July 2009 ~ Managing a Car Loan

Friday, July 24, 2009

Financial Advice on a Lease Vs. Purchase of an Auto

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A vehicle lease or purchase offers different benefits. Leasing restricts driving and car use through term and mileage limitations, so the option is not for everyone. A purchase may prove a better option for a driver who prefers to keep his car although leasing may prove beneficial to someone who normally trades out of a car every three to four years.

Leasing may initially show a low monthly payment, but your overall cost may be the same as a finance or purchase during the term you choose for the lease. Manufacturers offer rebates for new cars, which includes thousands off the window sticker price. Leasing is often assumed on the full sticker price. To fully gauge the difference in cost, add your total number of lease payments and down payment amount to calculate the overall cost. Compare the total lease cost to a finance by adding your down payment and monthly payments over an equivalent lease term, not the entire term of the loan. The difference may be minimal.

You may find that you can achieve a low monthly lease payment but have to pay thousands of dollars for a down payment. Limit the amount of money you put toward a lease. If you should lose your vehicle because of damages or theft, you will not receive your down payment back from the leasing bank. With a vehicle purchase, Edmunds suggests putting down 20 percent of the vehicle's value if financing. Because you own the vehicle, you can increase your equity by decreasing your loan amount or by paying off the loan early. If you suffer a loss, you can receive money back for the vehicle's loss through insurance coverage.

If you purchase a vehicle, you can drive it as much as you'd like without concern for penalty fees. Leasing may restrict your driving so plan ahead. Lease advertisements are based on a pre-determined mileage and term. You can change the terms to suit your driving needs. Low mileage leases, such as 10,000 miles per year, may offer a low payment but prove too restrictive. You can increase your mileage allowance up to 18,000 miles per year and change your term as well. Ask your dealer to show you the cost difference between different leasing terms so you can avoid penalty fees at the end of your lease contract.

Leasing fees can prove expensive. You may have to pay a fee if you decide to transfer your lease to someone else; but if you own your vehicle, you can likely sell it without incurring any fees. Some lenders may charge a prepayment penalty fee for paying off a loan early so be sure to inquire. When you return your leased vehicle, it must have limited wear and be in good condition. Leasing banks charge for wear-and-tear and over-mileage fees. Look over your contract to find out your limits, leasing requirements and penalty fees.

Can a Lender Repossess a Car Without a Legal Lien?

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When a lender tries to repossess a car, he's exercising his rights under a legal document known as a lien. When a lender provides money for a car purchase, there is a possibility that the borrower may not pay him back. A lien provides security against this risk. It is important for borrowers to understand the basics of liens and to know their rights in the event of a repossession.

A lien is a legal document that secures a loan with a piece of property. In the case of a car loan, the debtor's agreement to pay is almost always secured with a lien against the car itself. The lender's ability to exercise this lien is not absolute he must follow the terms of the loan agreement with the borrower and the provisions of state law. While not every lien is consensual, a borrower usually agrees to the lien when he takes out a car loan.

A lien grants its holder the right to take possession of property named in the document. A lender usually repossesses a vehicle as a last resort if the borrower has consistently failed to meet his obligations. According to Craig Howie, a financial reporter for AOL Autos, "the bank or lien holder has to fulfill several legal requirements before it can repossess a car." The lender usually has to give the borrower notice of his intention to repossess, and meet the paperwork filing requirements of local and state law.

A lender cannot repossess a vehicle if he cannot prove he has a legally valid lien. This is because the lien is the very document that grants him this right; without it, the lender has no property interest in the car. It is rare for a lender to provide a loan without placing a lien on the collateral. Even a valid lienholder may not succeed in repossessing a vehicle if he conducts the repossession improperly or violates his end of the loan agreement.

Not all liens are legally viable. In some unusual circumstances, a person may record a wrongful lien against another's property. In essence, a wrongful lien is a legally invalid document that its holder nonetheless claims in court, in an attempt to create a property interest where there isn't one. It is generally considered a type of fraud and in many states carries substantial legal penalties. In Utah, for example, recording a wrongful lien is a third degree felony.

Can You Get a Car Loan in Ohio Without a Co-signer if You Are 20 Years Old?

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Getting a car loan in Ohio as a 20-year-old is similar to getting a loan in any other state. While many 20-year-olds use a co-signer to get a vehicle loan, it is possible to secure your own financing without the need for a co-signer. There is nothing unique to Ohio about the process. Not using a co-signer may result in a higher interest rate, depending on your credit rating.

To qualify for an auto loan in Ohio, you need to show proof of income. Usually this means a full-time job. Being a full-time or part-time student does not exempt you from this requirement. In Ohio, as in other states, you must be able to show that you have the resources to pay on the loan. By not having a co-signer, the income responsibility falls on your shoulder. For the best results, you should have a full-time job in Ohio to get the loan.

At 20 years old, you may not even have established a credit history yet. In many cases, not having a credit history is as bad as having terrible credit. This is because you cannot show proof of paying your debts on time and being responsible with your debt payments. If you have already established a credit history, it is important that you have good or excellent credit. While it is not impossible to get a car loan in Ohio with bad credit, you will usually pay a higher interest rate on the loan. You can enter in your Ohio zip code on the Bankrate website to get an idea of the current interest rate in your area and the type of credit rating you need to qualify for that rate. It will show you local lenders instead of car dealer financing.

It can be easier to get an auto loan when you have a down payment for the vehicle. Typically, the larger your down payment, the easier it is to qualify for financing. This is true in Ohio and all other states. The reason is that it establishes immediate equity, which is seen as less of a risk for the lending institution. A larger down payment can also result in a lower interest rate on your car loan. Bankrate recommends putting down 20 percent of the purchase price, if you can afford it.

When you have found a car that you want to buy, you usually have more than one option for financing. If you are buying a new or used car in Ohio from a local car dealer or car lot, you can get financing through the dealer. Or you can apply at a local credit union or bank. If you are buying from an individual, you will have to use a bank or credit union. You may get a better rate at the financial institution where you do your banking. Some of the banks with a presence throughout Ohio include Chase Bank, Bank of America, US Bank and Fifth Third Bank. To apply for the loan, you will need your Ohio driver's license and your most recent paycheck stub.

Can a Lender Sue You for Default on an Auto Loan?

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Car loans are common financial tools for purchasing new and used vehicles, because few people have the liquid assets available to pay the full purchase price for a vehicle. A car loan typically requires monthly payments, which include a portion of the principal and interest charges. If you default on your payments, your lender may sue you for the principal and legal costs.

A default technically occurs if you are even one day late on a car payment. However, lenders rarely take legal action on a loan if you are not severely late on your payments. The time for a default varies among lenders and according to state and federal laws -- a lender commonly considers a car loan in default if you are 30 or 60 days past due.

Lenders typically initiate collection activity before filing a civil suit to collect unpaid balances on car loans. Most lenders have in-house collection agents who send letters and make phone calls in an attempt to bring a loan current. If in-house collection attempts are not successful, some lenders outsource collection activities to third-party collectors.

If you do not make full payment of past due amounts and late fees, the lender may hire a third party to repossess the vehicle. Some states, including Ohio, require lenders to send a notice of default to borrowers after repossession, giving them an opportunity to cure a default by paying past-due amounts and late fees by a specified date to regain possession of the vehicle. Partial payment typically will not cure a default or prevent the lender from continuing collection activities or pursuing recovery through a civil suit.

If the account remains past due after the notice of default has expired, and the lender believes that you will not voluntarily bring the account current, it may file a civil suit in the county in which you reside. The court will issue a summons notifying you of the suit, either in person or via mail, depending on state laws. Before the hearing, which is usually at least 28 days after the notice of suit, you may contest the suit. If you do not successfully contest the suit or attend the hearing, the court may enter a default judgment against you. If this happens, the lender can garnish your wages, freeze your bank accounts and place liens on any real estate or valuable personal property you own.

How to Calculate a Loan Amount Based on a Payment

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The principal of a loan is the initial amount of the loan, and the interest on the loan is an additional amount that the lender charges you for the loan. You will generally repay the loan by making fixed payments at regular intervals. You can calculate the loan's principal from the interest rate, number of payments and the amount of each payment.

