How to Transfer an Auto Loan

Whether you're selling your car to a stranger or turning it over to a friend, it is possible to transfer your existing car loan to that person along with the vehicle. If the person taking the car decides to arrange for his own financing to pay off your existing loan, the matter is easily solved. On the other hand, you can also request to modify your existing loan with your lender to transfer responsibility for future payments to someone else.

Instructions

1

Discuss transferring the auto loan over to the person who will be taking the vehicle. Review the details of the loan with her. Make sure she understands she will become solely responsible for all future payments. Realize that your name and information will be removed from the loan as if you never existed as the borrower.

2

Obtain a credit score from the person receiving the vehicle. Verify that his creditworthiness is as good as or better than your own. If his credit score is lower than yours, determine if he can put any cash down to add value to the proposal you will make to your lender.

3

Make certain the person also meets the insurance requirements of your loan agreement. Call and ask your lender what the requirements are if you are not certain. Discuss this with the prospective owner and have her correct any insurance coverage shortcomings.

4

Contact your auto loan lender and inform it of your desire to sell your vehicle. Let it know you have a prospective buyer. Supply the lender with the person's information and request that it consider transferring the loan.

5

Make certain the person taking over the loan signs all necessary paperwork completing the transfer once it's approved by the lender. Request a written statement from your lender confirming that your responsibility for the loan has been met and that your name and information have been removed from the financing documents. File these documents somewhere safe.

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Should You Buy a New or Used Car?

The debate over whether it's smarter to buy a new or used car is common. There are both pros and cons of purchasing a used car instead of a new car. In the end, it depends on your personal financial situation and what you truly want out of your next vehicle purchase.

Cost

Used cars are always less expensive than comparable new cars. If you're on a tight budget, then buying a used car might be the best option for you. Some people purchase used cars even if they're not on a tight budget because it brings luxury brand vehicles like Audi, BMW and Mercedes within their desired price range. Without purchasing a used car, they might not have been able to purchase a luxury vehicle.

Depreciation

After you purchase a new car, it will lose about 40 percent of its value after three years, according to MsMoney.com. After three years, its rate of depreciation will begin to slow down. Many people purchase used cars that are older than three years because they don't have to worry about depreciation as much as they would if they purchased a new car.

Maintenance

One advantage of buying a new car is that new cars require less maintenance than used cars. New cars usually don't require maintenance aside from an oil change within the first two years of ownership. Used cars are more likely to break down and can require major repair jobs depending on how many miles they have and how well they were maintained by the previous owner.

Warranty

Companies usually provide at least a three-year warranty on new cars. This means if anything goes wrong with the car within the warranty period, it will be fixed for free. Some higher-priced vehicles even have four-year, 60,000-mile warranties. In addition, manufacturers include warranty coverage for the powertrain of new cars, which is a major plus. Older used cars commonly have powertrain problems, which can be expensive to repair.

Insurance

Used cars are less expensive to insure than new cars, according to "Consumer Reports." Newer cars are the most expensive to insure because their parts are more expensive to replace.

Safety Features

Newer cars tend to have newer safety features that older models might not have, according to "Consumer Reports." If safety is your main concern, consider purchasing a new model.

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Should I Pay Cash for a Car or Finance It?

With the price of a new car running well into the five digits, most buyers will need to take out a loan to buy a car. But if you are in a position to pay cash, you can find a number of advantages by avoiding the financing headaches and high interest rates. Even so, you should consider both the pros and cons of paying cash for your next car.

Deal Negotiation

You may be able to negotiate a better deal with the car salesman if you can buy with cash. This is not always the case; but if you have the cash on hand to buy the car, mention it to the salesperson. A cash sale can be attractive to the dealer. It's a good idea to negotiate the price of the car first, letting the dealer assume that you will be financing. After the price is set, ask the dealer if an additional discount is available for cash purchases.

Interest Rate

If you can get a low-interest rate on a new car loan, it probably makes more sense to finance it than to buy the car for cash. This is particularly true if you can earn a higher interest rate on your savings than what you are paying for the car loan. On the other hand, if the interest rates you find are significantly higher than what you are earning on your savings, you will get a better return on your money by purchasing the car for cash and avoiding those high interest charges.

Emergency Fund

If it takes every last penny of your savings to buy the car for cash, it is probably better to take out a loan and keep that money in the bank. Experts recommend that all workers have an emergency fund containing at least three to six months' worth of living expenses, and raiding your emergency fund to finance the purchase of a new car could leave you without the money you need if you lose your job or face another financial setback.

Less Risk

If you pay cash for your car, you do not have to worry about becoming "upside down" on the loan. That can happen when you owe more on the car than its current value, and it is a significant risk. Since cars depreciate rapidly, the risk of becoming upside down on a car loan is high. That can pose a problem when you go to trade the car in or if the car is totaled in an accident. If you own the car outright, you do not face this financial risk.

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Can I Default on My Auto Loan If the Car Is a Lemon?

No one wants to make car payments on a non-functioning vehicle. If it seems like your new car is always in the shop or a particular problem keeps popping up again and again, you may own a lemon. Although state laws vary, all 50 states provide car buyers some form of recourse if they inadvertently purchase a lemon. Should you find yourself stuck paying for expensive repairs on a car you recently purchased, you may have grounds to get rid of the lemon and get out of your auto loan.

Lemon Laws

Just because a car suffers from frequent repair issues, that doesn't make it a lemon. Each state has different criteria a vehicle must meet before being classified as a lemon. As a general rule, lemon laws apply only to new vehicles.

A true lemon suffers from a considerable defect. Each state classifies these defects differently, but major issues, such as transmission problems or engine trouble, usually constitute a defect significant enough to make the car a lemon. In order for you to have legal recourse, the defect must occur before the car reaches a certain mileage, and you must have attempted to repair the problem.

Your Rights

If your car meets your state's definition of a lemon, you have the right to demand that the manufacturer either replace the vehicle or refund you the purchase price. You must provide thorough documentation that your car suffers from repeated problems that you tried to fix without success.

You must solve the problem through the manufacturer--not the lender that financed your vehicle. Your lender did not sell you the vehicle and is not responsible for its poor condition. Thus, you cannot default on an auto loan simply because your car is a lemon.

Payments

If the manufacturer offers to refund you the price you paid for the vehicle, you can use the refund to pay off your auto loan--eliminating the burden of making monthly payments on a car that doesn't work properly. With your loan paid off, you can then secure another loan to purchase a more reliable vehicle.

Warning

Defaulting on your auto loan carries severe consequences. Not only will your lender repossess your vehicle, it will report the repossession and your missed payments to the credit bureau. This hurts your credit score and makes obtaining a new auto loan difficult, if not impossible. If your lender cannot sell the car for a high enough price to cover your auto loan, it will sue you for the balance. You are responsible for paying your auto loan on time, regardless of whether or not your car is a lemon.

