What Happens When You Don't Pay Your Car Payment?

If you don't pay your car payment, your creditor might repossess your car, in addition to adding late fees and interest to the outstanding amount on your loan. Contact your creditor before you miss a payment, to discuss the situation and options.

Repossession

Most state laws allow your creditor to seize your vehicle, even on private property, without notice if the auto loan is in default. Your contract should state the determining factors of default. Missing between one and three payments typically amounts to default.

Sale

After repossessing your vehicle, your creditor can sell it. State law may require your creditor to notify you of the date and time of the sale.

Personal Property

You will be allowed to retrieve any personal property left in the car. Your creditor can't legally sell your personal property.

Deficiency

The difference between the amount your creditor gets for the vehicle and the amount you owe on the contract--plus late fees, interest and any expenses detailed in the contract--is the deficiency. If you owe $5,000 and the car sells for $3,000, the deficiency is $2,000 plus any fees owed under the contract. Most states let creditors sue for the deficiency.

Reinstatement

Some states allow you to reinstate your loan by paying the past-due amount in full before the auction date.

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Does It Adversely Affect Your Credit Score if You Refinance Your Car?

It's tough to outrun your credit score. Any time you attempt to finance a home, rent an apartment, purchase a car, apply for a student loan or fill out an application for auto insurance, someone is likely to run a credit check. A number of variables impact your credit, which may cause you to wonder if attempting to refinance an auto loan is a good idea.

Reasons You Might Refinance

You might want to refinance your automobile for a number of reasons. It's possible that your original interest rate was high due to your debt ratio or credit score. If your credit score has improved since that time, you may consider refinancing at the lower rate. It may be that interest rates have simply dropped since the time you purchased your car or that your bank is running a special rate for its customers that you'd like to take advantage of.

What Happens

As the refinancing process gets underway, your original lender is being paid off as your new lender takes possession of your auto lien. As far as your credit is concerned, there is an addition and subtraction going on at the same time. This is referred to as a "trade line."

Impact on Your Credit Score

Any time anyone other than you checks your credit, your score take a little ding, generally less than five points. You can cause that slightly lower score to rebound quickly by making your new loan payments on time each month.

Overall Outcome

The slight dip in credit score you experience will be offset by the fact that, as you make payments, your credit report will show that you are efficiently handling another account. If refinancing your automobile lowers your interest rate, helping you pay the loan off earlier, or provides you with a more manageable payment, it is likely worth going through the process.

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How to Avoid an Auto Repo

The repossession of a car can be a traumatic experience, particularly if you depend on your car to get you to work or your kids to school. In many places, having a car is the only way to get around to get groceries and other necessities. Avoiding a repossession can be simple, if you are upfront and honest with your lender. However, if you are completely unable to pay, due to a job loss or other unfortunate circumstance, avoiding repossession becomes more difficult.

Instructions

1

Work on a budget. If you have recently had a catastrophic event that has financially depleted you, you will need to figure out how much you can pay for a car, if anything, and how you are going to make that work.

2

Call your lender before you default. If you have already defaulted, call anyway. Your lender doesn't want your car. It's worth much less now than it was when you bought it. Your lender wants your money. Call them and be honest. Tell them you lost your job or whatever else occurred, but explain that you want to work with them. Tell them what you can pay. Your lender may be able to restructure your loan.

3

Sell your car. If you can sell it for what you owe on it, this might be a valuable option, however, it does leave you without a vehicle. If you live near public transportation or have another car, this might be worth your while. If you can't sell it for what you owe, see if you you can sell it for enough so that you can make up the difference.

4

Give it up. If facing repossession and a horrible credit report, giving up the car voluntarily looks better than if it's taken from you. This will also help you avoid legal fees and other costs from it being repossessed. If you lease your car, you may be able to turn it in without a big penalty.

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Websites That Sell Used Cars

You can buy nearly anything on the internet, including used cars. Used car Internet sites function in a manner similar to the newspaper classified sections of yesterday, though now you can often find the exact vehicle for which you are searching. You can often find research tools and financing options online when buying your used car from a website.

AutoTrader

AutoTrader offers used cars from private sellers and businesses alike in a search engine format. You can search by make and model on the website, as well as by your zip code. You can create an account on the website in order to save your browsing history. This feature is beneficial for finding used car listings again after you have left the page. When you buy a used car from AutoTrader, the company provides numerous resources for financing and insuring the vehicle.

CarMax

CarMax offers a used car website in addition to its physical locations throughout the United States. CarMax, unlike other websites that sell used cars, inspects its vehicles for problems before offering the vehicles for sale. CarMax provides customers with a vehicle history report and, as of 2010, a five-day money-back guarantee. CarMax provides financing for your used vehicle purchase if you qualify.

CarsDirect

CarsDirect offers a used car database comprised of private and corporate sellers. In addition to its used car search engine, CarsDirect provides research information and reviews on prospective used vehicles. After you purchase your vehicle, CarsDirect can provide financing resources for you.

EBay

For used cars in an auction format, eBay provides a search engine for a variety of vehicles. Listings are provided by private and corporate sellers, and vary in auction length. You must be the winning bidder on an auction in order to win the vehicle. After winning the vehicle, you must pay via a secured payment method online, as well as in person for the remaining balance. The company provides a rating system for sellers to ensure that you are buying from a quality seller.

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Buying Vs. Leasing a Minivan

If you need a minivan for extra room or family demands, you can likely save money over the next few years by choosing to lease just as long as you can stay within the requirements of your contact. Leasing is restrictive, so consider your overall minivan use to determine whether leasing or buying is best for you.

