Rules for Buying a Used Car

Buying a used car provides many benefits compared to buying a new car. You will save money on the purchase price and also save money on car insurance. The money you save on the used car can be put to good use elsewhere such as funding a much-needed vacation. Buying a used car does have some risks. Understand some basic rules for buying a used car and you can avoid potential problems and get all the benefits.

Planning

Decide on the maximum amount you will spend for a used car and if you have a preference for manufacturer or model. Research any known problems with the model you are considering. Determine what you will be using the car for. For example, if you are going to be doing a lot of driving, miles per gallon is important. Before shopping, make sure you have arranged a financing source.

Where to Shop

Do not limit yourself to looking for a used car at a new car dealership. Check the paper for sale by owner section because one advantage of buying direct is that you can find out about the history of the vehicle. Contact companies that only sell used cars.

Before You Buy

When you find a car you like, check the approximate value of the car at websites like Kelly Blue Book. Inspect the car for any obvious problems. Walk around the car and inspect the body for any damage. Look underneath the car for any corrosion on the frame. Examine the paint job to make sure the color looks consistent. Look at the tires for any excessive wear. Examine the treads to see if the tires will need replacing soon. Check the heating and air conditioner to make sure they are functioning properly. Look at the engine with a flashlight to check for any leaks or other engine problems. Listen to the radio. If the car has a CD, insert one in the CD unit to make sure it plays. Check the upholstery to make sure it is not damaged. Take the car for a test drive and check the brakes.

Before buying, get the Vehicle Identification Number -- VIN -- on the car and check with one of the services that report on accidents and other past problems.

Negotiation

Don't be swayed by a salesperson who tries to persuade you to buy a used car the first time you see it. If you are willing to risk losing the car, wait another day before making a final offer because this will put you in a stronger negotiating position. When the salesperson gives you a price, respond by telling him that the price is too high. The salesperson will probably offer you a lower price because his strategy is often to leave room for negotiation.

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Car Repossession Process

In today's troubled economy, many people are finding it difficult to make ends meet. This is resulting in more foreclosures and car repossessions than normally happen, as people simply cannot afford to pay for even these necessities. Car repossession is becoming commonplace and it is likely to see cars being towed away to go to the auction block if the owner cannot redeem them.

Late Payment

When a person misses a payment on his car, this may be the first step in the car repossession process. Many companies have the right to repossess even when you are only one payment behind and that one payment is only a day late. However, most companies will give you a chance to pay the payment and a late fee since they really do not want to repossess your car. However, if it becomes clear to the company that you can no longer afford to make the payment on your car, the company will begin the repossession process.

Late Notice and Phone Call

The company sends you a late notice. Then a representative may call you and ask you when you will make the payment. Based on the conversation, the company may then contact a repossession company and advise the staff to pick up your car. The repossession company will take your car from your home---even if you park your car in your driveway---or from your place of work or even from the supermarket parking lot while you are shopping. The repossession company is not allowed to remove your car from inside a protected place such as inside your garage, but they may remove it from private property as long as the car is not behind a locked door. They may take the car if the car is locked.

Repossession Process

Once your car has been repossessed, you will receive a notice from your finance company letting you know they intend to sell your car at auction and giving you an opportunity to get your car back by paying all late payments up to date along with all other fees incurred, including the repossession company's charges, storage and any other processing fees to have your car repossessed. The finance company will give you a date by which you must make your payment in order to get your car back. After that date, the finance company will sell your car at auction. The finance company applies the price received to your outstanding balance and bills you for any amount remaining. The finance company will report your car repossessed on your credit record.

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Is Paying Off a Car Good?

Though the decision to pay off a car may seem obvious, there are a number of factors a consumer should consider before making this decision. As with any large expenditure, a consumer should take the time to gather information and carefully consider all the available options. By doing this, the consumer will be able to make the right decision for her personal situation.

Loan Terms

Many car loans have prepayment penalties or require the payment of the full interest amount even if paying early. Before paying off a car loan, the consumer should determine whether or not the loan has these restrictions. In the case of a prepayment penalty, the consumer should compare the amount of interest savings of paying off early versus the amount of the penalty when making his decision. In the case of a loan requiring the full payment of interest, it generally makes little financial sense to pay the loan off early.

Emergency Fund

Many financial experts recommend that a consumer have an emergency fund to cover between three and six months of expenses. An emergency fund can be useful paying living expenses in case of a layoff or illness, replacing a broken furnace or other unexpected costs. Without an emergency fund, many consumers would have to use credit cards or other sources of high interest loans to finance these costs. If paying off a car loan early will cause a consumer to not meet this requirement, the consumer may want to consider saving the money and not paying off the loan.

Other Uses

Another consideration before paying off a car loan is what other uses the consumer might have for the money. If the consumer has a car loan with a 7 percent interest rate, but has significant credit card debt at a higher rate, it would be a better use of the money to pay off the credit card. If a consumer has a very low rate car loan, the consumer may make a higher rate of return by investing the money instead of paying off the car loan.

Reducing Debt

Some people simply do not like to be in debt. While few people actually enjoy being in debt, it is not a significant concern to most people. While paying off the car loan at the expenses of gaining a higher rate of return by saving and investing the money may not make sense mathematically, each consumer has to decide what is best for her specific situation. As long as the consumer is not putting herself into a desperate financial situation by paying off the car loan, there is nothing wrong with doing it.

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Options for Leasing & Buying a Car

One main difference exists between leasing and buying a car; the leasing bank owns the car during a lease, while financing results in full ownership. Leasing is similar to renting; you'll return the vehicle after using it. Both contracts offer flexible terms. To determine which is the better option, consider whether you would benefit from owning the car or leasing it based on your driving needs.

Term

Term options for a lease or auto finance differ. You may lease a vehicle anywhere from 24 to 60 months, although 36 or 39 months is the most common leasing term. Leasing for a longer term is not beneficial, as the lease payment increases and may prove similar to a comparable finance. However, you won't own your vehicle at the end of the leasing term. If you are financing, you can choose a term of 36 to 84 months. You can pay off your vehicle loan early and take advantage of your vehicle's equity at any time by trading it toward another purchase or selling it privately.

Monthly Payment

Leasing monthly payments are lower than a comparable finance, as payments are based on a car's expected depreciation. Depreciation is determined by the term and mileage of the lease you choose. Most lessees pay for about 50 percent of the vehicle's purchase value over the term of a lease. While the monthly payment for financing may prove higher than a lease, you can at least expect to own the vehicle outright once the loan is paid in full. When leasing, you'll return your vehicle at the end of the term without and won't receive any money back if the car has equity.