Calculate the interest rate for the payment interval. Assume the annual interest rate on the loan is 9 percent. Divide this interest percentage by 100 to get a decimal number of 0.09. Divide this rate by the number of loan payments in a year. Assume this loan requires monthly payments, giving you a monthly interest rate of 0.09 / 12 = 0.0075.

Multiply the term of the loan in years by the number of payments in a year. Assume the term of the loan in this example is 10 years. This loan requires 10 x 12 = 120 payments to repay the loan.

Determine the payment amount. You typically want to make the largest payment you can afford, to minimize the interest that you pay. Assume for this example that you can afford to make a payment of $200 each month.

Compute the loan amount with the formula A = (P / i) x [1 ' (1 + i)^-N]. A is the loan amount, P is the payment, i is the interest and N is the number of payments to make. The amount of the loan is therefore (200 / 0.0075) x [1 ' (1 + 0.0075)^-120] = 15,788.33 dollars.

How to Successfully Get Your Car Loan Reinstated

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When you finance a vehicle, the vehicle serves as collateral for the loan. Should you neglect to make your payments, your lender reserves the right to repossess the car and sell it to cover the remaining balance of the loan. The amount of time that will pass between the date you stop making payments on your car loan and the date the lender repossesses the vehicle will vary by lender. In many cases, however, you may be able to pay the amount you owe, plus fees, to have the car loan reinstated.

Instructions

Check your states laws concerning car loan redemption. According to the Federal Trade Commission, some states have consumer protection laws that allow individuals to reinstate their car loans if they are able to pay the past due amount plus any fees that the lender incurred by repossessing the vehicle.

Examine your original loan contract for an acceleration clause. If your car loan contract contains one, paying the past due amount and fees will not be enough to reinstate the car loan. As soon as the loan defaults, the amount due will accelerate. This means that you will not be able to reinstate your car loan without paying off the entire balance of the loan.

Contact your lender and ask for a written statement of the full amount necessary to reinstate the loan.

Pay the past due amount, plus fees, within the necessary time frame. A lender will not hold on to your car forever while waiting for you to redeem the loan. The standard time frame to reinstate your vehicle loan is 15 days.

Ask for a statement in writing that the loan has been reinstated and the date and time that the loan was reinstated. Should your car be accidentally sent to auction, or re-keyed after you reinstate the loan, this document will prevent you from having to pay additional charges to recover the vehicle.

Car Buying Rules on a Three-Day Grace Period

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Whether you signed a new, used or leased car agreement, there is no three-day grace period on automobile purchases in the United States, regardless of personal circumstance. However, there are options if you change your mind because of a mechanical problem with the car or your own financial state.

If your newly purchased car has mechanical problems, consult your state's lemon laws for information on returning the vehicle for a full refund. Lemon laws vary by state, but usually cover new or leased personal-use vehicles in their first or second year or first 18,000 miles, whichever occurs first. The dealer must be given the chance to remedy the problem in a set number of repair attempts, usually between two and four times. To determine if your vehicle qualifies as a lemon in your state, visit BBB.org to take the Auto Line quiz.

Buying a used car comes with risk, especially if the warranty is murky. According to the Federal Trade Commission's used car rule, all used car dealers must display a buyer's guide on the vehicle that outlines the warranty information, as-is condition, mechanical defects and the percentage of responsibility the dealer assumes after the sale is complete. If you did not receive a buyer's guide at the time of purchase, you have legal recourse to return the used car for a full refund.

If you purchased a car but changed your mind because of personal financial issues, there are a variety of ways to remedy the problem. Your best bet is to re-sell the vehicle, trade it in for a lower-cost model or find a friend or family member to take over the payments. You may lose money in the process, but your credit score will remain sound. If giving up the vehicle is not an option but you cannot afford the loan payments, consider filing bankruptcy, which will absolve you of the debt while allowing you to keep the vehicle.

If a repossession is imminent, talk to your creditor about your options. As a last resort, you can give the vehicle to your creditor as a voluntary repossession, which will save you money in towing and repossession charges. With a voluntary repossession, the creditor re-sells your car at auction to recoup some of the loss. Keep in mind that if the auction price does not equal your loan amount, you will be responsible for the remaining balance, which is known as a deficiency.

How to Lease Local Cars

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Leasing an automobile gives you the opportunity to drive a nicer car, while saving money on your monthly payments. Leasing is different from purchasing a car. Leases typically last from three to five years, but at the end of the lease term, you're obligated to return the vehicle in good condition. This arrangement suits anyone who enjoys driving a new automobile every few years. Before leasing a vehicle, however, it's best to know the process.

Instructions

Clean up your credit. Get a copy of your credit report and order your FICO score before beginning your car search. Fix bad information on your credit report such as late payments or high debts in an effort to raise your score.

Assess your budget. Look through your personal finances and decide how much you can afford to spend on car. Don't reveal this information to the dealership or salesman.

Save money. You can lease a car without a down payment. However, consider paying a down payment to lower your lease price and monthly payment--about 10% of the lease price.

Test drive cars. Visit several dealerships to look through their selection and test drive cars.

Negotiate a purchase price first. Don't disclose your desire to lease a car until you've negotiated a purchase price with the dealership. Make an offer on the vehicle. Research the car's value on Kelley Blue Book (www.kbb.com), and then offer a realistic price for the automobile.

Compare lease deals. After negotiating a lease deal with the dealer, contact two separate finance companies and request a no-obligation quote.

Read the lease agreement. Make sure you fully understand the lease agreement before signing your name. Check the contract for items such as mileage allowances, balloon payments and gap insurance. Ask questions if necessary.

How to Compare the Savings in a Standard MPG Car to a Hybrid Car

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Standard cars run off a combustion engine that burns gas. In contract, hybrid cars fuse a combustion engine with an electric engine --- hence the name "hybrid," according to the Oak Ridge National Laboratory --- and therefore often use less gas, thereby resulting in a higher miles-per-gallon rate. A higher mpg can help you save money every time you fill up at the gas pump. A simple calculation can help you determine just how much money you save, and may be a helpful factor to consider when you're buying your next car.

Instructions

Read the fuel economy label on the standard car in the dealer's lot. Each car sold in the United States must have this label displayed on its windshield or body, according to the U.S. Environmental Protection Agency. This label lists the car's miles per gallon during both city driving and highway driving.

Enter the car's make and model in the U.S. Department of Energy's online vehicle fuel economy database if you're researching a car that doesn't have a fuel economy label, such as a used car that you're buying through a private seller. Write down the department's estimated mpg rates for the car.

Divide the national gasoline price average, as listed by the American Automobile Association (AAA)'s online database, by the mpg rate of the standard engine car. This tells you the estimated cost for driving a single mile. For example, if the national average is $2.89 a gallon and the car has a listed MPG rate of 25, each mile driven would cost you approximately 12 cents.

Look up the mpg rate for the hybrid car to which you wish to compare the traditional car, using the same methods outlined above for the traditional car --- either using the fuel economy label, or the U.S. Department of Energy's online vehicle database.

Divide the AAA's national gas price average by the hybrid car's mpg. For example, if the average cost for a gallon of gas is $2.89 and the hybrid car gets 32 MPG, your average cost to drive a mile would be 9 cents.

Subtract the cost-per-mile of the hybrid car from the cost-per-mile of the traditional car to determine how much money you save every mile while driving a hybrid. However, some standard engine cars may outperform a hybrid car. In such cases, reverse the equation to determine how much money you save from driving the standard engine car over the hybrid.

How to Compare Auto Refinancing

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After improving your credit score, you may consider an auto refinance to see if you qualify for a lower rate. Lower interest rates on car loans can knock down the price of a car loan and save you money each month. Plus, auto refinancing works if you want to extend your auto loan for an additional four or five years, and reduce your monthly obligation. But before choosing a lender, compare different auto refinancing quotes to get the best deal.