Mileage

Determine your current annual mileage and expected future mileage over the next few years. Many leasing banks offer up to a 15,000 mile per year mileage allowance. Carefully consider the use of your minivan over the term of your lease. If you have children or other family members that you drive around frequently, you may exceed your mileage allowance. Fees for exceeding your mileage allowance may cost up to 20 cents per mile. If you are unsure of your family's transportation needs, you may benefit from buying instead. If purchasing, you can drive your minivan without restriction or penalty even if your needs change.

Wear-and-Tear

Many leasing banks offer up to $1,000 of wear-and-tear allowance for a minivan, which covers normal vehicle wear such as light scratches in the paint or slight wear on the seats. If damage exists beyond the bank's allowance, you will be charged for loss of the minivan's value. You must consistently repair and maintain your vehicle while leasing, as well. If purchasing, you won't be penalized for excess damage or wear as the minivan's owner. Unless you can avoid excessive seat and carpet wear, stains and other issues possibly caused by driving around a family or group of people, you can avoid excess lease fees by purchasing.

Trading or Selling

If you lease, the bank assumes responsibility for the minivan's future market value. When you return the van at the end of the contract, the bank resells it and assumes any loss of value if it was wrong about the minivan's future value. Financing or purchasing the minivan leaves you responsible for the vehicle's future market value. If you intend to trade out of the van or sell it privately within a few years of purchase, leasing protects you from a negative equity position.

Overall Costs

With any kind of vehicle lease, you should compare the overall costs of leasing and purchasing. Leasing may provide a cheaper monthly payment if you want to avoid providing a down payment and plan to return the minivan to the bank at the end of the contract. If you decide to purchase your lease, you'll likely spend thousands more than a purchase. A smaller monthly payment doesn't help to create equity in a vehicle. If you fail to negotiate pricing of your leased minivan, you'll likely end up paying sticker price in addition to taxes and fees for ownership.

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What Happens if You Break Your Car Lease Because You Are Unemployed & Disabled?

By signing a car lease, you agree to drive the vehicle and make monthly payments for a certain length of time. If you become disabled and unemployed, you may have to break your car lease. Breaking a lease has consequences to your finances and your credit score, but you may have other options.

Financial Issues

When you know you will need to break your car lease, you have the option of returning the car to the dealership. You can also request a voluntary repossession. However, simply returning the car does not release you from any financial obligations. You will owe the dealership the remaining balance on your lease. Most dealerships also charge a fee for early termination. The total early termination fee is listed on your lease agreement.

Consequences

If you return the car to the dealership, but do not pay the balance owed, the dealership may turn your account over for collections, which will cause a negative remark on your credit report. If you requested a voluntary repossession, the dealership will repossess your leased vehicle and arrange to have it collection from your possession. A repossession can also appear on your credit report and will damage your credit score.

Options

If you cannot make your car lease payments, you can arrange a lease assumption with another person. In a lease assumption, someone else agrees to take over your leased vehicle and begin making the monthly payments. You will have to pay a transfer fee for the dealership to change the name on the lease, but this fee will cost less than paying off your full lease.

Tips

Talk to the dealership as soon as you become disabled and unemployed and know you will not be able to continue to make payments. The dealership can help you determine how much you owe and what you will need to do to prevent damage to your credit score. Act quickly to avoid negative remarks on your credit, as these remarks will stay on your credit report for several years.

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Can You Finance a Vehicle With One Already in Your Name?

You may find that you can finance a second vehicle depending on your credit standing and debt-to-income ratio. If you can provide your lender with valid proof of income and the lender determines you can afford to pay another car loan, you are likely to obtain a loan approval.

Debt-to-Income Ratio

Your auto loan provider determines your approval based on the amount of money you have coming in and the amount of money you owe, known as a debt-to-income ratio. Your credit report lists your total debts, including monthly payment requirements for credit cards, loans and mortgage balances. A potential lender can also view secondary accounts, or debts that you share with someone else, such as a co-signed auto loan or a shared mortgage. Even with an excellent credit score, you may be declined for a loan if your lender rates your debt-to-income ratio poorly.

Employmment and Address Considerations

Expect to provide proof of income, employment and address information to your lender. Most lenders prefer to see at least two years of stable address and employment history. If you have moved multiple times or just started a new job, your loan may be declined. Your lender uses your year-to-date income on your most recent pay stub to determine your actual income. If you recently received a raise, the lender might not apply it to your income; most lenders figure gross annual income based on a verifiable year-to-date statement instead of the income you plan to make.

Considerations

Before you apply for a second car loan, consider the total cost of owning two vehicles, which costs more than loan payments alone. Lenders require a consistent, full-coverage insurance policy on loan vehicles, which may prove expensive. Check the cost of adding another vehicle to your insurance policy. Check also with your dealer or the auto shop where you maintain your current vehicle to determine the total costs of maintenance. Ensure you can comfortably afford owning two vehicles.

Preapproval

To determine whether you can obtain a second car loan, apply to an auto loan provider for a pre-approval before you head out to shop. Your lender may offer an approval with restrictions. You may have to provide a down payment or may find that your approval requires you to stay within a certain monthly payment, which restricts your vehicle price range. Depending on your approved term, interest rate and down payment, you may have to adjust your price range.

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How to Settle Repo Car Debt for Less

The struggling economy has caused many people around the country to lose their jobs over the past few years. Many of the people who are now without work have car payments that they are struggling to make, and in many cases, they have to miss several payments so they can buy food and pay the rent on time. This can quickly lead to the bank or car company repossessing the vehicle so they can recoup their loss. Repossession of a vehicle has a negative effect on credit, lowering an individual's score. Individuals who still want to settle their car repo debt for less can do so with proven techniques.

Instructions

1

Find out how much you still owe on the vehicle after the repossession takes place. Evaluate your auto loan documents and contact the finance company to find out how much you owe and what you can do to recover the car. When the car or truck is taken, the vehicle is then sold at auction. The amount that someone pays for the vehicle at the auction is often much less than the balance you owe on the vehicle. If you owe $12,000 on the vehicle and it sells at the auction for $8000, you will still owe $4000 on the vehicle. By keeping in contact with the bank or car company, you will have a better idea of how much you still owe.