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How to Purchase a Car From an Individual

Purchasing a car from an individual can prove less stressful than buying from a dealership. Dealerships might inflate the price of cars, and some salespeople employ pressure tactics. But before buying a car from a private party or individual, know what to expect.

Instructions

1

Apply for financing; go to your bank or credit union and get pre-approved for an auto loan.

2

Research Kelley Blue Book (kbb.com) once you have a car in mind. Check the retail or market value price of the car. This provides a price point to begin negotiating a price for the vehicle.

3

Ask if you can have a mechanic look at the vehicle. Bring a mechanic with you to test-drive the car. Have the mechanic inspect the car to assess the condition of the vehicle. Exercise caution and think twice about buying the car if the seller doesn't permit an inspection by a mechanic. The car might require serious repairs, which you're required to pay for after making the purchase. Follow your instinct and walk away from suspicious situations.

4

Get the car's vehicle identification number and get a Carfax report to check the vehicle's history.

5

Make an offer and begin negotiating with the buyer.

6

Schedule the loan closing if you are using a bank to finance the purchase. At closing, sign your loan documents and transfer ownership of the car.

7

Take the title to the Department of Motor Vehicles to pay your sales tax and register the vehicle under your name.

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How Does a Voluntary Repo Affect my Credit?

A repossession firm usually comes calling if you stop paying on your car loan. MSN Money writer Liz Pulliam Weston explains that banks and finance companies usually call in repossessors after 60 days, although your contract terms may allow your vehicle to be taken as soon as you default by missing just one payment. You can voluntarily turn in the car rather than waiting for the repossession firm to find you, although your credit is still damaged.

Definition

A repo refers to vehicle repossession, whether it happens involuntarily or voluntarily. The Federal Trade Commission (FTC) website explains that a creditor can repossess the car at any time without prior notice in many states if the car loan payments are delinquent. The repossessor may come on your property, if necessary, although you cannot be threatened or subjected to physical force. A voluntary repossession happens when you make arrangements with the creditor to turn over the car at a mutually agreed upon time.

Credit Effects

Both involuntary and voluntary repossessions have the same effect on your credit, according to the Edmunds automotive website. Other lenders see loss of a vehicle as a sign that you cannot manage bills, especially if you have other late or charged-off accounts. The MyFICO website warns that repossessions fall into the "payment history" part of your FICO credit score. Payment history makes up 35 percent of the total number, so a defaulted auto loan can drop your credit score significantly. Your bank or finance company can sue you for the difference between the loan balance and the amount of money it gets by selling your car, according to the FTC website, and that adds more negative credit report data.

Positive Effects

A voluntary repossession has some positive effects. You have time to get your personal possessions out of the vehicle rather than having it potentially disappear unexpectedly. The FTC notes that you also eliminate repossession costs that the lender would otherwise pass along to you.

Considerations

Sometimes you can legally escape paying the amount you still owe on your loan when your car was repossessed if the lender had it taken involuntary. For example, the FTC explains that you may have grounds to fight if the repossession firm did something illegal or the creditor did not sell the car in a commercially reasonable way or there was an unreasonable delay in suing you. Consider consulting an attorney about whether you may have a case.

Alternative

You can sometimes avoid a car repossession by talking to your lender as soon as you run into financial problems. The Edmunds website explains that creditors sometimes offer solutions, such refinancing or temporary payment deferment, depending on your previous payment history and delinquency reason. You may be able to sell the car and pay off the loan if its value is more than you owe.

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Tips on Leasing a New Car

All but the cheapest new cars cost upwards of $20,000. For this reason, many buyers, choose to lease rather than buy. Leases generally last for a period of two to three years, often with an option to renew. Using a few basic tips, buyers can successfully navigate their lease.

Watch Your Mileage

Most leased vehicles have strict limits on the amount of mileage that a driver is allowed to put on the vehicle. Usually, these limits are set on an annual basis. Any additional miles the driver puts on the car, past the limit, will incur a fee. For example, a driver may be allowed to put 12,000 miles on the car for each year of the lease, but will be charged one dollar for every 20 miles he puts on past that.

Know Your Fees

The price that a dealer advertises for a lease is only part of the story. In addition to monthly payments on the lease, the lessee may be required to additional fees, such as an initial signing fee and a fee that attends the return of the car. In addition, lessees should prepare to put a significant deposit on the car.

Mind The Wear and Tear

While the warranty for a leased vehicle will likely cover major repairs, it won't, in most cases, cover routine wear and tear to the vehicle, nor basic maintenance, such as oil changes and fluid refills. If the car is returned with nicks, dents and scratches, the lessee may be assessed heavy fees to cover the cost of repairs.

Know Your Insurance Costs

Before purchasing or leasing a car, prospective buyers should always have an idea of how much they'll be paying in insurance premiums. This is especially important for leased cars. Car buyers usually are allowed to hold the minimum amount of insurance coverage set by the state, but many car dealerships require people leasing a car to have far more extensive coverage.

Shop Around

Before selecting a lease, make sure you've examined all your provider options. Many prospective lessees are under the misconception that only the dealer can offer a lease on a car. In fact, many financial institutions will offer to extend a lease on a car as well. Once you've selected a make and model, shop around at various dealerships for the best price.

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How to Sell My Car By Taking Over the Payments

It's sometimes impossible to meet the car payment amount to which you agree in an auto loan contract. Alternately, you may need a vehicle that suits your needs better. Selling your car by having someone take over your loan payments -- known as loan assumption -- solves both these problems. To do this, you'll have to get permission from your auto lender and rework the loan paperwork so that the new buyer is legally responsible for payments.

Instructions

1

Look at your car loan documentation for any clauses regarding loan assumption. Some contracts forbid assumption outright. Call your lender and ask for written permission to proceed with loan assumption if there is nothing about loan assumption in your documentation.

2

Find someone who is willing to buy your car. Have this person provide your lender with all the documents necessary for an auto loan application, such as proof of income statements, ID and a credit report. Let the lender run the documents through the application process to determine if the buyer can handle your payments.

3

Permit the buyer to pull in a mechanic to inspect the car if he desires. A buyer probably will not complete the loan assumption if he can't get an idea of the true condition of the vehicle and the cost of any repairs to be made -- that is, he needs to know what he's buying.

4

Make an appointment with your lender and the buyer to negotiate the loan assumption. The lender probably will rewrite the loan, naming the buyer as the owner of the vehicle, but you'll likely still need to sign some release forms to terminate your rights to the car.