Vehicle Use

If you purchase your vehicle, you may do with it as you please. Finance contracts require full-coverage insurance over the term of the loan, whereas lease contracts require the same and more. When leasing, you must choose a mileage allowance. If you go over your contracted mileage amount, you'll pay up to 20 cents per mile over your allowance. Leasing banks also charge wear-and-tear fees. These fees make up for any loss of bank-determined value if your vehicle is not in good condition upon return, which may include tire replacement, excess wear in the seats or deep exterior scratches or body damage.

Ownership Cost

Leasing offers an ownership option. You do not have to return the vehicle at the end of the contract. If you want to purchase the vehicle, you'll pay the leasing bank for the car's buyout amount, which can finance elsewhere. You can also trade the vehicle or sell it for the leasing bank's purchase amount at any time, so you are not entirely stuck in your contract. However, a lease purchase often costs more than a comparable finance or cash purchase because of lack of negotiations and rebates.

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How to Purchase an Affordable Car

Buying a car for reliable transportation doesn't imply buying a car that's outside your budget. Spending more on a car than you can afford can impact your monthly finances and limit what you're able to spend. Know what you can afford before shopping and purchase an affordable car.

Instructions

1

Determine how much you want to spend. Have a price point in mind before talking with dealers and auto lenders. Review your income and present expenses and decide what you can realistically afford. For example, if you can spend $400 a month on a car payment, you can likely afford a car priced around $20,000.

2

Pull out financial documentation. A bank ultimately decides how much you can spend on a vehicle. Banks reach this conclusion after reviewing bank statements, W-2s or tax returns. Gather these documents and give them to your lender when applying for a loan.

3

Get pre-approved for a loan before shopping. Submit your employment and income information to a bank or credit union to get pre-approved for an auto loan. Based on the provided information and your other debt payments, your auto lender will pre-approve you for a specific auto loan amount.

4

Narrow down cars within your reach. Once you're pre-approved, create a list of possible cars within your financial reach to test drive.

5

Lower your car payment with a down payment. Knock down the amount financed with a bank by supplying a down payment -- whatever you can afford. For example, if buying a $20,000 car, providing a down payment of $5,000 reduces the auto loan to $15,000, and this reduction can create a more affordable car payment.

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Tips on Purchasing a Used Car From a Private Seller

Buying a used car can be a stressful experience. Figuring out what kind of car you need, trying to ignore the car you want but know you can't afford, and searching through endless for-sale ads can take up a lot of time. Buying from a private seller can sometimes save you money, but can also increase your stress level as you wonder about the identity of the person you are dealing with.

Knowledge Is Power

Never look at a car that is being sold by a private party without knowing what you are looking at beforehand. The Internet is overflowing with automotive information, and can supply you with the specs for the car you are considering. Before going to look at the 2003 Toyota Echo that your neighbor is selling, find out everything you can about the company, the model and the year. Every car gains a reputation over time as many different drivers use it. What you learn may make you want to grab it quickly, or may make you want to cancel the viewing. If you have the VIN (vehicle identification number), you can even research the exact car that's being sold by going to carfax.com. It will cost you a fee to get the information, but it's money well spent to avoid buying a lemon.

Hidden Problems

The biggest problem with buying a used car from a private party as opposed to a new one from a dealer is that you won't be in possession of a warranty if something should go wrong. Honest car owners will tell you about any problems the car has, but not all car owners are honest, and not all problems are even known to the owner. You can't get around this problem completely, but you can increase your odds of success by taking the car to a competent mechanic and paying him to give it a good going-over. A mechanic can test the compression of the engine, look at the level of wear on brakes, U-joints and transmission, and examine the chassis and frame to determine if the car has ever been in an accident.

Testing It Out

Never buy a car without taking it for a test drive. Don't be shy about making it a very extensive test drive. Given that you will probably be handing over thousands of dollars, you have the right to know what you're buying. Ideally, you could borrow the car and use it for a weekend, although many sellers will not be too keen on this idea. Drive the car on the highway and in the city, test it in parking situations, rapid turns and high speeds. Do everything you can think of to tease out any problems that it might have before you buy it.

Haggling

If you do all your research and you decide that you want to buy the car, you then are confronted with the question of price. In most situations, the seller wants more and you want to pay less. The challenge is to reach a middle ground that is acceptable to both of you. When haggling, keep in mind the fact that there are hundreds of millions of cars in the world. Unless you are a rare car collector, there is nothing special about this one. If the seller won't come down to a price you feel is fair, walk away and find another car.

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Georgia's Usury Laws on Used Cars

Usury interest rate limits are governed by state statutes. In Georgia, the Department of Banking & Finance is responsible for enforcing the state's usury laws governing interest rates that lenders conducting business within the state can charge consumers. The Georgia General Assembly enacted usury laws for credit card lenders, industrial and commercial loan lenders, retail installment loan lenders and motor vehicle loan lenders.

Georgia's Motor Vehicle Usury Law

Under Georgia Code Section 10-1-33(d), the state's usury laws govern vehicle loans of $5,000 or less. The usury laws do not apply to vehicle loans exceeding $5,000. If a buyer purchases a car exceeding $5,000 and obtains a car loan, he must negotiate with the seller as to the applicable interest rates. The state's usury laws do not include sales fees and insurance, and the annual percentage rate limits do not include those charges.

Motor Vehicle Sales Finance Act

The Georgia Motor Vehicle Sales Finance Act was amended in 1995 to limit the late fees charged for business and commercial vehicles to 5 percent of the installment due. Georgia law limits new car loans to 10 percent annual interest, and a vehicle loan for a new car cannot include interest terms for more than $100 of interest annually. For "Class 2" cars that are used but less than two years old, the state limits the interest rate at 13 percent. For cars between two and four years old, the cap is at 15 percent. For "Class 4" cars that are older than four years, the state limits the interest rate to 17 percent. Furthermore, lenders cannot charge late fees that exceed 5 percent of the loan per month or $50, whichever is less.

Consumer Complaints

Georgia is only one of three states that does not give its Attorney General the primary responsibility of investigating consumer fraud complaints. Instead, consumers must file complaints with the Georgia Governor's Office of Consumer Affairs. In addition to the state's usury laws, the Governor's Office of Consumer Affairs is responsible for investigating consumer complaints of odometer fraud.

Odometer Fraud

Under Georgia law, odometer fraud is a misdemeanor and can lead to penalties of up to $1,000 and one-year in jail. Knowing tampering with or misrepresenting the true reading of a vehicle's odometer is also illegal under federal law. The federal government considers the crime a felony, and it can charge those guilty of odometer fraud with up to $50,000 in fines and three years in federal prison. Victims of odometer fraud can file civil suits in either federal or state court for treble damages plus court costs and attorney's fees.

