What Happens When You Can't Pay the Claim Judgment Difference of a Car Loan?

If you are unable to make payments to your lender after a repossession, a court judgment likely entitles the lender to collect the balance due on the loan. While your lender may still accept a payment plan if you act quickly, it can garnish your wages to collect the money you owe.

Payment Plan

You might not have to pay the total judgment amount. Contact the party handling your account, whether the lender, its lawyer or a collection agency. Review your summons, contact your previous lender or ask the court to obtain the contact information of the entity suing you. Before calling, review your budget to determine how much you can afford to pay each month. Offer to make payments to satisfy your remaining loan balance.

Credit Damage

A repossession and history of late payments damage your credit rating. Both instances remain on your credit report for at least seven years. Once the collector wins its case against you, the judgment is also reported to the credit bureaus. The loan account information and a judgment are listed separately on your credit report. If you satisfy the judgment amount, it still remains on your credit report for seven years. If you don't pay the balance, the judgment may remain on your credit report indefinitely, depending on the creditor.

Settlement

You may be able to settle your debt with the creditor for less than the amount owed. If you pay a lump sum, the creditor might take far less for your debt. If you settle the debt, the repossession and judgment listed on your credit report will update to reflect the settlement payment. The amount excluded from your debt is considered income by the Internal Revenue Service. For example, if you owe $8,000 on your car loan and settle for $3,000, you must claim $5,000 as income on your taxes.

Wage Garnishment

If you don't settle your debt or pay it off, the debt collector may garnish your wages. After the judgment, your employer may obtain a court order to collect payment automatically from your paycheck each pay period. Bankrate.com warns that a creditor may take as much as 25 percent of your paycheck. Garnishment rules differ by state, and several states don't allow wage garnishment for repossessions or credit card debts. Speak with a lawyer to find out if you're at risk for wage garnishment.

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How to Request an Automobile Payoff Letter

When buying a new car, you may prefer to sell the old car outright rather than roll the old loan into a new car payment. Although you could wait to buy the new car until you make the monthly payments and the loan is satisfied, you do have the option to pay the car loan early. Request an automobile payoff letter from the loan originator. An automobile payoff letter provides the total amount of money needed to pay off the loan on your car and receive title.

Instructions

1

Find your initial loan documents. Review the documents for a prepayment penalty clause and the terms of the penalty. Calculate the amount of the penalty, if there is one.

2

Compose a short letter. Place the loan number under the address with the make, model and vehicle identification number of the car. These items should be on your loan documents. Add a line requesting a payoff amount for your car. Mail the letter with your monthly payment.

3

Call the loan company. Give your loan number, which is the same on the coupon sent with the loan, and ask for the credit department. Explain to the credit department representative that you would like a written letter with the payoff amount for your vehicle.

4

Visit the loan company's online website, if you make online payments. Click on the "Contact Us" tab that provides you an email address or opens up a form to complete. Request a payoff letter for your car.

5

Check the company's online website for the payoff amount. Click on the "Payment," "Make Payment" or "Payment Information" tab that should open a "Prepayment" option. Select the "Prepayment Option." The screen provides you the total amount due to repay the loan. Not all companies offer this option.

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How to Shop for a Vehicle at a Car Dealership

Buying a car is an experience that almost everyone goes through at some point, and walking into a dealership for the first time can be fairly intimidating. With the many sales tactics that dealers use, it helps to be able to go into the situation with some knowledge of what to expect. Otherwise, you may be pressured into a deal that you are not comfortable with and a car that you do not really want.

Instructions

1

Research the car that you are interested in. Get on the manufacturer's website and find out everything that you can about the car. This gives you the knowledge you need to make an educated decision before you ever get to the dealer. Check out third-party resources to see what other people are paying for the car. The manufacturer's website may also provide pricing and information about rebates or other promotions.

2

Talk to a sales associate. Once you arrive at the dealership, it should be a short time before a sales associate initiates a conversation with you. Find out about any dealer promotions or incentives that may be offered in addition to manufacture programs. Provide the sales associate with basic information about why you are there, but never seem desperate to buy the car -- the associate may use this against you.

3

Test drive the car. Once you find the make and model that you like, ask the associate to allow you to take a test drive. She may simply give you the keys and let you drive it around, or the associate may have to come with you on the ride. This will give you an idea of how the car handles and help you decide whether you really want it.

4

Negotiate the various aspects of the deal with the associate. Once you make it clear that you are interested in making a purchase, the associate will typically take you to a desk or a room to negotiate the deal. Negotiate each aspect of the deal separately: Work out a trade-in price for your vehicle, then settle on a final price for the car and financing arrangements. Many dealers try to lump everything together so that they can make a larger profit without you knowing it, according to ConsumerReports.org.

5

Agree to the terms of the sale. If you finance the deal through the dealership, you will sign loan documents as well as a sales contract. If you pay in cash or already have financing arranged, you will provide the payment to the dealer and sign the sales contract.

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How to Get Current for a Defaulted Car Payment

When your car payment is even one day late, it's considered to be in default. Late payments can cause a variety of problems, including late fees and interest accrual. If you're at least 30 days late with a car payment, it will be reported on your credit report, which can lower your credit score. Falling too far behind in your car payments can lead to repossession of your car. To get current on your payments, you'll need to make payment arrangements with the lender. If you haven't been late before, the lender may waive the late fee as a one-time courtesy (this policy may vary from lender to lender).

Instructions

1

Ask your lender for a deferral. If you're having difficulty making your payment, check with the lender to see if you qualify for a deferral, which will push your payment back to the end of the contract. This will give you time to get the money together so that the payment can be made. The lender will provide you with the necessary paperwork to fill out.

2

Find out about an auto loan refinance. Apply with your lender or another lender to get your loan refinanced. Submit a refinance application; if the application is approved, your loan terms will change and your next payment will not be due until 30 to 45 days later.

3

Call your lender and make payment arrangements. Lenders will often take your payment right over the phone. Give the representative your bank routing number and your checking account number; the money will be taken from your bank account in approximately 24 to 48 hours. Sometimes the lender will scan the payment, which means the money is removed immediately from your checking account. If you can't afford to make the payment now, ask for a little more time.

4

Make a payment with a credit card. Many lenders accept credit cards for payments. The representative will need your card account number and the expiration date; in some cases, you'll also need to provide the three-digit security code on the back of the credit card. The representative will confirm the amount that needs to be paid, including late charges.

5

Get a confirmation number from the lender. As soon as your payment is processed, the lender will provide you with a confirmation number that serves as proof that you made your payment. Write the number down for safekeeping. Review your checking account balance to make sure the correct amount of money was taken out.

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What Happens if I Cosign on a Car With Someone & Then They Die?

A cosigner of a car loan is legally responsible for repaying the loan if the person who took out the car loan defaults in his repayment obligations. If the original borrower dies, the cosigner has legal liability to resume the repayment obligations. The lender can file suit against the cosigner to enforce payment of the car loan should the cosigner refuse to assume the repayment obligations of the deceased borrower.

Identification

Borrowers who are relatively young or who have a poor credit history may find it difficult to secure a car loan. In such cases, to mitigate their risk, lenders will grant the loan only if the borrower obtains a cosigner. By agreeing to assume the borrowers payment obligations if the borrower defaults in the terms of repayment, the cosigner limits the lenders risk.

