There are three different new 2012 models, the pure coupe, the passion coupe, and the passion cabriolet convertible. An all-electric model is coming soon.

The smartfortwo cars are built by Mercedes-Benz and even though small in size, are one of the safest vehicles on the road with stability control, anti-lock brakes, a protective “safety cell” with eight air bags for superior crash protection.

They get excellent gas mileage (38 MPG on the highway), are comfortable, have plenty of head and leg room, and come with a unique automatic/manual transmission. They come in a number of stylish base colors, with interchangable color body panels.

The company is currently offering a $99/month lease deal on the 2012 smartfortwo pure coupe. It’s for 36 months and requires $999 cash down. This is the cheapest lease payment we’ve ever seen on a brand new car for 36 months. If you are in the market for a great little first car at the lowest monthly payment, this is the one.

You can go slightly more upscale with more features on the smartfortwo passion at $139/month for the 2012 passion coupe, 36 months, $999 down, or $199/month for the 2012 passion cabriolet, 36 months, $999 down. These are great lease deals as rated by LeaseGuide.com.

If you prefer not to lease, all these vehicles can be purchased with a 0.0% APR loan rate for up to 60 months.

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Car companies often select certain models and styles for these rebates, and the selection can change from month to month.

Dealers can use factory-to-dealer cash (sometimes called “marketing support”) in almost any way they choose but most pass it along to customers in the form of price discounts. Some dealers might advertise the low prices (not the rebates themselves) or simply offer a discount to customers during the buying process. He may choose to give all or just some of the total rebate.

Most customers are not aware of which vehicles have factory-to-dealer rebates, or the amounts. Therefore, it is difficult to factor in those discounts in the negotiating process. However, our sister web site, Best Car Deals, provides such information.  Some of these rebates are very large and represent a significant discount off of sticker price. This is particularly true for last year’s leftover models that dealers must sell in order to make room for this year’s incoming models.

If a dealer gets a factory rebate on a particular model and gives it to customers as a price discount, he still makes his usual profit on that car, even though customers may be getting a great deal. Smart customers will expect the dealer to contribute some of his usual profit as an additional discount — which makes an even better deal. In many cases, customers can buy a car for less than dealer invoice price, which is only possible if the car manufacturer is helping with the deal.

In summary, factory-to-dealer rebates can be a large factor in making new cars — especially first cars — more affordable. Look for vehicles with the largest factory-to-dealer rebates.

You can get free price quotes for any vehicle at Edmunds.com. The prices you get will contain any current price discounts and manufacturer incentives that are available.

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If you decided to buy one of the cars that other people are buying the most, you could reasonably assume that those purchases are being made on the basis of those cars having most of the good characteristics that people want in a new car — such as good reliability, good safety ratings, good performance, good styling, good fuel economy, and good driving comfort.

Following is a list of the top ten best-selling new vehicles in the U.S. for the last several months:

1. Ford F-150 truck

2. Chevrolet Silverado truck

3. Toyota Camry

4. Nissan Altima

5. Honda Accord

6. Ford Fusion

7. Ford Escape

8. Chevrolet Cruze

9. Toyota Matrix

10. Ram truck

Notice that the top two vehicles, and the tenth, are pickup trucks. Trucks have always been on top of the list of best-sellers because they are not only sold as personal and utility vehicles, but also as commercial work vehicles.

The top car on the list is the Toyota Camry. This car has held the top position for years — for many good reasons. It has almost the perfect balance of all the things that car buyers want. It might not be perfect in any one thing but, overall, it has the best mix of everything. You could certainly find other cars that might have better styling, or better performance, or better fuel economy, or lower insurance cost, or more fun to drive — but you would be hard pressed to find all of these things in just the right mix as with the Camry.

The Nissan Altima and Honda Accord come in a very close second and third for essentially the same reasons that makes the Toyota Camry so popular. All of the cars have exceptional reliability, are economical to drive, maintain high resale values, and have a high value-to-price ratio.

The Ford Fusion and Ford Escape have risen in the rankings in the last year or two due to Ford’s improved reliability, safety, and styling. Ford is also a leader in innovative in-car technology, which has attracted many young drivers to its ranks.