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How to Trade in My Car Instead of Refinancing

If interest rates have gone down since your initial car loan, refinancing can save you money over the term of your loan, or lower your car payments if you extend your term. You can also trade in your vehicle toward another car to do the same. However, if you owe more money than your car is worth, you may have difficulty trading in without putting money down. Learn how to trade in your car instead of refinancing.

Instructions

1

Check your credit at AnnualCreditReport.com. This website allows you to receive one free credit report per year from each of the three major credit bureaus. If your interest rate was initially high because of past credit issues, make sure your report is accurate and up-to-date from the time you took out your last car loan. If your credit has gotten worse, you may find you cannot lower your payments or get a better interest rate for a new loan.

2

Go to a dealership you want to work with. Large dealerships offer more options for financing, so if you want to work with a dealer who can provide the best financing option, use a large dealer. If you are unsure of where to go, you can research new-car dealers online (who also sell used cars) by going to a manufacturer's website to input your zip code for a list of dealers near you.

3

State your intentions to your salesperson--let him know what you hope to accomplish by trading in your car for another. Your salesperson will probably ask to run your credit report, so let him do so to help you in terms of monthly payments and budget. Give you credit information to your salesperson and sign the credit application.

4

Go over your credit report with your salesperson. He will probably let you know if lowering your rate is an option after the credit review. Give your salesperson the keys to your current vehicle and the name of the bank you currently finance through so he can appraise your car and get the correct payoff amount.

5

Discuss money down and vehicle options. Once your salesperson knows what your car is worth for a trade-in and the correct payoff amount, he can let you know if you'll need to put money down toward your loan for approval or to reach your budget. If you do have a budget, look at cars in your price range rather than the entire inventory.

6

Work with your salesperson until you can find a car that you want to finance. Once you do, make arrangements to pick it up and sign the paperwork at the dealership, which can be the same day or at a later date, depending on the dealer. Let your salesperson set up your new insurance policy with you, which includes transferring coverage to the new car and having proof of insurance faxed to the dealership.

7

Bring your title with you, if possible (some states hold titles until a loan has been satisfied), at the time you pick up your car. Sign all bank contracts and motor vehicle paperwork at the dealership. The dealer will payoff the old loan; you can expect to make your new car payment in 30 to 45 days, depending on the bank you financed through.

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California Laws on Auto Title Loans

Although California's consumer protection laws offer broad protection to most consumers who conduct business in the state with licensed businesses, it does not regulate most title loan lenders. For the most part, title loan lenders are unregulated in California because of the legislative loophole in lending laws. The California Attorney General's Office and the California Department of Corporations are responsible for enforcing and regulating finance lending laws in the state.

California Department of Corporations

The California Corporations Code and Financial Code requires financial service companies, investment brokers, stockbrokers, payday loan lenders, escrow companies, consumer debt resolution companies and mortgage lenders to obtain a state license before they can conduct business within the state. The department has the legal authority to file civil complaints against violating companies, revoke licenses, censure and suspend licenses. The California Department of Corporations can also work with the California District Attorney's Office to file criminal charges against unauthorized lenders or lenders who violate the state's usury laws and other consumer protection regulations.

Article 15 California Constitution

The California Constitution, Article 15, covers loans for personal, family or household purposes. For these types of loans, California's usury law prohibits lenders from charging more than 10 percent annually on loans based on the unpaid balance. The California Constitution does not apply to loans not used for personal, household or family reasons. However, although title loan lenders are exempt from Article 15 of the California Constitution, they are subject to maximum interest rate laws.

Pawnbrokers

In California, pawnbrokers are those who receive goods and are engaged in selling them. Furthermore, pawnbrokers that accept automobile pledges as security for a personal loan are included in the state's definition. Pawnbrokers can charge allowable interest rates determined by California statute, and they may not charge more than 2.5 percent per month. Alternatively, California considers title loan lenders as personal property brokers. Personal property brokers and pawnbrokers are subject to the same types of usury interest caps.

Finance Charges

According to the California Department of Justice, Attorney General's Office, there are no finance charge limits for personal, family and household good loans. Thus, pawnbrokers and finance companies that offer title loans are largely unregulated, and the lender can pursue claims for an unlimited amount against borrowers who default on their loans. The California finance lenders law allows lenders to repossess vehicles after one default, and their rights to repossession are incorporated in their contracts.

Considerations

Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

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Easy Financing for Cars

Getting easy financing for a car will involve preparation. Auto lenders base your financing package on numerous factors such as past credit patterns and how much you can afford. Planning and knowing typical lender requirements can help you score a good deal on financing a car.

Credit Approval

Auto loans include loans for people with bad credit; and many dealerships and banks offer sub-prime loan products. Unfortunately, financing options with bad credit are limited and don't always offer the best terms. Getting easy financing for a car starts with your credit history. Borrowers with good credit habits receive the best financing packages, which include the lowest interest rate on vehicle loans. Low rates reduce the car payment and these borrowers pay less interest on their loans. There's no minimum credit score requirement for a car loan, but aiming high (700 plus) can place you in a prime category for a loan.

Prepare Financial Documents

The average lender may not approve your vehicle loan without first confirming that you can afford the payment on the loan. Applying for a car loan without the necessary documentation can slow the process. Increase the chances of easy financing for a car by having your tax returns, bank statements or paycheck stubs ready for your lender.

Down Payment

Reduce the amount you finance by buying a car with a down payment. There's no required minimum; but the more you put down on the car, the less you'll pay each month on your vehicle note. And with a down payment, you can work with your lender and possibly talk down the interest rate. Down payments are recommended if applying for a car loan with bad credit, says Financial Web.

Co-signer Option

Borrowers can apply for a vehicle loan with no credit history or bad credit; and while lenders do offer loans to these individuals, some may require a co-signer. Co-signers essentially put a lender's mind at ease, making them feel more comfortable approving an auto loan. Co-signers are common when borrowers have credit issues or no prior credit history. They sign their name on the loan documentations; and while they aren't the primary borrowers, co-signers agree to make loan payments if the primary borrower defaults.

Car Loan Quotes

Remove the hassle of car shopping by getting approved for a car loan before test driving and negotiating price with a dealership. Pre-approvals are advantageous for numerous reasons. You learn whether you qualify for financing before beginning the car search, and you know exactly how much you can afford early in the process.

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How to Buy an Out-of-State Car in Delaware

Due to the low sales tax on vehicle purchases, Delaware is a popular place to purchase a car, even if you do not live in the state. If you are buying a car in Delaware as an out-of-state buyer, you will still end up having to pay the full sales tax amount for your state. While you'll only be charged Delaware sales tax when you buy the car, your state will collect the difference when you register the vehicle.