Contractual Liability

Legally, a cosigner is as much a party to the contract as the borrower who received the proceeds of the loan. The fact that the cosigner received nothing of value from the lender is immaterial for purposes of establishing his contractual liability. Even though the borrower is the one principally responsible under the loan contract, a cosigner is jointly liable as well. If the borrower is unable to or refuses to repay the loan, the lender can seek recourse against the cosigner. The death of the borrower does not relieve the cosigner from his legal obligation to assume the repayment obligations.

Lenders Recourse

Should the cosigner refuse to assume payment of the deceased borrowers car loan, the lender would have legal recourse against the cosigner and, in the absence of fraud, would be able to secure an enforceable judgment against the cosigner for the balance of the car loan due.

Considerations

A cosigner may have executed a separate and legally binding contract with the borrower that provides that, in the event the borrower defaults in his repayment obligations, the cosigner will be entitled to reimbursement from the borrower for all sums he has paid the lender under the terms of the car loan. If the borrower dies, the cosigner may have an action for reimbursement against the borrowers estate. However, the cosigners action against the borrowers estate in no way relieves him of his legal obligation to pay the remaining balance due on the car loan.

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First Steps for Car Buying

Some people love buying new cars while others despise the entire process. Buying a car can be confusing, especially if dealership sales people talk fast and act pushy. Whether you love or hate car buying, doing your homework before you walk through the dealership doors saves time, money and peace of mind.

What You Can Afford

Examine your finances to determine how much you're willing and able to spend an a car. You might decide that you don't have enough funds to buy a car outright, in that case you'll need to take out an auto loan requiring monthly loan payments. Many dealerships will finance your loan, but banks and other institutions also offer auto loans. If you decide that a loan is your best option, consider what monthly payment amount falls within your budget. Banks or dealerships may only be willing to finance up to a certain amount, based on your income and credit history. Consider setting up a loan counseling meeting with your lender before you begin researching cars so that you can easily determine the price range available to you.

Decide on New or Used

Both types of cars have benefits and drawbacks. New cars cost more, but are less likely to need repairs. Used cars cost less, but they have had wear and tear that could equal an unappealing appearance. Used cars will also need more maintenance than newer counterparts. If you decide on a used car, ask the dealer for a history report of the vehicle. This report tells you about any accidents or major repairs in the car's past.

Research Cars

Online information, such as car prices, features and dealership locations is a valuable resource for car shoppers. Kelley Blue Book's Used Car Retail Values is an often used industry standard for used car prices. Consumer Reports magazine lists the pros and cons of newer cars in its annual new car buying issue released in April. The United States Government's Federal Trade Commission website lists laws concerning car buying and advises how to avoid used car fraud.

Choose a Dealership

You can choose a car dealership in several ways. Through research you might discover the exact model of car that you want and find a dealership that carries that model car. Your bank might steer you towards a dealership that accepts its loan financing. Or, you might choose a dealership that can finance your auto loan itself.

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Automobile Sales Tax Calculations in Tennessee

The Tennessee state sales tax on an automobile is 7 percent of the purchase price less the value of a trade-in. Tax rates differ by county. For instance, the Knox County sales tax is 2.25 percent of the first $1,600 of the sale price. For purchases in excess of $1,600, the sales tax is 2.75 percent.

Sales Tax

Tennessee imposes a sales tax of 7 percent of the purchase price of the automobile less the total value of the trade-in. For instance, the sales tax on a vehicle with a sales price of $10,000 with a buyer trade-in worth $2,000 is ($10,000 - $2,000) x 0.07 = $560.

Local Tax

Depending on the county in which you live, an additional local sales tax is applied to the purchase price of the automobile. Knox County assesses a 2.25 percent sales tax on the first $1,600 of the price of the vehicle, but no more than $36. If the purchase price of the vehicle exceeds $1,600, the local sales tax is 2.75 percent, not to exceed $44.

Fees

Besides state and local taxes, you also pay fees for purchasing an automobile. Knox County charges a title fee of $11 and a $24 license plate fee. A wheel tax of $36 brings the fees to $71. Other fees charged in Knox County include a transfer or existing plate fee of $14.50 and a $2 mail-in registration fee.

Insight

Before purchasing a vehicle in Tennessee, understand the local state tax rates to properly budget your car purchase. Understand that the purchase price, local sales tax rates, and miscellaneous fees such as registration fees will increase the cost of owning the vehicle.

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Why to Lease a Car Instead of Buying

Why to lease a car instead of buying is a question with no absolute right or wrong answer. There are many advantages to leasing a car instead of buying one, including lower monthly payments and a shorter commitment period.

Lower Down Payments

Dealers often require lower down payments for leasing a car than they do for buying a car through financing, according to SmartMoney.com. In fact, some dealerships don't even require any down payment for leasing a car.

Lower Monthly Payments

Dealerships usually charge lower monthly payments for car leases than they do for financing. Lower monthly payments make it possible to afford a more expensive car which is one of the most attractive reasons for leasing a car.

Shorter Commitment

Car leases have a shorter commitment period than auto financing loans do. The majority of car leases last between two and three years while the average auto financing loan lasts five years, according to CNN Money.

Lower Sales Tax

Car leases have a lower sales tax than buying a car does which is another way car leases save you money. The sales tax on a car lease is usually half of what the sales tax is on buying a car.

Newer Car Flexibility

Leasing your cars instead of buying them makes it easier to get a new car every two or three years. If you purchase a car with a five year auto loan, you'll be stuck with an older model car after a few years. If you want a new car, you'll have to sell your older car before you get a new car. However, if you lease a car all you have to do is bring it back to the dealership, hand in your keys and sign the lease for a new car.

Try Before Owning

Most leases come with the option of buying out the lease after it's over. In other words, you can use the money you paid during the leasing period towards buying the car after the leasing period is up. The advantage of this is that you can try driving the car for two years before you make the decision to purchase it.

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What If My Truck Gets Repossessed?

Depending on your lender, you might have an opportunity to get back your repossessed truck. Your truck was likely repossessed because of nonpayment, so the bank is within its rights to repossess it. Once your truck is repossessed, locate it to obtain your belongings. Consider purchasing it back from the bank, if possible.

Locating Your Truck

A repossession company can take your truck from most locations. It can be taken from your home, place of employment or from a parking lot. If you are able to meet the repossession company before it towed the truck, you can take your belongings from the vehicle. If not, call your lender or your local police station to find out where your truck is. Make arrangements with the repossession company to remove your belongings.

Plates and Insurance

State laws vary on license plates rules. You likely will have to return them promptly. Call your state motor vehicle department to determine whether the plates should stay with the truck or whether they must be returned. If you have belongings to collect from your truck, take your plates as well. Cancel your insurance on the truck as soon as possible to avoid paying for a vehicle that you no longer own. Return the plates to a motor vehicle office if your state requires it. If you don't take your plates off the truck and receive notice from your state's motor vehicle office that they weren't returned, you might have to report your plates as lost or stolen or provide your state's motor vehicle office with proof of the repossession.

Purchasing Your Vehicle Back

You might have an opportunity to buy your truck back from the bank before it's resold. Call your lender to ask about the possibility. Often, banks allow you to pay your past due amount in addition to any repossession, collection and locating fees it incurred. Your repossessed truck is likely brought to an auction site or to a bank holding area, which is where you can go to retrieve it. Some banks require the entire loan balance upfront to retake possession of the vehicle.

