Can a Car Dealer Submit a Claim for Damages on a Repossessed Vehicle to My Insurance Company?

A dealership cannot put in a claim for your repossessed vehicle through your insurance company, nor would it want to. Dealerships do not extend loans directly. Your lender pays the dealership for the vehicle you purchased and can collect for the loan amount to which you agreed in your contract.

Full-Coverage Insurance

Although a full-coverage insurance policy is required for your vehicle while you have a loan on it, your lender cannot put in an insurance claim on your behalf. Your lender is listed as the policy's lost payee, not the policyholder. If you wanted to submit a claim for vehicle damages before your vehicle was repossessed, you could do so by contacting your insurance company. If you were at fault for the damage, expect to pay your deductible.

Dealership Involvement

Dealerships, with the exception of a buy-here, pay-here lot, do not extend loans to buyers. Dealerships sell a vehicle and your lender pays for it. In turn, you have an agreement to pay your lender. Buy-here, pay-here lots may have different rules, as the dealer is the lender and the seller. Regardless, if a dealership takes the vehicle back from you, it is not the policyholder and therefore cannot put in a claim to your insurance policy for damages.

After Repossession

After your vehicle is repossessed, you have the right to receive your belongings out of the car. If you are not sure where the vehicle is located, call your lender or local police department. If you do not need belongings from the car, ask the repossession agency when it will return your plates. Otherwise, remove your plates from the car and return them promptly. Call your insurance company immediately to avoid paying for insurance longer than you need to; you may even receive a partial refund.

Bank Collections

Once your lender collects the vehicle, it will be resold privately or at auction. The lender may not get as much money for your vehicle if it is damaged, so you can expect to pay for damages and depreciation at a later date. Once the vehicle is sold, expect to receive a letter stating the difference between the sales price and loan value; you are responsible for the balance due. If you do not pay, the bank will eventually pursue legal action. Unless you claim bankruptcy, the bank will pursue a judgment and may garnish your wages.

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Long Term Loaning for a Car

At first glance, a long term car loan might appear an attractive option because of a lower monthly payment than a comparable short term loan. The Lendingtree website defines a long term loan as 72 or 84 months. While some may argue that choosing a longer loan term negatively affects equity and interest payments, this isn't always true.

Interest Rates

Your approved interest rate depends on your credit, the amount you borrow and the age of the vehicle you purchase. Lenders typically offer the same interest rate for terms up to 60 months, although some may offer lower rates for shorter terms. Loan terms exceeding 60 months usually have higher interest rates. To determine the impact that a higher interest rate and longer term have on your total loan payback amount, use an auto loan calculator (see Resource link). Unless you pay off the loan early, you might pay back thousands in extra interest charges, relative to a short term loan. Ask your lender if it charges pre-payment penalty fees before you decide to pursue a longer loan term option.

Equity

Pursuing a longer loan term might result in decreased vehicle equity. If you pursue a loan term for 72 months or longer without a down payment or a plan to pay off the loan early, you'll likely run into problems if you try to sell your car or trade it at a later date. Expect to provide money out-of-pocket to satisfy your loan balance if you sell the car privately, or to cover negative equity if you trade it in toward a new purchase. Provide a down payment of at least 20 percent to avoid a negative equity situation. This way, you can still take advantage of a low monthly payment.

Dealer Incentives

Dealers often provide low rate financing as an incentive to purchase a particular new vehicle. You might find you can purchase a new car for zero percent. If you can take advantage of a low rate, such as zero or 1.9 percent for 72 months, you might create equity in your vehicle just as fast as with a shorter term loan, without having to provide a large down payment. Use an auto loan calculator to determine the differences in monthly payments and payback amounts. You'll save money by choosing the longer term because of the low rate.

Loan Considerations

Your credit rating and the vehicle you choose to finance effects your loan term approval. With poor credit, a lender might require you to borrow for a shorter term, such as 48 months or less, to obtain an approval. Or, if your approved interest rate is too high, you might have to choose a longer term to afford the monthly payment. Lenders might also require a shorter loan term for older or high mileage vehicles. Low interest rates offered as a dealer incentive or those advertised on lender websites require good to excellent credit. Your actual interest rate may vary and approval terms ultimately depend on your credit score.

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How to Refinance a Vehicle With a Down Payment Required

If you want to lower the interest rate on your vehicle's loan, refinancing can help you save money by paying off the old loan and getting a new one with better terms. However, when you go to refinance, you might find that your car is worth less than you owe on the loan and the lender is not willing to refinance because the loan will not be fully secured by the car. In this case, the lender might require that you make a down payment on your refinance to get the loan balance to less than the value of the car.

Instructions

1

Look at your most recent loan statement on your current vehicle loan to determine the remaining balance left to pay.

2

Enter your car's basic information into a website that specializes in used car values, such as NADA Guides, Kelley Blue Book, Edmunds or Auto Trader. Search for its private party value, which is the best estimate of how much it is worth on the market.

3

Compare the car's value to the outstanding balance on your loan. If your car is worth more than you owe, you will probably not need a down payment and can proceed with the refinance process without worrying about the payment.

4

Contact a lender for auto loans and ask about refinancing your vehicle. Tell the lender the outstanding balance and the car's value and ask how much of a down payment you would need to refinance.

5

Save up money over the next few months so you have the down payment you need. Some ways to save include eating out less frequently, avoiding consumer purchases as much as possible and getting more hours at work to increase your income.

6

Contact the lender again when you have saved enough money and follow the lender's instructions to apply for the vehicle loan. Depending on the lender, you might give the down payment you saved up directly to the lender or you might use it to pay off a significant chunk of your old loan just before refinancing.

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What Is a RV Short Sale?

If you have an RV listed for short sale, it usually sells at a lower price. A short sale occurs because you are facing financial difficulties and can't afford to make regular payments toward your RV loan. Selling the RV as soon as possible reduces your debt and minimizes your lender's losses.

Failure to Make Loan Payments

If you go through a financial hardship and have a loan on your RV, you may find that you can no longer afford to make your regular payments. If the situation continues, the lender may consider you to have defaulted on the loan, repossess the RV and sell it to minimize losses. This scenario hurts your credit score, making it difficult for you to obtain loans in the future. A short sale minimizes the effect of your financial problems on your credit score.

