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.
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.
What are the advantages and disadvantages of car leasing?
Car leasing has it’s advantages and disadvantages. Here is a summary:
Pros: - Get new car every 2-4 years, with latest features and safety equipment - Lower monthly payments - Usually no down payment - Car is always under warranty - Lower sales tax (in most states) - Avoids used car selling/trading hassles - Automatic GAP insurance included (most leases)
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. You can see your most recent credit score online with a simple sign-up at FreeCreditScore.com .
How do I get my credit reports and my credit score?
Whenever you apply for any type of credit or financing, a credit report is pulled from at least one of the three major credit bureaus. While there are hundreds of smaller credit bureaus around the country, virtually every credit bureau is affiliated with Trans Union, Experian, or Equifax.
These credit bureaus collect and maintain information on the vast majority of Americans, but they are not affiliated with the government in any way. The credit bureaus are for-profit corporations that sell your personal information for money.
Even when you find out your personal credit score, most people wonder how they stack up with other consumers. What’s a good score? What’s bad?
First, let’s understand that you don’t have just one credit score. There are three credit bureaus in the United States – Transunion, Experian, and Equifax. Each has it’s own data about you and your credit habits. Each also has a slightly different formula for creating credit scores, that all-important number that summarizes your entire credit report.
Your score is almost certainly to be different between the agencies because of the ways in which the score is computed. Lenders and car dealers typically look at only one of the scores but there’s no way you can know in advance which one it might be.
You can get each of your individual credit reports and scores at Equifax at Transunion, and at Experian.
David, 17, recently graduated from high school, landed a good paying job, and wanted to buy a new car.
His thought was that he would go to his neighborhood Ford dealer where he had been admiring a bright red Focus model that he felt he could afford, and arrange for a convenient loan to pay for it. He could easily get approved for the loan because his father knows the owner of the dealership.
The car cost $12,000 with discounts and rebates. He thought a 5 year (60 months) loan would be about right because he figured payments to be $200 a month ($12,000 divided by 60 months), which he could easily afford.
Until relatively 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.
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.
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.
Car leasing is extremely popular because it offers a more affordable method of auto financing. It allows you to have lower monthly payments than with traditional auto loans. About one out of every five vehicles driven by automotive consumers in the United States are leased.
But car leasing is not for everyone. Is leasing good for a teen’s first car? What are the pros and cons of leasing?
Leasing is a little more complicated than buying with a loan, so you should take the time to learn about leasing, and be sure it’s right for you before making a decision.
What is a Lease?
Both leasing and buying a car with a loan are simply two different methods of financing. Where a purchase loan is a method of financing the ownership of a vehicle, leasing is financing the use of a vehicle for a specified number of months, similar to renting but not quite the same thing.
When you use a Lease vs Buy Calculator such as the one at LeaseGuide.com, you should understand how it works and how to get the results you want.
Car leasing is a little different than buying a car with a loan. The language is different, the process is different, and the way that payments are calculated is different. Let’s take a look at how you would use an online lease vs buy calculator to better understand the differences.
Do you need an extended car warranty — car repair insurance?
All new cars come with a new-car warranty from the car manufacturer. There is typcially a general “bumper-to-bumper” warranty that covers just about everything that is not a wear-and-tear item, and a powertrain warranty that covers the engine, transmission, and drivetrain components.
For most new cars, the general warranty is good for 36 month or 36,000 miles, and the powertrain warranty for 60 months or 60,000 miles. Some car brands have higher mileage warranties, as high as 10 years and 100,000 miles.
There are also separate warranties on tires, batteries, and a few other components.
That’s about warranties on brand new cars. What about used car warranties? Do used cars come with warranties?
Here’s how to determine a fair price for brand new cars (see below for used-car pricing).
All new cars have a window sticker that displays the manufacturer’s suggested retail price (MSRP). It may also include destination charges, dealer-installed option prices, and other miscellaneous charges. The total of these charges is the price you would pay for that vehicle, less sales tax, without any discounts or rebates.