Considerations

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

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Cash Back vs. 0% Financing

When buying a new car, you may be faced with a choice of taking a cash rebate or getting a 0 percent interest rate on your car loan. Both of these options can be attractive, but one might work out better for you depending on the circumstances. Considering the long-term savings and whether you even qualify can help you in your decision.

Crunching the Numbers

To help you with this decision, you need to look at the numbers of the deal. Look at the total rebate in relation to the savings that you would realize from the low interest rate. Compare how much you would have to pay in interest with the rebate to how much you will save with the 0 percent interest rate. One option should provide you with more savings than the other.

Qualifications

Even though the auto dealer might advertise that you can choose between a rebate or 0 percent interest, this may not be the case for everyone. Most of the time, you have to have a stellar credit score before you can qualify for 0 percent interest financing. If you do not have a very high credit score, you may only qualify for a higher interest rate. If this is the case, it would most likely be to your advantage to take the rebate.

Outside Financing

Another option that you may want to consider is financing your automobile purchase through an outside lender. You may be able to take the cash rebate from the dealer and finance the entire purchase from a traditional bank. With this option, you might be able to get a very competitive interest rate and get to take advantage of the cash rebate as well. The interest rate will not be 0 percent, but it might be cheaper than what you could get through the dealer without great credit.

Negotiation

Even though the car company wants to make you think that you can only choose between the two options, you may be able to negotiate better terms. For example, some car companies will actually combine cash back rebates with 0 percent financing, depending on how badly they want to sell cars. You also need to work on negotiating the best possible price for the car to begin with. If you pay more than you should for the car, the rebates will not be as meaningful.

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How to Get an Auto Loan Without Proof of Employment

From a lender's perspective, if a buyer does not have proof of steady employment, he probably would default on a loan. Lenders do not favor writing loans that would be unlikely to be repaid. So getting an auto loan without proof of employment can be challenging. Yet, it is possible.

Instructions

1

Provide proof of income. If a borrower is self-employed, is a 1099 contract employee, is receiving disability benefits, or is collecting Social Security payments or retirement pay, income has to be proven. A loan applicant needs to be able to show access to a regular source of income. The sources can vary from trust funds to lawsuit settlements to retirement income, but the borrower must show stable and available income to justify the loan.

Without any source of income, an auto loan is impossible. Income can be shown using paycheck stubs, income tax returns, or bank statements reflecting regular deposits from an agency issuing disability or settlement payments. Borrowers often are asked to bring in two years worth of documentation of income, to average out a monthly income estimate for loan underwriting.

2

Check your credit. Lenders can feel somewhat anxious when extending credit to a borrower without proof of employment. However, they feel less anxious if that borrower has excellent credit. If the borrower can provide a satisfactory two-year credit history that shows no late payments, judgments, or collection accounts, the lender will consider that.

3

Have insurance information ready. No dealer or lender will allow a borrower to waltz off a lot in a new car--or a used one--without proof of insurance. Vehicles can be added to a policy in a few moments, so as long as the borrower has his insurance information with him, insurance should be an easy hurdle to jump.

4

Have a co-borrower on standby. If the income stated on the application does not meet the lender's standards, or if the borrower's credit is questionable, having a co-borrower can increase the chances of a loan approval. It helps if the co-borrower is employed, has stable income and good credit.

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Purchasing a Car With Cash Vs. Credit

There are a lot of factors to consider when deciding whether to purchase a car using cash or financing the vehicle. Sometimes the decision will be made for you. If your credit history is extremely bad, many dealers will refuse to finance a car purchase, while dealers who will take the risk will charge exorbitant interest rates. Your personal financial situation will be the determining factor. Weighing your cash reserves against the prospect of acquiring debt and a monthly payment is crucial, as is calculating the total cost of the car over the life of a potential loan.

Maintaining Cash Reserves

This initial consideration has less to do with deciding how to finance a new car and more to do with your cash position. If paying cash for a car leaves you with little or no money in the bank, it may be a bad decision. Regardless of the interest rate, a car loan may be your best---maybe only---option short of leaving yourself vulnerable to a rainy day. Don't empty your bank account to buy a car.

Comparing Credit Purchases

If you're currently mulling several purchases that involve loans, pay cash for the higher-interest-rate item. Let's say the financing rate on a loan for a car is 10 percent over four years and translates to $2,000 in interest payments. You're also considering a similarly priced home-improvement project at 5 percent over five years that totals $1,200 in interest payments. You can only pay cash for one item. Pay cash for the car. The numbers speak for themselves.

Actual Total Cost

On first blush, it seems that paying cash for a car will save you a lot of money in financing charges, even if you get a good interest rate on the car loan. Whatever the financing charges, you won't have to pay them if you pay cash. But you also have to take into account the money you'll lose by not having your money collecting interest of its own, either through a savings account or other investment vehicle. For example, let's assume that instead of a four-year loan for a $10,000 car at 10 percent interest, you choose to pay cash. The financed car would cost $12,174.24---the interest payment is $2,174.24. By paying cash, you won't have an interest payment of $2,174.24, but you also won't be collecting interest on your $10,000. A 5 percent interest rate on $10,000 over four years compounded annually yields a total of $2,155.06---virtually the same as your car loan interest. Compounded quarterly, the same $10,000 yields $2,198.90. So you have to compare the auto loan rate against your money's interest-bearing rate and decide which is the better way to go. A low car financing charge actually can save you money.

Establishing Credit

If you have no credit history, or a poor credit rating, you may want to take out a car loan simply to establish---or re-establish---your credit score. Perhaps a hefty down payment is in order so that your monthly payment doesn't swamp you. But you can use a relatively short-term financing instrument like an auto loan to establish credit or begin repairing bad credit.

Peace of Mind

If you're averse to debt of any kind, paying cash for your car may be your best bet. Not having to deal with a monthly payment over a two-, three- or four-year period can provide you with something money rarely can buy---peace of mind.

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How to Calculate Extra Principal Payments on Auto Loans

Whenever you make a car payment, a portion of your payment goes toward paying the interest on the loan and the remainder of your payment is applied to the loans principal--which is the amount you originally borrowed. If you choose, you may make larger or more frequent payments on your auto loan in order to pay down the balance more quickly. If you would like to pay off your auto loan early, you must calculate the correct payment amount each month to reach your goal.

Instructions

1

Choose a date by which you would like to pay off your auto loan.