The Chevrolet Cruze is the much improved old Cobalt with substantially better styling, performance, reliability, and safety. It, too, has attracted buyers who want a good solid car for an affordable price.

The Toyota Matrix makes the list as a very practical and economical small car with great interior space and fuel economy. It has excellent reliability and earns a Consumer Reports “Recommended” rating.

You can get free price quotes on any of the above cars from Edmunds.com. The prices will include any price discounts and manufacturer incentives currently available.

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If you simply want the fastest answer to that question, without explanation, we would say the Honda Civic is the best all-around car for teens. The Toyota Corolla would be a close second.

If you don’t like the Civic or Corolla there are other cars with similar characteristics and different styling that might suit you better.

But what is it about the Honda Civic, Toyota Corolla, and similar models that make them great as a first car for teenage drivers?

First, they are economical — relatively inexpensive to buy, inexpensive to insure, and inexpensive to drive.

It doesn’t cost much to buy a new or relatively new Civic. Used models might be a little higher priced that other brands but that works in your favor too. When you get ready to sell or trade, Honda and Toyota vehicles hold their resale value better than most.

Second, these cars have outstanding gas mileage, better than some hybrids, as much as 36 miles per gallon. And they run on regular fuel, the least expensive kind. Maintenance doesn’t cost much because the cars are so reliable — far more reliable than many other brands. The cars are relatively small and are driven by 4-cylinder engines that perform as well as many 6-cylinder models.

Next, the Civic and Corolla are safe. Many people equate small size with poor safety. Not true. The Civic and Corolla have “Top Safety Pick” ratings by the Insurance Institute for Highway Safety and consistently score well in Government crash tests. Both cars come with better than average safety features. Some models have Stability Control Assist, which is especially important for inexperienced drivers, and is highly recommended for all teenagers.

Finally, the Civic and Corolla are relatively inexpensive to insure, especially for teen drivers who pay the highest rates anyway. Four-door sedan versions are less expenisve to insure than 2-door coupes.

We’ve discussed our choices for best first car for teens. If you should decide on a different make or model, whether you buy new or used, make sure it has most of the same characteristics of the Honda Civic and Toyota Corolla.

You can get free price quotes for any of the mentioned vehicles at Edmunds.com. The prices you get will contain any price discounts and manufacturer incentives currently available.

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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 first cars in America.

However, if you already know you don’t want a Honda or Toyota, stay with me. I’m not going to try to convince you that these are the only brands you should consider. I’m just using them as a starting point to help you choose the right car for you.

Why the Honda Accord  and Toyota Camry? Because these two cars have an almost ideal blending of all the following characteristics — the characteristics that most people want in a vehicle:

Honda/Toyota Benefits

• Excellent quality and reliability
• Attractive styling
• Easy handling
• Great performance
• Good gas mileage
• Outstanding safety rating
• Good value for the money
• Affordably priced
• Luxury features standard
• Roomy and comfortable
• Good cargo capacity
• High resale value retention

However, as good as the Accord and Camry are, they are not the right vehicles for everyone.

All of us have different likes, dislikes, needs, and finances. But if you have no idea what car you should buy, and are flexible as to the brand and model, and need a good starting point, these two vehicles are excellent candidates.

First time buyers like Honda Civic

One of the most popular cars for teenagers and other first-time buyers is the Honda Civic. It’s smaller and more economical than the Accord and it’s easy to find used models in good condition. Insurance rates are relatively low and it’s inexpensive to drive. It’s also very reliable and safe.

For those who like to customize their cars, there are thousands of after-market appearance and performance products for the Civic. Used Honda Civics are affordable and dependable.

Other cars for first time buyers

The Kia Rio is a good choice with a base price of just $11,395. It is ranked high in quality and safety, and is very economical to drive. Beware of used Rio’s however. Have them inspected before you buy.

The Toyota Corolla is legendary for it’s dependability, great performance, quality, and lots of standard safety equipment. It’s the smaller sister to the Camry. Used models are usually in excellent shape and hold their value well.