Instructions

Pull out your current auto loan document. Review the document for information on your present interest rate, pay off date and prepayment penalties, if applicable. Knowing the terms of your existing auto loan helps you choose a new loan with better terms.

Apply for a loan with a loan broker website. Use an online loan broker website such as LendingTree.com to acquire multiple auto refinance quotes from different lenders. Refinance quotes are free, and there's no obligation to accept a quote you receive from a lender.

Get a quote from your personal bank. In addition to working with a broker to receive multiple refinancing quotes for an auto loan, check with a local bank or credit union to see if they can offer you better rates and terms on the auto loan.

Review each auto loan quote. Once you've acquired multiple quotes, do a side-by-side comparison of each lender. Compare refinancing offers by reviewing the quoted interest rate on each auto loan, the loan terms -- usually three, four or five years -- and the monthly payment on your new auto loan. This helps you assess which auto refinancing loan offers the most savings and the lowest rate. Pick the auto loan with the highest savings.

Auto Leasing vs. Buying

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Many benefits exist for leasing or buying a new car, but possible lessees must stick to certain bank requirements and restrictions. If financing, none exist beyond your monthly payment responsibility. Both options can provide a low payment that fits your budget. Weigh the pros and cons of either purchasing option so you can decide which is right for you.

The benefits of lending are obvious: making your payments results in your complete vehicle ownership at the end of the term. If you decide to lease, you can usually enjoy a lower monthly payment than a comparable finance, but without concern for future market values. Many lessees intend to walk away at the end of the term, which is usually around 36 months. Even if the vehicle depreciates a great deal, the bank assumes the resale penalties.

For lessees, several restrictions apply. You cannot go over your contracted mileage without paying fees, which usually result in 10 to 18 cents-per-mile over the allowed mileage. You cannot return the vehicle at the end of the term needing repairs or with damages, as stated in your contract. Even if you find your car needs thousands in repairs (assuming the vehicle warranty does not cover repairs), you must fix the cars or will be billed by the bank upon return. Failure to pay results in negative credit reporting. For financing, you can do with your car as you please.

General financing terms are 24 to 84 months, although you can usually pay off your car loan without concern for prepayment penalty fees. Leasing is generally most affordable at a term of 36 to 39 months. A 24-month lease is usually just as expensive as a comparable finance, while a longer term may find you out of the vehicle's warranty period, meaning you are responsible for vehicle repairs.

If you decide leasing is right for you, be careful not to pay too much toward your lease because you'll lose it all in the event of an accident or loss. Some consumers may be tempted to put thousands down toward a lease to substantially decrease the monthly payment, but doing so will not benefit you should a loss occur. Your leasing bank requires that it be listed as the loss payee on your full coverage insurance policy. Should the vehicle become a loss during a finance, you can receive payment for any amount due after the loan is paid off. For a lease, even if you paid the entire lease amount upfront, you will not receive any payment from the insurance company.

How Does "Cash Back" at Car Dealerships Work?

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Cash back offers, also known as a rebate, are automatic price discounts deducted from a vehicle's selling price. Rebates are offered from the manufacturer, not from an individual new-car dealer, so you should still plan to negotiate your sales price. Rebates don't usually offer a sales tax deduction, despite the reduction in sales price.

Cash back offers are advertised on manufacturer websites. The discounts are offered by the manufacturer and usually, you only need to purchase the vehicle to take advantage of the discount. Read the fine print in the advertisement to ensure you don't have to apply to the manufacturer's bank to qualify. Manufacturer banks often require a higher interest rate. If no restrictions apply, you can pay cash for the vehicle and still receive the discount. Check the expiration date of any offers you find, as most offers change monthly.

Most cash back incentives are offered in lieu of special financing, meaning you can take the automatic price discount or obtain low interest rate financing, such as a 0 percent loan. If you plan to finance, check your overall loan payback costs; the interest rate discount and a cash rebate often offer the same amount of savings. To determine which offer saves you the most money, use an auto loan calculator. Your total savings also depend on the financing term you choose and your down payment amount.

Most states do not recognize cash back incentives as a price deduction before applying sales tax. Even if you purchase a vehicle with a $5,000 cash back offer, expect to still pay taxes on the vehicle's sticker price. Budget for your tax payment; it can add thousands to your purchase price. If you purchase a $20,000 vehicle and pay an 8 percent tax rate, your tax equals $1,600. Cash-back incentives are similar to a down payment; most states do not recognize a down payment as a reduction in actual sales price.

No matter how large of a cash-back incentive you receive, you should still negotiate your vehicle's sticker price. Cash discounts are offered from the manufacturer, not the dealer. The dealer is reimbursed for applying manufacturer rebates. Without further negotiating, the dealership you purchase from makes full profit from your car sale. Most states recognize a reduction in vehicle sticker price before applying sales tax. For example, if you purchase a $30,000 vehicle and negotiate $3,000 off of the sticker price, you'll pay tax on $27,000 instead. Your cash-back offer is then deducted from the purchase price after tax is applied, much like a down payment.

Tips on How to Test Drive a New Car Without Buying It

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Test driving a new car can be exciting. Everything works perfectly, you have nowhere in particular to be and you get to experience the feel of a vehicle that is alien to you. Salesmen may push you to buy a car from the moment you walk into a dealership, no matter if you're ready to make your decision. Stand firm about what you're looking for in a test drive experience. Investing in a new car is a long-term financial decision and not one you should allow yourself to be pressured into because of a test drive.

Tell the salesman you are only looking to test drive a car. Explain that you aren't going to make any purchasing decisions right away because it's a big investment. Tell him that you want to experience the feeling of the car so you can know whether it's right for you before you research the car for purchase. Explain upfront that you're going to leave without purchasing a car, but that you'd appreciate any information he can give you about the car and you are grateful for the time he's spending with you.

After you get into the car, tell the saleswoman you need to be gone from the dealership by a time that is approximately 35 minutes after the test drive. Your test drive shouldn't last longer than a half hour because that would be inconvenient for the saleswoman. When you get back to the dealership, thank her for her time, then point at your watch and explain that you need to leave immediately, but you'll contact them if you decide you're interested.

Call a dealership and explain that you want to test drive a car without being pressured to purchase one. Ask if they can provide that service for you. If they can, ask them the best time to come in. Explain that you'd like to come in when they aren't busy. That way, you can spend time with a salesman who isn't focused on making an immediate commission.

How to Buy a Vehicle With Outstanding Finance

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Some states do not allow title transfers while a lien holder exists on the vehicle title. Whether you live in a state that does or not, make sure the current loan is paid off before you pay and take possession of the vehicle. Even if your state allows these types of transfers, the bank's collateral, or vehicle, can be repossessed from you if the original borrower does not pay.

Call your state's motor vehicle department to determine what paperwork is necessary to transfer vehicle ownership. Ask specifically about vehicle titles with recorded liens. Most motor vehicle departments require an original lien release, which is a bank statement proving the loan has been paid in full. Some states, such as New York, allow title transfers despite outstanding finance, although your new title will reflect the old lien information. Most buyers steer clear from titles with a lien recorded, making it difficult to sell in the future if you can't provide a clear title.

Hopefully the seller is using your purchase money to pay off the loan. In title holding states, the seller cannot even obtain the title to release to you until the loan is paid off. Otherwise, the bank provides the official release of lien to the original borrower, who then gives it to you to supplement your title and transfer paperwork. Do not accept a copy of the release, only the signed, original copy is accepted by motor vehicle departments. The seller should also provide you with a properly filled out and signed title.

Protect your funds by working with the buyer to make payment towards the loan instead of directly to the buyer. The buyer can call the bank to authorize you to call or stop in to make payment. Or, you can go together. If the seller owes more than your purchase amount, ask for him to pay the remaining due at the same time or before you make your payment, if doing so individually. Ask the seller to note the account so the bank can discuss the loan payoff amount with you. This way you can ensure loan is paid in full.

If you plan to finance the vehicle, you can apply to the same bank the buyer used for the vehicle's loan. Doing so can save time; you won't have to wait for a mailed title or wait for the seller to provide you with a lien release. If this is an option for you, work with the seller and the bank. Your approved loan amount will pay off the vehicle's current loan and the bank will pursue titling with you as the new owner.