All these charges but destination charge can be negotiated. Manaufacturers charge dealers this fee for vehicle delivery, and dealers simply pass it along to customers without markup. It cannot be eliminated from the cost of a car.
Price can be negotiated for most vehicles. Unless the vehicle is a hot seller and in short demand, it’s usually possible to get dealers to discount the MSRP. But, how much? What’s the best price I can expect?
Are certified used cars good deals or not for first car buyers?
Many car dealers sell “certified” pre-owned cars. How are these cars different from other used cars? Are they more expensive? Are they worth considering as a first car?
Most major automobile manufacturer’s dealers now offer “certified” used cars. A certified car has been inspected and repaired according to detailed manufacturer specifications before being placed on a dealer’s used car lot. Although manufacturer’s programs vary in details, all are fundamentally the same in concept.
Why is it important? Certified cars can significantly reduce one of the largest worries of used car buyers: that used cars can have hidden problems that cause problems and expensive repairs after the sale.
Many people choose to trade in a car when buying or leasing another car. But how does the trade-in process work? Do I lose money by trading?
Here is how a car trade works. Car dealers buy your old car from you and give you credit toward the price of a new car. The trade-in credit is like a down payment and reduces the price of your new car, making your monthly payments smaller. The dealer then puts your old car on his used-car lot to sell, or he sends it to a dealer car auction where another dealer will buy it to put on his own used-car lot.
Dealers make a lot of profit on selling used cars they’ve taken as trade-in. They pay the trading customer a low wholesale price, and sell the car for a higher retail price. That’s how they make their money and stay in business.
If you’ve decided that your first car will be a brand new car, there are things you need to know about the buying and financing process that makes it different from buying a used car.
New cars – only from dealers All new cars must be purchased from state-licensed and manufacturer-authorized new-car dealers. It’s the law. It’s the only way you can buy a new car.
If a car has never been titled or registered, it’s considered to be a new car. Even if you initiate your purchase through an Internet car buying service, or through a buying service at warehouse stores such as Sam’s Club, the car actually comes from a local new-car dealer.
Assuming you’ll buy with a loan, you will want to have a monthly car payment that will fit within your current income, after considering all your other expenses. Don’t make the mistake of buying based on future expectations — a forthcoming raise, a new job, or other potential improvements in your finances. Your expectations might not come to reality and you’ll be stuck with a car you can’t afford. Base your purchase only on current, stable finances.
Let’s say you see a nice used car that you like on a dealer’s lot that is priced at $14,000. Is it a good price? Can I talk the dealer down to, say, $12,000? How much discount can I expect to get?
These are all common questions when shopping for used cars, especially if it’s your first car.
Let’s look at the answers.
Used car prices can vary greatly – even for the same make, model, year, and condition. Prices tend to follow the laws of supply and demand. Large gas-guzzling SUVs are cheaper in times of high gas prices. Convertibles are more expensive in sunny Florida than in cold North Dakota. Used car prices are cheaper when dealers have too many on their lots.
Dealers are experts at knowing local car-buying customers, what they want, and what they are willing to pay. They set their used car prices accordingly. However, dealers make more profit on used cars than on brand new cars. This means there is a lot of “wiggle room” in used car prices – a relatively large difference between what the dealer has invested in his cars and the prices he sets for those cars. Unfortunately, there is no way for us as consumers to know what a dealer has paid for his used cars.
Check prices to know what is fair
The first step to getting a fair price on a used car is to find out how much the car is worth. Is the dealer’s asking price fair or not? If not, then it is time for some negotiation.
Some newcomers to car buying assume that there is some kind of “standard” price for used cars. It is not true. However, there are used-car pricing guides, such as Kelley Blue Book and NADA Guides, that compile data from a variety of sources to publish their version of suggested prices, based on make, model, year, equipment, mileage, condition, and region of the country.