Instructions

1

Visit a car dealership in Delaware or an individual seller that has a car you want to buy. In Dover, you will find the largest concentration of car dealerships. Some you can find include Price Acura, Hertrich's Capitol Lincoln Mercury and Dover Volkswagen. Test-drive the vehicle you are interested in before making your decision.

2

Use the NADA Guides or Kelley Blue Book website (see Resources) to check the value of the car. Once you know the value, you can negotiate the price so that you do not end up paying too much for the vehicle. Even though you live out of state, you need to enter in the local Delaware ZIP code to get an accurate value amount for the local area. Otherwise, you may end up paying too much for the vehicle.

3

Secure financing, if you have not already done so and do not have the cash. Financing can be done through a local bank of your choice or directly through the car dealership if you are at one. Some banks with branches in Delaware include Wilmington Trust Bank, First Shore Federal Savings & Loan and Wachovia. Ask to fill out the financing application and wait for the decision, which typically takes between 10 and 30 minutes. The financing application needs details about your income.

4

Sign the purchasing documents once you have agreed on a price and have financing. If buying from an individual, complete a bill of sale and the title transfer with the seller. Delaware requires individual sellers to also complete a "seller's report of sale," but you do not have to sign it. If buying from a car lot, you will be presented with paperwork, including the purchasing contract, bill of sale and financing contract. Purchasing documents in Delaware are similar to those in any other state. Before signing, review the documents to make sure you are not being charged for registering the vehicle in Delaware, since it must be registered in your home state.

5

Take your bill of sale or purchasing contract to your local department of motor vehicles when you get back to your home state. Depending on your state, you may need other documents such as a smog certificate. The document will show that you paid sales in Delaware of just 3.75 percent. As a result, the DMV will require that you pay the equivalent sales tax amount in your state to when you register the vehicle in your state. This means if your state sales tax is 8.75 percent, you must pay the difference of 5 percent when you register the car.

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How to Buy a Leased Vehicle After a Lease Is Completed

Buying a used car can be fraught with uncertainty, but not if you are buying a leased vehicle of your own after a lease is completed. This process provides first-hand knowledge of the car and completion of regularly scheduled maintenance. It allows you to know the current driving condition and quirks of the car as well as keep the treasured memories of the many enjoyable times in it.

Instructions

1

Do your research. Look at resources, such as Kelly Blue Book or Edmunds.com, to find out the retail and wholesale value of your car. Insert your car's make, model and year into the "used cars" section. Add the current mileage and condition for an accurate price.

2

Go to dealerships and look at their used car inventory. Find cars similar to your own and record their prices.

3

Look at your lease. Find the residual payment to keep the car. Compare the car's current value to the residual amount.

4

Secure financing. Contact several lenders to find the best interest rate. Pick the best offer with the terms that fit your budget.

5

Contact your lender. Inform him you are interested in purchasing the car once the lease expires if you two can negotiate a price adjustment. Explain that buying this same car from dealer XYZ would be x amount cheaper than paying the residual amount of the lease.

6

Negotiate a lower price. Mention the current value of the car online. Accept the new price if offered and complete the paperwork. Use your loan to pay off the car lease.

7

Walk away if the residual value is substantially higher than the current value. Allow the lender to contact you to restart negotiations. Turn the car in to the dealer and negotiate for a lower price one last time if you truly want the vehicle, otherwise find one better priced.

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How to Buy a Car in Hawaii

While there are no bridges connecting any of the Hawaiian islands, you can drive around on each island individually. If you are moving to the island and need a vehicle, you do not have to bring a car with you from the mainland. Instead you can purchase a new or used car in Hawaii. When you buy a new car, you'll notice that the price is higher than on the mainland, which is due to the cost of getting it there. Oahu is the island where you'll find most of the car dealerships, particularly in Honolulu.

Instructions

1

Visit a local car dealership to look at available vehicles. The Automotive.com website (see Resources) has a list of dealerships in Hawaii. Some dealerships include Servco Lexus Maui, Servco Auto Windward Toyota/Chevrolet/Suzuki and Hawaii Mitsubishi. When buying a new car in Hawaii, an excise tax between 4.166 and 4.712 percent is added to the cost of the vehicle. The exact amount varies by location.

2

Browse the local newspaper to look for individuals selling cars in Hawaii. A military base is located on Oahu, which creates a large used car market when people leave the island.

3

Look through online car listings, such as on the Auto Trader, Craigslist and eBay Motors (see Resources). If you find a car online that is located on the mainland, it will cost extra to have it shipped to the island. For that reason, it is typically cheaper to look for cars already on the island.

4

Secure financing, if you do not have the cash, by applying for a car loan with a local bank or with the car dealership. Fill out your loan application in person or on their website. Your income information is needed to complete the application.

5

Sign your purchasing contract or bill of sale to complete your purchase. If buying from an individual, you must get the signed car title from the seller as well.

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Refinancing a Repossessed Car

Most lenders don't repossess a vehicle until car payments are significantly past due, often 60 days or more. Once your payments are reported as late and unpaid to the credit bureaus, it becomes difficult to obtain another car loan. Work with your lender before it seizes your vehicle or seek the help of a co-signer if you can't refinance the car on your own.

Before a Repossession

Your lender may have programs in place to help distressed borrowers avoid repossession. Under some circumstances, it's financially beneficial for the lender to modify your loan or defer car payments to help you satisfy your loan balance. As soon as you know you can't pay your car bill, contact your lender. Let your lender know that you're having difficulty making your payment and need help. Your lender might allow you to skip several payments without penalty and extend your loan term to offer a lower monthly payment.

Total Loan Deficiency

Once your vehicle is repossessed, you'll have to refinance the total loan balance to satisfy your old loan. If the lender hired a repossession company to seize the car, you'll also have to pay repossession fees, which often exceed $1,000. Expect to pay the car's loan balance, late fees, past due payments and repossession costs to refinance your loan. Repossession often occurs when a borrower owes more than his vehicle is worth, Trying to refinance a loan balance for more than a vehicle's worth might prove difficult.

Importance of Loan-to-Value Ratio

Lenders base a borrower's loan amount on a loan-to-value ratio. Depending on your credit and the lending value of the car, potential lenders may approve all or only a portion of your loan. If you have poor credit, you might obtain a loan approval for only 50 percent of the car's lending value. If you maintained other lines of credit besides your car loan, your credit may not have suffered badly, although each individual's credit rating is impacted differently by repossession and nonpayment. You may have to provide a large down payment to obtain a loan approval.

Considerations

Your past due payments are reported to the credit bureaus. When you apply for a loan refinance, potential lenders can view your late payment history and the amount of days you're past due. A lender may request that you pay your past due payments before approving your loan. After a repossession, your lender will notify you of the date it intends to sell your vehicle. Since loan approvals can take up to a week, you'll have to move quickly to refinance your vehicle. Submit a refinance application as soon as your vehicle is repossessed, and while you're waiting for an approval decision, search for a co-signer in case you need one.