Long-term Effects

If you decide not to purchase your truck back from the bank, it will be resold at auction or it will be sold privately. Once the truck is sold, expect to receive a letter stating its selling price and the amount due on your loan balance, if the balance did not exceed sales price. If the bank sold the truck for more than you owe, it will return the profit to you after taking cost for repossession fees. If not, you must pay the remaining loan balance to avoid a future lawsuit and wage garnishment.

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The Best Financing for a Car Loan

Taking out a car loan is usually a straightforward process, one you can complete in anywhere between a few hours to a few days, depending on lender requirements. Before you visit a dealership and find yourself signing loan paperwork, learn about the best financing option for a car loan, as well as the details that could possibly help you get a better deal.

Car Financing

To get financing to purchase a car, you must have an acceptable credit score, history, debt and income. Even though the loan is secured by an asset (the car), the lender still wants assurance that you'll repay the loan on time and in full. The minimum credit score for getting a car loan is about 620, but varies depending on the lender and lending program.

Credit Union Loan

Many car dealerships who broker car financing agreements will inform you that credit unions are the best financing option for a car loan. Credit unions are non-profit organizations, which mean that they don't have the same for-profit motives as banks. So credit unions often charge lower car loan interest rates compared to other financing options. You may have to open an account with the credit union in order to apply for or finalize the loan. The average rates at credit unions were between 1 and 1.5 percent less than bank rates, as of 2009.

Online Search

To find the best possible deal for your proposed car loan, apply for the loan using an online loan application website that includes credit union quotes. These websites send your information to a number of lenders so that you can receive more than one quote back from one application. It saves time, and ensures that you get an accurate idea of the best rates you qualify for when buying your new car.

Additional Tips

You can also improve your chances of finding the best possible car loan terms by agreeing to put a larger down payment on the car. The larger your down payment, the less of a risk lenders associate with the car loan, and the lower the rate, in some cases. Also, in advance of visiting the dealership or searching for a credit union loan, check your own credit history and score to see if you can make improvements.

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What if a Military Spouse Defaults on a Car Loan?

Marrying someone in the military means getting used to uncertainty. Not just uncertainty about your spouse's safety but about her financial affairs as well. Congress passed a law that helps diminish some of this uncertainty. It may help your military spouse hold onto her car after defaulting on the loan.

Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act is a law designed to protect members of the military from the financial mess that can result from being called away from home to serve on active duty. Congress passed SCRA in 2003 to replace the similarly focused Soldiers' and Sailors' Civil Relief Act of 1940. SCRA limits the amount of interest lenders may charge military personnel, suspends certain court actions and restricts evictions. It's possible for military personnel to waive their SCRA protection, so check your spouse's loan paperwork to ensure her protection is still in tact.

Installment Contract

Your military spouse's car loan is considered an installment contract. An installment contract generally is an agreement to pay money in fixed increments. SCRA may prohibit your spouse's lender from exercising rights, such as repossession, without first obtaining a court order. The court may stay, or suspend, its decision to issue a court order while your spouse is away. To obtain this protection, however, your spouse must have been paying the car loan before she entered the military. She must also request that the court stay its decision to enter the order.

Requirements

Your spouse must be on active duty to qualify for SCRA protection. This extends to members of the National Guard and Reserve called on federal active duty. It does not, however, extend to National Guard members called on state, rather than federal, duty. SCRA also doesn't apply if your spouse is retired from the military. Generally, your spouse's SCRA protection also extends to you.

Consequences

Your spouse's car lender could face severe penalties for violating SCRA. One penalty is money damages based on a wrongful conversion theory. Wrongful conversion generally is defined as unlawfully taking another person's property with the intent of permanently or temporarily depriving her of that property. Another penalty is jail time. Your spouse's creditor could face up to one year in jail for violating SCRA because doing so is a misdemeanor.

Warning

SCRA will not allow your military spouse to get out of paying the amount she owes on her car loan, it will simply give her additional time to return and properly manage her financial affairs. Accordingly, if she wants to keep the vehicle, she must, at minimum, come up with the funds to do so.

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I Need a Car Financed & Have a Bad Credit History

Having bad credit doesn't change the fact that you need a reliable automobile. Auto lenders vary and some work specifically with people who have poor credit. Getting an auto loan with bad credit can help improve your score -- providing you pay the loan on time each month. Learn your options for financing a car with a bad credit history.

Compare Loan Offers

Knowing the different loan options available to you helps you get the best financing deal with a bad credit history. People with bad credit typically pay higher finance fees on auto loans. However, getting multiple loan quotes and comparing various offers can help you save money on interest. Check the rates of your bank or credit union and compare them to those offered by the dealer's finance team. The lowest interest rate on the loan will result in a lower car payment.

Add a Co-signer

Using a co-signer when financing your car is another trick to getting a better rate on the auto loan. Auto lenders take a co-signer's information, such as a credit score and yearly income, to determine your approval eligibility and use the median of both scores when deciding the interest rate on the loan. Using a co-signer with a high credit score can increase your chances of lowering an otherwise high rate. While your co-signer helps you get a better finance deal, this process is risky for co-signers because they assume responsibility for the loan if you default.

Personal Finances

Have your personal finances in order before talking with an auto lender. Earning enough money to afford a car payment can help make up for your bad credit history. What's more, providing a down payment when financing the car may persuade auto lenders to give you a better deal on the vehicle loan. Keep copies of paycheck stubs and tax returns for two years if you're self-employed. And if you have extra cash, consider putting a 20 to 25 percent down payment on the vehicle.

Considerations

Opening new credit and managing these accounts responsibly can give your low credit score a boost and ultimately improve your credit history. This is because auto lenders report your payment habits to the credit bureaus. Timely payments make up 35 percent of your credit score. For this reason, always submit loan payments before your due date and contact your lender to setup a new payment arrangement if you're unable to pay by the due date.

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How to Find the Cost of Renewal of Car Registration

The process you follow to find out your car registration renewal fees will vary depending on the state in which you live, and on the make and age of the vehicle. Each state sets its own registration fees, therefore there is not one standard fee. Each state's department of motor vehicles allows owners to access their information online to find out what payment is due and then often pay the amount using a debit or credit card.

Instructions

California

1

Visit the California DMV vehicle registration renewal page (See Resources).

2

Enter your vehicle license number and your vehicle's VIN.

3

Enter the county in which you live and type your ZIP code.

4

Click "Calculate Fees." The amount you owe will appear on screen.

New York

5

Visit the New York DMV vehicle registration renewal page (See Resources).

6

Enter your vehicle class code.

7

Enter your name as it appears on your renewal notice.

8

Enter your ZIP code and email address.

9

Click "Continue."

10

Enter your license number and VIN.

11

Click "Continue." The amount you owe to renew your vehicle's registration will appear.

Florida

12

Visit the Florida DMV vehicle renewal registration page (See Resources).

13

Enter your driver license number or your Social Security number, or your VIN or your license plate number.

14

Enter your date of birth and type the last four digits of your Social Security number.

15

Click "Continue" to find the fees associated with your renewal registration.

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If You Cosign an Auto Loan Does the Cosigner's Name Have to Be on the Title?

When you take out a collateral secured loan, the lender typically requires at least one of the borrowers to have an ownership interest in the property being financed. However, borrowers and property owners are not always one and the same and, in theory, a lender may allow someone to take out a loan secured by a property that he does not own, if the property owner agrees to the lien being placed.