How to Get Financing From a Bank for an Auto Loan

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Car financing is commonly offered straight through the dealership, but you can also choose to get financing at a bank to get greater control over the financing terms. Showing up at a dealership with bank financing also gives you negotiation power, as you have a guaranteed loan and don't have to rely on any special deals or offers that the dealership may try to offer you.

Instructions

Check banks for car loan rates. Banks usually disclose the lowest car rates on their website, although that might not be the rate you actually get since it can vary due to your credit status. If this information is not published on the bank's website, call its loan department.

Fill out a car loan application online, in person or by mail, depending on the bank's requirements. Car loan applications request personal and financial information. Copy your pay stub if you are a W2-receiving employee, or your tax returns if you are self-employed. Include this copy in your application as proof of income. The bank may also request a few months' worth of bank statements. Another area you need to fill out on the loan application concerns your current debt load. You'll need to provide your bills so the bank can determine how much of a car loan you are eligible for.

Go to the auto dealership once the bank has approved your car financing. The bank will provide you with the maximum loan amount that it believes you can finance. You'll receive the loan approval through the mail after applying, so you won't have to wait long to go car shopping. Once you have selected a car, the dealership contacts the bank to confirm and use the financing offer. Some banks may give you a blank certified check that the car dealership fills out with the total amount of the car loan.

Can the Co-Borrower Request My Car Be Repossessed?

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When you default on a vehicle loan, the lender may repossess the vehicle by force to recover the debt. Some borrowers may request that the lender repossess the vehicle when they fall behind in payments, but most repossessions are not voluntary. In most cases, either the primary borrower or the co-borrower can authorize a lender to repossess a vehicle if the loan is in default.

Repossession occurs when a borrower defaults on a loan secured with collateral. To recover the debt, the lender takes possession of the collateral and sells it. If repossession is voluntary, the borrower returns the collateral to the lender on his own or requests that the lender take possession of it. If repossession is involuntary, the lender takes the vehicle by force. If the proceeds from the sale don't cover the full amount of the debt, the lender can file a lawsuit against the borrower for the remainder, regardless of whether the repossession was voluntary or involuntary.

If you signed a vehicle loan with a co-borrower, you and the co-borrower have full responsibility for the loan and equal ownership rights to the vehicle. If you are behind in the payments, either one of you can surrender the vehicle to the lender or authorize a repossession. If the lender makes the decision to repossess on his own, neither one of you can prevent him from doing so.

Unlike a co-borrower, a co-signer takes full responsibility for the loan but has no ownership interest in the vehicle. Because a co-signer is not a legal owner of the vehicle, he can't turn the vehicle over to the lender in a voluntary repossession or request that the lender repossess the vehicle. However, the lender can still demand payment from the co-signer. If the co-signer fails to pay, the lender can obtain a judgment against him for the remainder of the debt and use it to garnish his wages, seize personal property or levy a bank account.

If you or the co-borrower requests a repossession of the vehicle, you are still liable for any debt the sale of the vehicle doesn't cover, and the repossession will still have a negative effect on both of your credit scores. The lender can collect the remaining unpaid debt from either borrower, regardless of which one requested the vehicle's repossession.

How to Check for Outstanding Financing on a Car

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You cannot legally complete the purchase of an automobile if the car is still financed--unless you pay off the lien holder as well as the seller of the car. Liens are placed on a car when it is financed, protecting the lien holder from being cheated out of the transaction if the car is resold. The buyer can resell the car, but the debt to the lien holder must be satisfied before the new owner can legally gain possession and obtain tags and title. That's why it's important to check for the presence of a lien before buying a car.

Instructions

Ask the buyer to provide you with the car's title, the official state document showing the ownership of the car. Review the title for authenticity. Make sure the printing on the title is clear and sharp. Hold the title under light and check for raised seals or water marks, as many states stamp these on titles. Compare the title from the seller side-by-side with a title from a car that you own; the comparison could be helpful in spotting an obviously fraudulent document, even if your title is from a different state and year. You can generally assume there are no liens on the car if the buyer presents you with what appears to be a legitimate title, but you can and should make other checks as well.

Check the car's vehicle identification number (VIN), which is visible on a small metal plate where the dashboard meets the window on the driver's side. Write down the VIN and compare it to the VIN listed on the title; the two numbers must match exactly. Suspect fraud if they do not. Take the VIN to a local office of your state's Department of Motor Vehicles. (All VIN numbers are recorded in state databases, and the Department of Motor Vehicles can check the VIN for ownership and lien holder information.)

Order a copy of the car's vehicle history report, which lists various data including details on ownership and liens (the vehicle histories are available online).

How to Finance Classic Vehicles

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If you are looking at a classic vehicles and do not have the money saved up for the purchase, it can be difficult to get financing. Typically classic cars are sold by collectors, which means that you must secure your own financing. Since the usual car valuation guides, such as Kelley Blue Book, do not offer values for collectible automobiles, you have to focus on specialty lenders for financing.

Instructions

Get your free yearly credit report from each of the three credit bureaus through the Annual Credit Report website (see Resources). Look over each credit report for any inaccuracies. If you find something, follow the dispute instructions on the credit report. Wait for a response from the credit bureau before you attempt to obtain financing. Having inaccuracies that are negative on your credit report can make it more difficult to obtain financing.

Ask the seller for a copy of the title before you try to apply for a classic car loan. According to Timeless Rides, not all states issue titles for collectible cars. If you cannot show a car title, you will not be able to secure financing.

Apply for financing through a specialty lender, such as Motor Cars Financing or J.J. Best Banc & Co. (see Resources). The lender will require that the car is inspected and that you have at least a 20 percent downpayment. You will be told which inspection service to use and cannot pick you own. Inspection prices vary. Car loans for classic autos can have terms up to 10 years.

How to Convert a Lease Money Factor to an Interest Rate

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Auto lease payments are often calculated using a lease factor instead of an interest rate or annual percentage rate (APR). The use of a money factor makes calculating lease payments easier for the dealer but keeps the actual interest rate of the lease a mystery to the car buyer. The ability to convert the lease factor allows the buyer to make sure that the lease rate is competitive and that the dealer is not trying to take advantage of the lease contract's structure for extra profit.

Instructions

Obtain the lease money factor from the dealership or leasing company. The lease factor is not printed on the lease contract. It will be a small decimal figure, such as 0.003125.

Multiply the lease factor by 2,400 to calculate the lease APR. In the example, 0.003125 times 2,400 gives an interest rate of 7.5 percent.

Divide a car purchase or car lease interest rate by 2,400 to calculate a lease factor. You can use rates from other sources to compare to the lease factor the dealer is giving on your lease quote. For example, an interest rate of 6 percent converts to a lease factor of 0.0025.

Can I Get Financing for a New Car If My Credit Is Poor?

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Auto loans are among the easiest loans to qualify for, even for people with bad credit. And even if you have bad credit, if you have a high enough income you are likely to qualify for a number of higher interest rate auto loans. That said, even high-risk auto lenders will not extend loans to borrowers whose credit is below certain limits.

Before applying for a loan, check your credit report so you know exactly where you stand. Federal law allows you to order your own credit report once per year for no charge. Knowing your credit score is important so you have a general idea of what you will qualify for and the interest rate you should expect to pay.

The lower credit your credit score, the greater risk you pose to lenders and the higher the interest rate you will be charged. In late 2010 well-qualified buyers could get auto loans at less than 6 percent interest, but those with poor credit might pay up to interest rates of 15 percent or higher.

While there is no "magic number" for a credit score, many experts say that a credit score over 720 will qualify most borrowers for the best interest rates. And the consensus is that anything below 600 will probably mean you can only get a high-risk loan with much higher rates. It will be difficult to qualify for any kind of loan with a score of 550 or below.

Income is also a big factor in the lender's decision. This is particularly true if you have poor credit. Most people with poor credit but a high, steady income will qualify for a loan.