Features

If you think you can't make your loan payment, contacting your lender immediately provides you with more options. Your lender may give you the options of short sale, loan modification or other ways to salvage your credit score. In a short sale, the lender agrees to sell the RV and use the sale proceeds to pay for the loan. Even if the sale price is below the outstanding amount, the lender will not demand that you repay the balance.

Process

If you can't make your loan payments, the lender usually gives you a deadline by which you must make contact if you don't want to face repossession. Beyond this deadline, the lender may claim your RV and your credit score may drop. You need to talk to your lender to explain your situation and provide supporting documents, such as pay stubs. Once the lender agrees to a short sale, you no longer need to make regular payments toward the loan.

Selling Price

An RV short sale aims to quickly turn the RV into cash to pay off the loan, so you may have to sell it below market price. Depending on your particular situation, the Internal Revenue Service may consider your RV to be your home. If so, you can get tax deductions on the loan interest on your federal tax return. Before selling the RV, talking to a tax professional helps you determine the tax effects of a short sale.

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Can I Consolidate My Car Loan?

You might be able to save money when you own several auto loans by consolidating them into a single account. It is possible to consolidate a single auto loan into a package of other loans, but this works best if you own a home. Before you consolidate, however, make sure the trouble of consolidation helps you out.

Identification

Consolidating a car loan happens like consolidation of any other loan -- by finding a lender willing to give you a new loan big enough to cover your existing car loans. Banks are probably going to be the first place you want to check. You can also consolidate a single car loan into a another loan, such as a home equity line of credit or a personal loan. A HELOC is usually easier to get, because it is backed your equity in the home.

Benefits

Consolidating loans may save you money when you find a creditor offering a lower rate than that on your current auto loan(s). Combining several loans often results in a lower overall payment by extending the life of the loan. Put your auto loan in a HELOC, and you might be able to deduct the interest on your tax return. At the very least, you can reduce the amount of paperwork you receive each month.

Tip

No matter how you consolidate your auto loan(s), collect your monthly car payment bill(s), show them to the lender and see what kind of rates you get. Go to several lenders, and never take the first offer. If you take a HELOC, only borrow what you need, and never take out more than 80 percent of the equity you own in your home. Personal loans require a credit check, so pull your report and clean up any negative items on it.

Warning

Some auto loan lenders charge a penalty -- often equal to the interest rate charge had the loan played out normally. Review your current auto lease for penalties and add them to the amount of money you need for auto loan consolidation -- called the payoff amount. Weigh the cost of any penalties against what you might save in a lower interest rate or taxes.

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How to Transfer My Auto Lease

If you want to cancel or end your lease early, you can avoid penalty fess and payments due by transferring your lease to another person. Depending on the bank you lease through, you may have to remain on the lease with the other party, although some banks do allow complete transfers. It is most likely that you will lose any money you put down towards the lease, but you won't have to continue making payments.

Instructions

1

Call the bank that you lease through; have your account number and current vehicle mileage handy. Tell a bank representative that you want to transfer your lease to another party and need instructions to do so. Bank rules and paperwork vary, so you may have to fill out paperwork with the potential lessee or have him call into the bank to offer his credit information.

2

Ask which account information the potential lessee needs in order to apply. You can expect to provide the VIN (vehicle identification number) and either your account number or a reference number provided by the bank. Ask how long the approval process should take and if you will be contacted by phone or mail.

3

Give the potential lessee the account identifying information so she can call to apply. Call at anytime to follow up afterward to check the status of the approval. You can expect to be mailed with a lease transfer application to fill out with the person you are transferring the lease to once the application is approved.

4

Fill out the transfer form with the new lessee and notarize signatures, which is usually required by the bank. Once the transfer form has been accepted by the bank, the new lessee will have to sign her own leasing paperwork and provide insurance for the car.

5

Pay any lease transfer fees required by your bank.

6

Remove your vehicle plates before giving the car to the new owner -- turn them in to your state's motor vehicle department as soon as possible and notify your insurance company that you've ended your lease. Give the vehicle, all sets of keys and owner's manual to the new owner.

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Should I Put Some Money Down If I Do 0% Automobile Financing?

Edmunds.com suggests providing a 20 percent down payment toward your new-car loan to cover the first year of depreciation. A zero-percent loan that doesn't require a down payment amount may seem attractive, but you should still aim to create equity and obtain a monthly payment that fits your budget.

Zero-Percent Loan Requirements

Check with your loan provider to determine the loan term and requirements of obtaining your zero-percent loan. Most new-car manufacturers require a specific term or a down payment requirement for advertised monthly payments. You may also find that advertised monthly payments do not include taxes or fees, which can cost you thousands of dollars. Ensure that the interest rate offer and loan is obtainable without a down payment before you decide not to provide one. You may find that an advertised car payment increases up to $100 without a down payment.

Budgeting

Some zero-percent offers require a loan term of only 36 months. A short loan term creates a high monthly payment. For example, if you purchase a new car that costs $20,000, expect to pay $556 per month even if you offer a down payment that covers tax and fees. The same loan for 60 months with an interest rate of 5.9 percent results in a monthly payment of $386 per month. To obtain the same payment for a 36-month loan, you'd have to offer about $6,000 for your down payment amount in addition to taxes and fees. Provide as much of a down payment as necessary to obtain a comfortable monthly payment.

Depreciation

Consider your vehicle's depreciation. You can determine your vehicle's present depreciation amount by checking its used car value immediately after purchase using Edmunds.com or the Kelley Blue Book website. Expect to provide a full-coverage auto insurance policy for the vehicle, but be aware that your insurance company will pay your lender only for the vehicle's market value; you are responsible for any additional balance due on the loan. You can't predict an accident, but if you should have one, creating some equity in your vehicle upfront can prove beneficial if you should incur a total vehicle loss.

Considerations

If you can afford to pay for a short-term loan with zero-percent financing, you'll create equity quickly. You probably don't have to offer a down payment. For a longer-term loan with a zero-percent interest rate, consider offering enough of a down payment to create equity. Or, consider purchasing a gap insurance policy, which covers your loan payoff if your vehicle is determined a loss and your insurance payoff isn't enough to pay your loan balance. A gap insurance policy may cost up to $600 but can prove a cheaper alternative to a down payment.