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Things to Consider While Purchasing a Car

Buying a car is one of the most expensive purchases you'll make in your life, and you'll probably make the purchase multiple times throughout your life. It's important to make sure you buy the right car from the right person or dealership, otherwise you'll be stuck with a car that you don't like or one that breaks down constantly.

New Versus Used

Modern cars are built better than older cars and last longer than cars of past, so buying a used car doesn't necessarily mean you're going to need to fix it up every few thousand miles. Still, you're generally going to have to pour more money into repairs for a used car than if you bought a new car, and there's always a risk of running into a large problem, such as a bad engine or transmission. New cars often have a guaranteed warranty and come with better features, technology and safety features, but the downside is they cost more money than used cars. If you don't have a lot of money, then buying used is often the way to go.

Dealership Versus Private Seller

If you're buying a new car, then you have no option but to go to a dealership. If you're buying a used car, you can either visit a dealership or buy from a private seller. You'll almost always get a better deal buying from a private seller, but unless you take the car to a mechanic prior to buying it, you have no idea if the seller is being truthful about the vehicle. While a used car from a dealership will result in a higher price, they often fix any major problems with the vehicle and some dealerships will back the car with a warranty.

Leasing

Leasing a vehicle means that you're essentially renting the vehicle from the dealership for a certain period of time, which is determined when you sign the lease. Leasing usually results in lower monthly payments than buying a car outright, although you generally need more money upfront and you can usually only drive a certain number of miles. After your lease expires, you give the car back to the dealership. If you like to drive new cars every two to three years, want lower monthly payments and don't drive over 15,000 miles a year, then you may want to consider leasing a car.

Buying

Buying a car involves getting a loan from a financial institution for the entire price of the car. After you pay the car off, you own the vehicle and you can keep it as long as you want. The downside of buying a car is that the monthly payments are higher than if you leased the car and you're responsible for the entire price of the car. Conversely, you own the car outright and you can do whatever you want with it. Buying a car is less expensive than leasing a car in the long run, if you plan on keeping the car for longer than the length of the loan.

Type of Car

The most important part of car shopping is deciding what kind of vehicle you want. If you live in a wintry state, then you might want to consider buying an all-wheel drive car or four-wheel drive truck or SUV, although those types of vehicles are usually more expensive than two-wheel drive vehicles. You'll also have to consider how big of a vehicle you need to accommodate your family. SUVs are roomier than cars, but tend to lack the gas mileage that a car can get. Also take a look at hybrid vehicles since they get better gas mileage than gasoline-powered vehicles and are better for the environment.

Insurance

Several factors have an impact on your insurance premium, such as your age and driving record, but the type of car you buy is one of the biggest deciding factors when it comes to determining your insurance premium. Sports cars, hybrid vehicles and expensive vehicles laden with technology and features and tend to cost the most to insure.

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How to Calculate Installment Loan Payments

An individual may borrow a certain amount of money, commonly referred to as the principal, from a bank or another lender. Then, under the loan agreement, the money is paid back in regular monthly installments over a designated period of time. Since the lender typically provides the money at a specified annual percentage rate (APR), you need to take into account the interest paid to the bank when computing the installment payments. As an example, we will calculate payments to amortize a $20,000 loan given at an APR of 6.6 percent for 5 years.

Instructions

1

Calculate the loan duration in months by multiplying the number of years and 12. In the example, the five year loan corresponds to 5 x 12, which equals 60 months.

2

Divide the loan APR by 12 and 100 to calculate the interest rate per month. In our example, the monthly interest rate is 6.6 percent / (12 x 100) = 0.0055.

3

Add 1 to the monthly interest rate, then raise the sum to the power that equals the loan duration in months. In our example, the value is (1 + 0.0055)^60 = (1.0055)^60 = 1.389711.

4

Subtract 1 from the value computed in Step 3. In our example, 1.389711 -1 = 0.389711

5

Multiply the monthly interest rate and the value computed in step 3, then divide the product by the number obtained in step 4. In the example, (0.0055 x 1.389711) / 0.389711 = 0.019613.

6

Multiply the loan amount by the number from step 5 to calculate the monthly installment payments for the loan. In the example, payments would be $20,000 x 0.019613 = $392.26. Therefore, this installment loan's payments would be $392.26 per month.

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How Buying a Car With Cash Saves You Money

First and foremost, avoiding any type of interest-bearing debt is a big money saver for any consumer. By paying cash for a car, the driver avoids paying interest over the entire time period that he owns the car.

Significance

If a borrower buys a $10,000 car with a 5% loan and a 5-year term, he pays $1,322.74 in interest over the life of the loan.

Function

Paying cash for a car may make the deal even better for the consumer. If a consumer pays cash for a car, the seller may be willing to negotiate a lower price, eager to get all of the money up-front.

Time Frame

Paying cash for a car can save you money when it's time to sell. Cars are a depreciating asset and if you have to sell a car for less than you owe on it, you are liable for the remaining debt.

Considerations

Saving up for a car can take time, but it is worth it in the long run.

Misconceptions

Paying cash for a car does not mean that an individual does not have good credit. It simply means that he is able to save up for what he wants to buy.

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How to Get a First Time Auto Loan with a 681 Credit Score

Getting a first-time auto loan is an exciting time, and several factors determine whether you're approved for a loan and the interest rate you receive. Applicants with a low credit score typically obtain higher rates, whereas people with a credit score in the 700s pay the best rate. A 681 credit score is considered average by lenders, and you can get an auto loan with this rating. But to improve your chances of an approval, it's best to know the lender's guidelines.

Instructions

1

Provide employer information. Expect the finance manager of a dealership to verify your income and employment history. Come prepared. Bring copies of your most recent paycheck stub or tax return.

2

Shop around. You don't have to use your dealership's finance companies. Secure your own financing in advance to obtain a preapproval and possibly lower rates. Visit your bank or credit union and complete an application for an auto loan. Compare this rate to the dealership's finance package.

3

Lower the loan balance. Although a 681 credit is average, it doesn't justify the best interest rate on an auto loan. Higher rates equal higher payments. Consider offering a down payment on your new automobile to reduce your loan balance and payments. Put down at least 10 percent.

4

Get a co-signer. Find a co-signer with a higher credit score to help you get a lower rate on the auto loan. The finance company takes both scores and calculates the average (add both scores and then divide by two) to determine the interest rate. For example, having a co-signer with an 800 credit rating creates a median score of 740.