If you have poor credit, apply for a loan before you begin car shopping so you know how much car you can afford. Also keep in mind that banks have different policies, so it is possible that one lender will approve you while another turns you down. Or one lender may offer more favorable loan terms than another.

What Is a Normal Auto Loan Rate?

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Some financial websites regularly publish average interest rates for the various types of debts, including auto loan interest rates, to keep the public updated. Check on these averages to see if the rate quote youre getting from your bank is normal and fair considering your current credit situation.

The national auto loan rate was 5.41 percent for a 5-year loan on a brand new car, 5.38 percent for a 4-year loan and 6.44 percent for a 3-year loan to buy a used car as of September 22, 2011 according to Bankrate. The normal rates for used car loans exceed new cars because used vehicles come with a higher risk. These are the most common loan terms but the average rates for other loan terms fall within the same range.

The average rate for car loans is just an average pulled from various institutions across the country. It varies depending on your credit status and other considerations. Generally, you need a credit score of 740 or higher to get the best rates. If you have a fairly high debt-load already, even if your score meets those requirements, expect to pay higher than the normal rate. The type of car you plan to finance (and its price tag) also changes the rate.

You have a better chance of getting a rate quote in the normal or average range for a car loan if you give the car seller a substantial down payment on the purchase. It shows that you have the cash to contribute to the transaction. Go to the dealership with a minimum of 10 percent down to get the best quote possible.

Generally, a bad credit score is 600 or less. Car dealerships often advertise bad credit or no credit deals, also known as sub-prime loans, to people with this type of credit. Sub-prime rates are substantially higher than the average. Expect to pay rates as high as 20 to 30 percent. With a rate of 25 percent on a $10,000 car loan for five years youll pay $7,611, which is almost as much as the car price tag that is not normal. Instead of paying that kind of interest, scale down your car price range so that you can buy with cash or wait until your credit situations improves to apply for a loan in the future.

How to Take Over a Defaulted Car Payment

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If you want to help someone behind on a car loan, pay the past due amount. To take over payments, apply to the lender for the loan amount or pursue your own financing. Unfortunately, you cannot just transfer a loan into another person's name. Every loan approval is based on individual credit information, which affects approval term, rate, down payment requirements and ultimately monthly payment amount. Once approved for the loan, you must pay taxes on the vehicle's price and complete the vehicle transfer at a state motor vehicle office.

Instructions

Check over your funds. To take over the loan, you must pay it in full. Use cash or finance the vehicle yourself. Use the same lender to transfer the balance immediately, which can help the original borrower avoid repossession.

Ask the owner to call the bank and note his account that you are going to apply for the loan's balance. The seller should give you any information the bank requires and authorize you to discuss the account. Before applying to the lender, have the vehicle's information handy, including its VIN (vehicle identification number), year, make, model and mileage.

Apply to the bank either by phone or in person at a branch office. Provide identifying account and vehicle information and apply for the loan's payoff amount. Proceed to give relevant credit application information, such as your date of birth, Social Security number, name, address, employment and address information.

Review your loan approval information as soon as you receive notification of approval. This includes term, rate and monthly payment. If you wish to put money down toward the loan, speak to your representative about doing so.

Follow any instructions the bank requires, which may include providing your most recent paystub or proof of address. Call your insurance company to add the vehicle to your policy and obtain proof of insurance to bring to the bank --- a requirement of most lenders.

Go to the bank to complete your loan contract. Once your loan is complete, the bank immediately pays off the default borrower's loan. Take all applicable paperwork to a local motor vehicle office to complete your title and registration; your lender will offer further instruction.

Can You Get a Car Loan If You Are Unemployed?

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There are certain situations that will allow you to receive a car loan even if you are unemployed. If you meet the lending criteria for financial institutions, they will approve your loan.

If you have the ability to pay, you can be approved for a car loan. There are sources of income such as Social Security, pension, interest income, disability income, VA benefits or court-ordered child support that may qualify you for a loan.

Lending institutions will consider you for a car loan if you have the willingness to pay. If you have paid your debts on time in the past, it's most likely you will be approved for an auto loan.

You need some type of stability. If you have been at your residence for one year or more, this demonstrates some type of stability. Your previous residence also will be considered. This criterion is not as important as the first two.

Having a down payment to put down also will help you get approved. When someone has a down payment, they are less likely to default on the loan.

Sometimes you can get a co-signer to strengthen your loan application. If you are insufficient in one of the areas above, a co-signer can be considered. However, when you miss a payment, the co-signer will be expected to pay.

If your credit is bad, you could qualify for a bad auto loan. There will be substantial fees, and the interest rate will be higher, which means you pay more money in finance charges.

What to Ask When Buying a Car?

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Car ownership is an essential part of everyday life for many Americans. People rely on cars to commute to work, run errands, and get to wherever they need to be, when they need to be there. Cars range widely in terms of costs and features. It is important to ask questions of a seller and yourself when buying a car to get one that meets your needs and doesn't come with any surprise costs or drawbacks.

A seller should be able to tell you the history of a car and why they are selling the car. This question does not apply to new cars, but the history of a used car can indicate whether it might be likely to experience problems in the future. For instance, if a car has seen several accidents in the past, it is more likely to have problems in the future than a car that has only been used for errands that has never been in an accident. Carfax and AutoCheck are vehicle history reporting services that allow drivers to check vehicle history based on a car's vehicle identification number.

A car's mileage is how many miles it has been driven since it was brand new, which will be displayed on the odometer on the car's dashboard. The lower the car's mileage the better. A heavily used car might only be a few years old but have over 60,000 miles. Mileage is a better indicator of the wear and tear the car has gone through than the actual age of the car.

Car insurance can be expensive, but the cost varies based on the type of car you buy and how much insurance you buy. It typically costs more to insure expensive cars, and cars with safety features like anti-lock brakes and airbags may cost less to insure than cares without extra safety features. State law requires liability auto insurance.

Any car will get you from point A to point B, but many drivers demand extra safety an convenience features such as power windows, power doors and air conditioning. It is important to identify all the car's extra features and whether the car has a manual or automatic transmission. Another feature that is important to many drivers is four-wheel drive; cars with four-wheel drive will be more able to traverse rough roads and avoid getting stuck in snowy conditions.

Cheapest Way to Lease a Car

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Leasing itself is usually cheaper than a finance, depending on the money you put down and how long you plan to lease for. While various leasing provisions are available for an interested lessee, choosing some options over others, such as term, amount down and mileage, will lower your payment.

If you check manufacturers' websites to view leasing advertisements, you'll notice that most leases run for a period or 36 or 39 months. While some people have different needs that leasing can provide for, such as an increased yearly mileage or an extended term, keep in mind that dealers advertise the lowest-priced scenario. Because leasing is based on paying for the portion of the vehicle that you use, about half of the vehicle's price stays out of the lease. This amount is based on bank-determined future market value. A vehicle depreciates quickest in the beginning of a purchase, figuring the car has its highest resale value at 36 to 39 months, or much less of a resale value at just 24 months or at 48 to 60 months when the vehicle is older and the mileage higher. Choose the 36- or 39-month option for the lowest monthly payment.

Just as with leasing term, the future market value is also figured on expected lease-end mileage. The ideal yearly mileage for a vehicle is 12,000 per year -- anything after causes a decrease in resale value. Again, check the manufacturer's advertisement and you'll find the advertised mileage allowance is 12,000 miles per year. Some leasing banks offer up to 18,000 miles per year, but the increase in monthly payment will equal that of a finance payment. Some banks also offer a 10,000 miles per year option, but unless the lease is cheaper, it is not worth choosing over the 12,000-mile-per-year option. Choose 10,000 or 12,000 miles per year to enjoy a cheaper payment.

The more money you put down toward a lease, the more your payment will drop. While this seems obvious, it is important to note the impact that $1,000 down has on a lease payment. For every $1,000 that you lease (remember that about half of the vehicle's price stays out of the equation), you will pay around $30 per month in payment. This is more significant than a down payment for financing, which equals about $18 per month in payment. Put down enough money to lower your payment, but not so much that you could suffer a loss. Be aware that if your vehicle becomes a total loss as determined by your insurance company, your full-coverage policy pays the bank, not you. Even if you pay your entire lease up front, you will not gain any of it back in such an event.