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How to Get a Pre-Approved Loan for a Car

Getting pre-approved for a car loan can make your car shopping experience much easier. When you are pre-approved, you know how much you can spend, you know how much it will cost you to own your new car each month and you do not have to worry about haggling with the dealership over how you will finance your purchase. Prior to meeting with your bank, there is information you need to collect. Also, there are some basic guidelines you should understand to make sure you get the best deal for you -- and not the best deal for the bank.

Instructions

Getting a Pre-Approved Car Loan

1

Collect all of your pay stubs from the last six months and make copies. The copies are for your bank. Keep this information, and all of the information for your pre-approved auto loan, in an expandable file folder.

2

Use the various auto loan calculators available on the Internet to get an idea of how much you should expect to spend per month, based on various interest rates and different car prices. You will want to be prepared to discuss the terms of your pre-approved loan with your bank, rather than simply accept the terms they are offering. (If the bank gives you amounts that vary more than 20 percent from what you found in your research, ask to see how they are arriving at their numbers.)

3

Analyze your household budget and determine what kind of monthly payment you realistically will be able to afford. It is important to stay within your budget because the bank may offer you a loan that calls for a bigger monthly payment than you are willing to pay. When you know how much you can afford prior to negotiating with the bank, you can make decisions that fit into your budget.

4

Determine how big a down payment you can afford. A good number to try to achieve is a down payment of at least 10 percent of the cost of the vehicle.

5

Shop your pre-approval around to other banks to see if you can get a better deal. Be careful, though, as many pre-approved loan agreements are good only for a set period of time, and you will want to purchase your vehicle before your agreement runs out. So, do not spend too much time shopping for a better deal.

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How to Extend My Leased Car

Some banks allow current lessees to extend a vehicle lease contract. However, don't assume your leasing bank allows lease extensions without first speaking to a bank representative. If the bank doesn't allow an extension, you must return your car or pay the lease buyout price and purchase the car. Continuing to make payments after the lease contract is over results in an account default, as you must abide by the end-of-lease options your bank stated in the leasing contract.

Instructions

1

Call your leasing bank and have your account information ready. State your intentions with a leasing representative to determine whether a lease extension is possible.

2

Discuss lease extension options. The bank may offer a three- or six-month extension option, but your monthly payment may change based on the vehicle's current value and mileage.

3

Decide if the monthly payment change (if any) and term are suitable. If so, tell the bank that you want to extend your lease contract. Submit your credit information if necessary; not all banks require a credit check for an extension, depending on past payment history.

4

Sign your lease extension contract. If the bank isn't local, mail your paperwork back quickly. Keep a copy of the paperwork for your records.

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Effects of Refinancing a Car on a Credit Report

When you refinance an auto loan, a lender closes the original loan account and opens a new account. Therefore, a refinanced loan will cause a few changes in your credit report, but those changes usually have a small impact on your credit score. You may be able to avoid refinancing altogether if your lender is willing to change your loan terms without requiring you to refinance.

Inquiries

The lender that reviews your application to refinance your car will check your credit. That check results in a notation on your credit report that the credit industry refers to as an inquiry. One inquiry on your report should have a small effect on your credit score, according to the Fair Isaac Corporation. The company created the FICO score, and Fair Isaac indicates that one inquiry would reduce your FICO score by less than five points. However, the company notes that inquiries can cause a bigger drop in your score if you have few credit and loan accounts, a short credit history or several other inquiries on your report.

Account Age

A refinanced auto loan would show a new opening date for your account, because the original account will no longer be active. The age of a credit or loan account affects 10 percent of your FICO score. The longer you've held an account in good standing, the better it is for your score. Therefore, having a refinanced account for your car on your credit report may slightly lower your score, especially if most of your other accounts are new too.

Loan Modification

Ask your lender to consider modifying your loan instead of refinancing it. You could get a lower interest rate if the lender just changes the loan terms instead of giving you a new loan through refinancing. An inquiry could appear on your credit report anyway, because the lender would likely check your credit before modifying the loan. However, changing the terms of the original loan, instead of refinancing it, could have less of an effect on your credit score, according to Fair Isaac. You also could avoid paying refinancing fees.

Considerations

Refinancing an auto loan outweighs any potential change to your credit report if you're having trouble making your car payments. People usually refinance auto loans to reduce high monthly payments they can no longer afford. Making late payments on your auto loan, or having your car repossessed, would have a much worse impact on your credit rating than refinancing would.

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Can I Trade in My Car at a Dealer If I Am 60 Days Past Due?

It is unlikely you can trade in your vehicle while 60 days past due on another car loan. Unless you pay cash for your new purchase, possible auto loan providers prefer that all accounts are up-to-date, so your loan application will likely be declined. You might be able to use a cosigner for a new loan, even if your current loan is past due.

Paying the Past Due Amount

You can avoid trade-in issues by paying off your past-due loan amount before applying for another car loan. You're likely to run into issues when financing while your account is past-due, so pay your lender as soon as possible. Once you've paid your lender, obtain a receipt. If you plan to work with a dealer to obtain financing, provide the dealer with your receipt. Any lender will want to see that you've brought your account current before determining whether to provide you with a loan.

Effects on Credit and Financing

Your credit score will drop when your payment is past due. Additionally, other creditors can view how many days you're currently late on your loan and how many times you've been late. For example, if your account is 60 days past due for the third time, your credit report will read "60 3" next to your loan account. You aren't likely to obtain another loan until you make your loan payment. If you do obtain financing, expect to pay a higher interest rate, which increases your car payment.

Using a Cosigner

A cosigner is someone who applies for a car loan with you. Your cosigner's credit history and credit score are used to secure your loan. If you can find a cosigner with good credit, you can likely obtain a loan approval, although finding a cosigner might not be easy. A cosigner is equally responsible for your car loan, so his credit is at risk if you fail to pay your loan payment. Even if declined for a loan on your own, you can reapply using a cosigner.