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How to Release Liens on Automobiles

If you have ever financed an automobile and had to make payments, there is no better feeling than to pay the loan off and own your car with no liens on the title. There are a few details that must be taken before you truly own the car free and clear.

Instructions

1

Call your lender who is holding the lien on your automobile. Ask for a final payoff of your loan and explain that you want to receive your cleared title as expeditiously as possible. If you are planning to sell or trade in your car, you will want to have your title showing it released of liens as soon as possible.

2

Send in your final payment on your automobile. You can do this by mailing in a check for the final payment or making the payment online with your bank (if your bank is your lien-holder). If you want to expedite the final posting of the payment, pay it online or send in a cashier's check for the final amount.

3

Follow up with your lender by calling and asking the customer service account representative to tell you when you can expect your title. When the lender receives the payment and posts the correct amount to the account, they will pull your car title from file storage. They will sign off in the space for lender lien release on the back of the title, date it and then they must forward it to your State Department of Motor Vehicle (DMV) division. The DMV office will check the vehicle identification number (VIN) against what is shown in their system, change the information to cleared or unliened and issue a cleared title. This will be sent to you (or it may be sent back to the lender, who will in turn send it to you).

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Does a Cosigner Have Legal Rights to a Vehicle if They Have Made No Payments?

Some people who cosign a vehicle loan for a friend or relative fail to realize the implications of what they're doing. Cosigning that loan isn't simply being helpful; it's taking on an obligation. If the person responsible for the loan fails to make his payments, you have to do it for him, whether or not your name is on the car title.

Making Payments

You cosigned a car loan for a friend and he's made all his payments on time so far. That's good because he's building a solid credit history and yours is protected. You don't have the right to take his ride for a spin just because you cosigned the loan. Just be glad he's a responsible borrower.

Lapsing

You cosigned the loan and now your friend -- who was so grateful for your help -- has missed a payment. Or four. The creditor who loaned your friend the money is after you for the payments. And the creditor has every right. When you signed the loan documents, you promised to pay for the car if your friend didn't. Now you must pay or risk damaging your credit. But unless your name is on the car title, you can't take the vehicle, even if you are making payments.

Co-signing

Never cosign a loan unless you can afford the financial burden, says the Federal Trade Commission. The reason is because cosigners often wind up making the payments. Check your budget and see if the payments are within reach. If they aren't, don't cosign the loan, no matter how fond you are of your friend or relative.

Protect Yourself

If you're still willing to cosign a vehicle loan, have the borrower agree to add your name to the vehicle title. In this case, if he defaults on the loan and you wind up having to pay, there won't be a legal hassle about taking the car as your own. You should also stay on top of his paying status. Keep in touch with the financial institution each month to make sure the account is up-to-date and your credit is out of harm's way.

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The Best Way to Finance Buying a Luxury Car

Luxury cars can vary in price; some can cost as much as a home. With a higher financed amount, an interest rate can have a huge effect on the end cost of your car. Tax in some areas can also add a hefty amount to your price. Before searching for financing, research the price of your car and taxes to determine how much money you'll put down. High-priced cars in excess of $50,000 can require down payment for lending.

Instructions

1

Check your credit history. Make sure your history is correct and your score is decent. Consider your debt-to-income ratio, that is, the amount of money you have coming in versus the amount you pay out every month. This is reflected in your credit report. Close any longstanding, inactive accounts with high balances as these do not work in your credit favor.

2

Review manufacturer's websites for discounts. Higher-priced luxury vehicles rarely have incentives, but you can find decent discounts for lower-priced luxury vehicles costing $40,000 or less. Check rates---you might see a low rate on a short-term finance for your car, but be careful as payments can skyrocket. For example: If you find a manufacturer offering 0 percent on a vehicle for only a 36-month term, you'll pay $1,388.89 per month for a vehicle that costs $50,000, not including taxes or fees. If you finance this same vehicle for 60 months at a rate of 4 percent, your payment drops down to $920.82. Use an auto loan calculator to determine if a low-rate option is for you.

3

Apply for a loan. Check your local credit union; rates are often competitive through credit union lenders. Consider a line of credit you already have such as a home equity loan. Compare the rate of your home equity loan with competitive local lenders. Check with your dealer---someone with excellent credit can merit a low and competitive rate through the manufacturer. Apply either online or in person.

4

Discuss monthly term options with your lender. The shorter your term, the less you'll pay in the long run---it is cheaper in the long run to pay off a high-balance loan as soon as possible. Usually, a rate does not differ for a period of three to five years. Ask about pre-payment penalty fees with your lender if you plan to pay the loan off early.

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How to Get Lower Payments on a New Car

Buying a new car is a wonderful feeling. Unfortunately, new cars are expensive, and some people can't afford the monthly payment. Rather than stick with your current automobile or purchase a used vehicle, consider different ways to get a lower car payment. In return, you're able to buy the car you want--without breaking the bank.

Instructions

1

Increase a low credit score. Several factors influence the payment on a new car: the sale price and the interest rate. To get the best rate on the car, order a copy of your credit report and examine your credit score. Take steps to improve your credit such as paying down debt, paying bills on time and limiting credit inquiries.

2

Save money for a down payment. Auto lenders don't require down payments. However, if you want to get a lower payment on a new car, give the dealership a 10 or 20 percent down payment. This reduces the amount financed, which reduces your payments.

3

Apply with a co-signer. People with no credit history or bad credit rarely obtain a low rate on a new car loan. If possible, find someone with a good credit history and ask her to co-sign the auto loan. Co-signers can help you acquire a lower rate, which can decrease your monthly payments.

4

Shop around. Some car buyers accept dealership financing. However, dealership lenders tend to charge higher rates. Instead, contact your local bank or credit union and apply for an auto loan. Oftentimes, these lenders offer lower rates and lower payments.

5

Extend the car loan term. Choosing a three or four year auto loan lets you pay off the loan sooner. Unfortunately, these loans require higher payments. To get a lower payment, pick a five or six year term.

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How to Sell a Financed Car That You Have Had for 5 Months

Selling a car you have only owned for five months should prove challenging. The challenge lies in paying off your loan, not in selling the vehicle. New vehicles suffer the greatest amount of depreciation once driven off the lot, meaning you likely owe more than the vehicle's private-sale value. Most states do not allow title transfers if a lien exists on a vehicle's title, and most knowledgeable buyers know the risks associated with purchasing a financed vehicle that isn't paid off, even if your state allows such transfers.

Instructions

1

Call your lender to retrieve the vehicle's payoff amount. Ask for a 10-day payoff; loan balances change daily because of interest charges unless you have a zero-percent loan. Ask for the loan's per-diem amount, or the amount of interest added daily, so you can add it to the payoff amount after the 10-day period.