Security Interest

When you take out an automobile loan your lender places a lien on your vehicle. In order for the lender to place that lien, you must sign a security document as the property owner and give your consent for the placement of the lien. You cannot secure a loan without a property owner signing the a security document. However, while this document offers up the automobile as collateral for the loan, it does not place the vehicle owner under any obligation to repay the loan.

Loan

When you take out a loan, you sign a loan contract and agree to repay the debt under the terms of loan agreement. Nothing in a loan document says that the primary borrower or cosigner have to have an ownership interest in the automobile being financed. If you and the other cosigner fail to repay the loan, the lender can repossess the vehicle that secures the loan. Therefore, the collateral only plays a role in the loan once the loan goes into default.

Risk

When you fail to repay a loan, your lender can notify the credit reporting agencies about the delinquent debt, and the credit agencies can reduce your credit rating in order to let other lenders know that you have a history of defaulting on your debts. However, if you cosign on a car that you do not own, the lender cannot repossess any of your property when you default on the debt. Conventional logic suggests that you are less likely to refuse to pay a loan that you secure with your own property as opposed to a loan that you secure with someone else's property. Therefore, few lenders write loans on which neither cosigner has an ownership stake in the property being financed.

Considerations

People with poor credit or limited income often apply for automobile loans alongside cosigners who have good credit and good income. Adding a cosigner to a loan often makes it much easier to qualify for credit. However, when you cosign for the loan, it shows up as an obligation on your credit report and could make it more difficult for you to obtain credit in the future, as lenders may feel that you already have all of the debt that you can handle.

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How to Fix Your Credit if There Is a Vehicle Repossession

Banks and auto lenders do report car repossessions to the credit bureaus, and repossessions stay on credit reports for seven years. But while a repo remains on your file for this length of time, the effects of repo can reverse itself if you practice good credit habits. A drop in credit score and higher rates are typical after losing a car to the bank. However, a repo on your record doesn't have to result in a permanent low score.

Instructions

1

Get another auto loan from a bad credit or subprime auto lender. Start rebuilding your credit score with a new auto loan. Purchase an affordable car from a dealer that offers "fresh start" programs to help people with past repossessions. The interest rate is higher on these sort of loans but as your repay the loan, the lender will update your credit report with positive information.

2

Avoid defaulting on your other credit accounts or loans. If you have a student loan, home loan or credit cards in your name, pay these creditors on time every month to help fix your credit score after a vehicle repossession.

3

Eliminate outstanding account balances to help raise your score. The amount owed on your accounts make up 35 percent of your FICO credit score. Use credit but then pay off account balances immediately to avoid accumulating debt.

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How to Make an Auto Loan Payment

Before auto loan companies moved online, making an auto loan payment meant sending a personal check in every month to your lender or going into a bank branch and making the payment in person. Even though you still use this process today, online payment centers make payments easier for auto loans. With the Internet, and the introduction of debit cards, many convenient options to make automatic loan payments on your vehicles and maintain good standing with your lenders.

Instructions

1

Write a check payable to your auto lender for the payment due. Send the payment in enough time for the lender to receive the check prior to the due date. Many auto lenders that accept checks also take a check by phone. To tender a check by phone, call the lender and provide the routing number that identifies your financial institution. The routing number is a nine-digit number on the bottom left portion of your check. Next provide your account number and the check number you want to use. Remember to void out the corresponding check that was used to make the phone payment.

2

Set up an automatic withdrawal from your checking account or have an automatic allotment taken from you pay and directed to your auto lender. Automatic payments eliminate the threat of late payments and late fees. With a bi-monthly allotment, you make half payments and decrease the overall amount of interest paid on your auto loan.

3

Sign into your auto lender's website or register for an account to make payments online. Make the payment using a debit or credit card. The payment process is the same: enter your account number, expiration date and three-digit verification number on the rear of the card. The payment is automatically deducted from the attached account. The drawback to using a credit or debit card is potential fees charged by your bank or credit card provider.

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What Benefits Does the Cosigner of a Car Have in Texas?

When a borrower has poor credit or a limited credit history, she may be unable to acquire an automobile loan without a cosigner. While cosigning a loan may benefit the borrower, it has very limited benefit -- but significant risk -- to the cosigner.



The benefits and burdens of obtaining or cosigning a loan are outlined in the Uniform Commercial Code and are not specific to an individual state. However, the Texas Office of the Attorney General explicitly lists warnings of the risks posed to the cosigner.

Indication of Risk

If a cosigner is needed, it is an indication that the borrower does not satisfy basic credit or income standards prescribed by the lender. According to the Federal Trade Commission, nearly three out of four cosigners eventually repay the loan because the original borrower defaults.

Benefit to the Cosigner

The benefit of cosigning a loan is the feeling of helping someone in need. Parents and other relatives may cosign for a young family member with a limited credit history. If all goes well, one family member may feel grateful that he had the opportunity to help another. A cosigner does not enjoy any of the benefits of owning the vehicle; the cosigner's name does not appear on the vehicle title or registration.

Liabilities of the Cosigner

The Texas Office of the Attorney General has authored a brochure detailing the risks of cosigning for any type of loan. When an individual cosign for a loan, he guarantees repayment of the entire debt amount. Should the borrower fail to make payments, the lender may seek recourse from the cosigner. If the lender sues the borrower for nonpayment, the cosigner will also be held legally responsible for the debt.

Effect on the Cosigner's Credit

If the borrower does not make timely payments, this will be reported on the credit report of both you and the borrower. Lenders consider a cosigned loan a component of your total debt load; a high debt load relative to income may make it difficult for you to obtain additional credit.

Benefits to the Borrower

The original borrower does not expose herself to increased liability by having a cosigner; cosigned loans can be a benefit to the borrower. Cosigned loans can help a borrower with damaged credit or a limited credit history to secure an automobile loan at a lower interest rate than he could obtain independently. If the borrower has bad credit, a history of timely payments on the cosigned loan can help to rehabilitate her credit.

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The Average Depreciation of a New Car Off the Lot

Depreciation is one of the greatest costs in owning a car. Since cars have a limited useful life, a car that is older or that has received more wear and tear has less value than a car that is newer and in better shape. Due to the effect age has on the value of a car, the average car is worth only a small percentage of what it is purchased for at the end of five to seven years.

Immediate Depreciation

Depreciation begins the moment a new car owner signs the papers and drives his purchase off the lot. The typical buyer purchases a new car for a price over the dealer's cost that allows the dealer to make a profit and stay in business. Once a car leaves the lot, it is no longer worth the original purchase price because it could not be sold at a profit for that price. The true value of the car is the price that it can fetch that allows a profit in the open marketplace. Most often, that is the dealer cost or the wholesale trade-in value.

Amount of Depreciation

According to Autos.com, while some models can fetch a premium of up to 15 percent over dealer cost, the average profit margin on most models is between 6 and 9 percent. Some base models and inexpensive vehicles may have a profit margin of as little as 3 percent. This means the average car loses a minimum of between 6 and 9 percent of its value when it leaves the lot, with the actual amount depending on the vehicle. CarsDirect reports that the amount can be as high as 20 percent.

Lifetime Depreciation

Besides the hit the car takes after the initial purchase, Bankrate reports that cars lose an average of 15 percent to 20 percent of their value per year, based on the present value of the vehicle. For example, a car worth $10,000 that has lost 20 percent of its value the first year is worth $8,000 the following year. The second year, the car loses 15 percent of that $8,000, so it is worth $6,800. This continues the next year, when the car is worth $5,780.