Paying Cash

If you're able to pay cash for your vehicle purchase, just let your dealer know that your loan account is past due. Your dealer will find out regardless, as a dealer representative must call your lender to obtain your total loan payoff amount. If your lender hasn't started the repossession process, the dealer will pay off your loan to accept your car as a trade-in. As long as the dealer can stop the repossession process, you can still trade in your vehicle.

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How to Handle a Car Repossession

If you've defaulted on your car payments, your car loan company has the law on its side. It is perfectly legal for the company to seize your car. Defaulting may be different for each company, so make sure you read your contracts carefully. Know your rights with a car repossession so you can handle it professionally and properly.

Instructions

1

Allow the repossession company to seize the car, and don't try to stop it. The company is protected by the law, and if you assault or even verbally abuse its representatives, action could be brought against you. It's best to handle the repossession professionally, and work on getting the car back later.

2

Read your contract to discern how you defaulted. Gather check stubs and receipts so you have a record of your payments and can discern at what point you defaulted. These receipts are also good evidence of your past prompt payments.

3

Note whether you've paid for at least 30 percent of the car's retail value through loans. If you have, try to work out a deal with the car loan company. If you've paid for 30 percent of the car, you are within your rights to negotiate a deal through which you pay all back payments, any late fees as well as the car repossession charges, and retain ownership of the car, assuming payments.

4

Recognize that if you haven't paid 30 percent of the car's value back through loans, your loan company can legally sell your car to try and recoup missed payments. However, try to work with the company to make a deal for a higher interest rate to keep the car. Speak to your account manager and see how flexible he is. If he will not loan the car back, you won't get it back and will need to look for a new car.

5

Pay your loans promptly and in full in the future. Make sure that when you purchase another car, it is well within your budget. Put your loan on auto-pay to be deducted from your account on the same day monthly so that you'll never be late again.

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The Advantages of Leasing Vehicles

When looking to obtain a new car, you should weigh the option of leasing the vehicle as opposed to purchasing it. If you plan to keep the vehicle for a long period of time, purchasing is likely the better choice to eliminate things such as excess mileage charges. If you plan to keep the vehicle for only a short period of time such as two to four years, leasing can offer certain advantages.

Keeping Up with Trends

Because leasing allows drivers to keep a vehicle for a relatively short period of time at an affordable monthly rate, it is ideal for those who want to keep up with the latest trends. Rather than having to sell the vehicle or trade it in, you can simply return it at the end of the lease period and obtain a newer vehicle.

Lower Down Payment

Leasing is also a good choice for those who either don't want to make or don't have the money for a large down payment. Leasing generally requires a much lower down payment than is required when purchasing a vehicle, so it can be beneficial for a first-time car buyer such as a recent college graduate.

No Used Cad Hassles

When your lease period is up, you simply return the car to the dealership. If you want to buy it, you pay the predetermined price. If you don't, you simply walk away, assuming you have kept the car in good shape and have stayed within the mileage restriction. This eliminates the hassle of trying to sell your car or negotiate a fair trade-in value.

Lower Monthly Payments

With a lease, because you have possession of the vehicle for a predetermined period of time, you are in effect only paying for a portion of a vehicle. Because of this, monthly payments can be significantly lower than when purchasing a vehicle. According to LeaseGuide.com., monthly payments can be reduced by as much as 30 to 60 percent. In many states, your sales taxes will be lower as well, because you only pay taxes on the lease amount, rather than on the full price of the car.

Reduced Maintenance

When you lease a car, you usually get a brand-new vehicle and keep it for a short period of time, so there are likely to be major maintenance issues. In the event that a problem does occur, it will often fall under the manufacturer's warranty. One way to not have to worry about large repair bills is to be sure that the negotiated lease period does not extend past the warranty period.

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Do's & Don'ts About Buying a New Car

Buying a new car can be confusing, and not understanding the entire purchase process can be costly. For many people, a car is a requirement to get to and from a job. Unless you live in a metropolitan area with a public transportation system, you need a vehicle. Educating yourself about what you should and should not do when purchasing a new car may save you from paying too much or making a poor decision.

Research Fees

A purchase contract for a new car is often a long contract, with many fees listed that may seem obscure. The dealership may state that each of these fees is a requirement for the purchase, but this is probably not true. An example is the "dealer prep fee." Dealer prep means the work done by the dealership to get the car ready to sell. The car may arrive at the dealership with a type of plastic wrap to protect it during transportation. The car is inspected, and fluids may be added at the dealership. The car manufacturer pays the dealership for this work; however, the dealership may attempt to charge you this fee, which may be $150 to $200, according to Car Info (carinfo.com). If you do not understand this fee, you may feel you have to pay it. You don't. Although the process may be time-consuming, go through each item on the purchase contract and understand what it is and if you are required to pay it. Unfortunately, you may need to do you own research, as the salesperson may not be completely honest about the charges.

Financing

According to Car Info, a practice at many dealerships is to manipulate the interest rate for a "kickback" from the lender. The salesperson may tell you that based on your credit rating that you must pay a higher interest rate than you expected. You may feel as if you have no options; however, this may not be the case. The actual interest rate may be lower, but you are relying on your salesman to provide you an honest interest rate. For example, if your qualify for a 6 percent interest rate, your salesman may tell you that based on your credit you qualify for an 8 percent interest rate. To avoid this potentially costly maneuver, go directly to your bank and get pre-approved for a car loan. You will know your interest rate and have the funding ready for your new car purchase.

Determine Needs

Before you shop for a car, determine what you need in a new vehicle. Once you arrive at a dealership, you may get starry-eyed over a car that is out of your price range. You may be lured into purchasing a car that is difficult to pay for, when you may have initially wanted a car that is much cheaper. Determine what you want and can pay for. Stick to that amount. Use free online quote programs such as CarsDirect, CarQuotes and Autos.com to get a true idea of what a vehicle will cost you. Then, when you go into a dealership, be firm with the salesperson and with yourself on what you are willing to spend.

Add-Ons

After you have agreed to the purchase price of a vehicle and understand the interest, taxes and registration fees, you are often not done with dealership offers. Your salesperson or the finance manager will continue to sell add-ons. For example, you will be offered an extended warranty. The cost to you may be up to $2,000, while the actual cost to the dealership may be half that. If you feel an extended warranty is important, investigate companies outside of the car dealership for pricing. This can be another piece of research you do before going into the high-pressure situation of a dealership.

