People Who Want to Get Out of Their Car Lease

Despite having signed a contract, you can still get out of your car lease. You have several options available to you, but they may be limited if your leasing bank doesn't allow lease transfers or if you're currently late on payments. Consider all of your lease-end options to best determine which can save you the most money.

Lease Assumption

Lease assumption, or transferring your lease to another person, may prove the cheapest way to end your lease. As long as your lease payments are up-to-date and your bank allows it, you can transfer the remainder of your lease to someone else. The new lessee must finish your monthly term and use the mileage you have left on your contract. A fee may apply for this option, but it is likely several hundred dollars, which is cheaper than paying to terminate your lease instead. You can also transfer any fees to the person assuming your lease.

Bank Offers

If you're nearing the end of your lease, your bank may offer you the opportunity to end the lease early if you finance or lease through the same bank again. Some banks offer this opportunity up to one year before a lease contract ends. Call a same-make dealer or your bank to find out if any offers exist. If so, you may end your lease early without having to pay early termination charges or the remainder of the payments due on your contract.

Trade or Sell the Vehicle

You can choose to purchase your vehicle from your leasing bank. Depending on your vehicle's equity amount, you may have to provide little or no money toward the vehicle's buyout price to satisfy the bank. If you can sell your car or trade it for more than the bank's buyout amount, you can keep any profit you make. If you owe more than the car's buyout amount and plan to trade to a dealer toward another purchase, you can offer a down payment or roll the extra money over into a new loan or lease. If you sell the car privately, you must provide any additional money due to your bank to transfer ownership.

Pay for Termination

Depending on how far along you are in your lease contract, termination may prove an expensive option. Bank termination fees vary; you must call your bank to obtain exact costs. Aside from a termination fee, you must pay any monthly payments still due on your contract. Paying to terminate your contract is not likely to prove the best option during the first two years of your lease. Determine the cost of termination and compare them to other options before choosing this route.

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Pros and Cons of Purchasing a Car

Buying a car provides several advantages. The car owner does not have to depend on a bus or train schedule to get to work and can leave at any time. The car owner also can use the car for recreation, visiting campsites and distant cities where mass transit is not available. The main disadvantages of car ownership are its extra costs, including maintenance and insurance.

Short-Term Use

A con of purchasing a car is that an individual does not have to purchase a car to use one. Rental agencies allow a customer to use a car for a short period for a daily fee. Individuals also can lease cars. A lease allows someone to drive a car for a longer period, which may be several years, without paying the full costs of ownership for the car.

Purchase Price

Another con is that purchasing a car can be expensive. Buying a new car for cash can require the buyer to pay $20,000, or more, up front. A used car will be cheaper, but the used car buyer may need to pay for additional repairs to fix the wear and tear on the vehicle. If the buyer needs to use financing to purchase the car because he does not have the full cash purchase price available, he also will pay additional interest payments to purchase the car.

Lease Responsibilities

A benefit of purchasing a car is that the owner receives full rights to use the car after the purchase. A lease agreement often includes limiting clauses, such as that the driver cannot drive the car more than 10,000 miles each year or that the driver must take the car to the dealership for scheduled maintenance according to manufacturer recommendations. The lessor may charge the driver additional fees for not following these contract terms.

Long-Term Benefit

Another benefit of purchasing a car is that once the owner pays off the car loan, the owner can keep using the car, as long as the car still operates. If a person takes a train or bus, he will always have to purchase a ticket to travel. When a driver leases a car, the driver has to return the car at the end of the lease, unless the driver has the cash available to purchase the car.

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How to Clear a Reposession From Credit

If you purchase a car with a loan from a financial institution and then do not pay on the loan, or default on the loan, then they have the right to claim the vehicle. When they repossess the car, it could remain on your credit report as such. The lender can sell your vehicle to recoup some of their costs, but may still charge you with any leftover balance on the loan. A repossession can be extremely harmful to your credit score.

Instructions

1

Contact the lender to see if and what your balance is. If they were able to auction your car off, they will credit that to your account, but chances are that you will still owe what is left. If you can make payment arrangements, or even pay off your balance, then the lender may take the account off of your credit report. If they agree, draft a letter or have the lender draft a letter saying that they will remove the item once paid in full.