The Mazda3 is popular with first time buyers because it looks good, is roomy, has good performance, low fuel cost, and doesn’t cost as much as other cars with similar features. Used models have excellent reliability.

Other cars, both new and used, that are popular with new teen drivers are the Ford Focus, Honda Fit, Nissan Sentra, Mitsubishi Lancer, Ford Mustang, and Scion models.

What if I have different needs?

Using the Honda Accord and Toyota Camry as a base of comparison, what would you want to be different?  Why doesn’t the Accord or Camry work for you? Do you need a different type of vehicle? Do you want a lower price? Do you need a smaller size? More performance or speed? Larger with more passenger and cargo capacity? More luxury? Sportier look?

Vehicle buying is a very personal experience. As such, it is almost impossible for us to tell you exactly which vehicle you should buy.There are many vehicle makes and models, and style variations, called “trim levels”, within each model. And then there are options that can be added. The result is that there are thousands of different combinations from which to choose — which is a big part of the problem of deciding.

Recommendations as a first car
Certain vehicle makes and models consistently rank high in owner surveys and ratings. Here are our suggestions of recommended vehicles in different categories, based on overall quality, reliability, safety, performance, and value for the money:

Some of the factors that you should consider before making a final decision are in the following list. Rank them as to which are most important to you.

Important Factors in Making a Car Buying Decision

• Reliability / Dependability
• Safety Rating / Features
• Price – Rebates and Incentives
• Styling / Appearance
• Passenger and Cargo Capacity
• Comfort / Luxury Features
• Performance
• Resale Value and Depreciation Rate
• Operating Costs and Fuel Economy
• Routine Maintenance Costs
• Insurance Costs

The resulting prioritized list will help you in determining the vehicle that will best fit your needs.

My first car – new or used?

Even if you have the money or finances to buy a brand new car, it’s often smarter to buy used. But not always.

For example, in a tough economy such we are experiencing right now, car manufacturers and dealers are desperate to sell cars. As a result, most brand new cars currently have heavy incentives, rebates, low-interest loans, and large price discounts. This means that a current-year model car can often be purchased for less money than a used car of the very same make and model. See the following web site for a list of current new-car incentives and rebates:  Best Car Deals

See the following article for more advice about buying new cars versus buying used: Your First Car: New or Used?

Narrow your choices and get prices

Try to narrow down your list of cars to no more than three. Then research the cars on the Internet, shop at dealers or online listings, and finally make your decision.

If you are considering a brand new car, you can get pre-discounted online price quotes at TrueCar. Prices are usually lower than dealer invoice price.

You can look at used cars online at dealers in your area at UsedCars.com. The prices are already discounted.

If you have credit problems, or no credit, look at Drivetime.com, a dealership that has locations around the country.

Caution for online car buyers

Watch out for common car scams if you are considering buying your car online. Dishonest sellers often advertise used cars at unbelieveable low prices, take your money, and disappear. It’s always best to buy from a local source where you can see and inspect your car, and meet the seller face-to-face.

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New 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.

A co-signer does not share ownership of your vehicle. If you pay off your loan on time and without problems, the co-signer has no further role, rights, or responsiblities. Their job is finished.

Even if you default (fail to pay) on your loan and the co-signer has to step in and make payments, he/she still has no owership rights. The car would still be in your name. Many people who co-sign do not understand this important point.

Another point that is important for co-signers to understand is that a co-signed loan or lease shows up on both the borrower’s credit report and the co-signer’s as a financial obligation or debt. This may affect the co-signer’s ability to get a new loan or lease for themselves if they are already close to being over-borrowed. It increases their “debt load” which is a factor that is considered when one applies for new credit. Both you and your co-signer should know your credit score before you apply for a car loan. You can get your most recent credit score online at FreeCreditScore.com.

However, on the postive side, if you pay off your loan with no problems, both you and the co-signer benefit from the good credit report. Both you and the co-signer will improve your credit scores. This makes having a co-signer a great way for someone with no credit to begin building a good credit history.