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Credit Requirements for a New Car Purchase

Depending on the type of financing you intend to pursue for your new car purchase, various credit requirements may exist. For example, special interest rates offered by the manufacturer often require good to excellent credit. Or, poor credit buyers may be required to offer a down payment for a loan approval.

Common Requirements

No matter where you submit your auto loan application, expect to provide a valid Social Security or Tax Identification number on your credit application. You'll also need proof of identity, which states your date of birth, such as a passport, driver's license, or state or military identification. You also must prove your gross annual income and employer information. Determine your income using your most recent paystub and its year-to-date statement. If self-employed, you'll need to provide proof of claimed income, such as previous tax returns. Some lenders may approve borrowers without credit history, but an established and positive payment history is preferable.

Considerations

Aside from having an income, many lenders prefer at least two years of employment history. You must provide your employer's information so your lender can confirm your time on the job. Established time at a residence is also preferable; expect to report at least two years of address information, as well. Your income must cover the debts you pay out each month, known as your debt-to-income ratio. Your debts are listed on your credit report and you'll provide your lender with your housing costs on your credit application. Even if you gross $100,000 annually, you may still be declined for a loan if your credit is maxed out and you have a high debt responsibility.

Good to Excellent Credit

If you want to pursue new car purchase incentives and offers such as low rate financing or leasing, you must have good to excellent credit to obtain an approval. A zero-percent interest rate offer may seem attractive, but not everyone can qualify because of credit standing. If you do not qualify for a lease or low-rate offers, you can still pursue traditional financing. Credit requirements for bank or credit union loans are more lenient than manufacturer requirements, although you can expect a higher interest rate or lose the option to lease.

Approval Requirements

Depending on your credit and the lender you submit your application to, you might be asked to provide additional information or face loan restrictions for your approval. If you have negative items reported on your credit history, your lender may ask you to provide proof that debts are satisfied. Your lender may also require a copy of your Social Security card if your credit report lists alternative Social Security numbers, which is often the result of an error. You may be asked for references, or for the names, addresses and phone numbers of up to five family members or friends.

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Car Payments Vs. Paying the Car Off

The process of buying your brand new car was perhaps a long and tedious one, from picking the brand and model to picking the right color. But now the focus is on your ability to pay off your loan. As a general rule, the faster you can pay off the loan, the better, because it will save you money in the long term.

Affordability

First of all, ask yourself if you can afford to pay off your car loan in its entirely. If you have, say, $15,000 left on your car loan and have $15,500 in your bank account, you need to consider if you can afford to live off $500 until your next payday. You must be able to handle having your finances depleted, at least for a short period of time.

Interest

Paying off the remainder of your loan will immediately mean that you no longer have to worry about interest payments. That's because you're outstanding balance will be zero. Having an outstanding balance accruing interest doesn't benefit you, only the lender. So eliminating your debt means you won't pay any extra unnecessary fees. That can save you hundreds of dollars per year, which can turn into thousands, depending on how long you keep the loan and its interest rate.

Debt

While some debt is not necessarily bad -- such as a student loan or mortgage -- having too much is not an ideal situation. Having too much debt can hurt your credit score and can hamper your ability to get a needed loan or get an optimal interest on your loan or mortgage. The amount you owe makes up 30 percent of your credit score, so the faster you can eliminate your debts, the better it is for your score.

Pay Larger Installments

If you have decided that you can afford to pay off your car loan entirely, but depleting your finances is too much of a risk, consider making a series of larger payments. Instead of paying $250 every month, pay $1,000 each month for however long it takes to eliminate the debt. Or make two large payments over two months to lessen the blow.

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Debt to Income Ratio to Purchase a Car

Debt to income ratio is the amount of debt a person has compared to the amount of income a person makes in a year and is important for buying a car. By determining the debt to income ratio, a person can determine if they have the available funds to purchase a car with financing and can reduce their interest payments. The lender looks at debt to income ratio because a lower debt to income ratio shows a person's ability to pay back a loan. A higher debt to income ratio, means a lender will take on a higher risk of the borrower defaulting.

Calculating Debt to Income Ratio

Calculate all debt paid monthly and monthly income, then divide debt by monthly income. For example a person has $40 in credit card bills and a $200 mortgage each month. The person also makes $2,000 a month. His debt to income ratio is $240 divided by $2,000 which equals 12%.

CCCS Recommendations

The Consumer Credit Counseling Service (CCCS) recommends a debt to income ratio below 15% (see reference 1). The CCCS is an excelled resource for providing information on consumer credit for individuals.

Ratio to Obtain a Car Loan

According to MSN Auto, a debt to income ratio below 20% will allow a person to obtain financing for a car. Any ratio above 20% could reduce chances of obtaining a loan.

Results of High Debt to Income Ratios

A high debt to income ratio will result in either denial of credit or increased interest rates. Increased interest rates force the person to pay more money through interest than if he had a lower debt to income ratio.

Online Calculators

For ease of use, several pages offer online calculators. These online calculators often allow the user to change different variables in order to find out how much debt reduction is needed to have a specific debt to income ratio. MSN, Consumer Credit and Credit.com offer online debt to income ratios.

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How to Calculate a Car Loan Payment Rate

Car loans provide a borrower a means to finance the purchase of a car. The borrower is required to repay the money in monthly installments over a set period of time. Before purchasing the car, the borrower needs to calculate the estimated monthly payment to determine whether the expense can be afforded each month. If not, the borrower should not purchase the vehicle.

Instructions

1

Determine the interest rate each month that the lending service will charge. For example, if the lending service is charging 12 percent on a loan, then the monthly interest rate is 1 percent, or 0.01.

2

Multiply the interest rate per month by the amount of money borrowed. For example, if you borrow $20,000, then $20,000 multiplied by 0.01 equals $200.

3

Multiply the years the borrower has to pay the loan back by 12. This is the number of payments on the car. In our example, if the borrower has five years to pay the loan, the number of payments would total 60.

4

Add the interest rate per month to 1. In our example, 0.01 plus 1 equals 1.01.

5

Raise the number calculated in Step 4 to the power of the negative of the number of months needed to repay the loan. In our example, the 1.01 raised to the power of -60 equals 0.550449616.