Leasing is based on the manufacturer's suggested retail pricing (MSRP). Just as most people would not pay sticker price for a vehicle purchase, you should also negotiate the same if leasing. Keeping in mind that every $1,000 equals $30 a month in payment, you should be able to negotiate at least $1,000 off of the MSRP (at least for cars over $20,000) which should automatically reduce your monthly payment or reduce the amount of money you have to put down. Research pricing just as you would if you were going to buy the car in cash, and negotiate the pricing accordingly.

What Happens If I Leave an Auto Loan Defaulted?

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If you aren't paying your auto loan provider, expect your lender to repossess your car. Once your vehicle is seized by your lender, you may pay to get it back or allow your lender to sell it. If the lender's sale amount does not warrant enough money to satisfy your loan amount, you must pay the balance due. If you still do not pay, your lender may sue you.

If you miss a car payment, your auto loan provider will try to contact you by mail and phone. If you do not respond to its correspondence, expect your lender to contact you at your place of employment or to contact any references you offered at the time you initiated your loan. Read your loan contract over to find out when your lender can start the repossession process. Although most contracts state that repossession is possible after you miss just one payment, many lenders do not start the repossession process immediately. Call your lender to discuss payment options; it may offer help so that you become current on your car loan.

If you fail to discuss your loan with your lender or to make arrangements to pay past-due payments, expect the lender to start the repossession process. If you do not make arrangements to return your car, known as a voluntary repossession, your lender will hire a repossession company to seize your vehicle. The repossession company can take your car from just about anywhere, including a parking lot, your place of employment, a friend's house or your driveway. Avoid the potential embarrassment and inconvenience of an involuntary repossession by arranging for alternative transportation and bringing the car back yourself.

After your vehicle is repossessed, your lender will send you notice of its intent to sell your car and the amount due if you want your car back. You can pay your past due amount and the lender's repossession fees or the vehicle's total loan balance depending on your lender's requirements. If you do not pay to get your vehicle back, your lender will sell it either privately or at an auction. Once the vehicle sells, you'll receive notice of its selling price and the amount you owe for the lender's loss, or remainder or your loan balance. Call to make arrangements to satisfy the loan's balance and to avoid further consequences.

Your lender will still try to contact you to make payment arrangements for your past-due loan amount after your car sells. If you do not pay or contact your lender, it will start to pursue its other collection options. At some point, you can expect your lender to sue you for non-payment, even if it's over a year later. If your lender wins the court case, it can pursue a judgment and garnishee your wages.

Is Insurance on Leased Cars the Same As on Owned?

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If you own your vehicle outright, you can insure it as you please. Otherwise, financing and leasing insurance requirements are very similar. During the term of your contract, full-coverage insurance, or a collision policy, is required. Lenders can also require deductible limitations and higher limits than those required by your state.

A collision policy includes liability and comprehensive coverage. The liability portion pays for damages you cause to other people or property. Comprehensive coverage includes repairs to your car or its market value if your vehicle is damaged from matters such as theft, fire, vandalism, animal impact or weather-related damages. Collision coverage increases coverage to include repair cost or market value replacement for your vehicle no matter who is at fault in an accident or why. For example, if you crash your car into a road sign, collision coverage will pay to repair it.

You can increase coverage for the liability portion of your collision policy, and you must also choose a deductible. States require only minimum limits for bodily injury coverage, which pays for damages you cause to other people in an at-fault accident, and property damage coverage, which pays for property you damage in an at-fault accident. Deductible options range by insurance provider. A deductible is the amount of money you will pay out of pocket for repairs or market value payment when at-fault. Most insurance companies offer a 0 to $1,000 deductible option.

Whether financing or leasing, expect to increase your bodily injury and property damage limits. While your state may require very little coverage, most lenders require more, which increases the cost of your insurance premium. Your policy cost may increase, but you'll have adequate coverage in a serious accident. Lenders and leasing companies also require lower deductibles; many set the limit at $500, which also increases the cost of your policy. Leasing banks often require gap insurance, which may be a requirement of your auto loan provider as well. Gap insurance covers the gap between your insurance company's market-value payoff and the bank's loss of value if your vehicle is declared a loss.

If you purchase your new car in cash, you can insure it with your state's liability policy only. Most states require this coverage for a vehicle to remain registered and on the road. Although liability coverage is your cheapest option, it offers no coverage for your vehicle. Unless you can easily replace your new car if it became a loss, add collision coverage to your policy and consider increasing your limits as well. This protects your purchase and finances in the event of a loss or a serious accident. Otherwise, you'll find yourself without a car or can face a lawsuit if the injuries and damages you caused are more than your state's limits.

Is There Any Disadvantage of Putting Your Car Insurance Under Your Parent's Name?

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Getting your first new car is an exciting experience, but you must tame your emotions a bit to ensure that you can get the car properly registered and insured. If you're a young person, it is tempting to simply choose to put your car on your parents' policy, but first understand any potential disadvantages of this arrangement.

When you first purchase a vehicle, you must provide proof of insurance in the majority of states. A car insurance policy protects you, other people, your vehicle and the property of others. When you purchase a car as a teenager or young person and you still live under your parents' authority, you may have the option of maintaining coverage under your parents' auto policy. This is often cheaper for you than trying to get your own policy.

One disadvantage of going on your parents' auto policy is that you may put them in a higher risk category. Teens and young drivers are more prone to incidents while driving due to lack of experience. Also, issues like texting and talking on cell phones while driving are a major concern of insurers. If an insurer allows you to insure your car under your parents' policy and you then experience an incident, that could drive up your parents' rates dramatically.

In some cases you may have to list one or both of your parents as the owner of the vehicle in order to use your parents' insurance policy. In this case your parent partially or wholly owns the car --- it is called having an "insurable interest" in the vehicle. If a parent is the titled owner, he decides what happens to the car. You do not have rights over the vehicle, just permission to drive it from your parent. The insurer lists you as a driver on the policy.

You're more likely to get approved for your own separate policy if you have a clear driving record. Also, as a young person it helps if you take a defensive driving course (and observe what you learn). The course could eliminate points from your license and lower your rates. It is crucial to maintain the policy in good standing going forward.

The Regulations for Buying a Vehicle in Pennsylvania

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Buying a vehicle in Pennsylvania requires several important steps. Each component of the buying process is in place to help ensure that vehicles are sold to only those legally able to operate a motor vehicle. A dealership that does not adhere to these buying requirements risks losing its license to buy and sell vehicles in the state. The Pennsylvania Department of Transportation oversees vehicle buying regulations.

In order to legally purchase an automobile in Pennsylvania, you must have a valid, state-issued driver's license. Your new vehicle must also be insured. The auto insurance policy for the vehicle must be created by a licensed insurance agent certified to create auto insurance policies in Pennsylvania. You are required to submit proof of insurance coverage before an auto dealer or licensed sales agent may release the vehicle into your possession. Pennsylvania does not allow you to take delivery of a vehicle the same day you purchase it. This regulation is in place to allow a dealership at least one business day to verify your insurance information and driving record.

To legally transfer ownership of a vehicle, the dealership or vehicle owner is required to provide the purchaser with written proof of ownership. This is a document stating that the car dealership or other business is the legal owner of the vehicle and its ownership is being transferred to the purchaser. Acceptable ownership documents include the manufacturer's certificate, a Pennsylvania certificate of title or a certificate of salvage. Additionally, all new vehicles built after 2008 with gross vehicle weight of less than 8,500 lbs. and less than 7,500 miles on the odometer are required to be certified by the California Air Resources Board for vehicle emissions. The dealership should present you documentation that the vehicle meets these standards upon purchase.