Selecting a co-signer

You should take care in selecting a co-signer. Since approval of your loan will depend on their credit worthiness, the person should have a strong and healthy credit history, a steady source of income, and not have excessive debt. For most new car buyers, this will probably be a close family member.

If you have already shown a history of financial irresponsibility, you may have difficulty finding someone who is willing to assume responsibility for your new obligations. Like the banks or loan companies, your potential co-signers may not want to take on the added responsibility and credit debt load. If the co-signer is not able to take over payment when the primary borrower defaults, both the borrower’s and the co-signer’s credit score are damaged.

If you can’t find a co-signer

If you can’t find someone who will co-sign for you, you have few other options. You may have to work out your transportation needs another way while you save enough money to get started with an inexpensive used car, while building your credit history so that you won’t need a co-signer the next time. Get a couple of credit cards or department store cards, use them often, and pay them off each month. You can then watch your credit score improve with a monitoring service such as FreeCreditScore.com.

You could also borrow cash from friends or family, although this method doesnhelp you build a good credit history. In many cases, you may not need the entire amount to buy your car. Often, a large down payment will allow you get a loan even with no credit or bad credit. A smaller loan presents less risk to a lender, and could allow you to be approved.

You could also try a used car dealer who specializes in working with people with bad credit, such as Drivetime.com. They have 78 locations around the country and offer a wide selection of used cars. This type of dealer its their own loans, which means it won’t help — or hurt — your credit.

Summary

Getting a co-signer is a great way to start building your own credit history. If you make your payments on time, don’t skip payments, and don’t default on your loan, you’ll be in great shape for your next loan — without a co-signer.

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Buy-here-pay-here car dealers provide auto loans to people with bad credit.

Most car dealers do not directly finance loans on cars they sell. They work with outside banks and finance companies to provide loans for their customers. It’s up to those banks and finance companies, not the dealer, to approve and provide customers car loans.

However, a different breed of used car dealer, called  ”buy-here-pay-here” dealers,  do provide their own financing without an outside bank or loan company. They primarily function to sell used cars to people who have bad credit and cannot get approved for loans from conventional sources.

Buy-here-pay-here (BHPH) dealers can be recognized by their promotional ads or storefront signs. They use the terms “easy finance” or “no credit checks” or “we finance anybody” or “in-house financing” or “fast loan approval” or “we approve you regardless of your credit.”  They are sometimes called “tote the note” dealers.

How do buy-here-pay-here dealers work?
BHPH dealers typically sell older used cars for higher-than-market prices. They may ask for a down payment that essentially covers their investment in the car. Then the customer pays off the rest of the amount with a high-interest loan, which is the dealer’s profit.  There is no credit check because the interest rate charged is the highest allowed by the usury laws in that state.

The loan might be divided into 12-18 months of payments that are set up on a strict weekly or bi-weekly schedule. In many cases, the payments must be made at the dealership in cash or money-order. Personal checks are often not accepted.

Many BHPH dealers use special devices on the cars to make sure that customers pay on time and don’t skip town. One device is a starter interrupter. If a customer is late with one payment by even a day, the car will not start, and cannot be reenabled until the payment is made and a special code is punched into the device. If a payment is missed (late by more than a couple of days), the car will be immediately repossessed — no 30 day grace period. A GPS locator device hidden on the car tells the dealer where the car can be found.

If a car is repossessed, it is usually placed back on the sales lot to be sold to the next customer. BHPH dealers normally do not report repossessions to credit agencies. In some cases, a repossessed car might be sold at wholesale auction and the customer billed for the balance of his loan. This can happen if the car has been damaged or wrecked.

Should you use a buy-here-pay-here dealer?
Buying a car from a buy-here-pay-here dealer is an expensive option, but if it is your only option, and you know how it works, then you can use it.

Make your loan as short as possible to reduce the effects of the high interest rate. Have the car inspected by a qualified mechanic before you buy because such cars are sold “as-is” without warranties or guarantees. The dealer is not obligated to fix problems after the sale. Check out the dealer at your local Better Business Bureau (find their web site or call them on the phone).

Don’t expect your credit to improve if you make all your payments on time. Just as BHPH dealers don’t check your credit when you buy, they also do not report your good (or bad) payment record to the credit agencies. Unless your credit score improves for other reasons, you’ll end your loan with the same bad credit as when you started.