2

Keep records of all of the information dealing with the car repossession. Record the day that the car was taken as well as the amount you owe on the car. In many cases, you will also be able to find out the date and place that the car will be sold at auction. You will have records detailing when the car will be sold as well as the amount for which it sells.

3

Negotiate with your creditor on your own. You will be able to call the creditor and ask if they can work with you to lower the payments to something that you will be able to afford. When consulting with your creditor, make sure that you have an idea of how much you can afford to make with your current payments. For instance, if you have a new position or have acquired a lump sum of money, make sure that you divulge this information to demonstrate that your current financial situation has improved since the repossession occurred. If your finance company refuses to work with you, you can hire a debt settlement firm to negotiate on your behalf.

4

Find an auto repossession debt settlement company that will be able to help you negotiate your balance. In many cases, a debt settlement company will be able to lower the amount that you owe, and they will be able to help you settle a car repo debt for less than you would normally have to pay. You can find companies such as Franklindebtrelief.com to help you settle the debt. Companies like these work directly with the finance company to settle the debt. They typically offer less than the initial transaction. If you go this route, ask the auto repossession settlement company if they will be able to have any of the fees associated with the repossession waived or lowered. This will reduce the overall financial burden. Also make sure to ask the company what fee they charge for their services. The repossession fee is usually between $200 and $400. (See Resources.)

5

Consider purchasing the car from the public auction. If the car has already been set for public auction, you can consider purchasing it directly. For this to work, however, you will need to obtain cash to pay for and buy the car directly from the auction. By pursuing this route, you may actually buy the auto for less money than you previously owed when it was financed as most auctions are typically sold below market value and at a significant discount. However, you will still be liable for the money that you previously owed when the car was repossessed minus the price that it was sold at auction and any applicable fees. In addition, you will need to pay these payments until the balance is paid off. This will go on your credit report, and it will stay there for seven years.

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How to Stop a Repossession in the Final Stages

Missing several car loan payments eventually results in a repossession, where a lender finds the vehicle and takes back the car. A repossession stays on your credit report for seven years and causes a drop in your credit score. Even if your lender is prepared to repossess your car now, you can stop the repossession, keep your car and get your loan back on track.

Instructions

1

Explain your situation to the lender. Communicate regularly with the lender to help slow down a repossession. Situations such as illness or being unemployed may persuade your lender to help you keep the car or defer the repossession.

2

Ask your lender to take partial payments. If you can't afford the entire monthly balance, talk to the lender to see if they will temporarily accept partial payments to stop an imminent repossession.

3

Discuss forbearance options. Some auto lenders defer repossessions and permit loan forbearance, allowing you to skip payments for a few months and giving you time to get the loan back on track.

4

Restructure the loan. Talk to your lender to see if they will restructure or modify the loan. There's a chance the lender will extend the loan terms and possibly lower the payments, or the lender can voluntarily reduce your monthly payment to an affordable amount.

5

Pay the past due amount. If you're able to financially recover before a lender takes action, contact your lender to discuss paying the delinquent balance and stopping the repossession. Be prepared to pay additional fees for missed payments.

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How to Calculate Auto Loan Monthly Payments

People commonly take out a loan from a bank, car dealer or other financial institution to finance the purchase of their vehicle. These loans use the car as collateral, meaning if you fail to make your payments, the car may be seized by the lender. To figure out whether a particular car fits in your budget, you need to calculate the cost of the monthly car loan payments.

Instructions

1

Convert the annual interest rate to a monthly interest rate by dividing the annual interest rate by 12. Do not use the annual percentage yield (APY). For example, if the annual interest rate on the car loan equals 9.6 percent, you would divide 9.6 by 12 to get 0.8 percent per month.

2

Convert the monthly rate from a percentage to a decimal by dividing by 100. In this example, you would divide 0.8 by 100 to get 0.008.

3

Multiply the monthly interest rate by the amount of money borrowed. Continuing the example, if you borrowed $19,000, you would multiply $19,000 by 0.008 to get $152.

4

Add 1 to the monthly interest rate. In this example, you would calculate 1 plus 0.008 to get 1.008.

5

Raise the result from step 4 to the negative Pth power, where P is the number of auto loan payments you will make over the course of the loan, using a scientific calculator. In this example, if you were going to repay the loan over 60 months, you would raise 1.008 to the -60th power to get 0.619966287.

6

Compute 1 minus the result from step 5. In this example, you would calculate 1 minus 0.619966287 to get 0.380033713.

7

Figure the monthly payment on your auto loan by dividing the result from step 3 by the result from step 6. In this example, you would divide $152 by 0.380033713 to find your monthly payment would be $399.96.

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Can a Car Dealer Trade in My Car & Pay Off My Loan?

Accepting trade-ins and paying off existing loans are common practice for dealerships. Most dealers can also arrange new loans, allowing you to carry over negative equity if you owe more than your car is worth. Depending on the value of your car, you may have to put money down toward the new loan or may receive a credit to put toward your new balance.

Trade Value

Dealers offer trade amounts based on wholesale value. Depending on the dealer, it may use the NADA guide, Black Book or Galves appraisal guide to determine an acceptable value. To gauge wholesale value yourself, use Edmunds.com, NADAGuides.com and the Kelley Blue Book website to access appraisal tools. Use a median of the three values for a fair expectation. Your vehicle's value is reduced if the car needs repairs or body work. Dealers may also offer more money for a well-maintained vehicle in excellent condition.