2

Purchase or otherwise obtain a copy of all of your credit reports. There are three credit bureaus that you will need to get your report from. Check to see if the repossession is on these files. If you have finished making payments and the repossession remains, send the credit bureau a copy of the letter from the lender and your proof of payments to have it removed. If you have not made payments, you may still be able to have it removed.

3

Dispute the repossession on your credit file. If you have access to the Internet, you can do this step online. If not, call the credit bureau and request the paper dispute to be mailed to you. The lender has 30 days to verify that the debt is correct. If they do not verify it, then even if you legitimately owe the debt, the credit bureau is obligated to remove it.

4

Check your credit report after 30 days. If it has not been removed, you can dispute it. If the lender does not verify the disputed item in time, it will have to be removed from your credit file.

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The Advantages of Turning a Leased Vehicle in Early

In 2009, about six million Americans owned an underwater car -- a vehicle that is worth less than the money owed on it -- according to Bankrate.com. However, it is possible to turn in a lease vehicle early and escape a car with negative equity, or one you just don't want. At the very least, talk to your auto dealer about your options, because walking away from the lease usually is the worst thing you can do.

Benefits

Turning in a leased vehicle early lets you get out from an obligation you might not be able to afford. A new car might be especially helpful if you currently lease a car with problems such as low gas mileage and outdated safety features. Depending on how you turn in the leased vehicle, you might not have to pay any more charges. If you cannot afford the car at all, turning it in early means the dealer does not need to repossess the vehicle and bill you for it.

Disadvantages

If you just give the dealer the keys to the car and stop making payments, he will report it as a delinquent account on your credit report, which can lower your credit score by dozens of points. Turning in the leased car does not necessarily relieve you from the legal liability to pay the remaining balance due. You could even pay an early termination fee.

Misconception

You could owe far more on your lease than what you anticipated. Each dealer has its own policy on how it calculates early termination costs. Returning a car early might mean you have to pay a penalty equal to the remaining monthly payments on the car -- plus extra money for the dealer to take it back and charges for excessive wear and tear.

Tip

You can get out of a vehicle lease early without making further payments on the car. One option is to turn in the vehicle and lease a new car. The dealer usually adds the remaining payments to your new lease, but he does not report the account as delinquent to the credit reporting agencies. Most leases come with the option to buy the car, which might be less than the resale value of the car -- meaning you make money in this situation. Another option is to transfer your lease to someone else -- called a lease assumption.

Dealers may work with you when you have certain hardships, such as divorce or relocating to a new state, and allow you to make partial payments.

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How to Handle a Car Payment When a Loved One Dies

When a loved one dies, the responsibility of handling his debts and assets often falls to his grieving family. If your loved one owned a car that was not yet paid off, your family can choose to either keep the car and transfer the title or sell the car and pay off the outstanding loan. You may then allocate any leftover funds accordingly. In either case, you will have to continue making payments on the loan to prevent the lender from repossessing the vehicle.

Instructions

1

Compare the value of the car to how much is currently owed on the vehicle. If your loved one owed more on the car than it is now worth, it is not in your best financial interest to keep the property. Call the lender and allow it to repossess the vehicle. You will not be liable for the amount owed on the car.

2

Call the lender if you decide to keep or sell the vehicle. Ask to speak to a supervisor and explain the situation. Request that the lender defer payments until you and your family have a chance to straighten out ownership of the car through probate. Most lenders will oblige and defer one or more car payments until the transfer of ownership process is complete.

3

Ask for the supervisors name and direct mailing address within the company. Mail a copy of your loved ones death certificate and a letter detailing your original conversation with the supervisor to the address you were provided with. Request that written confirmation of the agreement be mailed to your home address.

4

Find out who intends to keep the car in your family. The person who intends to have the vehicle transferred into her name will be responsible for making the car payments until ownership of the car can be legally transferred through probate court.

5

Come together as a family to make the payments if you intend to sell the vehicle and the deferment period runs out prior to the vehicle being purchased. One option is to have each family member pay a small percentage of the car payment each month until the vehicle is sold.

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Who Pays the Deductible in a Car Accident?

As a car insurance policy holder, when a car accident occurs it is a relief to be able to say "I'm covered." But bear in mind that most car insurance policies require the policy holder to take some type of responsibility for an incident in the form of a deductible.

Claims Process

When you experience an incident while driving and wish to use your insurance coverage you must call the insurer to open a new claim. You must provide your policy information, date of the incident, police report and a full description of the occurrence. The insurer sends an adjuster to evaluate the damage and estimate the cost to return the car to an acceptable condition. When approved the insurer sends you that amount less the deductible.