6

Subtract the number calculated in Step 5 from 1. In our example, 1 minus 0.550449616 equals 0.449550384.

7

Divide the number calculated in Step 2 by the number calculated in Step 6 to determine the car payment. In our example, $200 divided by 0.449550384 equals $444.89 as the borrower's monthly payment.

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What Happens When an Auto Loan Matures With Monies Owed?

An auto loan document outlines your payment terms. There should be no remaining balance when a car loan matures, assuming that you were making the monthly payments as scheduled. A typical maturity on a car loan is 48 months, or longer for new vehicle financing. You have to complete all your payments to have the account settled as paid in full.

Auto Loans

When financing your car auto, read your loan documents carefully. The most important items to note are the interest rate, down payment and any other upfront fees that may alter the original selling price of the vehicle such as taxes. Signing the loan documents means that you agree to make payments on time as stipulated in the loan contract. On a new car loan, a bank can extend the payment terms to 72 months (six years) or more; however, the typical length of an auto loan is 48 to 60 months.

Delinquency

As the loan matures, the outstanding balance will approach zero. However, if you are delinquent (considered over 30 days past due), the bank will charge additional interest and late fees that will cause the payoff balance to increase. Therefore, it is important that you make your payments on time or within the grace period before late charges begin to accrue.

Credit Reporting

The bank will pursue you for the outstanding balance after the car loan matures. Rather than show on your credit report as paid off, the car loan will show as an open balance. It will reflect delinquent payment information as well. According to FICO, payment history accounts for 35 percent of your credit score. Late payments remain on your credit report for 7 years, dropping your score dramatically.

Repossession

If the bank cannot collect the remaining balance from you, it can escalate matters further by repossessing the vehicle. A car loan is a secured debt giving the lender the right to repossess the vehicle if you fail to pay. The loan documents outline the bank's security interest. The bank is required to notify you of an impending repossession.If you cannot reach some kind of payment agreement, the bank will sell your car at an auction to recover as much value for the car as possible.

Considerations

If you still owe on your car loan after the payment term, contact the auto lender to inquire about making a payment arrangement. Even if you receive a notice of repossession, you can still work out a payment plan with the bank. The bank is willing to work with you because repossessed vehicles usually sell for less than what the car is worth.

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Advice for a Woman Buying a New Car

When it comes to buying a new car, the car itself makes no distinction between men and women. However, women may find that dealers sometimes do. An ethical dealer, of course, will treat all customers with honesty and respect. Women who are looking for a new car should be prepared to deal effectively with those few who do not. The fact is, a car dealer's goal with every customer is to take as much money for the sale as possible, and it's a generally accepted belief that more women than men are uncomfortable dealing with the hard-ball negotiation tactics that car salesmen and finance managers are trained to pursue. Truly, though, negotiating a car sale with an experienced seller such as a car dealer is intimidating for anyone, man or woman, who doesn't know how to do so successfully to get a fair deal.

Dealers

Ann Fleming, writing for the website Car Insurance Companies, says that, on average, women pay more than $1,000 more than men for a new car. This may be due to a combination of women feeling less confident in buying a new car and dealers taking advantage of this fact. Fleming writes that well over half of women take another person with them when shopping for a new car, and this is generally accepted as good advice. Approach dealers with confidence, let them know exactly what you're looking for. Don't settle for a car that's almost perfect. When you sit down to handle paperwork and negotiate a price, start at the invoice price and negotiate up. Four percent of invoice is generally accepted as a profitable margin for most new car dealers, but there's no guarantee a dealer will accept such an offer. Your best bet at this point in your negotiation is to stick to an offer that gives the dealer a fair, low-margin profit and remain patient as the dealer personnel work you over for up to a few hours. If you feel you can't get a fair price at a low profit margin, you have every right to leave the store.

Support

Having someone with you when you shop for a new car is good advice not only for women but for anyone who is seeking a second opinion and perhaps a more level head during negotiations for a very expensive investment. Be sure, many car salespeople would prefer you do not bring a wing man to the negotiation. But if you're new to buying cars, having a friend or relative with you to act as devil's advocate can benefit you on several levels.

Insurance

One area where gender is in a woman's favor is that of auto insurance. Because women are engaged in fewer traffic accidents than men, statistically, they can qualify for lower insurance rates. You should investigate the rates of various insurance companies before buying a car, and find out the impact of various models on your insurance rates. Minimizing your rates prior to buying your car is the easiest way to save your money for other things.

Mechanical Issues

There is a generalization that women are less mechanically inclined than men. What is certain, even in the new millennium, is that the majority of professional mechanics are men. If you're not a mechanic yourself and will be taking your new car to a professional mechanic for maintenance, be sure to develop a good relationship with a mechanic who will not try to take advantage of you because you are a woman. The best way to do this is to know as much about the mechanical functioning of your car as possible, and to invest in your local Better Business Bureau office's listings.

Financing

Most people who buy new cars do so with the help of a car loan, and as a result are generally paying for a car for years after they buy it. Acquiring a car loan with good, low-interest terms, either from the dealer or from a bank, can make a major difference in the amount of money that you end up paying for your new vehicle.

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Do You Have to Pay the Difference When You Surrender a Vehicle?

When you surrender a vehicle, known as voluntary repossession, you must still pay your loan balance if the bank doesn't recoup its total loss when reselling the car. A repossession, whether voluntary or involuntary, doesn't excuse your contractual responsibility to pay the loan's total balance.

Determining the Difference

Once your vehicle is resold by your bank, you'll receive a letter stating the amount your vehicle sold for and the balance you owe on the loan. Before the bank sells the car, you'll receive a letter that states the date of the car's sale. If you don't receive confirmation of the sale up to two weeks after the planned sale date, contact your bank to find out the amount you owe. The vehicle may not have sold the day it went to auction, but the lender will likely attempt to sell the car again the following week.

Other Fees

The amount you owe to the bank includes the loan's payoff amount and any additional fees the bank incurred from the resale process. If you surrendered the vehicle but allowed your lender to pick it up with a tow truck, you'll have to pay repossession fees. Repossession fees usually include storage and collection costs, which often exceed $1,000. Expect to also pay fees the lender incurred for preparing your car for resale, such as washing and detail costs. If your vehicle was damaged, the vehicle will sell for less than trade-in value, which is similar to wholesale cost at auction.