Loan Payoff

Expect to provide your bank information and account number or social security number so your salesperson can call for your vehicle's payoff amount. Unfortunately, a dealer representative must call for the payoff amount to ensure it is correct, so have your account number ready if offering your Social Security number makes you uncomfortable. If you owe more than your vehicle's value, you can put money down or transfer the negative equity into your new loan. If you owe less than the vehicle's value, you can use the credit as a down payment.

Paperwork

Have your title ready. The dealer needs it to complete your trade-in paperwork. A co-owner, if one exists, must also sign the title. Expect to sign an authorization form that allows the dealer to satisfy the loan on your behalf. Once you complete your trade and new car purchase, your dealer processes your paperwork with your state's motor vehicle department, new and old lender. Contact your old lender after 10 business days to ensure the loan is satisfied.

Old Loan

If you have a payment due during the shopping or trade process, be sure to pay it. Even though the dealer must pay off your old loan completely, it may take time to do so. Most dealers complete this process quickly. If your payment is late, your lender will notify the credit bureaus, which can affect your credit standing. If your last payment has not been processed yet and the dealer pays off the loan, your old lender will return the payment to you.

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How to Buy a Car During Bankruptcy

Buying a car while you are in bankruptcy may be difficult, but it is not impossible. Car shopping requires a few more steps to complete and some guidelines to follow.

Instructions

Getting Bankruptcy Trustee Permission

1




Contact your attorney to request a meeting with your bankruptcy trustee, who must grant you permission to acquire credit before you can buy a vehicle. Meet with the trustee and discuss your need for a vehicle. Bring a copy of your paycheck stub so you can determine a monthly payment budget. If the trustee determines you are in need of a vehicle, a permission letter will be issued and filed in your case.

2




Shop for a lender that will grant you an auto loan. You may have to try several lenders before you find one that will. Offer the letter from your trustee as assurance as well as your proof of income. If you are unable to find a bank to offer you financing, try a finance company. Finance company interest rates tend to be higher, but if you need a car they may be able to help when a bank cannot.

3




Find a vehicle that fits within the guidelines your trustee has given you. You are not limited to dealerships, so try searching classified advertisements for vehicles offered by private sellers. Because most trustees are strict with their price parameters, you probably will be forced to shop for used vehicles. Have any vehicles you are interested in inspected by a certified mechanic and check consumer and professional reviews for reliability and safety ratings.

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Lease Vs. Buy for New Cars

Leasing and buying are two methods of new car financing. Leasing is a way to finance the use of a car over a period of time. Buying with a finance contract is a way to purchase a vehicle over a period of time. Each method has drawbacks and advantages. The choice depends on a combination of personal preferences and financial priorities.

Buying Summarized

Typically, when you finance the purchase of a new car, you arrange to pay for the vehicle regardless of how many miles you intend to drive it. You usually make a down payment. Sales taxes and registration fees are charged, and you are likely to have them rolled into the loan. You will pay interest. The rate of interest may be determined by the lender and the lender's determination of your credit worthiness. If you decide to sell before the loan contract is completed and paid off, you can do so by arranging to pay off the loan and transferring the title to the new owner.

Leasing Summarized

When you lease, you may not be required to make a down payment. You make a lease agreement to pay a monthly amount for the use of the car during a specified period of time. Depending on your state of residence, you may pay only sales tax on the monthly payment. You pay a rate known as a money factor, which is similar to loan interest. The lease agreement may also contain additional fees. When the lease period expires, you usually have options. You may be able to return the vehicle and, provided you have not exceeded the mileage portion of your agreement, you walk away. If you have exceeded the mileage, you will be charged for the additional miles as stated in your lease agreement. Another option would be to keep the vehicle, purchasing it at the lease end. If you terminate the lease before the end of the contract, you have the responsibility for early termination charges written into the agreement.

Reasons for Leasing

For some drivers, driving a car that is never more than two or three years old is important. The car may remain under manufacturer's warranty and have a low risk of breakdown and need for repair. With leasing, monthly lease payments are commonly lower than monthly loan payments. When you lease, you are paying for the car's depreciation and the use of it. You own no interest in it.

Reasons for Buying

For other drivers, ownership is important. While the initial cost to enter the loan may be high and monthly loan payments including interest may be higher than a lease payment, after the loan is paid in full, the vehicle belongs to the owner. Its value will have depreciated just as the leased car's value has depreciated, but no further payment will be required from the owner who has paid off the car.

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What Is a Tier Two Automotive Credit Rating?

In purchasing a new or used car, credit counts. While most people realize this, what they don't know is that a regular FICO score is not the only criteria auto dealers use. In fact, many auto dealers do not use standard credit scores at all, but rather a proprietary credit score which divides prospective buyers into tiers. A tier two automotive credit rating will affect the rate of financing available to a car buyer.

What Are Auto Credit Scores?

Auto credit scores are generated in a similar fashion to regular credit scores. The difference is that auto credit scores consider criteria related to prior auto purchase and leasing, in addition to a regular credit history. This means it is possible for someone to have a very high regular credit rating, but a much lower or even no auto credit score if he has never purchased or leased a car in the past.

Criteria for Auto Credit Scores

Auto credit scores are based on a number of criteria: income, past auto purchase and payment history and overall credit history. Important considerations include the amount of car payment as a percentage of overall income and total debt to income ratio. Residence stability also plays an important part in determining auto credit scores.

Tier Two Auto Credit

Different auto dealers have different names for tier two credit: 2 Tier Credit (Ford Motor Credit); B Tier (GMAC Financial); Gold Tier or Tier 2 Credit. This tier roughly corresponds with a FICO score of 600 to 699. Slow payment (especially on auto loans), too many recent credit inquiries and small collections are the criteria which divide tier two credit from the top tier credit.

Leveraging Tier Two Credit

One way to obtain more favorable lending rates with tier two credit is to obtain your regular credit reports, and take them with you to the dealer. Allow the dealer to report the credit scores she has received for you, and if they are higher than the scores you have, allow her to use those scores to determine your financing. If they are lower, offer the scores you have obtained and ask her to consider those instead.