What Is a Deductible?

The deductible is a sum of money that you have to pay to contribute to fixing your car in case of an incident. So for instance, if the insurance adjuster estimates $3,000 worth of damages and you have a $250 deductible, the insurer will pay the difference of $2,750. Generally the higher the deductible associated with the policy for each incident involving the car, the lower the policy premium.

Who Pays?

The person who ultimately pays the deductible in case of an accident depends on who is at fault in the accident. If the other driver is at fault he must process the claim through his insurer and pay the deductible. If you are at fault or it is determined that the incident was a no-fault accident you would have to pay the deductible related to your own claim.

Considerations

Some car insurers offer low or no deductible policies. Even though it may seem like an inconvenience to have to pay a deductible on a claim, you have to consider the extra premium costs you would pay if you choose a no or low deductible policy. For instance, say the cost of a very low $100 deductible policy is $1,400 a year while a $500 deductible is $1,000 per year. If you continue to pay the higher premium of $1,500 for years and then have an incident requiring a claim, you would end up spending a lot more on the policy premium than the extra $400 for the claim deductible. Also, you can look into "vanishing deductible" policies that reduce your premium each accident-free year.

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What Is the Payoff for a Leased Car?

The purchase price for a leased vehicle changes throughout the contract term. If you purchase the car before the end of the lease term, you'll pay more than the purchase amount, also known as the residual value, which is stated in your contract. Expect to also pay fees comparable to those of a first-time purchase, such as tax and motor vehicle fees.

Residual Value

If you wait until the end of your contract, you'll pay the lease's residual value to purchase the car from the leasing bank. The residual value was determined at the time you initiated your lease. The leasing bank guessed the future wholesale value of the vehicle, which may be incorrect. Try to negotiate a lower purchase price that's inline with current resale values. Check the current value of your leased vehicle at Edmunds.com or the Kelley Blue website to determine if the bank guessed the car's future value incorrectly, and if so, negotiate accordingly.

Early Purchase

If you want to purchase your leased vehicle before the end of your contract, expect to pay your remaining payments in addition to the buyout amount stated in your contract. Call your bank at anytime to determine the car's present purchase price. If you plan to purchase the vehicle from a dealer, call your leasing bank to obtain the buyout price ahead of time. Some leasing banks allow dealers to increase the buyout amount to make a profit.

Repossession

If your leased vehicle was repossessed, your loan payoff amount likely includes late fees, penalty charges and repossession fees if the vehicle was seized rather than returned. When you lease a vehicle, the leasing bank pays the dealership for the car's total purchase price. If you default on the loan, expect to pay for the entire cost of the car, not just the lease amount. If you don't pay to retrieve your vehicle after the repossession, your bank will sell the car. If the sales price doesn't satisfy the total cost of the car, you must pay the remaining balance.

Additional Fees

Whether you purchase your vehicle early or wait until the end of your contract, you'll pay additional fees, as if you were purchasing a used car for the first time. You don't own your car during the lease. When you purchase the car, you'll pay your state's applicable taxes and motor vehicle fees. Ask your leasing bank or a dealership which fees you'll pay in addition to the buyout amount so you can budget accordingly. Depending on the tax rate of your town and the purchase price of your vehicle, you may pay thousands more than you expected.

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Can You Renegotiate a Car Lease?

Your leasing bank ultimately determines if you can renegotiate your lease; some banks may choose not to renegotiate lease terms if you've already signed your contract. If you haven't signed the paperwork for your lease yet, you can change the terms of the lease to better suit your needs. Consider which options your leasing bank may let you change and which other avenues you can pursue to end your lease without penalty fees.

Before Signing Paperwork

If you haven't signed your lease paperwork yet, you can change the leasing contract terms to better suit your financial situation and driving habits. Most leases are advertised with a low mileage allowance, some as low as 10,000 miles per year. Potential lessees can choose up to 18,000 miles per year or more, depending on the bank. Terms can be adjusted from 24 up to 60 months. You don't have to pay the advertised down payment amount; only your first payment is required to initiate a lease. Offering less of a down payment, increasing mileage or changing term is likely to increase monthly payments.