If you are purchasing a vehicle with an out-of-state title, review the vehicle's ownership documents carefully. If the vehicle has a current lien, its lien holder must release the vehicle's title into the Pennsylvania Department of Transportation's possession so the title may be legally transferred. According to PennDOT, many lien holders refuse to do this unless payment arrangements are made to satisfy the lien in full. Once the lien is satisfied, the vehicle's title should have the owner's signature and current odometer reading present on it. The owner's signature may also require notarization depending on its original issuing state.

A licensed sales agent is required to verify the legitimacy of any loan documents used for the purchase of a vehicle in Pennsylvania. This ensures that the loan is valid and that the lender is prepared to release appropriate funds to pay the dealership for the vehicle. If a consumer pays more than $10,000 in cash for a vehicle, she is required to fill out IRS Form 8300, Report of Cash Payments, before delivery is taken on the vehicle. This form must be submitted to the IRS no later than 15 days after the purchase of the vehicle.

Is Ending a Vehicle Lease Early Possible?

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It is possible to end your vehicle lease early. While some options may not be the most favorable to you, you can end your lease and avoid having to pay any excess charges, or at least purchase or lease a new car again. There are even ways to get out of your lease early without penalty.

You can terminate your lease early if you pay every payment due, in addition to bank-determined penalty fees, which you can find out more about by contacting your bank. You can find out the purchase price of your car and sell it or trade it in to a dealer for a new car for at least the amount owed to the bank, if not more --- any extra profit is yours to keep, or you can come up with the difference to pay back the bank. Your bank may even offer a "pull-ahead" program, which allows you to get out of your lease free of fees or payments in the event that you lease or buy a new car and use the same bank.

To sell or trade your vehicle to a dealership for the amount you owe, you should have some equity in your vehicle, or at least enough equity to equal your lease buyout amount. This is most likely to happen at the end of the lease term, as payments are cheaper than they'd usually be for a finance, which creates equity faster. Even if your equity and payoff amount equal out, you can benefit from tax savings as well. For example, certain states allow you to deduct the trade-in value from the new car selling price before you're taxed; this can save you thousands of dollars.

Good to excellent credit is required for a lease, and also to lease again. If you qualify for a pull-ahead program, which allows you to end your lease in the event you purchase or lease a new car, your credit must have remained in good standing during the time of your lease. Unfortunately, this doesn't mean payments must be satisfactory with only your lease but with all other bills and credit as well. You may not be able to lease again or have difficulty financing because of credit issues that arose during the years of your lease.

If you qualify for a bank-approved pull-ahead program, it may change before you can take advantage of the offer. If you receive mail or notification of an opportunity to get out of your lease payment penalty-free, make sure you check the date that the offer is good for. If you're upside down on your lease and have chosen to trade in your car using an advertised dealer allowance --- meaning you can take advantage of thousands off of the new car to help cover negative equity --- find out how long the offer is good for. A pull-ahead program can offer the opportunity to end your lease up to a year ahead of time, and dealer incentives often change monthly.

If you really want out of your lease and none of the traditional options interest you, check with your leasing bank to find out if lease transfer is an option. Certain banks don't allow this, and fees may apply, depending on your lender. Also, your bank may require that you stay on the lease contract with the assuming party, making you liable for charges incurred at the end of the lease. However, this option may work well for you. Check the LeaseTrader and Swapalease websites to see if this option could work for you.

Trouble Financing a Car

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When you have poor credit, financing a car can be a challenge, and coming up with the money you need may take some work on your part. While auto financing may not be easy for you, you may still find some options out there to help you buy the car you want.

If you have poor credit, you may want to focus on securing the auto loan before you actually shop for your car. Many people mistakenly think that you have to pick out the car and then take whatever financing is offered by the dealer. That, however, is not the case. You may secure auto financing from any number of lenders in the market. You may start the process by applying with online lenders and auto lenders in your local market.

It is to your advantage to come up with a larger down payment. Lenders feel more comfortable extending credit to a buyer who is investing a significant amount of his own money into the purchase. It lowers the inherent risk for the lender and also means lower payments for you over the life of the loan.

Even if you have poor credit or no credit, you may still obtain financing from automobile dealers who promote "guaranteed approval" or some other similar term. These are also sometimes referred to as "buy here, pay here" dealers. With such dealers, as long as you have a job that provides regular income you can get an auto loan. The downside to these dealers is that they charge very high interest rates because of the risk that comes with guaranteed approvals.

When working with a dealer, negotiate all of the terms separately. Negotiate the price for the car and negotiate the price for the trade-in. Then negotiate the terms for the financing. Dealers sometimes try to bundle everything together and make more profit. Avoid financing extended warranties and insurance when the interest rate on your loan is high. You may acquire them separately without paying interest.

What Happens When a Vendor Places a Lien on Your Vehicle in Houston, Texas?

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In Houston, a vendor lien on your vehicle's title represents a third-party financial security in your vehicle until the vendor's charges are paid. Similar to a bank or credit union lien, the vendor lien will only be taken off your vehicle's title when the vendor's outstanding balance is paid off, which will release the lien solely into your name.

The vendor that places a lien on your vehicle is a partial owner of the vehicle until the financial security owed to the vendor is paid off. In other words, the vendor is the secondary owner of the vehicle until you pay the vendor's fees.

The only way to release a vendor lien on your vehicle's title is to pay the vendor, who will remove the lien from the title and send you the clear title, releasing you of all debt. If there is no financing on the vehicle, the vendor will release the lien to you once the vendor's fees are paid in full. Otherwise, you must satisfy your lender's lien before your clear title will be released to you.

Houston does not recognize clear (no vendor or financing lien) vehicle titles from other states unless you re-title your vehicle in Texas, which releases the out-of-state lender lien if the amount has been paid off. To title your vehicle in Houston, visit the Houston County Tax Office and fill out a title application fee. At the time of publication, the fee is $28 per vehicle and you must also provide a copy of your title and a release of lien form. Once your application has been processed, the Houston County Tax Office will send you a new, lien-free title.

If there is a vendor lien on your vehicle's title but you want to sell, you must fill out a release of lien form before the vehicle is titled to the buyer. You will also need to give the buyer your vehicle's title and last registration receipt. The new buyer must fill out a new title application form at the Houston County Tax Office, preferably with you present (in person). If the buyer cannot accompany you to the Tax Office, fill out a vehicle transfer notification form at the Tax Office within 30 days of the sale; the office will notify you when the buyer titles the vehicle, releasing you of all liability.

What Are the Purposes of Refinancing Automobiles?

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The term refinancing is often associated with mortgage loans. But if you finance a car through a bank, you can qualify for an automobile refinancing. But before talking with a lender, it's important to understand the reasons for refinancing and the potential consequences.

Refinancing a car loan requires speaking with a bank or credit union and then completing an application for a new car loan. The new car loan replaces the original auto loan. The new lender pays off the old debt, and you begin making payments to the new lender, with adjusted terms.

The interest rate on auto loans is determined primarily by credit history. Someone with a recent bankruptcy may qualify for an auto loan but receive a high rate due. If you improve your credit, it may be worth refinancing because a lower rate is possible.

Building your credit score and getting a lower rate with an auto refinance has a positive domino effect. The interest rate on a vehicle loan influences the monthly payment. Naturally, paying a reduced interest rate can decrease the monthly note on a car loan.

Owing more than your car is worth is considered an upside down vehicle loan. There are options to correct this. For example, you could make higher payments to pay down the balance more quickly; or you can refinance to a shorter loan term and pay off the car as fast as you can. Some auto lenders will not refinance if you owe more than the car is worth, and getting approved may require shopping around and speaking with different banks.

How to Trade in an Auto Lease

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The process of trading an auto lease is similar to trading a financed vehicle. You can purchase your leased vehicle at any time, usually for its lease-end value in addition to any monthly payments left in your contract. Because a leased vehicle's purchase price should equal its value near the end of the term, you may owe more than the vehicle is worth. If the lease buyout is less than the vehicle's value, you can use the equity to put toward your new loan.

Instructions

Go to a dealership you want to purchase from. To find a dealer in your area or to shop local inventory, conduct an online search or visit a manufacturer's website to find dealers by your zip code. Call to make an appointment or stop in with your leased vehicle.