Summary
In summary, buy-here-pay-here dealers exist for a reason: to sell cars to people who have bad credit or no credit and are not able to buy a car any other way. On the other hand, they are often viewed as predatory, taking advantage of people’s misfortune with high prices and maximum-allowed interest rates.

You may be able to get a better deal from conventional discount used car dealers in your area. You can get free prices quotes from these dealers from the UsedCars.com web site. These dealers may also be able to find you a loan source.

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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. 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.

Special Promtional Deals on New Cars- Don’t overlook this year’s (or last year’s) brand new cars as a potential source of good bargains. There are currently tons of heavy rebates and other incentives being offered by car manufacturers, especially on American brands, and especially on last year’s models, that can often make certain new cars less expensive than used cars of the same make and model. See New Car Rebates and Incentives.

Used Cars Online – Although the Internet is a good potential way to find cheap cars, take extra caution due to the possibility of getting scammed. If a deal seems to be too good to be true, it probably is. Craigslist and Autotrader are particularly frequented by scam artists. We recommend sticking with sites such eBay Motors, which has a buyer protection program (only for cars puurchased through the eBay site) and UsedCars.com, the Internet’s largest used car buying service, with over a half a million used car listings.

Lease a New Car – If your goal is simply to get low monthly car payments, leasing a new car can be 30% to 60% less expensive than buying the same car with a loan – cut your payments in half. This allows you to drive a brand new car for the same or less money than you might spend on a late model used car. However, be sure to read the free Lease Guide before you make a decision to lease. It’s cheap but may not right for everyone.         

Take Over a Car Lease - Take over a cheap car lease from someone who needs to get out of their lease early. Online services such as Swapalease offer car lease takeovers at bargain prices. These are almost-new cars being offered by sellers who are often desperate to get out of their leases. These can be excellent deals. It is the cheapest way to drive a almost-new car.

Government Car Auctions – This is an often overlooked source of cheap cars and trucks. Local, state, and federal government and law enforcement agencies frequently auction surplus and seized vehicles. Outstanding bargains are possible. To participate, you have to know where and when the auctions take place, and how to bid. See Government Auto Auctions for more details.

Damaged and Salvage Cars – Cars that have been damaged or salvaged can be a good source of cheap cars. See Damaged Cars for Sale for more details.  Salvage Auctions and Repossessed Car Auctions are other possible sources of cheap cars and project cars for sale. Obviously, a lot of caution must be taken to make sure you know exactly what you’re buying but, if done correctly, some great deals can be had this way.

Police Seized Property and Surplus Auctions – Law enforcement agencies seize and impound vehicles from law-breakers and sell them at public Police Impound Auctions, for bargain prices. Many are high-end late-model luxury vehicles in perfect condition. These agencies also sell Surplus Vehicles that are being replaced with newer vehicles. These auctions are conducted regularly and are open to the public.

Rebuildable Wrecked Cars – If you have mechanical skills, Buying and Rebuilding a Wrecked Car can be a way to a cheap ride. Cars that have been declared total losses by insurance companies can often be purchased as salvage vehicles and project cars for almost nothing. Many of these vehicles have little damage and can be rebuilt and restored to good running order for little money.

Unclaimed and Abandoned Car Auctions – Cities and towing companies pick up unclaimed abandoned vehicles every day from the sides of streets, highways, and parking lots. They try to find the owners, but if they can’t, the cars are sold at auction, often for almost nothing. The cars can range from junkers to almost-new vehicles. See our article, How to Find and Buy Unclaimed Cars.

If you are looking for a good cheap car, start with the suggestions above and remember to take extra caution to make sure you don’t get scammed and that you get what you pay for. Used cars are sold “as-is” which means that you have no right to get your money back once the sale has been made. It’s always a good idea to have your car inspected by a qualified mechanic before you make the purchase.

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We wondered about that question too. Are there certain cars that most people are buying, asking about, seeking information about, and asking for pricing on? What car makes and models are most popular? Are they the best cars to buy?