Considerations

Auto credit ratings are not available to the consumer at any price. However, some auto dealers only use regular FICO scores. If your regular FICO score is high, you can finance a car with a dealer that uses them, and maintain good payment practices to increase your auto credit rating.

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Is it Better to Have a 36 or 39 Month Lease on a Car?

To decide between a 36 and 39 month lease option, consider your monthly payment amount, warranty coverage, maintenance schedule and vehicle needs. While three months may not seem like much of a term difference, you may find yourself outside of the vehicle's factory warranty period. Vehicle repairs and maintenance are your responsibility while leasing.

Payment

Sometimes the payment for a 39 month lease is cheaper than an alternative 36 month option. Your monthly leasing payment is based on expected depreciation of the vehicle, which depends on the mileage and term that you choose. The manufacturer calculates the car's value at the end of your lease contract, and sometimes the extra three months makes a difference. If you want a lower monthly payment without providing an extra down payment, you may have to pursue the 39 month term option.

Warranty

During a lease, you are responsible for all vehicle repairs, so ensure you stay under the vehicle's bumper-to-bumper warranty period during the lease period. Manufacturers offer two warranties on vehicles; a bumper-to-bumper warranty, which covers just about anything that breaks or doesn't operate properly in your vehicle, or a powertrain warranty, which covers major components of the transmission and engine. Powertrain coverage often exceeds bumper-to-bumper coverage for many new cars. If your bumper-to-bumper warranty is limited to 36 months, choose a 36 month term. Otherwise, consider purchasing an extended warranty to cover possible repairs so you don't have to pay out-of-pocket if something breaks.

Maintenance

Check your vehicle's required maintenance schedule over to determine how much you'll pay to maintain the vehicle for the extra three months. Depending on the mileage you choose for your lease, you may have to pay several hundred dollars for an extra maintenance appointment. Check with the dealership's service department to obtain a maintenance schedule and determine costs. Also compare the price differences between the 36 and 39 month lease payment option. For example, if it costs $250 for the extra maintenance appointment required for a 39 month lease, but the 36 month lease option is $10 higher per month, it's cheaper to pursue the 39 month lease as you'll pay an additional $360 more over the term of the lease.

Pull Ahead Considerations

If you consistently lease a same-make vehicle, the three extra months probably won't tie you down to your lease contract. Many banks offer some kind of lease pull-ahead program, which allows you to end your lease up to one year early if you lease or finance through the same bank again. Many dealers are willing to work with buyers to end a lease three months early as well. If you want to lease or purchase a vehicle from a different-make dealer, the dealer may pay your last three lease payments to terminate your contract and sell you a new vehicle.

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Do I Still Owe Money If My Car Is Repossessed?

If your car is repossessed, you are still responsible for any balance due after the car is resold by the bank, as stated in your contract. While you may not have to pay right away, your lender is within its legal rights to sue you. Before a lawsuit is filed, you may have options to settle the remaining balance, make payments or pay the balance in full.

Upon Repossession

Once your vehicle is repossessed, you can get it back by paying fees determined by the bank. The amount you'll have to pay includes any payments and late payments due, as well as repossession, locating and towing fees. You can expect to receive a letter stating the total amount due and at which date your vehicle will be offered for sale. If you do not receive the letter, you can call your bank for details.

After Car is Sold

Once your vehicle is returned to the bank, it is usually resold at auction or by the bank itself. In the event the vehicle is sold at auction, it is sold at wholesale value. The wholesale amount is equivalent to trade-in value, which is thousands of dollars lower than retail value. After the vehicle is sold, you will be notified of its sale price and billed for any balance due after the sale. However, if your vehicle warrants the bank a profit, the bank must return the excess amount to you.

Collections

If you do not make arrangements to pay the balance due, your account will be turned over to a collections agency. You can expect letters and phone calls offering you a payment plan or an opportunity to settle the amount due for less than the original balance. Should you decide to ignore collection efforts, it is likely you'll be taken to court. In such an event, the bank will pursue a judgement, garnishing your wages for the amount due.

Warning

If you settle on an amount that satisfies the delinquent loan, the amount you do not pay is reported to the Internal Revenue Service, which considers the amount income. For example, if you owe $10,000 but settle for $4,000, you can expect to pay taxes on $6,000. Unless you claim bankruptcy to cancel the debt, you must claim the canceled part of the debt as income.

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How to Refinance a Wachovia Car Loan

Whether you are attempting to lower your monthly car payments or you are trying to get a lower your car loan interest rate auto refinancing might be right for you. Refinancing a Wachovia car loan can be time-consuming, but as long as you keep yourself informed and focused, the process can be fairly straightforward.

Instructions

1

Review your original auto loan documentation to see if you have any prepayment penalties or if there are any penalties for refinancing. If you are planning to refinance your existing Wachovia car loan with another loan from Wachovia, you should not have to worry about any penalties. You will also need these documents to record when your last payment was scheduled to be paid to Wachovia for your vehicle.

2

Obtain a copy of your credit report and credit score. Credit reports can be obtained once each year free of charge, but you will need to purchase your credit scores. Many companies offer free trials of credit monitoring services which will allow you access to your credit report for two weeks or one month.

Wait to obtain your credit score until shortly before you plan to call Wachovia to discuss you refinancing options. This will help ensure that you are up to date on your credit score and will help avoid any unpleasant surprises. Do not call Wachovia or any other bank without first knowing your credit score and any negative items that are listed on your credit reports.

3

Find out your current vehicles pay off amount. This amount will represent that amount that Wachovia has you owing on the vehicle. You will need to know this loan amount so that you know the amount that you are hoping to refinance. Do not guess at this amount and do not use your credit report to obtain this amount. Credit reports can be 30 or more days behind and, as a result, may not include a payment or two that have been made since your reports last update.