Dealer Price Negotiation

You can also negotiate the price of the vehicle you lease; doing so is financially beneficial. Most leases are assumed at sticker price, or the vehicle manufacturer's suggested retail price. Depending on the price of the vehicle you choose, you may be able to negotiate thousands of dollars off of the price of the car. Every $1,000 you negotiate off the price of the vehicle is equivalent to about a $30 per month difference in payment. Negotiating the cost of the car can warrant you a lower monthly payment and cheaper buyout price at the end of the lease.

Contract Negotiations With Banks

If you've already signed your paperwork and find you're going over your mileage allowance, call your leasing bank to find if it will allow you to adjust your mileage. Some banks may allow mileage adjustment, but expect to pay the difference upfront, not at the end of the contract. Once the lease is over, you can offer to buy the car for a price less than the amount stated in your contract. Not all banks will agree to this, but if the vehicle's lease-end value, which was predetermined at lease inception, is incorrect; the bank may not receive its asking price when it tries to resell the car.

Lease-End Options

Leasing banks will not negotiate the over-mileage or wear-and-tear penalty fees you agreed to in your contract. If you went over mileage or find you have to pay fees, you can get out of the lease before it's over or avoid returning it by selling it instead. Even if you go over your mileage, you can sell your car for the price listed in the lease contract. If you want to get out of your lease before the contract is over, consider letting someone else assume the lease if the bank allows it. You can call your bank at anytime to obtain the car's purchase price. You can then sell the car, trade it or even purchase it yourself.

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Can You Move a Financed Car Across State Lines?

You can move your car across state lines as long as your loan contract doesn't state otherwise. However, you might run into problems when titling and registering the vehicle in your new state because of different insurance and title requirements. Consider the various issues you might face when moving a financed vehicle out of state so you can plan ahead.

Lender and State Rules

Before you move out of state, check the requirements of your old state motor vehicle department, new state motor vehicle department and your lender. As long as you maintain your full-coverage insurance requirements throughout the loan term and update your address information, you can probably move your vehicle. Many states, however, require new residents to apply for a driver's license within 30 to 45 days of residency. Because of the new driver's license, you'll have to title and register your vehicle within the state that you reside, which isn't an easy switch in some states.

Transferring the Vehicle Title and Registration

You can't keep your vehicle titled in your previous state once you claim residency in a new state. Depending on the state you move to, you might have to refinance the vehicle if your current lender (lien holder) isn't licensed to operate in your state. Upon moving, many states require previous drivers to return their license plates. If you didn't plan ahead, you might find yourself unable to transfer your title and register your vehicle before finding a new lien holder licensed to do business in your state.

Insuring the Vehicle

You won't default on your loan as long as you maintain full-coverage insurance with proper limits and deductibles. However, once you change your driver's license over to your new state, you must also switch your insurance policy to your new address. Because you'll have to change your current insurance policy's address or switch your policy to a provider licensed to operate in your new state, your insurance provider will electronically update your policy change with your old state's motor vehicle department. To avoid penalties, you must cancel your registration immediately or return your plates, depending on the old state's requirements.

Exceptions and Possible Penalties

You can move to a different state and keep your vehicle registered, titled and insured in your old state if your state allows temporary non-residency. Qualifying non-residency drivers include college students or military personnel, so check with your state motor vehicle department if you think you might qualify. Many states impose fines for new residents who fail to apply for a driver's license or re-title a vehicle within a certain number of days of moving. Depending on your old state's rules, you might find your driver's license suspended if you don't cancel your registration after moving. You can't apply for a driver's license in a different state when another state has issued a suspension.

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Repossession Laws for Texas Car Loans

The worst thing a person in danger of having their car repossessed can do is fail to communicate with the lienholder, according to Edna Hild, veteran used-car dealer of 38 years and owner of Texas Auto Mart in San Antonio, Texas. Most dealers and bankers are willing to work with you, Hild adds, because it is more expensive for them to repossess your car and dispose of it again, especially if you haven't maintained it.

Lienholder's Right to Reposses and Dispose

Texas automobile lienholders have the right to repossess a vehicle any time the borrower becomes delinquent as long as they "proceed without breach of the peace," according to Texas Business and Commerce Code, Uniform Commericial Code, Chapter 9, Section 609. Hild explains "breach of peace" as being without violence. For example, the creditor can't break into your garage and take the car or harass you at work. However, creditors are not required to notify you before they repossess your car. The lender also has the right, after taking possession, to sell the vehicle as long as he gives you notice 10 days before sale, and as long as the sale is "performed in a commercially reasonable manner," according to the Uniform Commercial Code, Chapter 2, Sales.