Well, we went to one of the most-visited used-car web sites, UsedCars.com, and found such a list. Actually, the site compiles a real-time list of the makes and models that their site visitors most often request information about, which is an indicator of the most popular cars.

The most-popular car list can change from day to day, but not by much. A vehicle that is #1 today might fall to #2 tomorrow, and vice versa, because the rankings depend on what online visitors to their web site are asking about and searching for on any particular day.  

Here’s the current list of most popular used cars at the time of this writing:

Notice that Honda is on top. Why? Because Honda is the most reliable brand of automobile. Used Honda cars will continue to run reliably almost forever if maintained properly.

The Ford F-150 is next. It’s the best selling make/model new vehicle of all time. No wonder it’s also in the top three of used cars too.

Toyota is just behind Honda in reliability and high-resale value, so it is no surprise the popular Camry model is on the list. Other Toyota models are popular too.

Then there’s the Ford Explorer, the most popular SUV, and the Ford Mustang, the most popular affordable performance car.

Finally, there are the Nissan Maxima and Altima, high in reliability and resale value, just not quite as high as Honda and Toyota. But many people like Nissan’s styling, particularly young people, better than Honda and Toyota.

Where to buy

If you prefer buying your used car from an individual private seller, you can find them in newspaper classifed ads, in free “auto trader” magazines at your local auto parts store or supermarket, and online on the Internet. We suggest you also look on eBay.com at their list of .

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Car payment calculation is not simple math. It requires a rather complex business math formula that is not easily done by hand and most people are not capable, or not willing, to take it on. It’s not as simple as dividing loan amount by the number of months in the loan. Finance charges (interest), which change every month, must be accounted for.

It’s much easier to use a hand-held business calculator, such as the HP 12c or HP 17b, or, even better, use an easy online auto loan calculator which does the math for you.

To use a car loan calculator, you must know the amount being financed, the number of months you want to finance, and the interest rate. You’ll also need to know the down payment amount, if any, and the value of your trade-in vehicle, if any. You also need to know the sales tax rate that applies to your home location, not where you buy your car.

How Car Payments Work

It’s a fact of life. Anytime you borrow money for a car, a house, or for credit card purchases, the lender wants you to pay an extra amount (interest) for your use of his money. The more money you use (borrow), and the longer your payoff term, the more you pay.

The way in which car loan payments are calculated sets a fixed monthly payment figure that includes two parts: 1) a part that repays some of the principal ( the amount you borrow), and 2) a part that pays interest (finance charges) on your outstanding balance.

Since your loan balance (principal) decreases with each monthly payment, the amount of interest in your payment also decreases and the amount going towards your loan balance increases. 

This means that in the early months of your loan, you pay a lot of interest and less principal. As you move toward the end of your loan, you pay less interest and more principal. In other words, you pay off your loan faster at the end than at the beginning. 

No two month’s payments are exactly the same in the amounts of the two parts, although the total payment is always the same (except for possibly the last payment which is usually less).

One possible problem with the way that car loans are structured is that the small amount of principal being paid in the beginning of the loan term may not pay the loan balance down as fast as the value of the vehicle depreciates.

This means you may be “upside down” — you owe more on your loan than your car is worth — during much of your loan term, which can be a problem if you decide to sell or trade before your loan is paid off, or nearly paid off. It can also be a problem if your car is stolen or totaled in an accident. Insurance companies pay you what the car is worth, not the amount you still owe on your loan. 

If you decide on a long-term loan (more than 48 months), or have a high interest rate, or make little or no down payment, or roll over negative equity from a previous car loan, you are almost assured of being upside down for most of your new loan term.

Some banks and loan companies allow you to make extra payments or pay more each month toward principle, which ends your loan sooner, lowers total finance costs, and reduces the chance of being upside down. Contact your bank or loan company to make arrangements.

The interest rate that you pay on your car loan depends on your most current credit score. If you don’t know your credit score, you should get it before you go shopping for a car or apply for a car loan. You can get your most recent credit score online at FreeCreditScore.com.

Calculating car loan payments is easy if you use an online car loan calculator.

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