4

Call Wachovia dealer services and speak to a representative about refinancing your existing auto loan. Most representatives will try to get you to complete an application on the phone with them or will tell you to go online to complete an application. Before letting them complete and run an application on your behalf ask the representative for the minimum credit requirements.

Knowing the minimum credit score needed to be approved for refinancing will help you avoid being denied based on your credit score. If the minimum credit score quoted is higher than your current credit score, it is best to clean up your credit and try to apply later. Asking will save you an inquiry on your credit and will let you know if you should choose to seek financing with another finance company.

5

Complete an application on the phone with a Wachovia dealer services representative. If you meet the minimum credit requirements and your income to debt ratio are within reason you will be approved over the phone. If your credit report has a number of recent inquires or you have a high debt to income ratio your approval might be delayed.

Always get a number to call and record the name of the representative you are working with if you are asked to wait for a decision. Find out how long a credit decision should take and call back at that time to inquire. If you are refinancing application is denied ask for the reasons for the denial and ask for a reconsideration. In cases where your credit report is not reflecting current paid off debts or a considerable increase in income, you might be asked to fax additional documentation to verify any new information.

When you are approved, your representative will explain the new terms, including your new, lower, monthly payments and interest rate. New loan documents reflecting the changed interest rate, payment amount, and loan terms will be mailed, faxed, or (in a few cases) emailed to you for signature.

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Definition of Car Lease Residual Value

The residual value is the approximate value of a leased vehicle at the end of the lease period, which is often 36 months. The longer the term of the lease, the less residual value the vehicle will have. The residual value is based on the expected depreciation amount of a vehicle.

Meaning

The residual value is the amount you would pay for the vehicle at the end of the lease term if you decide to purchase it. The final amount is predetermined at the time the lease is executed and will not change. Generally, the higher the residual value of the vehicle, the lower the lease payments will be.

Importance

Residual value is considered the most important of the four factors that are used to calculate your payment, which also include the price of the vehicle, the length of the lease term and the money factor, meaning what you can afford. This is why when shopping for a lease, it often best to compare residual values offered by different financial institutions.

Calculation

Residual values are determined by the financial institutions that provide you with the lease agreement by taking into consideration factors such as the model of the vehicle and how much they estimate it will be worth at the end of the lease based on the model's history. The residual value is typically non-negotiable.

Example

Suppose you lease a $25,000 car for three years, with a 50 percent residual value. Since you would only be using 50 percent of the car's total value, your monthly payment (not including taxes, fees or interest) would be $347.22 (12,500 divided by 36 months). If you leased the car for four years and the residual value was 60 percent, you would have used 40 percent of the car's value, so your monthly payment would be $277.78 (10,000 divided by 36 months).

Best Value

As a general rule, luxury cars have a better residual value than other types of vehicles because they tend to depreciate more slowly, meaning that you will have used less of the vehicle's value during the lease, which can help to keep the payments lower. To find the residual value of a car you may be interested in leasing, visit https://www.alg.com/.

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How to Lower the Lease Buyout Amount

Lowering the lease buyout amount on your car can save you money. You may be happy with the car that you've been leasing and know that it's mechanically sound, so you would like to buy it when given the option. However, negotiating with the dealership or leasing company when your lease expires takes skill and knowledge. Before you approach the subject of buying the vehicle that you've been driving, you need to understand the terms of your lease and know valuable details about your car.

Instructions

1

Read your lease carefully to understand the terms of your buyout. Look for the residual value, which is how much your car is estimated to be worth at the end of the lease, and any fees associated with the purchase. If you return the vehicle and don't buy it, you may owe the leasing company money if the residual value is higher than the market value.

2

Check your odometer to determine if you have exceeded the mileage limit specified in your lease. Driving more miles than allowed on the lease increases the buyout amount. If you are in this situation, do not divulge your mileage during negotiations with the leasing company, because it can compromise your position to negotiate.

3

Check your car's current market value on a reputable website that allows you to enter the make, model, year, options and mileage. You will use the value to compare it to the buyout amount once you receive it.

4

Wait to contact your leasing company. You can call them for the buyout amount a few months before your lease expires, but knowing that you are eager to buy your car risks your posture during negotiations. If you are patient, the company may give you a buyout offer close to the date of expiration.

5

Research loans from various lenders once you know the buyout amount. You can save money by financing your buyout with a company other than the dealership or current lease holder. In addition, use the information as a bargaining tool when negotiating the terms of your buyout. However, many lease buyout loans carry higher interest rates than a standard car loan.

6

Offer or counteroffer the lease holder an amount less -- as much as 25 percent -- than the residual value of the car, depending on whether you contact the company first or the other way around. If you return the vehicle, the car dealer will not be able to sell it on the lot for a high residual value or, possibly, even market value, because it was leased. Therefore, it saves the dealership time and money if you buy out the lease.

7

Counteroffer at 15 to 20 percent less than the residual value if the leasing company does not accept your first offer, and it is less than a month from the expiration of your lease. Explain that, once the car is returned, the lease holder may not be able to earn as much as you are offering if it is sold at wholesale or auction.

8

Decide if it's cheaper to buy the car for the leasing company's final offer just before your lease expires or to purchase another similar vehicle. Ideally, you will not have to pay full residual value after negotiating the buyout amount.

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What Type of Credit Does a Cosigner Need to Lease a Car?

Bad credit borrowers often ask someone to co-sign an auto lease because they cannot qualify on their own, but finding another party to guarantee your lease doesn't mean the dealer automatically approves your loan. Your co-signer needs to meet all of the requirements of a normal borrower. Thus, you should only ask a person with excellent credit to co-sign a loan.