2

Calculate the number of months between the current month and the month in which you would like to pay off your auto loan.

3

Divide the loan balance by the number of months you have given yourself to pay off the loan. The number you are left with is the payment you must make each month toward the loans principal to meet your goal. For example, if you would like to pay a loan with a balance of $6,000 in one year and your current monthly payment is $250, you would need to pay an extra $250 each month in addition to your current payment to meet your goal.

4

Find out if your lender uses simple or compounded interest. This will determine how much interest you will owe as you pay down your loan balance. You must take the interest rate into consideration when calculating the amount you will need to pay each month to meet your payoff goal. Auto lenders have different methods of applying interest to your account. Check with your lender to find out how making extra payments will affect the interest charges on the loan.

5

Send a notice to your lender with each payment stating that you would like the money to be applied to the principle of the loan. If you do not specify how you would like your extra payments to be applied, your lender may opt to apply the payments toward the interest--thus complicating your efforts to pay your loan off early.

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How to Get Car Loans for Bad Credit and No Co-Signer

Getting a car loan even if you have bad credit can ultimately help improve your credit score. Paying a car loan each month adds favorable information to your credit report because lenders report your timely payments. Because the vehicle secures the auto loan, you can qualify for financing with bad credit and no co-signer. Knowing where to look is key to getting your loan approved.

Instructions

1

Buy from a dealer that offers sub-prime loans. Call different dealerships in your area and ask to speak with a finance manager. Explain your situation and ask whether the dealership offers loans to people with a low credit score. Privately owned dealerships that offer in-house financing typically work with bad-credit applicants.

2

Set aside money for a down payment to increase your negotiating power. A down payment can help you obtain a better interest rate on your car loan. Aim for a down payment of about 20 percent of the purchase price.

3

Bring pay stubs to confirm employment and income. You won't qualify for a car loan without steady employment and evidence of income. Auto lenders will request tangible proof of income, and they might contact your employer to verify the accuracy of financial information.

4

Prepare to pay a higher interest rate on the vehicle loan due to your low credit score. People with credit problems customarily pay higher interest rates on auto loans. Keep your rate to a minimum by shopping around and requesting free loan quotes before purchasing your car. Auto lenders provide quotes after reviewing your credit score and history.

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What Are the Benefits of Leasing a Vehicle?

Purchasing a vehicle is a big decision for most families and individuals. The decision to finance a vehicle for purchase or to lease is one of many you will make in the process of acquiring a new car. Leasing has a number of benefits, making it an attractive option for many car buyers.

Maintenance

Leasing rather than buying may spare you the cost of repairs. The lease term can coincide with the manufacturer's warranty, which allows you to have repairs covered during the lease term, then turn the vehicle in before the warranty ends. The lease requires you to maintain the vehicle during the agreement, but if you're leasing a new car that's under warranty, you'll only pay for things that the warranty does not typically cover, such as oil changes.

Lower Cost

A leased vehicle generally has a lower monthly payment than a vehicle purchased through traditional financing. According to Lease Guide, the average lease payment is between 30 and 60 percent lower than a traditional car payment. A lease agreement is designed to charge you for the time you use the vehicle, rather than the entire purchase of the car.

Low Down Payment

A lease agreement does not require a large down payment, or in some cases any down payment at all. Car buyers have the option to put a down payment on the vehicle to lower the cost of the monthly payments. If you don't have a large amount of money for a down payment on a purchase, you may find a lease arrangement a better option.

Opportunity to Purchase

At the end of the lease term, you have the option to purchase the vehicle, and the purchase price is typically specified in the lease itself. This allows an opportunity to try the car for a longer period before making a commitment. You can walk away from the leased vehicle at the end of the agreement and turn the vehicle in for another car, or make the decision to purchase it under the terms set forth in the lease.

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When Is it Worth it to Refinance an Auto Loan?

Refinancing an auto loan isn't the best option for some borrowers. An auto loan refinance can provide better, more affordable loan terms, which is ideal for buyers who need to reduce their monthly expenditure. But because cars depreciate with time, there are factors to consider before applying for a refinance.

Improved Credit Score

Some people apply for an auto loan with bad credit and must therefore pay a higher interest rate on the loan. If you are paying a high interest rate, and you've recently made credit improvements to boost your low score, refinancing an auto loan can result in a lower interest rate. Auto lenders use credit scores and credit history to determine the rate on an auto loan. Factors that can increase the rate on a loan include a history of late payments and high credit card debt.

Considerations: Loan Term

Auto loans have varying terms, and some borrowers select a 60-month term to keep their payments reasonable. Because a refinance can extend the auto loan for an additional five years or 60 months, consider an auto refinance only if you plan on keeping the same vehicle for several years. If you've paid on the car loan for two or three years, rather than refinance for another five years, choose a term that's shorter to stick with the same pay-off schedule and to save money in interest payments.

Lower Payment

Refinancing an auto loan is worth it if you need to reduce your car note to keep the car. A decrease in income can impact your ability to afford your present car loan payment. Rather than sell or trade in the car, speak with your auto loan lender first to see if you can refinance and secure a lower interest rate. Refinancing for another five years can also help reduce the monthly payments on an auto loan.

Loan Balance

The amount you owe on the auto loan determines refinancing eligibility. As a standard, auto loan lenders do not approve refinancing when borrowers owe less than $7,500 on the vehicle. Call your auto loan lender in advance and ask for your pay-off balance. Because lenders vary, inquire about auto loan refinancing requirements.

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Dealer Financing vs. Credit Union Financing

When shopping for a car loan, the process is sometimes more difficult than shopping for the car itself. Loans from financial institutions, such as credit unions, and dealer financing serve as your two primary methods for obtaining a loan. Generally, credit union financing has more pros than cons, while dealership financing may be required if you can't come to an agreement with the credit union.

Credit Union

When you apply for a loan at a credit union, you have the opportunity to create a relationship with the lender, especially if it's a credit union you already belong to. By doing this, you can persuade the credit union that you are responsible with your finances by showing how you've paid back your past loans or lines of credit. You can also sit down and provide your credit report and point to your checking and savings statements as indicators of your healthy finances. All these personal interactions allow you to explain in detail that you're not a risk and that you will pay back the loan. Additionally, credit union financing is typically simple interest, which means interest is paid out evenly throughout the duration of the loan.