2

Find the private sale value of your vehicle by visiting KBB.com and Edmunds.com -- both offer a different value but can help to determine the correct asking price. Subtract the vehicle's resale value from your loan amount to determine the amount you must come up with to satisfy the loan and receive the title (if in a title-holding state) or the lien release.

3

Check your funds. Set aside the money needed to pay off the loan in full. Call your bank again to find out how to pay off the loan, obtain the title or lien release and the time it takes to do so. This way you and your buyer know what to expect.

4

Advertise your vehicle for sale in local or surrounding area newspapers, classified advertisements, used car publications and Internet car classifieds. Not all advertising methods are free, but the more people you try to reach, the better chance you have of selling your vehicle.

5

Include as many pictures and as much detailed information about your car (such as price, warranty and mileage along with year, make and model) as possible in your advertisements. Meet with potential buyers until you find one interested. You do not have to advertise that your vehicle has a loan on it; wait until you have an interested buyer.

6

Tell your buyer where you have your loan, and if he plans to finance the vehicle, you can have him apply to the bank. Otherwise, make arrangements to go to the bank together to pay off the loan balance or contact your bank to make your remaining payment and allow the buyer to call and make his payment.

7

Wait for the title or lien release if your bank is not local. Otherwise, the bank should supply you with all you need while you are there in person. Sign your title over to the buyer following your state's requirements and provide her with the original lien release (you cannot keep the original).

8

Take your plates off of the vehicle and give the owner the keys. Make sure all your belongings are out of the car before releasing it to the new owner. Follow your state procedures for returning license plates and remove the car from your insurance policy.

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How to Cosign an Auto Loan if the Cosigner Lives out of State

Having a lack of credit or a poor credit history often results in a financial institution requiring the signature of someone else with good credit before approving you for an auto loan. The person who signs your loan is known as a cosigner and guarantees the financial institution that he will pick up your payments if you default. Most cosigners sign the loan while in the presence of a financial institution employee. An out-of-state cosigner must visit a notary public to cosign your loan.

Instructions

1

Ask the financial institution if they will accept an out-of-state cosigner. Major financial institutions likely will, but small local ones may not.

2

Mail the loan documents to the cosigner. The financial institution may prefer to mail the documents; however, it might be acceptable to have the papers faxed. If you plan on traveling to the cosigners state, ask if you can take the documents with you.

3

Tell the cosigner to visit a notary public with the loan documents. The cosigner can find a notary public at a notary office. Some banks also offer notary services. Instruct the cosigner to bring photo ID with him. Inform him that notary services charge a fee, typically under $5.

4

Ask the cosigner to mail or fax the documents back to the financial institution after signing them in front of the notary public.

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How to Trade a Car That Is Upside Down in Value

Being upside down means you owe more on your car loan that the car is worth. This is a bad situation for a car as they usually depreciate with age (unlike real estate). The difficult part is trying to trade the car in for another car, especially if the difference is extreme. Unfortunately, for most of us, a car is necessary for employment or family. The good news is that there are strategies to make the process less painful.

Instructions

1

Walk through an example. Let's say you owe $20,000 on a car that is now only worth $10,000. This means that you are $10,000 upside-down on the car. If you decide to trade in the car, you will have to pay the $10,000 you owe on the car plus the the cost of buying the new car.

2

Bite the bullet and pay off the loan. This is difficult, but it's better than carrying negative equity over from your old car loan, which will only increase the monthly car payment for your new car.

3

Keep the vehicle until the negative equity is gone. This is by far the easiest way to get out of an upside-down car loan. However, if your car breaks down or is inoperable, this may not be an option unless you can afford to by a used car that does not require a loan. In this case, you will need to determine whether or not it is more important to pay off the existing debt or purchase an older (cheaper) car with it. Ultimately, this decision depends on your financial situation and your willingness to say no to "new car fever."

4

Request a cash rebate on the new car. Continuing with the same example, if you have $10,000 negative equity on your car loan, ask the dealer for a cash rebate to cover the amount. Make the purchase of the car contingent on this cash rebate. The more cash you can put down on the new car and the better your personal credit score, the more you will be able to negotiate up the amount of the rebate.

5

Check for rebates and incentives yourself. You can do this on most any website dedicated to auto sales. For instance, Edmunds.com has an "incentives and rebates page" (see the Resources section for a link).

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How to Get a Good Price When Buying a Used Car

It's a fair bet that sooner or later you'll find yourself car shopping. Choosing a used car over a new car can save you thousands of dollars, but not all used car dealerships are honest. Some used car dealerships mark up vehicles beyond their actual value while car salespeople use psychological tricks to make shoppers more apt to spend beyond their budgets. By educating yourself on the used car shopping process before you visit the lot, you're more likely to get a good price on a used car.

Instructions

1

Look up the market value for the make and model of used car you want to buy. You can find retail estimates for used cars through Edmunds.com's "True Market Value" estimate or researching the vehicle in question at the Kelley Blue Book's website, kbb.com.

2

Secure financing before you go car shopping. Although many car dealerships offer financing options, financing at the dealership is only a wise choice if the dealership offers you a lower interest rate than your bank. In addition to offering notoriously high interest rates, car dealerships have been known to sneak additional services and items buyers did not request into financing contracts.

3

Shop for your car at the end of the month. The sales teams at used car dealerships have monthly quotas to meet, and you're more likely to get a better price in the last days of the month when the sales manager is pushing for additional sales.

4

Mention to the car salesperson that you aren't in a hurry and need an opportunity to compare the price he quotes you with the price at other dealerships. Even if you need the car immediately, letting the salesperson know this makes him less likely to offer you a good deal because he knows your options are limited.

5

Make a lower offer than what the dealership quotes you. Remember, the price sticker on the car is only a starting point for negotiations. The price isn't set in stone. Continue to make a lower offer until you reach a compromise with the dealership.

6

Walk away if you can't reach an acceptable price with the dealership. The last thing a car salesperson wants is to see you buy a car from the competition, and she might acquiesce to your offer if you get up and walk away. If not, visit other dealerships until you find a car you want that fits your budget.

7

Scrutinize your final contract for junk fees. Like a real estate contract, a used car sale contract often contains fees such as a "dealer convenience fee" or "advertising fee." These are fees for nonexistent services or services the dealership must perform regardless of whether you actually buy the car. If a car dealer informs you the fees aren't negotiable, walk away. Most dealerships won't risk losing a sale on account of junk fees.

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How to Terminate a Car Lease Early

Cars and homes are two of the most expensive items that most people own. While homes may appreciate in value, cars tend to depreciate. Auto loans are often based on values which will be considerably lower in the future. It is for this reason that some people prefer leasing as an option to purchasing a car outright. Most leases last for two to four years and the driver pays monthly "rental" payments at an agreed upon price over the length of the leasing period. Most dealers will penalize you with significant fees if you terminate your lease early and defaulting on a lease can trigger a breach of contract, resulting in negative marks on your credit record.