Identification

Ideally, your co-signer should have a credit score in the highest tier -- above a 760 for most lenders. An average -- at least a 620 -- to above average credit score might suffice for an auto dealer. However, you never know the cutoff point for a lender, so adding a co-signer with the best credit score possible gives you the best chance at an auto lease approval.

Considerations

While car dealers weigh credit scores heavily in their auto lease decisions, they are not the only factor. A co-signer with a high credit score and excessive debt can be just as bad as a co-signer with a poor credit score. In general, a co-signer's monthly debt charges should never exceed more than 35 to 55 percent of his monthly income.

Alternative

Bad credit does not preclude you from acquiring an auto lease on your own. Auto dealers may overlook poor credit if you offer a substantial security deposit on the lease or pay for several months upfront. Alternatively, the auto dealer might just increase the cost of your lease. This is the least desirable option because you always want to pay as little as possible for any leased or borrowed goods.

Warning

If you decide to ask someone to co-sign your auto lease, make sure he knows the risks involved. Auto dealers often report leases to the credit reporting bureaus, so late payments on your part could drag down both of your scores. Should you end up defaulting on the lease entirely, the dealer could go after the co-signer for the outstanding balance.

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Lease vs. Buy Car Insurance

The insurance requirements of leasing and auto loan providers are very similar. Until you fully own your vehicle, your lender or lease provider requires full-coverage insurance coverage to protect its purchase. If you pay cash for your car, you may insure your vehicle as you please as long as you maintain a liability policy, a requirement in most states.

Collision Insurance Coverage

Collision coverage offers the most protection for your car. If the vehicle is declared a loss by your insurance company because of an accident, damages or theft, your leasing company or auto loan provider receives the market value payout from your insurance company for your car even if you're at-fault for damages. Whether financing or leasing, you must pay the remainder of the lender or leasing bank's loss if the insurance payout is not enough. Full coverage insurance does not guarantee your loan payoff.

Lease Exception

Whether your lease or finance, your lender or bank is listed as your insurance policy's loss-payee; you do not receive payment for your vehicle from your insurance provider. If the vehicle's market value payout exceeds your loan payoff, you'll receive the excess amount from your lender. If leasing, you won't receive any of your money back. For this reason, it is advisable to put as little down as possible when leasing a car. If the car is determined a loss, expect to lose your down payment amount and any monthly payments you made toward the lease contract.

Liability Insurance

If you pay cash for your vehicle, most states require at least liability insurance for registration. Liability coverage is the cheapest you can purchase, as it offers the minimum amount of coverage required by your state. A liability policy offers coverage for damage you cause to other people, known as bodily injury coverage, and damage to property, known as property damage coverage. Unless you can afford to replace your vehicle, it is advisable to add collision coverage to your policy to protect your vehicle purchase.

Penalties

Your lending or leasing contract describes the penalties you'll incur if you don't maintain required coverage. The penalty possibilities are very similar. Your lender or leasing bank may repossess your vehicle if you do not maintain coverage. Or, it may choose to add an expensive policy to your loan or lease amount until you provide proof of coverage again, which raises your monthly payment. If you fail to maintain state required coverage, your state may suspend your license or impose fines. Your insurance company reports your coverage limits, lapse, cancellation, reduction in coverage and renewals to your lien holder and state.

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How to Get Financing at Your Car Dealership

Most car dealerships have a special department set up to assist car buyers with the financing of their car purchase. A dealer considers the finance department to be a source of additional profits when cars are sold. A car buyer should understand what the dealer financing can and cannot provide.

Instructions

1

Determine the type of car you want to buy and how much you can afford for a down payment and monthly payment.

2

Estimate the car price for your budget using a rule of thumb of $5,000 for each $100 of payment for a new car, and $4,000 for each $100 on a late model used car. For example, if your payment budget is $350 for a new car, 3.5 times $5,000 gives a target price of $17,500.

3

Tell the car salesman what your price range is and that you plan to finance your car purchase. The salesman will ask about your payment expectations and if you have money for a down payment. As a negotiating tactic, tell the salesman you want to see the best financing deal you can get after you have picked out a car.

4

Select the car you want to buy and make sure the price is near your target price range. You will then have to negotiate the price and financing arrangement.

5

Complete a credit application with the salesman and tell him the amount of your down payment and that you want to see the best payment plan possible.

6

Negotiate with the dealership sales staff until you are satisfied with the car price and financing details. In negotiating, you should keep asking for a lower price and lower monthly payment. Make sure you get the rate of interest for the loan and the number of payments. Once you have agreed on price and financing terms, the dealership will complete the documentation required to get you the car loan.

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How To Look Into Refinancing My Auto With a Lower Interest Rate

Refinancing a car loan requires you to apply to another lender to pay off your old loan so you can start a new one. Refinancing is beneficial to some, as interest rates, credit standing or needs can change, and a refinance can accommodate save you money over the loan term or lower your monthly payment. When looking into refinancing, you should shop as you did for your original car loan.

Instructions

1

Call your current lender to determine the vehicle's payoff amount. Ask for a 10 or 15 day payoff so the amount due includes daily interest charges, known as the per-diem. The amount stated is the amount you'll have to pay to end your current loan.

2

Check your funds. You do not have to finance the entire payoff, as you can put money down--this can lower your payment if you were limited at the time you financed your car. If your situation has changed and you want to put money down for the refinance, you can do so, and instead of paying a higher monthly payment no matter how much you pay towards the loan, you can lower your payment by borrowing less.

3

Use an auto loan calculator to determine a new monthly payment based on extending your term, putting money down or lowering your interest rate. The Edmunds website offers one to use. Take out the taxes and fees when calculating.

4

Check the rates for used car loans in your area. Contact the bank where you have your checking account, credit unions and other banks of interest. Many banks offer rates on their websites, or, call to find out if you do not see the rates listed.