Traditional Dealer Financing

When you walk into a traditional dealer and explain that you need financing before you can purchase a car, the salesman will typically walk around with you until you settle on the car of your choice. Afterward, he'll sit down, take your financial information and begin sending the information to financial institutions that the dealer works with on a consistent basis. The dealer may also send your information to a manufacturer's financing department, such as Ford Motor Credit or Toyota Motor Credit. There's no personal interaction. If you are approved for a loan, it is based off your financial data alone; nothing you say will likely impact the decision. In addition, dealer financing may come with higher interest rates and front-loaded interest. Front-loaded loans result in a large portion of your payment going toward interest at the beginning of the loan and more going toward the principal payment at the end of the loan.

Buy Here, Pay Here Dealerships

Buy here, pay here dealerships offer financing at the dealership itself. There's no outside bank to go through. Typically, these dealerships offer loans that include higher-than-normal interest rates. These loans are almost always front-loaded. You must pay your loan payments at the dealership itself.

Making a Decision

If you belong to or live near a credit union, always attempt to secure a loan by visiting the credit union before going to the dealership. You'll likely get a better rate. If you cannot secure a loan from a credit union, visit a dealership, but bring a full range of financial information with you, including your credit report. If you believe the loans you're offered come with too high of an interest rate, present your credit report and explain why you should qualify for a better rate. If you have no credit or a poor credit history, consider visiting a credit union and a traditional dealership first. If you are not approved for a loan, visit a buy here, pay here dealership.

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When You Lease a Car, Who Owns the Vehicle?

When you lease a car, the leasing bank owns the vehicle, not you. You must pay to insure it, but even so, your bank is entitled to any insurance payoff of your leased vehicle. You may choose to purchase your vehicle from the leasing bank at any time if you want to own it outright.

Lease Process

When you lease a vehicle, the leasing bank purchases the vehicle from the dealer and then leases it to you. Your dealership acts as a go-between for you and the bank. While you do most of your business with the dealer, the payment for the car is arranged between the bank and the dealer. In fact, unless you negotiate a better lease payment, the leasing bank purchases the vehicle for sticker price. The dealer follows all bank rules when leasing you a vehicle, such as obtaining a credit application, contract signatures and proof of insurance.

Purchasing the Lease

You can purchase your leased vehicle at any time during your lease contract or once your lease contract expires. If you decide you'd rather own your vehicle, call your leasing bank to obtain a purchase price. You may then apply elsewhere for the purchase amount and pay off the leasing bank once you're approved for an auto loan. Review your lease contract to find out how much the car will cost to purchase at the end of the contract, which is listed as your last payment.

Contract Provisions

Because the bank owns the vehicle, it sets the rules for your vehicle use. Lease payments are based on expected depreciation of the vehicle, which depends on the mileage you choose and the term you plan to drive the car. If you exceed your mileage allowance, your bank may charge up to 30 cents per mile. Your contract also states the amount of wear-and-tear you're allowed during the contract, which covers light vehicle wear, repair and maintenance items. If you return your vehicle needing repairs, maintenance items or exceeding the general wear-and-tear allowance, you must pay the bank for the vehicle's decrease in value.

Auto Insurance

Leasing banks also require that you continuously maintain a full-coverage insurance policy on the vehicle during the lease contract. If you do not maintain the required coverage, the leasing bank may choose to add an expensive policy to your lease account, which increases your lease payment, or repossess the vehicle. Leasing banks also require increased bodily injury and property damage limits and a lower deductible. If your vehicle is declared a loss by your insurance company because of damages or theft, your leasing bank receives the vehicle's insurance payoff. You will not receive any of your down payment amount or lease payments in return.

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Financing Process for a Car

When buying a car, you may need to finance a portion of the purchase with an auto loan. To get a loan that meets your needs, you will have to shop around and negotiate the terms that you want. Understanding the auto financing process can help you get the best deal available.

Planning Stages

Before you enter into the financing process, you need to do a little bit of planning. This involves finding out exactly how much you can afford to spend on a car payment each month. You will most likely need to make a down payment on your car purchase, which means that you need some cash saved up as well. Look at your budget to determine a realistic number for a monthly car payment and this will give you valuable information when shopping.

Shopping for Financing

While you could potentially go into the dealership and get financed for your vehicle, you may want to spend some time shopping around for financing first. If you take the necessary time to shop for financing before you go into a dealership, you can sometimes get better terms. You can shop online and with local lenders to find terms that meet your needs as a buyer. This way, you can often find the lowest interest rate that is available in the market.

Applying for Financing

Once you find a lender you would like to work with, you will need to apply for a loan. During this part of the process, the lender will give you a loan application and you will need to complete it with the appropriate information. You will need to include your personal information such as your name, Social Security number, income and address. This allows the lender to do a credit check and determine if you are worthy of a loan.

Getting the Loan

After you apply for the loan, the lender will tell you if you have been approved. At that point, you can try to negotiate some of the terms of the loan. You may be able to negotiate the interest rate or the down payment amount. You need to get information about the total financing charges and the annual percentage rate that you are being charged. Once you work out the terms, the lender may give you a check that you can use to buy the car.

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What Happens When the Bank Writes Off a Car Loan?

A car is a necessity in most people's lives, particularly for people who do not live near public transportation. While a car may be necessary, the nicest, sportiest or most luxurious car is not. The deck might be stacked against you when you go into an auto dealership and try to resist the "great" deal being offered to you, but be firm. If you buy a car that you really cannot afford and then default on your payments, your lender might write off, or charge off, your loan. That is something that you will want to avoid at all costs.

Repossession

If you miss making your car payments, you probably already know that the lender will repossess your car. No doubt, this is not a good thing. But, there is more to the story. What the lender will do after repossessing your vehicle is to resell it. If there is a shortfall on what you owe and what the lender sold the car for, the lender will come after you for the difference. Not only that, you will be responsible for any repossession fees, legal fees and any other fees the lender incurred trying to sell your car.

Owing Lender

In your original loan deal, you not only agreed to pay back the car loan, you agreed to do it at a certain rate of interest. When you default on the loan, creating a charge off scenario for the lender, the lost interest is another fee that you will owe.

When Write-Offs Occur

The bank can actually claim your loan as a write-off before or after it repossesses your car if you have missed payments. The write-off is done for accounting purposes to show that your loan is no longer an asset for the bank. It happens when the lender decides that you are not going to pay your debt. While this changes the lender's assets for tax purposes, it does not get you off the hook regarding paying the loan back.

Damages Credit

Write-offs will appear on your credit report, which will make it difficult to get future loans. Many time, write-offs are the result of a bankruptcy. When a person files Chapter 7 bankruptcy, that person will get a fresh financial start and will not have to pay back most of his debts. There are still consequences, however. Your credit will definitely be shot if bankruptcy happens, and you won't be able to get any loans for the next 10 years, according to financial planner Gary Foreman writing for The Dollar Stretcher. Even if you get a write-off without bankruptcy, it will still be a bad mark on your credit.