Arranging to Pay Your Balance

No matter how you pay your loan balance, the repossession will remain on your credit report for a term of seven years. If you pay the balance in full, your credit report will reflect a paid balance. After you receive a letter stating the amount you owe, contact your lender to make a payment arrangement that works for you and your budget. Determine how much you can afford to pay each month and contact your lender with your offer. Make your payments on time to avoid further collection activity.

Settling Your Balance

Your bank might accept less than you owe toward your loan. Contact the lender and try to negotiate your balance, although the bank is more likely to accept a lesser offer if you pay a lump sum to satisfy the balance. If the lender doesn't accept the agreement, it will sell your debt to a collection company for a lower cost. Debt collection companies can often take less than the amount owed. Once you settle the amount you owe, your credit report reflects a settled balance, which is viewable to future lenders.

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How to Get Rid of a Truck Debt

Owning a new truck often comes with a price other the price tag. The other "price"' is the motivation and determination to pay off the truck debt. In the beginning, trimming a budget to make payments seems minimal; but after several months, it can become challenging. If you are determined to keep your new truck and are willing to make a few concessions, getting rid of that automobile debt will be easy. Afterward, you will be able to enjoy the nice ride even more knowing that it's paid for.

Instructions

1

Make a list of all bills and necessary weekly expenses. Be sure to include the truck payment.

2

Make a list of any extra items money is spent for to include, video games, movies, eating out and any money special hobbies may require.

3

Using a highlighter, highlight all expenses that are not necessary. If it isn't related to food, clothing, shelter or the ability to stay safely warm or cool, it isn't necessary.

4

Using the telephone book, call each company for services provided that are highlighted on your list. Cancel or reduce services to reduce the amount of your monthly payment.

5

Using a calculator, determine how much money has been saved from the reduction or elimination of services and extras. Most people are surprised at this amount.

6

Add this amount to the amount of your truck payment. In some situations, a truck debt can be eliminated in half the time just by making concessions.

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How Is the Length of a Loan Determined on a Car Loan?

A range of factors determine the length of term for a car loan. The car buyer has a lot of influence on the length of the loan term. The vehicle manufacturer, type of vehicle and the chosen lender all affect the number of payments for a particular loan.

Typical Loan Terms

Auto loan lenders provide rates for loans of 2, 3, 4, 5 and possibly 6 years. These loan terms equate to 24, 36, 48, 60 and 72 payments, respectively. As the term of the loan gets longer, the interest rate will increase. The five-year/60-month car loan is traditionally the longest available car loan, but some lenders or captive finance companies will provide the longer 6-year auto loans to make payments more attractive on more expensive cars.

New Car Loans

New car loans will be available with terms of at least 60 months and probably 72 months. Term limits are set by the lender based on the type and price of a car. Incentive rate loans from the car manufacturers will often promote lower rates for shorter terms. For example, a car manufacturer may offer zero percent loans with a 36-month term. A longer-term loan will have a higher rate such as 2.9 percent for 48 months and 3.9 percent for 60 months. Six-year loans will have a significantly higher interest rate than five-year car loans.

Used Car Loans

Used car loans will be term-limited based on the age of the used car. A lender may not want to accept a five-year loan on a 6- or 7-year-old car but will be happy to take a longer-term loan on a 1-year-old used car. Each lender will set term limits based on the age of a used car. The interest rates for used cars may also increase as the model year gets older.

Car Financing Considerations

A car buyer has the option to choose the term of the car loan. The dealer will almost always quote payments at a 60-month or longer term on new cars to make the payment as low as possible. Shorter-term loans will have higher payments, but possibly a lower rate and pay down the loan quicker. It is possible to get a loan for any term less than the maximum such as 42 or 54 months. Used car buyers should look for late model used cars for longer loan terms and lower rates.

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How to Negotiate Low Car Interest Rates

Auto lenders charge interest on car loans in order to earn money on the loan. Unless you finance an automobile during a 0 percent interest promotion, you can expect to pay interest on a vehicle loan. Borrowers with low interest rates will have a lower monthly payment, and those given a high rate pay higher monthly payments. Savvy buyers are interested in ways to obtain the lowest rate possible.

Instructions

1

Skip the 60-month term. Agree to finance your automobile for less than the traditional five-year term to get a lower rate on the loan. Borrowers who choose shorter terms such as 36 or 48 months receive cheaper rates.

2

Wait until you're a prime applicant. Auto lenders classify prime applicants as those with a good credit score. According to Experian.com, good credit includes a score of 700 or higher. Pay bills on time and keep your debts low to improve your credit rating and get the lowest rate.

3

Use your own bank or credit union. Auto dealers work with specific banks when financing car buyers. You can use their banks to finance the purchase, or do your own shopping and compare rates with more than one bank. During some promotions, the dealer will offer extremely low interest rates, and if you qualify, that might be your best option. However, the ultra-low rates typically are available only to buyers with very high credit scores.

4

Bring down the interest rate with a down payment. According to Cars Direct, higher down payments help reduce the interest rate. Aim for a down payment of at least 20 percent. If paying $15,000 for a car, save at least $3,000 for a down payment.

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What to Expect at a Car Repossession?

Not knowing what to expect for a repossession can prove worrisome. If you have missed a car payment -- or more likely, two or more payments -- your bank will try to contact you and arrange a solution before it attempts repossession. You should get in contact with your bank (if you haven't already) to avoid an involuntary repossession, meaning a repossession company comes for your car. The repossession company does not need to notify you of its collection, although repossession details should be further explained in your contract.

Voluntary Repossession

If you're preparing for repossession, you don't have to wait for the bank to send out a repossession company to take your car back. You can offer to bring your vehicle back to a dealership or other drop-off location to participate in a voluntary repossession. Call your bank to ask where you can drop off your vehicle and return it as soon as possible. This way, you can plan for the day you won't have access to the vehicle any longer and avoid a potentially embarrassing situation.