Resale Value

Eventually the rate of depreciation slows down, usually after the third year. It will slow down again after the fifth year, according to CarsDirect. The industry considers cars that are worth 50 percent or more of their original value after five years to be resale value standouts. These are cars of higher quality that wear well and have a longer useful life, or retain their desirability longer. Some models can drop to as low as 20 to 30 percent of their original retail price after five years.

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What Does it Mean to Refinance an Auto Loan?

Refinancing a car loan is much like a loan transfer. You must apply for a new loan to pay off your old lender. Reasons for pursuing a refinance vary. Often, refinancing presents an opportunity to save money, either by lowering your loan's interest rate or changing your term to lower your monthly payment amount.

Why Refinance

Check current interest rates to determine if your rate is higher than average. If substantially lower, you can save thousands of dollars over the term of your loan and decrease your car payment. Even if interest rates haven't changed, you can benefit from providing a down payment toward your loan amount. If you put thousands toward your current car loan, your car payment won't decrease. Refinancing with a down payment allows you to shorten your lending term, interest payback amount and monthly payment.

Determine Costs

To determine if a refinance could prove financially beneficial, use an auto loan calculator to review different refinance scenarios. Edmunds.com offers a free auto loan calculator. Call your current lender to obtain your car's payoff amount and use the balance as your loan amount. Using a calculator, determine overall payback costs and monthly payment differences by changing the interest rate, providing a down payment or adjusting the term. You may find that pursuing a refinance is not beneficial, or that you can save money.

Considerations

In order to obtain a competitive interest rate, your credit must be in good standing. While you can still obtain a lower interest rate by refinancing, you might not obtain an approval for your requested loan amount. If you just initiated your current loan, you may find you're upside down, or owe more than the vehicle's value. With excellent credit, you can hope to obtain up to 120 percent of the car's bank-determined vehicle value. However, if you also financed your taxes and after market items, a down payment may be required to put your loan and vehicle value in line with one another.

Other Options

If you're having a hard time making payments on your current loan or are experiencing financial hardship, your lender may be able to work worth you to modify your current car loan. You'll have difficulty obtaining a new car loan if you're unemployed, if your income has decreased or if your current loan payments are past due. While applying for a new loan with a co-signer is an option, you can also ask your lender for help. You may be able to defer your payments, which allows you to miss several payments without penalty. You lender can also modify your loan to increase your payback term and decrease your car payment.

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What Does Cash Back Mean at a Dealership?

"Cash back" is a term frequently heard or seen in sales advertisements from dealerships. The dealers usually provide the price of the car and then stress that you can get cash back with signing. Unfortunately, they often don't detail exactly what cash back means or what is involved, which can leave you with questions.

Definition

Cash back is a rebate that auto manufacturers, not dealerships, provide. The manufacturer authorizes the dealerships to advertise a rebate on particular models. You finance the entire cost of the vehicle that has the cash back offer, and then the manufacturer gives you money back in the advertised amount.

How to Use the Rebate

You can use your cash back rebate on anything you want, and in this way cash back rebates are nice small loans. However, it's better to put the rebate back into your car by using it to cover the down payment or other fees. This is because you've already taken out the financing loan for the vehicle cost. If you don't reinvest the rebate, you really don't get a discount on the cost of the car. You have to decide whether it is more important for you to have the money available immediately to cover other costs. This may depend on the amount of the rebate.

Significance

When a manufacturer offers a cash back rebate on a particular vehicle, it does not mean that the vehicle is of any lower quality or value than the other vehicles the manufacturer produces. Rather, cash back rebates simply mean that a manufacturer wants to sell one vehicle more than other models. A common reason for this is the need to make room for the next year's model. The higher the rebate, the more likely it is that the manufacturer is desperate to move the car. Cash back rebates provide some indication of how well a manufacturer is doing.

Application

Cash back typically applies only to new cars and goes directly to the consumer. Other incentives are available for the dealer and and leased vehicles. An example is dealer cash incentives, which are payments made to a dealer upon the sale of a vehicle to defray marketing and lot costs.

Advertising

Cash back rebates are a marketing tool manufacturers use to draw consumers to particular vehicles. The more a manufacturer wants to sell a vehicle, the more aggressively the manufacturer will market that vehicle. If manufacturer is doing well, it might not advertise the rebate. It's a good idea to ask your dealer or contact the manufacturer regarding what rebates are available before you go shopping.

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0% Financing Credit Restrictions for Cars

A zero percent loan saves you money in interest payments over the term of your loan. Despite its interest-saving benefits, you'll find that restrictions apply to loan approval. Term restrictions may increase your car payment dramatically. If you have trouble affording a zero percent loan or obtaining an approval, other financing options may still save you money.

Credit Standing

To obtain low-rate financing, you must have good-to-excellent credit. You can often find this requirement in the fine print of advertised offers. If you don't have good credit, you can still use a co-signer to obtain your loan, as the co-signer's income and credit history secures your loan. Otherwise, you may have to apply for traditional financing instead, which requires that you pay an interest rate. To determine if you can obtain the zero-percent loan option, apply at the manufacturer's website or at a dealership.

Term Restriction

Term restrictions often exist as part of a zero percent offer. Terms may run from 36 to 72 months. A 36-month term raises a car payment substantially. Without a large down payment, you may find that the car payment is above your monthly budget. Check the manufacturer's website to determine if a term restriction exists. Then, use an auto loan calculator to figure your monthly payment amount and whether it's affordable to you. Edmunds.com offers an auto loan calculator that also calculates fees and tax charges based on ZIP code, which also affects your monthly payment amount.

Debt-to-Income Ratio

Banks consider a borrower's debt-to-income ratio to determine loan approval. A shorter term requirement that results in a high monthly payment may exceed your debt-to-income ratio even if you have good or excellent credit. The bank will review all monthly debts on your credit report and your income to determine whether or not you can afford your requested loan amount. You might be declined for a loan when the car payment exceeds $500 per month, but obtain an approval for $300 per month. You may have to provide a down payment or choose a longer term to obtain a loan, which may require a higher interest rate.

Other Options

If you can't meet bank requirements for zero percent financing, you have other options. Zero percent financing is commonly offered in lieu of rebates, which offer savings as well. Often, the discount offer can save you just as much money as the zero-percent loan over time. Use an auto loan calculator to calculate the differences in overall payback amount. Rebates are usually offered without lending requirements, meaning you can apply to a lender of your choice and still receive a price discount. Be sure to explore your interest rate and rebate options; zero percent does not always save borrowers more money.

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How to Avoid Mileage Penalties on a Lease

Leasing a car can work if you don't want to commit to one car for the next five years. People who lease can swap out their cars every two or three years, and often make smaller monthly payments than those who buy. But with leases come potential mileage penalties when the lease expires. Learn how to protect yourself and avoid a huge out-of-pocket expense.

Instructions

1

Purchase adequate miles at the lease signing. Lease contracts permit drivers to put 10,000 to 15,000 miles on the car per year. Avoid mileage penalties by negotiating enough miles in your contract. Track how many miles you drive a month, and then make sure that your lease agreement can accommodate your driving habits. For example, if you drive 1,000 miles a month, get a lease that permits at least 12,000 miles a year.

