?

How to Buy a Used Car

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.

Continue reading How to Buy a Used Car

Do I Need A Co-Signer?

Who needs a co-signer for a car loan? How does it work?

need a co-signer for car loanNew or first-time car buyers are often surprised at being turned down for a car loan because they have no credit history, which unfortunately has about the same effect as having bad credit. Getting a co-signer might be the answer.

Lenders want to see that a borrower has a good record with previous loans and credit cards. Without a history of credit, a borrower represents a risk to lenders. If they don’t know a borrower’s history, they take the low road and assume the worst.

It’s a familiar “catch-22″ situation in that you can’t get a loan to establish credit without already having credit. So what is the answer?

What is the answer?

The most common solution is to have someone “co-sign” your loan contract. Typically, it’s family member who has a good credit score. A co-signer plays no part in the loan unless the primary borrower fails to make payments. In that case, the loan company would have the right to seek payment from the co-signer.

Continue reading Do I Need A Co-Signer?

Do I Need a Down Payment on a Car?

How much down payment do I need for my car loan?

how much down payment on car loanUntil recent times, it was standard for car dealers and finance companies to require at least 20% down payment on the purchase of a car. It was for a good reason.

Because cars depreciate in value from the moment they are driven off a dealer’s lot, a down payment helps offset that rapid decrease in value, which may keep the loan from becoming “upside down.”  It also protects the loan company or bank because, if they have to repossess the vehicle, they have a smaller risk of losing money. It also protects the car buyer from financial loss if the car is stolen or totaled and the insurance money isn’t sufficient to cover the loan.

Things are different now
Auto manufacturers and dealers are now very competitive and business must be fought for. They are willing to take risks that were unheard of just a few years ago. In many cases, down payment requirements have been reduced or eliminated altogether, primarily for customers with good credit. Continue reading Do I Need a Down Payment on a Car?

Deciding on Your First Car

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.

Continue reading Deciding on Your First Car

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?

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?

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

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?

Zero Down Car Lease

zero down car leaseLeasing can provide an affordable option to anyone needing car financing at minimum monthly cost. Upfront cost can also be minimized by paying no money down — $0 down payment.

Lease payments are 60% – 110% lower than loan payments for the same car. And most leases can be obtained with zero money down— $0 down.

So what’s the catch?

First, leasing is a bit more complicated than buying a car with a loan. If you don’t understand how leasing works, or how to determine if it’s right for you, you should skip it until you take the time to learn about leasing — from LeaseGuide.com.

Second, in order to get a zero down car lease, you need a good credit score. In fact, you may need a better score than you would need if you were buying with a loan. You should always know your current credit score before going car shopping.  What’s your FICO score? Find out now when you check your credit report for $1 at Experian.com!
Continue reading Zero Down Car Lease

Auto Loan Rates – How to Get the Best Rates

car loan rateWhen you buy a car with a loan, you not only pay back the amount borrowed but you also pay finance charges (interest).  Each month’s loan payment consists partly of principle and partly of interest. Actually, the amount of principle and interest changes each month, although the total remains the same. In the beginning, you pay more interest and less principle. Near the end of the loan, you are paying nearly all principle.

The amount of finance charges you pay depends on the interest rate and the length (term) of your loan. Interest rates can vary between different lenders. The interest rate you pay also depends on your credit score. Someone with poor credit will pay a higher rate than someone with outstanding credit. More about credit later.

Interest rates are generally higher for used cars than for new cars. And longer loan terms have higher interest rates than shorter loans.

At the time of this writing the national average new-car interest rate is about 3.0% for a 4-year car loan and a bit higher for used car loans. Dealers sometimes add a percentage point or two for additional profit. This is called “reserve.”

Continue reading Auto Loan Rates – How to Get the Best Rates

5 Tips for Getting an Auto Loan

tips for getting auto loansFor many people, an auto loan is the most significant and largest financial transaction they make in their lives — at least until they get a home mortgage. Because it is so significant, it makes sense to take the right steps and avoid mistakes in the process.

1. First, shop around for auto loans at your local banks, credit unions, and financial companies. You don’t have to finance through your car dealer. In fact, by shopping around first, you’ll know if your dealer’s loan offer is good or not. When you talk to a bank or credit union, you may also be able to get pre-approved at a guaranteed interest rate and for a given amount. That way, you’ll know what price car you can afford when you go to your dealer. You are not obligated to accept any loan offer you receive, even those for which you are pre-approved.

2. Know your credit score. Your credit can make the difference between getting approved for a car loan or not. If you are approved, your credit score will determine the interest rate you pay and the down payment amount you’ll have to make. Car companies offer special promotional deals each month, such as 0% APR loans and low-payment leases, which require good credit. To get the best rates and best deals you’ll need a credit score of 700 or above. What’s your FICO score? Find out now when you check your credit report for $1 at Experian.com!
Continue reading 5 Tips for Getting an Auto Loan

0% Car Loans – Zero Interest

Car manufacturers are constantly offering low-interest loans and other incentives to help sell cars.

With “normal” interest rates around 3.0% at the time of this writing, it’s not much of a stretch for car companies to offer 1.9%, 0.9%, or even 0% loan rates.

A zero-percent (0%) loan means no interest at allno finance charges for the life of the loan. Some car company deals limit no-interest loans to 36 months but some extend it all the way to 60 or even 72 months.

Understand that no-interest loans are not something you can get by negotiating with a dealer. These promotional loan deals are only offered by car manufacturers on selected models and styles for a limited amount of time.

How much money do you save with a 0% loan?

Continue reading 0% Car Loans – Zero Interest

Quick Guide to Buying a Car

guide for first car buyersFirst-time car buyers are often unaware of everything that’s involved in the process. It’s not surprising because it’s not simple and not like buying anything else that we normally buy, even a house.

We’ll explain it all in this quick guide to buying a car. Further details can be found in the various articles posted on this web site.

1. Decide on a Car

Choosing a car for the first time can be a bewildering experience because there so many choices — old cars with lots of miles on them, newer cars with better safety and tech equipment, small cars, compact cars, sedans, coupes, large cars and SUVs, sports cars , fast cars, fuel-efficient cars — not to mention all the different makes, models, and styles that are available.

Decide what kind of car you want or need and what’s important to you. Do you want good looks, safety, good gas mileage or high performance, automatic or manual transmission, 2-wheel drive or 4-wheel (for winter weather), sporty 2-door coupe or 4-door sedan or convertible, passenger car or roomy SUV or minivan? Do you want good reliability and dependability, and low insurance cost? What is is your budget and how much can you afford, either as a cash purchase or as monthly loan payments?

Continue reading Quick Guide to Buying a Car

Car Loan – In Plain Language

car loan explainedYou, the car buyer, wish to purchase a car but you don’t have the necessary cash.

You need a car loan.

A bank or credit union can provide you the loan you need, or your car dealer can arrange the loan for you with a bank or finance company that he works with. Understand that dealers generally don’t make loans nor approve them.

The bank or finance company explains the loan to you in this way:

“We are willing to loan you our money to pay the dealer for your new car, assuming we check your credit history and find that there is not a risk that you won’t pay us back our money. If you have no credit history or your credit is poor, we may decide to turn you down. We might also turn you down if you do not have a steady source of income that will allow you to repay the loan. If you can get a co-signer with good credit and a good income who is willing to sign with you, we may reconsider”.

Continue reading Car Loan – In Plain Language