Involuntary Repossession

If you have not paid for your car, the bank will sooner or later come and get it. A repossession company can take your car back while you are at work, while you are in a store shopping, or right from your driveway while you are home. The company does not have to call you first, nor must it come to find you once the vehicle has been loaded on the tow truck. If you did not make arrangements with the bank for return, expect the vehicle to disappear at any time, even with your belongings in it.

If You Are Present

If you are at home or at work while your vehicle is being loaded onto the tow truck and notice it being taken, you can get your belongings out of the car before it leaves. Bank contracts differ as do laws by state, but more often than not, the repossession company does not have to notify you. The repossession company's main interest is collecting the vehicle, not taking your belongings. If you get the opportunity to access your car, you can clean it out and take off your license plates to return to your motor vehicle office.

After Collection

You can call the bank or a police station (the repossession company will notify the police of the car's location) to find out where your car is located. It is usually in the possession of the repossession company until the vehicle is returned to the bank. You can make arrangements with the company that has your car to collect your belongings. You do not have to pay storage fees to obtain your property, although you will have to set up an appointment to access your vehicle, which is likely in a locked yard.

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Is It Easy to Get a Car Loan if You Have an Open Car Loan?

Unless you have excellent credit and an acceptable gross annual income, you may not find it easy to get an additional car loan if you already have an open car loan. If you plan to trade your financed vehicle to a dealer for another purchase, however, obtaining a loan approval might be easier. Consider the information that auto lenders review to determine whether a second car loan is possible.

Debt-to-Income Ratio Consideration

To obtain a second car loan approval, you need sufficient and stable income. You must prove to your lender that you can pay for two car loans. To determine whether you can obtain another loan, your lender will require proof of income, such as a recent paystub that lists your year-to-date earnings. Your lender will also verify time with your employer by calling the business for which you work. If you are self-employed, your lender may require several years of tax returns. Based on the accounts listed on your credit report and on your credit application, your lender determines whether you can afford a second loan in addition to your other debts.

Credit History

You must also have good credit to obtain a second car loan. If your credit has suffered since you started your last loan, you may not easily obtain another loan. Having one loan does not guarantee you'll obtain an approval for another. Potential auto loan providers review your current accounts and payment history. Your credit report states the number of accounts you have open, the number of payments you've made and if any payments have been late. Unpaid accounts, late payments, new lines of credit and the number of debts you have listed on your account may result in the decline of your loan application.

Application Requirements

Expect to complete a credit application to apply for your loan. A potential lender also considers the information you provide on your application in addition to your credit history. Your employment history may appear on your credit report if you've applied for a loan previously and listed this information. Otherwise, a lender prefers at least a two-year employment history. You'll provide a contact phone number for your employer so your lender can verify your employment. You must also list your rent or mortgage payment amount. Your housing payment is also used to determine your debt-to-income ratio.

Trading Your Vehicle

You may have to trade in your current vehicle to obtain another car loan or at least pay off your first loan to obtain another loan approval. If you trade in your vehicle toward another purchase, your dealership will satisfy your current loan amount. If you owe more than the vehicle's trade value, you can transfer the excess balance to your new car loan. If you are required to satisfy your current loan before taking out another loan, consider selling your car privately. You must pay the remaining balance due toward your loan if the vehicle's sales price is not enough.

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Who Has to Buy Car Insurance on a Co-signer Loan?

When applying for an auto loan, a lender may ask an applicant if he has a co-signer. For instance, a parent with established credit might co-sign for a child with no credit history or a husband might co-sign for a wife. When it comes to purchasing insurance for the car, both borrowers on the car loan must decide who will buy the insurance policy.

What Is a Co-Signer Loan?

A co-signer loan is an arrangement where one person backs another's car loan application for approval. Both people are responsible for paying the lender for the loan. If the primary borrower defaults or cannot pay, the co-signer must then take up the slack. The credit history of both parties is at risk in case of a default. The main loan applicant is automatically listed on the title at purchase. It is up to the lender and car seller to decide to list the co-signer on the title; in most cases that will happen by default.

Who Should Buy the Insurance?

The person listed on the title and registration must match the car, and the registered owner of the car must also have valid insurance policy for the vehicle. To avoid potential issues, the main applicant listed on the loan and title should be the person who buys the insurance policy for the car. If the title lists both names, the owners can also secure a car insurance policy in both names if they wish.

A Common Scenario

One common scenario where both co-signers might be listed on one insurance policy is if a parent co-signs a car for a child. When the parent co-signs on the loan it allows the child to get insured under the parent's policy, as long as the child is listed as a driver as well. It's important to ensure that the lender plans to list both parties as co-owners or at least the parent as the main owner on the title to add a child's vehicle on the parent's policy.

Suggestions

You should start searching for car insurance before you even go car shopping. Get quotes from a variety of insurance companies based on the type of car you wish to buy and either you or the co-signer's driver's history. Note that each co-owner as shown on the title is also listed on the car's registration paperwork. The rules for insuring a financed car vary by state, so check with your department of motor vehicles before you visit a car dealer.

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How to Eliminate a Car Debt

Buying a car is exciting; however, paying for it sometimes ruins the pleasure of owning a nice ride. Eliminating a car debt can be easy for someone who is determined and quite challenging to those who do not like making concessions. Depending on how determined you are toward eliminating a car debt, this will determine how fast you can get rid of that car debt. The principle is: in order to gain something, one must be willing to give up something.

Instructions

How to Eliminate a Car Debt

1

Write down in a notebook a list of current bills and weekly expenditures. Include the car payment.

2

Write down extras such as renting games or movies and eating out. Plan to cut these expenses in half if you can't tolerate a period of sacrifice.

3

Highlight bills and expenditures that are not absolutely necessary. Remember the principle, don't forget it. After your car debt is eliminated, funds will be available to return to some of life's simple pleasures.

4

Call the cable company, trash service, or cell phone company and cancel any of the unnecessary bills and expenditures that are highlighted. If you cannot cancel the entire service, reduce the amount of service. For example, a cell phone bill of $100 for 1,000 minutes can be reduced to $50 for 700 minutes.

5

Calculate the money saved from the elimination of services and extras.

6

Add this amount to the car payment. If you make enough concessions, you can eliminate your car debt in half the time it would take to pay it off making minimum payments.

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