Prevention/Solution

Before you let your car get into a write-off status, do everything you can do prevent that from happening. You can try to refinance your car through your bank or credit union, but that is very unlikely to happen, according to LeaseGuide.com. Your best plan of action is to contact your lender immediately. Your lender might be willing to work with you because banks are not in the business of selling cars. The lender might allow you to "short sale" the car, similar to what people do with houses they can no longer afford. You would sell the car, probably for less than you owe on it, at a price the bank agrees to. You would owe less to the bank this way than if the bank had to repossess and sell your car at auction and charge you expenses.

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How to Remove a Co-Signer From an Auto Loan

Many people require the aid of a co-signer to acquire a car loan for a variety of reasons --- no credit history, a bad credit history or no down payment. Sometimes the co-signer might ask to be removed from the loan, or individuals who have been responsible in making payments wish to take full accountability for the loan. Removing a co-signer from a car loan is possible, but not easy to accomplish. Lenders might require a new down payment or refinancing to accomplish this goal.

Instructions

1

Review the terms of your current auto loan, and make note of the interest rate and other factors that could affect your payment scale if the co-signer is removed. Obtain a copy of your credit report and verify your credit score. Review your personal budget to determine if your finances will allow you to put a down payment on the loan if the lender agrees to remove the co-signer under that condition.

2

Contact your lender, explain the situation and ask if you can refinance the current loan under your credit alone. Expect the lender to be reluctant to do so, and be prepared to offer reasons why the lender should consider it, such as your good payment history or improved credit ranking. Ask what requirements your lender has for removing co-signers.

3

Consider contacting other lenders if your current lender is unwilling to assist you in your request. Apply for a new loan under your credit alone to replace your shared loan, but expect to qualify for higher interest rates and see a drop in your credit score afterward.

4

Request documentation that the co-signer has been removed from the loan. If you received a new loan, make certain your original lender sends paperwork stating that the old loan has been paid in full. Share copies with your former co-signer and file these documents for safekeeping.

5

Have your co-signer check his credit report. The loan should no longer appear as active under his name. Dispute it with the credit reporting agency and the lender if the loan still appears on the co-signer's credit report as anything other than "paid in full, closed" after six months.

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Is it Better to Pre Qualify for an Auto Loan?

Pre-qualifying, or acquiring a pre-approval, for an auto loan before you shop has its benefits. You'll know your interest rate ahead of time, allowing you to budget accordingly. You can also save time while shopping; some banks can take as long as a week to provide an approval.

Saving Time

Without a pre-approval, you might shop until you found a car you wanted and then apply for your loan. Because bank approval times are not usually immediate, you might lose your car deal to another ready and more prepared buyer. If you obtain a pre-approval, you'll know your lending limits, interest rate and term. You can promptly finish the loan process by providing the bank the car's information to receive your loan check quickly.

Considerations

While you can wait as long as a week to obtain a pre-approval, dealerships can send in a loan application electronically. The response from the bank is quick, usually within an hour. Without a pre-approval in hand, you may find yourself in the spur of the moment making a quick decision at a dealer. Dealers can increase your approved interest rate to make a profit. If you already know your rate, the dealer is likely to try and beat it, not increase it. When using a dealer, your pre-approval acts as financial protection.

Manufacturer Offers

If you're buying a new car, check the dealership or manufacturer's website for special offers before applying on your own. You may find the vehicle you want has an offer as low as 0 percent. When the manufacturer offers a rate to entice borrowers, it is often lower than you can obtain through any other lender. Call local banks or visit websites to gauge common rates. If the manufacturer's incentive is the best you find, apply at the dealership to get the rate, in which case a pre-approval is unnecessary.

Budgeting

Obtaining a pre-approval allows you to set your budget and shop within your means to find the car you want. Because you'll already know your interest rate, term and monthly payment, you can avoid looking at cars that are too expensive. Your bank's loan representative will go over your pre-approval terms in full, meaning you'll know how much you'll pay every month and the total amount paid back over time. Dealers don't always extend the same courtesy, as many try to focus buyers on monthly payment, not interest rate or other loan information important to your finances or budget.

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Can I Apply a Partial Payment to the Principal of My Car Loan?

Interest on most car loans is simple. The larger your principal balance, the more of your payment goes to pay for interest rather than reducing that principal balance. That means that reducing your principal can be the magic bullet to paying less interest over the life of your loan. In most circumstances, you can do this by applying extra or partial payments to your principal balance. Knowing the terms of your loan and how interest works can save you time and money.

Per Diem

Most car loans operate on simple interest, which means that interest accrues over time, but is not capitalized, or added to your principal balance. This interest accrual is based on a simple formula: principal balance x interest rate x time. The first part of this equation will give you your daily interest per diem, or the amount charged each day. This per diem is then multiplied by the number of days since your last payment, which yields the amount of interest outstanding on any given day. Lowering your principal amount reduces this per diem, which results in less interest paid over time.

Principal Only

Contact your lender to determine the best way to make a partial or principal-only payment. If you manage your loan online, many financial institutions now offer the ability to pay more than your minimum payment or to make an additional payment. If it is not clear that these additional amounts will be applied to principal, confirm with the lender themselves before submitting the payment, as it may be difficult to have the payment reversed.

Early Payment Penalties

Before making any additional payments, review your original loan documents to ensure that there are no early payment penalties in your contract. Some lenders require that the initial payments all go to the interest that would be paid over the life of the loan before any amount goes to principal. This would negate the benefit of principal only payments. Other contracts may charge a percentage of the outstanding amount as a pre-payment fee. Be sure that you are not in either situation before calculating the benefits of extra or principal only payments.

Side Effects

In addition to pre-payment penalties, be sure to discuss any other unintended consequences to making extra or partial principal payments with your banker. In some cases, the extra payment may go to satisfy future payments in addition to or in lieu of paying down your principal. If you arranged to have your payments made automatically, your next payment may be reduced due to the extra payment you made this month, which may prevent you from paying your loan down as quickly as you had intended.

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How to Calculate Car Payment by Hand

Many online calculators are able to calculate a car payment in seconds, but the formula to compute the monthly payment by hand is not very complicated and will not take much longer. The amount of a monthly car payment depends on the amount borrowed, interest rate and the number of months in the repayment term.