2

Car pool to work. If possible, car pool with another co-worker or take advantage of public transportation to keep the mileage on a leased car low. This advice applies even more if you're nearing the end of your lease term and you fear going over your mileage allowance.

3

Rent a car when taking car trips. Because lease contracts limit mileage, avoid long-distance driving in your leased car unless you have adequate miles. Get a rental car, take a train or travel to your destination by airplane.

4

Purchase the leased car to avoid mileage fees. Leasing a car gives you the option to purchase the car at the end of the term. Buying the car eliminates any extra mileage fees.

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How to Get a Deferment on an Auto Loan

When you fall on hard times financially, you really need all the help you can get before the situation becomes impossible to turn around. One of the first things you can do to help your situation is call your auto lender and request a deferment. A deferment is when the lender takes one or possibly two payments that you currently owe, and adds them to the end of your loan. Here's how to get one.

Instructions

1

Grab your loan paperwork or payment booklet. You have to refer to your account number frequently during this process so have it on hand.

2

Call your lender. Tell the customer service representative that you want to request a deferment.

3

Explain why. You have to tell the representative working with you why you need the deferment.

4

Fill out the paperwork. Once approved for a deferment on your auto loan, the representative will send you the appropriate paperwork, generally by fax.

5

Fax it back. You have to do this as soon as possible. If they requested additional materials from you, such as a copy of the title, make sure you fax that back as well.

6

Send in the upfront funds. When you get a deferment for an auto loan, upfront funds are always required. The amount depends on the lender and the amount of your loan.

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When to Terminate a Car Lease

Leasing a car is an alternative to buying that gives you the chance to have a new car every few years. However, leases prevent you from building equity in your vehicle as you do when you buy and finance a new vehicle. Leases also include terms that require you to keep the vehicle for a specified amount of time unless you can find a creative solution to terminating the agreement.

When You're Out of Options

You may choose to terminate your lease early when you feel as though you don't have any other options. For example, perhaps you're about to move to a city where you'll rely on public transportation or simply can't afford the monthly payment that your lease entails. In these cases, you can turn in your lease early and pay the early termination fee. However, you'll also see your credit score fall when the early termination shows up on your credit report as a voluntary surrender, which is the same as a repossession, according to Bankrate. Turning in your lease early without a special deal in place is possible, but should serve as a last resort.

During a Promotion

Car dealers will sometimes allow drivers to turn in their leases early as part of a promotion. This may involve forgiving mileage overages, eliminating remaining lease payments, not charging an early termination fee and steep discounts on new vehicles. Rarely will dealers offer promotions that don't involve the driver agreeing to purchase or lease a new vehicle. However, if you can wait for such a promotion and your lease is eligible, you may be able to terminate the lease sooner than expected.

Early With a Rollover

In some cases, a car dealer may allow you to turn in your lease early if you roll the lease over into a new lease. This gives you a chance to avoid mileage overages on your old lease and also get a new car, which may better suit your lifestyle. The new lease will include the cost of the remaining payments on your old lease, which will add to the monthly lease payment. This also means that the closer to the end of the lease that you ask for a rollover, the easier it will be to afford. Rollovers don't hurt your credit report the way other early terminations do.

At the Natural Expiration

Of course, you can wait until a lease reaches its natural end to terminate it. When you sign your lease agreement, it specifies when the lease will end, usually around three years after signing. As this date approaches, you'll hear from the dealer and need to make a decision as to whether you want to buy the vehicle outright for the predetermined price or surrender it, pay for any excess mileage and wear and tear and walk away without a vehicle or any remaining obligations.

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How to Sell a Lease Outright

Car leases allow you to use a car for a designated period of time, the lease term, in exchange for regular payment during that time. At the end of the term, you have the option to return the car to the dealer or buy it at the buyout price. If you want to get out of the car lease before the term is completed, you may have penalties to pay. Instead of returning the car and paying penalties, you can sell the lease to a willing buyer.

Instructions

1

Call the leasing company at the number listed on the lease agreement.

2

Ask what the buyout amount is on the car. If you are just starting the sale process, get the buyout amount for the next few months since it will go down with every payment you make.

3

Find a buyer for the car who will pay at least the amount you owe on the lease buyout. If the car is in good condition with minimal mileage, you may be able to get a fair market price for it. However, don't have high expectations of making a lot of money. In fact, you may not even be able to get fair market value, depending on how the lease payments and buyouts are structured.

4

Write a contract between you and the new buyer. You don't officially have the title on the car so you can't transfer the title to the new owner as of yet. State in the agreement that for the money given, the title will transfer as soon as the lease buyout is completed and the title is released.

5

Obtain the cash and pay the lease company with the money from the sale.

6

Wait for the title from the lease company. Transfer the title to the new owner and file the appropriate paperwork with the department of motor vehicles.

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Should I Buy a Service Contract for My Vehicle?

When you purchase a new vehicle, two different agreements can provide repairs and service for your vehicle in the future: warranties and service contracts. Every new vehicle comes with a manufacturer warranty, but service contracts (also called extended warranties) are optional agreements that buyers make to provide for necessary vehicle services not covered under the manufacturer warranty.

Warranty vs. Service Contract

Every manufacturer issues a warranty with the purchase of a new vehicle at no cost to the buyer. This warranty stipulates that, should specific problems occur with the vehicle within a certain time frame or before you have driven the vehicle a certain number of miles, the manufacturer will pay to fix it at no charge to you. On top of this coverage, dealerships offer service contracts that cover a broader collection of services over an extended period.

Misconceptions

The majority of automobile dealerships do not make their profits on new vehicle sales. Instead, they make their money by performing warranty-covered repairs for manufacturers and by selling "extras" to customers, such as service contracts. Remember that you do not have to purchase any type: Even if the dealer acts as if it is compulsory, it is not.

Pricing and Coverage

Even if you want to purchase a service contract for your new vehicle, you do not necessarily need to do so through your dealer. An advantage of going through your dealer is that he will often specifically tailor your service contract for your vehicle in light of the manufacturer's warranty. This is important because the is no use in paying for a service contract that simply duplicates the coverage that comes with the manufacturer warranty at no cost. However, remember that dealerships often look at their customers as being a captive audience of sorts. This may mean that your dealership is offering you a price significantly higher than similar coverage would be from a third party service contract provider. According to SmartMotorist.com, "coverages available from dealerships cost anywhere from 40 percent to 100 percent more than the same coverage available from the third party insurers I surveyed."

Service Availability

Even if a dealership or third party service contract firm can give you an affordable service contract that covers the services you need, it may not be any good to you if it is only available in a certain area. Dealership service contracts, for instance, might only be good for services performed at the dealership. If you move to another state or if vehicle problems arise while you are on vacation, your service contract may prove useless exactly when you need it the most. If you decide to buy a service contract, make sure that it applies to a large network of service providers rather than a single location or a small chain.

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Can a Co-Signer Refinance a Car?

As a cosigner, you can refinance a car loan in your own name as long as your credit is good enough to obtain a loan approval. If your credit has suffered since your original loan, refinancing might not prove worthwhile. The vehicle's co-owner must agree to give up his portion of ownership before you can refinance.

Obtaining a Co-owner's Permission

The person you cosigned for, also known as the vehicle's co-owner, must agree to sign the vehicles title to release her portion of ownership. Talk to the co-owner to ensure she'll sign her name on the title. If she refuses, you can't refinance the loan. If your co-owner agrees to transfer ownership to you and your new lien holder, she'll have to sign the title as required by your state. Some states send vehicle titles to the lien holder and not the registered owner, known as a title holding state, so the co-owner may have to arrive at your old lender's establishment with you to complete the loan transfer process.