Bring your account number and bank information with you to the dealership. Your salesperson will call your leasing bank to find out your leased car's purchase amount. Speak to a salesperson and state your intentions.

Tell your salesperson which car you want and ask to test-drive it properly equipped. If you have not found a car yet, shop the lot until you find one you like. Once you have a new vehicle picked out, offer your account information so your salesperson can retrieve your leased car's buyout amount.

Give your keys to your salesperson to have your car appraised. Discuss leasing and financing options for the new car, including pricing, money down, term or mileage preferences. Wait while the salesperson figures out your monthly payment with your lease trade-in included.

Talk about money down if necessary; you may have to put money down if you owe more than the car's value. Fill out a credit application; your leasing or financing options depend on your credit standing. Once your credit application is complete, the dealer can submit your application electronically.

Purchase the new vehicle and drive it home the same day if approved, or make an appointment to come back and complete the purchase. Give the salesperson any additional information it requires. You likely have to bring your leased vehicle's title, if you have it (some states send the title to the leasing bank).

Set up your insurance with your salesperson; he will offer your agent the correct information and obtain proof of coverage to provide to your state's motor vehicle office and lender. Sign your contracts and motor vehicle work to complete your purchase.

Advantages & Disadvantages of Paying Cash for a Car

11:30 PM 1 comment

The main appeal of paying cash for a car is that you avoid accumulating additional debt. Nonetheless, there are times when carrying debt may be a better option for people who want to buy a home, bolster their credit rating or build an emergency fund.

You own your vehicle outright when you pay cash for it. You wont be subjected to the threat of a bad credit rating or a repossession due to falling behind on car payments made to a lender. Paying cash allows you to avoid monthly interest charges on an auto loan, which would increase the cost of your vehicle throughout the life of the loan. You also keep more money in your budget to save and invest if you're not strapped with a monthly car payment.

People who are trying to build a good credit history miss the opportunity to do so if they pay cash for their vehicle. Paying a car loan on time each month can improve your credit rating. Consider whether paying cash for a car would leave you short of money for emergencies. One of those emergencies could involve a major repair for your car. Therefore, an auto loan may be a better option if you have to drain your savings account to pay cash for a vehicle.

You could hamper any home-buying plans you have if you pay cash for a car by unwittingly increasing your mortgage costs. Mortgage lenders generally want home buyers to make a down payment that's equal to 20 percent of a home's purchase price. Home buyers who pay less usually have to get private mortgage insurance, or PMI, which allows a lender to recover costs associated with loan defaults. You could pay as much as $1,000 per year for PMI if you put down just 5 percent on a $200,000 loan, according to a July 2010 article published by "Smart Money." Reconsider paying cash for a car if you also intend to buy a home with less than a 20 percent down payment.

You may get an unenthusiastic reception at an auto dealership if you want to pay cash for your car because dealerships make more money from financed purchases. Some salespeople may even try to persuade you to finance or lease your vehicle instead of paying for it outright. Extended warranties, upholstery treatments and other extras are things that car buyers are more likely to purchase if they can spread out the costs through monthly loan payments, according to "New York Times" writer Micheline Maynard. Maynard noted that such extras can account for as much as 75 percent of a dealership's profits.

What Does It Mean When You Co-Sign for a Car Loan?

3:09 AM No comments

Co-signing an auto loan involves assuming full responsibility for another person's loan. The arrangement comes with financial risks, and it could damage the co-signer's credit rating. The main difference between co-signing an auto loan and taking out your own auto loan is that you won't have any rights to the vehicle that the loan buys.

You become a guarantor if you co-sign an auto loan, which means you guarantee repayment of the loan if the borrower doesn't repay it. If necessary, the auto lender can sue you to collect the unpaid amount. The payment history for a co-signed loan appears on both the borrower's and co-signers credit reports. Therefore, any late payments can negatively affect the credit ratings of both parties. That's one reason the U.S. Federal Trade Commission warns consumers to think twice about co-signing auto loans.

The FTC indicates that many co-signers eventually have to repay loans for borrowers, so co-signing also involves ensuring you can afford the payments before you agree to become a co-signer. Figure out how much you could pay on an auto loan each month, while you continue to pay your other bills. Car buyers usually repay auto loans in 36 to 60 months. The longer borrowers take to repay their loans, the lower the monthly payments will be. However, borrowers also pay more in interest charges if they stretch out the payments over a longer period.

Co-signers take on the responsibility of an auto loan with none of the potential benefits, according to the Illinois Legal Aid organization. The organization indicates that co-signers dont have any rights to the vehicle the borrower buys with the loan, even though the co-signer is equally responsible for repaying the loan. As a result, a co-signer cant take the vehicle away from the borrower for his own use if the borrower isn't making payments on it.

The lender can repossess a co-signed vehicle if both the borrower and co-signer fail to make payments on it. A repossession would damage the co-signer's and borrower's credit rating, and it would remain on their credit reports for seven years. Furthermore, they still may be obligated to repay the remaining balance on the loan after the lender repossesses the vehicle. Lenders often sell repossessed vehicles to recoup as much of the loan balance as possible. However, the lender can require the co-signer and borrower to pay the difference if the vehicle sells for less than they owe on the loan.

How to Buy Another Car When Your Car Is Repossessed

12:28 PM No comments

Most people need reliable transportation to go to work and take care of personal affairs. But if you recently lost your vehicle to repossession, you may have to rely on public transportation or other people to get around. A repossession stays on your credit report for seven years and lowers your FICO credit score. A low credit score can limit your financing options. However, several techniques can help you acquire another car after losing your vehicle to repossession.

Instructions

Pay cash and avoid a car payment. Check local used car dealerships to see if they have a selection of low-priced automobiles. Paying cash alleviates credit checks and high finance fees.

Get someone to sign the auto loan agreement with you to qualify for another car after a repossession. Submit the co-applicant's personal and financial information with your application.

Finance a cheap car to keep your loan manageable. You'll likely pay a high interest rate if financing the car, so avoid a high car note by selecting a vehicle with an inexpensive price tag.

Put a down payment on the car if financing the purchase. A down payment (around 20 percent) decreases how much you will finance with a bank. This can compensate for paying a higher rate on the car loan.

Go to a privately owned dealership. Sub-prime and privately owned dealers may offer in-house financing and give you a car loan with a repossession in your past. Research lenders first, and acquire quotes before making a decision. Plan to pay a higher rate on the vehicle loan.

Friday, July 24, 2009

Long-term Pricing

Down Payments

Leasing Terms

Read Your Contract

Basics of Car Liens

Repossession

Repossession Without a Lien

Wrongful Liens

Thursday, July 23, 2009

Do You Have a Job?

How Is Your Credit History?

Do You Have Money for a Down Payment?

How to Apply

Wednesday, July 22, 2009

Time for Default

Collection Proceedings

Notice of Default

Civil Suit

Monday, July 20, 2009

Interest

Payments

Payment Amount

Loan Amount

Instructions

Sunday, July 19, 2009

Lemon Law

Used Car Rule

Financial Solutions

Voluntary Repossession

Instructions

Instructions

Saturday, July 18, 2009

Instructions

Benefits

Restrcitions

Term

Warning

Friday, July 17, 2009

Resources

Interest Rate Offers vs. Cash Back

Tax Considerations

Dealer Negotiations

Be Honest

Set an End Time

Call Ahead

Motor Vehicle Requirements

Lien and Title Release

Paying Off the Loan

Financing

Thursday, July 16, 2009

Instructions

Tuesday, July 14, 2009

About Repossession

Co-borrowers

Co-signers

Considerations

Monday, July 13, 2009

Instructions

Instructions

Instructions

Checking Your Credit Report

Low Credit Score

Credit Score

Income Is a Big Factor

Qualify for the Loan First

Sunday, July 12, 2009

Average Auto Rates

Credit and Other Considerations

Down Payment

Warning About Bad Credit Offers

Saturday, July 11, 2009

Instructions

Consistent Income

Credit History

Stability

Down Payment

Co-signer

Bad Credit Loan

Friday, July 10, 2009