Insurance Rules

Texas Finance Code, Chapter 348, Motor Vehicle Installment Sales states that a creditor can require an automobile buyer to "insure the motor vehicle purchased under a retail installment transaction and accessories and related goods subject to the holder's security interest." If the buyer fails to provide proof of insurance, the lienholder can purchase insurance that is more than the required coverage and add the premium to the installment contract. The creditor may also substitute limited coverage. However, Hild advises against limited coverage because it only covers the purchaser. If you loan someone else your car and he has an accident, the insurance company will refuse to pay, she adds. Don't let insurance lapse or the lender may have the right to repossess.

Repo and Resale Fees

Under Texas law, a lender who repossesses your car has the right to charge you a repo fee, ranging from $200 to $500, according to Hild. You can opt instead to sell your car to a third party provided you don't owe more than it's worth, a term known as "upside-down on your payments, she adds. If the car is resold, you may get some money back after the dealer recoups any costs associated with the sale or the one-time delinquent fee. If the dealer sells the car for less than you owe, you owe them a deficiency fee for the difference.

Bankruptcy Protection

Filing bankruptcy may initially protect you from repossession, according to the Texas Young Lawyers Association. Under Texas Bankruptcy Law, an individual has the right to keep their homestead and $30,000 worth of certain personal items, including furniture, food and an automobile, $60,000 for families. However, bankruptcy does not cancel your obligation to continue making your car payments. Failure to make payments after the bankruptcy has been executed can result in repossession.

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Is it Easy to Lease a Car If You Already Are Leasing?

If you are already leasing a car, you likely had good to excellent credit at the time you initiated your contract, which is a requirement of leasing. As long as your credit has remained in good standing, you should be able to lease another car. If you want to pursue a second lease, your approval also depends on your debt-to-income ratio.

Credit Considerations

If your credit has suffered since you initially leased your current vehicle, you may not obtain a lease approval. Banks require good to excellent credit for leases. All of the accounts on your credit history should be current, meaning that you aren't late on payments for any lines of credit. If you have a consistent and on-time payment history with your leasing bank and have maintained your good credit, you shouldn't have a problem obtaining an approval for another lease. Otherwise, you may have to finance your next vehicle. Auto loan providers are more forgiving when credit issues exist, as loan terms are adjustable based on credit.

Apply for a Lease

The best way to determine whether you'll obtain another lease approval is to apply to a leasing bank. If you do not want to shop until you have a definite approval, many manufacturers offer a convenient online application process. Go to the manufacturer's website to virtually build a vehicle and apply for a lease approval. If the website doesn't offer an application option, contact a local dealership. Give a dealership representative your credit information over the phone and discuss the vehicle you want to lease. Your application may be approved immediately, or you'll obtain a letter stating why your application was declined.

Debt-to-Income Ratio

If you plan to pursue a second lease and have excellent credit, the bank uses your debt-to-income ratio to determine your approval. Even with excellent credit, you must prove you make enough money for two lease payments and other debts listed on your credit report. If you have maxed out your lines of credit or lack the necessary income to support two lease payments, the leasing bank may decline your loan. If so, use a co-signer on your application. A co-signer secures your lease with his income and good credit.

Budget Considerations

If you do obtain a second lease approval, budget the costs of a second car appropriately. Expect to carry another full-coverage insurance policy through the term of your lease contract. Check the costs of the extra coverage before you decide to lease another car. Lease contracts also require that you consistently maintain your vehicle, so consider the costs of consistently maintaining a second car. Contact your dealer's service department to discuss the vehicle's maintenance schedule and cost. Some vehicles are more expensive to maintain than others.

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How Much Will the Bank Negotiate With You to Pay off a Car?

Paying off a regular auto loan early reduces interest charges from your loan account, possibly saving you thousands of dollars. If you're purchasing a leased car from the bank, it might accept a reasonable offer instead of your lease buyout amount. Balances due for repossessed vehicle loans are often negotiable, although settling the balance causes tax issues.

Auto Loan Negotiations

A bank isn't likely to negotiate the actual payoff amount of your car loan, although your future interest charges are subtracted from your payoff amount. Otherwise, the bank loses money if it negotiates the loan's principal balance. When you purchased the car, the bank paid out the original loan amount, and since it can legally collect the balance due, most banks won't negotiate. If your bank charges early payoff penalty fees and you don't plan to refinance, offer to pay the balance in full if it reduces the charges.