Instructions

Communication Is The Key To Terminating A Car Lease Early

1

Contact lease trading companies. Instead of terminating your lease, consider trading or swapping with someone else. The process reassigns your lease to another person and vice versa. However, you might have to pay fees to the trading company for listing the item once it sells.

2

Buy a new car or trade in your car for a new one at the dealer. Buying a car or extending your lease obligation is often presented as the least expensive option in terms of upfront or short term costs.

3

Buy the car. Request a statement showing the payoff value of the car from the dealer. If the payoff value is lower than the resell value you should consider buying the car outright for a quick profit. Additionally, your credit rating will increase.

4

Talk to your dealer. Sometimes dealers will terminate the contract for extreme personal circumstances. Prove your record for taking care of the car and making payments on time. If they won't terminate the lease, some dealers will offer lower payment amounts to help alleviate some of the financial burden.

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Is the Present Value of a Financed Car Always Lower Than Paying Cash?

Vehicle purchase, trade, retail or insurance value does not differ because of how you paid for the car. Cash is treated the same as finance during the car buying process, as the dealership receives a check either way; there is no holdup in funds. Beyond initial pricing, financed vehicles may include an interest rate, which results in a higher cost of ownership.

How to Determine Value

You can find retail values using the Edmunds, Kelley Blue Book and NADA Guides websites. If you research a car, you will notice values remain similar across the board. The sites do not base values on how you pay or how much you owe. If trying to determine differences in dealer wholesale values, check the trade-in values from these sites, as dealer wholesale books are in line with fair market trade-in values.

Procedures for trading in a financed vehicle may differ from one owned outright since the loan must be satisfied, but values do not differ.

Interest Rates

Financed vehicles may appear to have a lower value because of the need to pay off the loan. A person who has a loan on his vehicle pays more for the car in the end, unless the purchaser has a zero-percent loan. Otherwise, interest rates differ, costing thousands in extra payments, all of which go toward interest. When an interest rate exists, the borrower's payment goes toward interest rate and principle amount, so it takes longer to pay for the vehicle's total value.

Considerations

While no consumer receives a discount for paying cash (lenders also pay cash), certain incentives may exist for consumers who finance. Manufacturer banks sometimes offer price discounts for financing, which really provides more profit to the bank than to the consumer because of the total payback amount of the loan plus interest. Also, if the borrower purchased and financed vehicle add-ons, such as an extended warranty or paint protection, it takes even longer to pay toward the vehicle's principle. This makes it appear as though a large gap exists between vehicle value and finance amount.

Precautions

In conclusion, the customer who finances pays more because of interest, not the car's price. A cash-paying customer may appear to have more value in his car, but he is only saving money because he had the means to pay for the purchase interest-free. If you do have a loan on your vehicle and lack equity because of your interest rate or lack of money down, be sure to get guaranteed auto protection (Gap) insurance. In the event that your vehicle becomes a loss, the policy will cover the loan if your insurance company does not. Cash buyers do not have this luxury.

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How Much Should Having No Credit Affect the Price of a Car?

If you have no credit history, the financial effect of buying a car will be steep. However, the pain will not be felt by the purchase price; the buyer will feel the effect when making payments. That's if the car dealership even decides to sell to someone without a credit history.

Interest Rate

Your credit really only comes into effect when determining the interest rate you will pay on your car loan. If you have little or no credit history, lenders may be fearful to lend you money because they don't know if you are a good or bad financial consumer. As a result, to offset the risk, the lender will charge a higher interest rate.

No Sale

When buying a car from a dealership, you may seek financing through the company. Or you may talk to your bank to get a loan. Because of your lack of a credit history, both may deny you a loan or financing because neither would want to take on the risk. Therefore, there may not even be a sale, which means you don't get a car. Car dealers are not obligated to sell you a car, especially with so much risk involved.

Buy it Outright

If you are denied a loan to buy the car at an ideal interest rate, then consider buying the car outright without taking on a loan. This can only be done if you have the financial ability -- the right amount of money saved up in the bank. That way, your credit history makes no difference to the dealership because there are no financing or borrowing terms required.

Establish Credit

If you are unable to buy the car outright or your can't get ideal terms from the lender due to your lack of credit history, then consider establishing credit before buying the car. Start by getting your first credit card. Get a secured limit. Your credit score is built on five pillars -- your ability to pay on time, keeping your debt ratio low (both of which make up 65 percent of your score), length of history, new credit and types of credit used (such as having a mix of credit cards, mortgages and other loans).

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Can I Sue If a Vehicle That I Cosigned for Gets Repossessed?

If you can't pay for a car with cash, an auto loan can allow you to finance the cost of that vehicle over a certain period of time. The loan, however, must be repaid. If you're a co-signer on a car loan and that car is repossessed, your status as a co-signer affects your right to sue.

Identification

A repossession occurs when the lender assumes ownership of a vehicle from the borrower due to the borrower's breach of the car loan agreement. Often this breach is in the form of missed payments on the loan. Repossessions can be voluntary, where the borrower returns the car to the lender, or involuntary, where the lender sends a tow truck to retrieve the car from the borrower. Both types are reported as a repossession on your credit report, where it can remain for up to seven years.

Significance

A co-signer is jointly obligated for the debt signed for. As a co-signer, you agreed to be personally liable for the payment of the debt in case the primary borrower did not make the payments; therefore, you can sue neither the primary borrower nor the lender for the repossession of the vehicle. The lender has the right to repossess if the terms of the car loan agreement are not met either by the primary borrower or by you.

Consideration

A repossession does not relieve you of your obligation for the car debt. According to the Federal Trade Commission, once the lender repossesses the car, it may decide to sell the auto to recover some of the money owed on it. The difference between what the car sells for and the amount still owed on the loan is called deficiency. As a co-signer, both you and the primary borrower are liable for payment of this amount; however, according to the Federal Trade Commission, the lender must sell the car in a commercially reasonable manner. This means the selling price of the car must be in keeping with the fair market value of other such cars in your area. If the lender sells the car at a price below fair market value, this may give you a claim against the lender for damages or serve as a defense against a deficiency judgment.

Warning

Depending on the dollar amount, the lender may decide to sue you and the primary borrower in civil court for the deficiency if you don't pay it. If the court grants a judgment, the lender may be able to aggressively pursue collection of that judgment, which could include garnishment of your wages, seizure of the funds in your bank accounts and the placement of a lien on your personal property, depending on the laws of your state. A judgment appears on your credit report for up to seven years as a public record.

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