These guides often differ significantly in prices for the same vehicle, same mileage, same everything. Confused car buyers often ask, “Which is right?” or “Which is more accurate?” Neither is more right or more accurate. However, the guides serve as a good benchmark for determining a fair price for a car you may be considering to buy. For example, if a dealer is asking $14,000 for a car that the guides show as only being worth $10,000, he’s asking too much and it’s time to negotiate a fairer price.
If you don’t check prices
We’ve seen questions from car buyers who ask something like, “How much can I talk a dealer down on this $14,000 car?” The answer to the question is really another question. It is not so much how much you can talk him down, as it is how much is the car worth?
For example, a dealer may put a $14,000 price on a car that is worth only $10,000. He hopes that he’ll get a customer who hasn’t done her price research and who will “talk him down” to $12,000. The customer is happy because she thinks she got a $2000 price discount, and the dealer is happy because he sold the car for $2000 more than it was worth.
Asking prices are not selling prices
Nearly all used cars are sold for a price that is less than the original “asking” price. Dealers post asking prices on used car window stickers. Individuals selling used cars advertise them with asking prices. Dealer asking prices may be 20% or more higher than selling prices. Individuals usually price their cars about 10% higher than the price they are willing to accept.
Negotiate based on car’s condition
If you find a car you like and the price seems fair for a car in good to excellent condition, make sure you get a mechanic’s inspection and have the mechanic document any problems he finds. Assuming the problems are not serious enough to stop you from buying the car, use the mechanic’s report to negotiate for a lower price.
Also get a Carfax vehicle history report and do the same thing. If the car has been in an accident, even if the repairs have been done expertly, use the information to try to get a better price.
Where to buy
Used-car dealers are an obvious source of used cars but it takes time to visit and find out which ones have cars you might be interested in. One way to save time is use an online site such as UsedCars.com that lets you search for discounted cars from dealers in your area.
If you prefer to buy from a private seller individual instead of a dealer, we suggest you look at the eBay Motors web site for a list of .
If you have less-than-perfect credit, your car buying choices may be limited to dealers, such as Drivetime.com, who specialize is dealing with people with credit problems. They have dealerships around the country.
How do I buy a car from an individual private seller — not a dealer?
When you buy a car from an individual, you pay with cash, a money order, or a bank cashiers check. The money can come from savings, a checking account, a family loan, or a loan from a bank or financial company. Most sellers do not like personal checks.
Buyers sometimes expect a private seller to “take payments” but any smart seller will not agree to such a plan. It is too risky. As a buyer, it’s better to get your own loan.
Most 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 parents are buying and have set a price limit, or that you have your own budget and limited income.
Obviously, you know that new cars can only come from new-car dealers, but used cars can come from a variety of places including private individual sellers, car dealers, automotive web sites, classified ad sites, and even public car auctions.
From private party sellers
You can buy a used car from an individual seller - someone who owns a car they no longer want. These people may advertise their cars in a number of ways. Some simply place “for sale” signs in the windows. Others may park the car in an abandoned parking lot or consignment lots with a “for sale” sign and contact information. Others may advertise in newspaper classifieds or “autotrader” magazines available free at supermarkets and auto parts stores. Others may place ads on online sites such as , AutoTrader, and UsedCars.com.
Is it possible to get a car loan and buy a car with no credit?
The answer? Yes, under some conditions. Let’s explain.
It is a common situation, especially with young people who have never had a loan, never had credit cards, or never borrowed money for a car. Without a history of prior loans and payments, there is no credit history and no credit score, which is the number that represents credit rating.
In fact it is not quite sufficient to simply have a good credit score to get a car loan — or any loan. You may also need to have an established steady income (a job) and no excessive debts. You should have no recent bankruptcies or auto repossessions, which you wouldn’t be likely to have anyway if you have no credit.
So how is it possible to buy a car with a loan when you have no credit record and no credit score?
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.
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.
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).
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.
Is your credit score average? 
Here’s how to determine a fair price for brand new cars (see below for used-car pricing).