Your Current Credit Standing

Check your credit before submitting an application to refinance your loan. If you took the vehicle back from the person you cosigned for because of late payments, your credit score may have decreased. A new lender will also require that your current loan payments are up-to-date before providing you with an approval. If you find that the person you cosigned for wasn't paying payments, pay the past-due amount to bring the account current. Fix any errors on your credit report.

Refinancing Process

Check the interest rates of auto loan providers to determine where to apply for a loan. Contact your current lender to obtain a 10-day payoff quote, which includes the cost of interest added to your account daily, known as the loan's per-diem amount. Apply to the lender for the loan's balance unless you wish to provide a down payment. Also expect to provide your vehicle's identification number, mileage and features so the lender can determine its lending value. Once approved, your new lender will pay off your old loan.

Information Used to Determine an Approval

Your lender might ask you to provide a down payment if your vehicle's value is less than your requested loan amount, known as a loan-to-value ratio. Other than your credit score, your lender also reviews your debt-to-income ratio to determine the amount of debts you pay out each month in comparison to the money you have coming in. If your debt-to-income ratio is poor, your lender might require a down payment to provide a lower monthly payment. With poor credit, you won't necessarily be declined for a loan, but the lender may raise your interest rate and shorten your loan term, which can significantly increase your monthly payment.

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What Happens When I Return a Lease With Equity?

Leasing is a method of financing a vehicle that offers lower monthly payments than are possible with conventional financing. Leases are designed to pay off the depreciation portion of the vehicle. A lease is often presented to a consumer as only paying for the portion of the car that you use. At the end of the lease term, you return the car to the leasing company unless you make other arrangements.

Equity

A person who leases a vehicle does not build equity in the vehicle. As a result, the lessor of a vehicle does not have any ownership interest in the vehicle, as the leasing or finance company considers the payments that a lessor makes to be rent. Even without ownership interests, a lessor may be able to make money at the end of his leasing term.

Refund of Mileage

If you purchase over 15,000 miles per year to use with your lease, the leasing company may give you a refund for the miles that you do not use. If this is possible, the terms of the buyback of any unused mileage will be defined clearly in the original lease agreement. If the contract does not specifically allow for a leasing company buyback of unused miles, the leasing company will probably not refund any mileage.

Leased Vehicle Purchase

All leases have a residual value. This is the price that the leasing company will sell a vehicle for at the end of the lease term. The actual value of the vehicle may be more or less than this residual value. If the vehicle is worth more than the residual value, or your purchase price, it may be worth purchasing the vehicle, particularly if you like it. If the vehicle is worth less than the residual, you may still want to purchase it, but realize that you are probably overpaying for the vehicle. The leasing company may be willing to sell the vehicle for closer to its market value if you ask.

Right of Purchase Transfer

If the leased vehicle is worth more than its residual value, you may want to attempt to sell or transfer the right to purchase the vehicle to a dealer or other individual who is interested in your car. Basically, you have an option to purchase a vehicle at below market price, and if you are not interested in exercising this option, someone else probably is. This is a good way to negotiate a purchase or lease on a new vehicle to replace your expiring lease.

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Things to Know When Leasing a Vehicle

Leasing a vehicle is a financing option car buyers can choose as an alternative to taking out an automobile loan. This financing option can lower monthly payments for drivers and eliminate some maintenance issues on the vehicle. Before deciding on a lease for your next vehicle, you should evaluate the terms of the lease to determine if it is the best option for financing the car.

Lower Payments

The vehicle's depreciation over time, not the full value of the vehicle, determines a vehicle lease. Cars that have a lower depreciation rate and are worth more at the end of the lease will result in lower monthly car payments for the driver. The monthly payments are based on the value of the vehicle at the end of the term.

Financial Institutions

Car dealers do not lease vehicles, but they do deal with finance companies and banks to connect the car buyer with an appropriate financing plan. Leasing a vehicle through the car dealership is not the only option car buyers have when searching for the best financing deal. Car buyers can search for leasing deals from banks, credit unions and independent leasing companies. Independent leasing companies can search for the best terms for the customer.

Type of Lease

Not all vehicle leases are the same and consumers will have the option to choose the type of lease agreement they enter into when financing a car. A closed-end lease allows the driver to turn the vehicle in at the end of the lease with no further financial obligation. The driver has the option to purchase the vehicle or simply walk away. Consumers are not responsible if the value of the vehicle is less than the stated value in the lease terms. Drivers are held responsible for additional mileage driven outside the terms of the lease.

An open-ended lease charges the customer the difference between the actual value of the vehicle and the stated value in the lease. Businesses and individuals who plan to put a high amount of miles on the vehicle may choose this lease option because it does not have restrictions on miles.

Single Payment leases allow the customer to save money by paying a single lump sum in advance to avoid interest charges. Customers should calculate the cost of the lump sum payment to be sure that the finance company or car dealer does not add interest charges to the payment.

Points for Negotiation

When entering into a lease agreement, consumers should negotiate the cost of the vehicle, the amount of initial payments, fees, the term of the lease and additional charges at the end of the lease agreement. Consumers should also understand the type of lease agreement and whether they have the option to purchase the vehicle at the end of the lease.

Mileage and Maintenance

Before executing a lease agreement, the consumer should determine the amount of miles allowed during the term of the lease and the charge for excess miles. Lease agreements also have maintenance requirements with which the driver must comply during the course of the agreement.

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Can I Lease a Car After Bankruptcy?

After bankruptcy, getting financing for anything can be a challenge, because bankruptcy drops your credit score. Larger loans like those associated with vehicles are particularly difficult to get. You may have to work harder to get a lease following bankruptcy than if you never had filed, but your bankruptcy should not prevent you from getting a vehicle.

Lender Requirements

Regardless of whether you lease or buy a car, dealers look for specific factors when you apply for financing. They look at your credit history, credit score, your debt-to-income ratio and possibly your employment status. In other words, they assess your ability to pay the lease.

Second-Chance Lenders

Some dealers see opportunity in people with bankruptcy and poor credit. These lenders offer "second-chance" leases because they can make excellent profit from charging you higher rates of interest. This means that your ability to get a lease after bankruptcy is based largely on which lender you approach.

Other Factors

Bankruptcy stays on your credit report for up to 10 years, but this does not mean you cannot get financing sooner. Many auto lenders will give you a lease, provided you have clear evidence such as bank statements and pay stubs that verify you are financially rehabilitated. Some people qualify for financing in as little as two years following bankruptcy, depending on how consistent they are with payments and what steps they take to clean up other areas of their credit report. Additionally, the amount of a lease is almost always less than the amount of an auto purchase loan. Therefore, some lenders see you as less of a risk and will approve a lease with a bankruptcy before they'll approve a purchase loan.

Bottom Line

Whether you can get a lease after a bankruptcy depends on the lender; shopping around is necessary to get the best interest rate. You may have better luck if you wait a while so you can build up your credit score and history. Even though you might have to do some research to find a good deal, you'll probably have an easier time getting a lease than a purchase loan after bankruptcy, simply because lease amounts are less than purchase amounts. You pose less risk to the lender.

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How Much Money Do I Put Down When Leasing a Car?