Interest Rate

The monthly car payment depends heavily on the interest rate you are charged on the loan. When you obtain a loan, you will know the annual interest rate. Convert this from a percent to a decimal by dividing it by 100. Then convert it from an annual interest rate to a monthly interest rate by dividing it by 12. For example, with an annual interest rate of 8 percent, convert it to a decimal rate of 0.08. Divide by 12 to find a monthly interest rate of 0.00667. This rate, called the periodic rate, is the amount by which your loan balance is multiplied each month to find out how much interest you owe for the month.

Monthly Payment

Set up a fraction to compute the amount of the monthly payment. For the top of the fraction, multiply the monthly interest rate by the total amount of the loan. For the bottom of the fraction, add 1 to the monthly interest rate and raise this to the negative power of the number of months in the repayment term. Then subtract this answer from 1. For example, say the loan is for $19,000 to be repaid over 48 months. The top of the fraction is $19,000 times 0.00667, or $126.73. The bottom of the fraction is 1 - (1 + 0.00667)^-48, which simplifies to 0.273. Divide $126.73 by 0.273 to calculate a monthly payment of $464.21.

Calculate Total Interest

After calculating the monthly payment for the car, you can use that to calculate how much interest you will pay over the life of the loan. To do this, multiply the monthly payment by the number of monthly payments, which will give you the total amount you will pay. Subtract the amount of the loan from this to find the total interest you will pay. For example, multiply $464.21 times 48 to get a total of $22,282.08. Subtract the loan amount of $19,000 to calculate $3,282.08 in interest payments.

Considerations

When deciding what type of auto loan to get, the wisest choice is to get the shortest term of loan that you can reasonably afford. A loan with a shorter term has higher monthly payments but lower total interest payments. This will help you pay off your car quickly and less expensively. It also helps prevent you from becoming underwater on your car, which is when you owe more on the loan than the car is worth.

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How Many Years Can You Finance a Used Car?

The number of years you can finance your vehicle varies depending on your credit, your lender and even the vehicle you choose to purchase. Some institutions lend longer than others, so you may need to shop around. Even so, learn which factors you should consider when deciding how long you should you finance a used car before pursuing any term.

Common Terms

Lending options include 24 to 84 months for used-car financing and even longer through some institutions. However, the bank considers age, value and cost of the vehicle before approving a loan. Banks prefer a vehicle to depreciate appropriately in comparison to a loan. For example, you are not likely to find a lender to extend a 72-month term for a vehicle with a value of $6,000 because of depreciation. An 84-month term is not uncommon, although bank guidelines may require you to borrow a minimum of $30,000. The most common terms for used vehicles are 24 to 60 months.

Credit and Income

Your lending term may be affected by your credit history or income, as the bank considers both for your approval. For example, if you make $2,000 per month but pay out over $1,500 in debt, the bank may limit your borrowing to $200 per month for a car payment. This can affect your term by requiring you to go longer than you wanted to. Or, if you have poor credit, your lender may require you to purchase a vehicle for a shorter term, which results in a higher payment but allows the vehicle's equity to keep in line with the loan amount.

Interest Rate

Before deciding on what loan to apply for, use an auto loan calculator to view overall costs including interest rates during the time of your loan. The Edmunds website (see Resources) offers an auto loan calculator for free use. While you may prefer a lower car payment, using an auto loan calculator can prove a longer term displeasing because of the actual amount you'll pay back over time. Used-car interest rates usually remain the same from 24 to 60 months, although a term over 60 months warrants a higher rate.

Considerations

If you would like to keep your payment low but need a longer term, ask your lender if you can pay off your loan early without incurring any prepayment penalty fees. Many lenders do not charge you for paying off your loan early, but some do. If your bank does allow you to pay off your loan early, find out how you can go about sending in an extra payment and apply it to the loan's principle amount rather than balance with interest. You can avoid some of your interest charges this way.

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How to Check VIN Numbers on a Car

Run a check on the vehicle identification number, or VIN, when you buy or sell a used car. A VIN is a particular car's unique code, revealing its basic information in 17 numbers and letters. This system has been in use since 1981. Entities such as insurers, titling agencies and salvage yards use VINs to report cars with flood or hail damage or that have been in accidents, as well as other information useful to buyers. Checking a VIN gives access to that information. Sellers wanting to prove the worth of a used vehicle may present the results of a VIN check to prospective buyers.

Instructions

1

Ask the car owner for the VIN. If he does not want to supply it to you, as a potential buyer, you may want to take a pass on purchasing that car.

2

Search for the VIN if the car is yours or you have access to it. Insurance cards and registration documents often list the VIN. If not, look for the VIN in the door frame or on the dashboard, near the windshield, on the driver's side. Record the number.

3

Search online at websites that let you do a free VIN check. A free check provides basic information, such as whether or not the car was salvaged.

4

Enter the VIN on the website page in the appropriate text field. Select "Submit," "Enter" or "Okay" -- the button or link text may vary according to the website. The VIN report will display. After displaying basic information, some websites offer a detailed report for a fee.

5

Repeat the VIN check on a different websites; information can vary from site to site.

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Can I Finance the Buyout on My Lease?

Drivers who take good care of their leased cars and keep the mileage to a minimum may want to purchase the car after the lease period ends. Most leases have clauses that allow the driver to buy the car for a price that is negotiated at the time of lease signing. This is called a "lease buyout." If you don't have the cash to buy the car, you must finance the car with a used-car loan.

Financing Options at Lease End

Financing a lease buyout is no different than financing any other used vehicle; however, some lending institutions have higher rates for a lease buyout than for a used car. When your lease is nearing the end of its term, the leasing company sends out a letter informing you of your options. Your options are to return the car to the dealership or leasing company, or to purchase the car. You may want to finance the purchase through the bank that handled your lease -- since you are already doing business with the company, they may offer you a good rate or a streamlined approval process. If not, you have other options.

Shop Around and Compare Rates

When you decide to purchase the car, research your finance options online or through your local bank, credit union or savings and loan. Some websites let you compare interest rates and loan information to help you make a more informed decision. Once you know the going interest rate for a used car, leverage that information to negotiate a better interest with lenders. Most purchase loans for used cars are fixed at 36-, 48- or 60-month terms.

Fees and Conditions

Many lenders have set conditions for their used car purchase rates. Some require a certain credit score and have application fees, while others have fixed document preparation fees, according to Bankrate.com.

Considerations

Ask your current leasing company whether the final lease buyout price is negotiable. They may have too much inventory and a glut of leases for sale. According to Philip Reed, Senior Consumer Advice Editor at Edmunds.com, most people don't realize the buyout price may be negotiable, depending upon market conditions. If you leased your car from a large automobile manufacturer, they may have a sales person dedicated to lease returns. Speak to them and ask whether the lease buyout is negotiable.