5

Visit the websites of the banks you're considering, as some may offer perks worthwhile to you. You will have to open an account at the bank you choose, so if some offer cash back on purchases, reward debit cards, travel miles or local discounts, this can help you to decide which bank to use.

6

Call or go to the bank you've chosen. Have your vehicle's VIN (vehicle identification number), year, make, model, level, options (such as leather or sunroof), mileage and payoff amount ready to give to your loan representative. Tell her you want a pre-approval for a refinance.

7

Ask the representative figure your new monthly payments if you are approved and have decided to refinance. Assume that you will be approved at other banks as well so think carefully before signing the papers. If you find that the refinance payments are attractive, you can complete the application process.

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How to Get a Good Interest Rate on a Car

Buying a car may require financing from your bank. Banks compete for car loans and strive to provide good interest rates for qualified applicants. Loans that are secured by a car provide the lender with collateral until the loan is paid in full. Most lenders offer car loans that range from two to six years. A car loan provides you with a method of obtaining financing over time for the vehicle that you want now. You can get a good interest rate on a car if you have stable income, excellent credit and timely payments on previous auto loans.

Instructions

1

Review your credit data online. Obtain your credit score, as well as a copy of your credit report. Visit websites such as Annual Credit Report and myFico to get your credit report. Dispute any incorrect items with the reporting credit bureau.

2

Check the interest rates for a car loan at financial institutions where you currently have a banking relationship. Inquire about interest rates from your bank, credit union or credit card company.

3

Use your membership from organizations such as AAA, Sam's Club, Costco's or BJ's Wholesale Club to find good interest rates for car loans. Contact your member services department to gather details about member's only specials on auto financing.

4

Speak with the finance manager at a car dealership. Share a copy of your credit report and mention some of interest rates that were offered to you for car loans. Compare dealer incentives and the interest rates offered by car manufacturer's against your research to determine your best deal.

5

Apply for a two- or three-year term. Select the most affordable term for your car loan, while considering most banks and auto lenders provide lower interest rates for shorter terms. Choose a four-year term instead of a five-year to term to get a better interest rate on your car loan.

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How Can a 16-Year-Old Buy a Car?

The excitement of turning 16 is often fueled by your ability to obtain a driver's license. Once you accomplish this motivating task, a desire to put your skills to the test and obtain a car is sure to follow. 16-year-olds, however, are ineligible for auto loans. In order to purchase a car, you must find creative ways to finance your vehicle.

Establishing a Note

One easy way to purchase a car as a 16-year-old is to create a note between yourself and a family member. In exchange for making monthly payments toward a purchase price, the seller offers you the car. This concept is similar to getting a loan from a bank for your car and making monthly payments. The difference is that credit, debt-to-income ratios and down payments are not factors in determining your approval. As long as you have a job, the family member or friend selling you the car can determine -- based on your character -- whether to create a note for a car. You can negotiate the amount of your monthly payments and the length of time you want to pay off the car.

Private Car Sales

Finding a car in the classified ads is a great way to buy an inexpensive car. Teens who save up to purchase cars commonly buy from private sellers. Buying the car outright requires little paperwork, similar to creating a note with a family member. Request a Carfax report to determine the condition of the car before handing over your savings. An adult experienced in buying cars from private owners can be an invaluable resource during your transaction.

Loan Exceptions

Auto loans are not impossible to attain, if your parents are willing to co-sign on a loan. Your parents need good credit, stable income, employment and a down payment to obtain a car loan. Once the car is purchased, your parents are considered the legal owners of the car. Even though you are not the official owner, you do have a right to operate the vehicle. Many auto lenders require buyers to have insurance coverage prior to approval. You may be able to obtain a policy in your name, but the cost of insurance for drivers under 25 costs more than for older drivers.

Titles

Generally, if you are under the age of 18, you are not able to enter legal contracts. Even after you purchase your car, your parents may be required to co-sign on the title. There are exceptions to this rule, since laws surrounding car ownership are state-mandated. To be safe, contact your Department of Motor Vehicles to determine the best way to obtain the title to the car you purchase, as well as register the vehicle. Many states consider any property of a minor to be the legal property of his parents until he turns 18.

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Is it Smart to Refinance a Car?

You may have considered refinancing your home mortgage loan to take advantage of falling interest rates, but you may not have thought about doing the same with your auto loan. In some cases, refinancing your car loan can also be beneficial, resulting in a substantial savings in the long run.

Significance

According to Edmunds.com, refinancing at the right time can possibly save you thousands of dollars in interest charges. It is also easier to accomplish than other types of refinancing such as for home loans, as there is usually less "red tape" for the borrower to deal with. In some cases, a refinance application can be completed in as little as 10 minutes.

Considerations

Factors to consider when deciding whether refinancing is a smart move include whether there has been a drop interest rates from the time when your purchased the vehicle or discovering that you could have obtained a lower interest rate for your newly purchased vehicle from a lender other than the one provided by the dealership. If you are about to make a major purchase like buying a home, refinancing your auto loan may also help you lower your monthly payments, easing your financial burden.

Time Frame

Generally, the less the time that has passed since you took out your initial loan, the more you may be able to benefit from refinancing. The longer the time period that you are paying the lower interest rate, the more money you may be able to save in the long run.

Warning

There are some factors that could reduce the benefits of refinancing your auto loan. For example, it is possible that the terms of your original loan may include a prepayment fee for paying the loan off early, such as when you refinance to another loan. In this case, you would need to weigh the amount of the penalty versus what you would save with the new loan to determine if refinancing is worthwhile.

Process

When seeking quotes to help you make your refinancing decision, it is a good idea to check with several lenders. According to Edmunds.com, the Bankrate.com website offers a service that will match your loan application with a number of suitable lenders, which can save you time and effort in your search.

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