Offer as little of a down payment as possible when leasing your vehicle. If your vehicle is declared a loss by your insurance company, you'll lose any monthly payments or down payment that you put toward the lease. However, if you want to lower your monthly lease payment, you may have to provide a down payment to do so.

Vehicle Loss

While leasing a vehicle, your bank requires that you maintain a full-coverage insurance policy over the term of your contract. This policy pays for vehicle repairs or its market-value to your bank if you should incur damages or a complete loss. Your leasing bank is your insurance policy's loss-payee, meaning that any insurance payment goes to the bank and not you. Any down payment or monthly payments that you provide are lost if your vehicle becomes a loss, even if you paid your entire lease cost upfront. For this reason, you should provide as little down payment as possible.

The Purpose of Gap Insurance

Leasing banks also require gap insurance. If your vehicle was declared a loss, you'd become responsible for paying the bank for the vehicle's total value, not just the lease amount if your insurance company's payoff did not satisfy the bank's total cost. While this may seem like good reason to offer a down payment, it isn't because of a leasing contract's gap insurance requirement. This policy pays for the gap between the bank's actual cost and your insurance payoff. Even with no down payment at all, gap insurance will pay the remaining balance due.

Meeting a Budget

If you have a strict budget, you may have to provide a down payment to reach your target monthly payment. If you saw a lease advertisement with a low monthly payment, read the fine print. Lease advertisements are figured on a best-case scenario, which assumes the best mileage, term and down payment amount to reach a low monthly payment. Taxes and fees are often excluded from the down payment amount, which may cost around $1,000 or more. The impact that $1,000 has toward a lease is about $30 per month, so choosing not to provide a down payment may substantially raise your monthly payment amount.

Negotiating

When leasing a vehicle, your leasing bank pays your dealership for the car's total cost. Leasing can prove profitable for dealers because many lessees do not negotiate vehicle pricing, meaning the dealer sells his car for full sticker price. You can minimize your down payment amount and still lower your monthly payment by properly negotiating your vehicle's price before you lease it. Negotiate the price of your leased vehicle the same you would if paying cash or financing. Doing so can minimize the down payment you'd have to provide to reach a target monthly payment.

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How to Fix an Upside Down Car Loan

Most people buy cars, especially new cars, with a car loan that can last five or six years, or more. Automobiles, however, depreciate rapidly. When the car is first driven off the lot it depreciates significantly because it is no longer a new car. So almost from the beginning, a car loan is upside down because you owe more than it is worth.

Instructions

1

Determine how much you owe on your car loan. You can call the bank that holds the loan to find out exactly how much you owe.

2

Conduct research to find out what your car is worth. You can determine what similar cars are selling for in the newspaper or on car sales sites. The best way to get a solid number is to research the Kelly Blue Book value of your car.

3

Evaluate the amount you are upside down on, which is the amount you owe over the amount the car is worth. Most car loans are upside down. This isn't necessarily a problem unless you want to sell your car or trade it in.

4

Keep your car. You can trade in your car for a loss and end up owing the cost of the new car plus some of the cost of the old car on a new loan, but that will exacerbate the problem.

5

Continue paying your car loan. The longer you continue paying the loan, the closer it becomes to turning right side up. When your car loan is totally paid off, the car should be worth something even though you will owe nothing.

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Is Refinacing an Auto Loan Bad for Your Credit?

An automobile loan is a type of secured loan used to purchase a new or used vehicle. If your terms, interest rate or loan length are not the way you would prefer them to be, you can refinance the auto loan. Refinancing creates an entirely new loan with different terms, but it may also affect your credit score.

Credit Score Basics

Your credit score consists of a calculation by the Fair Isaac Company, also known as your FICO score. The company uses many different factors for your score calculation, such as length of accounts, your account balances, the diversity of your accounts and any negative credit marks such as collections or late payments.

Refinancing

Refinancing pays off your original loan and creates a new auto loan, typically with different terms, such as shorter or longer repayment times, a different interest rate and monthly payments. You may also refinance to take a co-signer off a loan or to get promotional rates through the lender that are much better than your original loan terms.

New Account

A refinanced auto loan is a new account, which can raise or lower your credit score depending on how the rest of your credit file looks. If you have a well-established credit file with many long-running accounts, a refinanced auto loan is not going to have a large impact. If you are just establishing credit, however, the new account status may greatly shorten your average credit length, reducing your credit score. As the account gets older, this negative affects your credit less and less.

Inquiries

When the refinancing lender pulls your report, the credit bureau places an inquiry on your report. Inquiries have a slight negative affect on your credit score. Generally, they do not impact you getting credit unless you have a large number of inquiries on your report. If you check refinancing options with several different lenders for your auto loans, their inquiries all count as one. Inquiries completely disappear from your report within two years.

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What Is Considered High Interest on a Car Loan?

Between promotional rates to encourage you to buy a new car and the varying rates between new and used car financing, it can be hard to figure out if you are getting a good financing rate or being ripped off when you take out a car loan. To discover this, you need to do just as much homework looking into ways to finance your car as you did to pick out the car you want to buy.

Economic Conditions

The state of the economy will drive interest rates up and down. This includes interest rates on car loans. Rates can be affected by the national economy but also by state and local economies as well. To understand whether or not the rate you are being charged is high or just a result of a bad economy, you need to compare the rate to what other places are offering.

Credit

You credit score will be a big factor in what interest rate you will be offered for a car loan. If your credit is poor, you will be charged a higher interest rate than if you had excellent credit. Even with poor credit, you will find some variances in the loan rates. CardownLoan.com recommends being very cautious if you are being charged more than 12 percent for a car loan and you have bad credit. Before seeking a car loan, you should check your credit score to get an idea as to whether you will be charged a higher rate or not.

New vs. Used

You will also find differences between rates offered for new and used cars. Don't expect the rate on a used car loan to be as low as that of a new car, particularly when some car manufacturers off zero percent rates on new car financing from time to time. When comparing the rate you are offered, compare it to the same type of car loan (new to new, used to used). This will show you if there is a discrepancy between your rate and what is offered elsewhere.

Average Rates

It is impossible to calculate an average car loan rate and have it be of any use when you go to buy a car. However, CardownLoan.com says that you should expect a new car loan of 4 to 7 percent if you have good credit. If you are being quoted a rate higher than this range and you have good credit, you are looking at a high rate. Some in-house financing for cars may go as high as 20 to 28 percent, which is a very high rate.

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How Do I Get My Car Out of Forfeiture?

Getting your car out of forfeiture is possible, but it takes persistence and follow through. It is your responsibility to communicate with your lender. Without consistent communication, your lender will repossess your car. When talking with your lender, you have to have something to offer, such as money on a specific date, and a plan to get caught up on the total you owe. Be prepared to pay more than your normal payment.

Instructions

1

Call your lender. Ask what is required to keep your car and what options are available. Offer an alternative solution if you are unable to fulfill any of the options given to you by your lender. Remember that your lender may not be able to agree to your option.

2

Follow up with your lender at least every other day. Your lender may not have an answer for you in terms of your options right away.

3

Pay on your plan as required. Keep in touch with your lender if you need to change your plan. If you default on your plan, your lender won't hesitate to repossess your car.

4

Prepare to pay some money at the time you implement a plan with your lender. More than likely, your lender will want to have some cash down when writing a repayment plan for you to demonstrate your willingness to pay.

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