Another Negotiation Option

If you plan to finance another loan through the same bank, try to negotiate better terms for your next loan. Talk to a lending representative to find out current rates for a new loan. Submit an application to find out your approved interest rate. Let the lender know that you plan to pay off your old loan and will only sign another loan if the lender reduces your approved rate. While this won't save any money on your current loan, you can at least save a few hundred dollars on your new loan.

Repossessions

Banks often negotiate the balance due on an auto loan after a repossession. When a bank repossesses a vehicle, it sells the car shortly after to recoup some of its loss. If the car sold for less than you owed toward your loan, you must pay the leftover balance. If you pay a negotiated amount instead of the full balance, the balance is considered a settlement. The IRS considers the unpaid portion of a repossession settlement as income and charges taxes on the portion of the loan balance you didn't pay. For example, if you owe $6,000 to satisfy the repossession's loan balance but settle for $2,000, you'll pay taxes on $4,000.

Lease Considerations

Your leasing bank may negotiate with you to lower your purchase price. Leased vehicles are often sold at auctions, which yield wholesale values. Wholesale values are the lowest of all vehicle values. Check the current value of your car using appraisal websites, such as NADA Guides (nadaguides.com) or Edmunds.com. Compare your vehicle's trade-in value, which is the same as wholesale value, to its private sale value. If the car's wholesale value is less than its private sale value, use the wholesale amount as your starting point for negotiations.

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Can I Qualify to Buy a Car After Repossession?

Don't think that it's impossible to buy a car after a repossession. True, the majority of car lenders will reject your application. But by looking in the right place, you can secure a car loan after a repossession and drive away with a new or used automobile.

Rebuild Credit After Repossession

If you're not in a hurry to buy a new or used car after a repossession, delay the buying process and take this opportunity to improve your low credit score. Credit issues, such as foreclosures, bankruptcies and repossessions, severely damage credit profiles and lower scores. A damaged profile triggers higher finance fees and credit rejections. Instead of jumping into a new vehicle loan, rebuild your credit by paying your remaining credit accounts on time. If your old auto lender auctioned off the repossessed car but there's a balance on the loan, make plans to pay off this balance.

Use a Co-signer

If you know someone with a good FICO credit rating, ask him if he would be willing to co-sign on your new or used auto loan. This is a way to get you into another vehicle after a repossession as your co-signer is using his good credit to assume joint ownership of your wheels. Be aware that the lender will seek payment from your co-signer if you cannot come up with the money.

Acquire an Auto Loan

Sub-prime auto lenders work with people who have repossessions on their record. Rather than find a car and then look for an auto loan, secure your financing before visiting dealerships. Online auto loan brokers provide the opportunity to shop for multiple loans at once and compare lenders' offers. You can view interest rates, monthly payments and other terms. Choose the best loan for you and then search for a car.

In-house Financing

Dealerships that provide in-house financing are another option because they also work with sub-prime borrowers and people with no prior credit history. These dealerships are often smaller and privately owned, and they advertise "buy here, pay here." Depending on the dealer, you can get a used auto loan with no money down or credit check. Unfortunately, sub-prime auto loans have higher finance fees and higher monthly payments. Check with the lender first to see if it reports to all three major credit bureaus. Regular updates to your credit file help repair your credit after a repossession.

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How Does Car Credit Work?

Cars can cost thousands of dollars, especially a brand-new vehicle, so buyers typically finance them to spread out repayment over several years. A car loan is a type of credit which you must apply and qualify. The automobile acts as security for the debt, so there are some special provisions for defaults.

Loan Type

Car credit falls into the installment loan category, according to Teri Cettina of the Bankrate financial site, unlike credit cards that have variable repayment schedules. You borrow a certain amount of money that covers the car purchase. The loan runs for a set number of years, typically between one to five years or more, with the same payment amount every month. You must pay off the loan in a lump sum if you sell the vehicle before the end of the loan term.

Loan Sources

Many sources offer car credit, including dealerships, banks, credit unions, finance companies and online lenders. Dealers do not actually provide the money; they act as intermediaries, finding loans for their customers. A dealership-arranged loan has some profit built in for the dealer, according to Capt. Robert Luyties of the U. S. Army's Fort Leonard Wood Legal Assistance office, so you can find better terms on your own. Financial institutions are often willing to pre-approve you so you can negotiate your car price without worrying about whether you will qualify for the loan.