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Car Donation Programs in Minnesota

Minnesota has miles of rural and suburban land with little public transportation. For many Minnesotans, a car is the only viable mode of transportation to and from work, school and shopping locations. Certain Minnesota-based nonprofit charities accept donations of inoperative and running vehicles. Many of these charities repair the donated cars and lease or sell them at affordable rates to needy members of the communities they serve.

Newgate Education Center

Newgate Education Center in downtown Minneapolis is a nonprofit organization that helps train low-income individuals in the Twin Cities metropolitan area for technical careers. The center has a car donation program where area residents can donate non-working vehicles. Unlike many nonprofits, which sell or lease donated cars for transportation, Newgate uses donated cars as teaching tools for its automotive repair job training program.

Minnesota Valley Action Council

The Minnesota Valley Action Council in Mankato helps families and individuals in Blue Earth and Nicollet counties with a variety of necessities, including transportation, food, heating and energy costs. The MVAC runs "Wheel Get There," a vehicle donation program offering low-cost cars and trucks to impoverished Mankato area residents. MVAC leases these vehicles out at low rates, and the organization occasionally offers low-cost vehicles for sale. The program accepts working and repairable vehicles for donation.

Courage Center

The Courage Center in Minneapolis is a nonprofit dedicated to helping adults with disabilities and medical conditions in the Twin Cities area. The nonprofit runs the Cars for Courage vehicle donation campaign. The donation program leases the cars out to the individuals it serves. Area residents can donate working or inoperable cars or boats to the program. The Courage Center will tow a vehicle to its facilities at no cost.

Donate Cars USA

Donate Car USA, also known as the The Vehicle Donation Processing Center, Inc., is a private organization that accepts donated cars and disburses them to charitable organizations. The organization will contact charitable agencies to transport cars from individuals homes and tow or transport them to charitable facilities. As of December 2010, the organization did not charge for its services. Minnesota vehicle owners can contact Donate Cars USA at 800-269-6814 for specific car donation instructions.

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Oregon Auto Repossession Rules

Many car owners buy their automobiles with a car loan provided by a creditor. When this car loan goes unpaid, the specter of a car repossession looms over the borrower. Oregon allows for car repossessions, although the state has specific laws that govern these actions. Talk to an Oregon attorney if you need legal advice about a car repossession.

Security Agreements

When you buy a car using a loan, you and your creditor enter into a security agreement. A security agreement is a type of loan in which the creditor requires you to give up collateral. In this case, the collateral is your car. If you do not repay the loan, the creditor has the right to take back the collateral. These security interests give your creditor an interest in your car, meaning that if and when they repossess it, they do not have to go to court to ask permission.

Titles

When a creditor takes a security interest in your car, your car title must indicate this. Your car title is the official document that proves who a car's owner is. In Oregon, the Oregon Department of Motor Vehicles must keep a record of this title and is the only one authorized to issue new titles. For example, if you take out a car loan through your bank, the bank's name is listed on the car title that you have and the one kept at the Department of Motor Vehicles. If no lien is indicated, the creditor has not perfected the security interest and does not have the right to repossess the car.

Default Terms

A creditor has the right to repossess your car when you go into default on your loan. The conditions under which this happens vary based on the terms of the loan, however. For example, your creditor can require you to make monthly payments every month until you pay back the loan. If you miss a payment, or are late, the creditor may repossess your car if the terms of the agreement allow for it. Creditors typically, however, do not repossess the car until you have fallen delinquent on several payments.

Repossession

The main limitation on the creditor's right to physically take back your car is that in doing so the creditor must not violate any laws. For example, a creditor cannot assault you or physically force you out of your car to try to repossess it. Creditors can, however, hire collections agencies to find your car, get into it in the middle of the night and drive it away without telling you. Because the car is the creditor's property, no laws are violated even if they break into the car or damage it in the process.

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Does Financing a Used Car Build Credit?

If you have bad credit, or very little credit history, taking out a car loan can be beneficial and help you improve your credit score. However, you have to handle the loan responsibly and ensure your timely payments are being reported to the credit bureaus.

Used or New

In terms of building your credit history, financing a used car is no different than financing a new one. In fact, if the amount is lower and the loan is more affordable, financing a used car is probably a better move. You need to ensure you can comfortably afford the monthly payment, and you need to pay it on time every month. Try setting up a monthly withdrawal from your bank account or other method of paying automatically so that you never forget.

Reporting

The crucial factor in building your credit from an auto loan is to make sure the lender is reporting your history with the account to the credit bureaus. If you have a loan from a large, nationally or regionally recognized financial institution, this is a given. If you are getting financing from the used-car dealer himself, you need to check.

Dealer Financing

Some used car dealers offer a buy-here-pay-here arrangement. This is financed by the dealer and is usually for people who have bad credit. It can involve really high interest rates. Most of these loans are advertised as being a good way to build your credit, but some unscrupulous dealers do not have a connection with the credit bureaus. Your conscientious payments will be doing your credit score no good at all.

Co-signer

If you don't trust dealer financing and would rather go with a more established financial institution, look for a co-signer. If you have a relative or friend with much better credit and the person is willing to co-sign for you, you will be able to get a loan at lower rates from a reputable auto loan company or bank. This institution will report your payments and as long as you keep current, your credit score will improve.

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How to Get a Clean Title in NY After Paying Off a Lien

When you finance a car purchase in New York state, the lending institution is listed on the car title. The lender is the lien holder, with the auto loan being the lien. When you pay off your auto loan, the New York State Department of Motor Vehicles does not automatically send you a new title with the lien removed. Instead, it is your responsibility to get a new title after paying off a lien in New York.

Instructions

1

Request proof of paying off the lien, called a lien release, from the financial institution if you do not automatically receive the release after satisfying the lien. Once you have paid off the auto loan, call the customer service number for the lien holder and request the documentation. You are required to have this to get the clean title.

2

Call the New York State Department of Motor Vehicles to confirm the current fee for removing a lien and getting a clear title. At the time of publication, this fee is $20. Call center hours for the DMV are weekdays from 8 a.m. until 4 p.m. The phone number is 212-645-5550.

3

Send the lien release, a check or money order for the fee and your original title certificate to the New York State Commissioner of Motor Vehicles at the attention of the Title Bureau. The mailing address is 6 Empire State Plaza, Albany, NY 12228-0322. You cannot send photocopies. Once you send everything in, you will get the clear title sent to your mailing address listed on the original title. If you have a new address, you must enclose proof of the new address, such as a copy of your current registration or a copy of a utility bill with the new address on it.

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