Considerations

Vehicles lose their value quickly, so you may become "upside down" on your loan, meaning that you owe more than your car is actually worth. This dilemma is particularly common for lengthy loans. Avoid it by financing your car for the shortest possible term and putting down a high deposit. Never get a loan for more than 42 months, consumer advocate Clark Howard's website recommends. Otherwise you will have to come up with extra cash if you sell or trade-in your car, or roll the upside-down amount into your new auto loan, which compounds the problem.

Co-signed Loan

Automobile buyers with little or no established credit files, or those with bad credit, can use a co-signer to qualify for car credit. This person, usually a family member, agrees to be fully responsible for the debt if you default on it. Your payment history affects the co-signer's credit records, MSN Money writer Mary Rowland warns, so you can destroy their good standing if you do not handle your car loan responsibly.

Warning

Car credit contracts typically have a provision allowing your lender to repossess the vehicle as soon as you default, the Federal Trade Commission advises. Some lenders will take the car if you miss a single payment. The repossession team usually can seize your vehicle from private property, depending on your states' laws. The bank then sells the car and holds you responsible for any difference between the sale amount and owed balance. For example, if you owed $5,000 and the car sold for $3,500, you are liable for the remaining $1,500.

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What Is the Longest Term I Can Get on a Car Loan?

Car loan term options differ by lender. The amount of money you want to borrow or your credit standing may restrict your term options. Some lenders may offer up to 84 months or longer for an auto loan, although restrictions may apply, based on the vehicle you choose.

Resources

To determine the longest term allowed by the loan provider your want to use, call potential lenders to inquire. Also, find out if any restrictions apply to available term options. Some lenders may offer loans that exceed 72 months, but may require that your loan amount meet a certain threshold, or that you meet certain credit requirements. The age of your vehicle and its mileage can also affect your approval term.

Benefits

You may benefit from limiting your loan term to create vehicle equity and minimize your debt. A longer term provides a lower monthly payment, however, which you can use to your advantage while your finances are limited, or your loan payoff decreases. A 7-year car payment or longer can cost you thousands in interest, but you can provide a down payment to decrease the interest charges. You can also refinance the vehicle later to decrease your term and lower your rate; you are not stuck in a long-term finance.

Depreciation Considerations

Consider your vehicle use and its depreciation. If you plan to keep your vehicle until it no longer runs, you might not be concerned with future market values. If you normally trade out of your vehicle every few years, however, you may have to provide a down payment or choose a shorter-term option. Otherwise, your extended term creates a negative equity position, meaning you'll owe more than your car is worth. Provide a down payment to avoid this situation. Otherwise, you're likely to need a down payment to trade out of the car, in the future.

Interest Rates

Most lenders offer consistent interest rates for loan terms up to 60 months. Longer terms result in a higher interest rate, which affects your overall payback amount. Use an auto loan calculator to determine the total amount you'll pay for interest charges. You may also find your loan term length limited if you pursue a manufacturer offer. Manufacturers offer low-rate options, but for shorter terms. For example, you may obtain a zero-percent loan, but only for a term of 60 months.

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How Does a Car Title Loan Work?

Basics

A car title loan is a way for a consumer to borrow money against the title of his or her vehicle. When a car or truck is owned free and clear of any liens, the owner holds a title. Without the title, the person cannot sell the vehicle. There are auto title lenders, similar to and sometimes in the same building as payday lenders, that specialize in loaning money to consumers using their auto titles as collateral. When someone borrows money with a car title loan, they give up the title to their car, and thus full ownership, in exchange for the loan. However, the owner can still drive the vehicle as long as he keeps up with the loan payments.

Risks

Car title loans are considered risky and are illegal in many states. If someone borrows $1,000 on a $20,000 car, the lender still gets the car title and can come legally take the car if it is not paid. These kinds of transactions are considered forms of predatory lending, and senior citizens and single parents have become especially susceptible. Some lenders also charge in excess of 30 percent interest, with some even charging as high as 300 percent interest for short-term cash loans.

Alternatives

An alternative to a car title loan may be a regular payday loan, which still is controversial but does not put someone's car at risk. Some banks will also issue lines of credit or secured loans based on the vehicle as an asset, or place a lien against the vehicle title for the amount of the transaction only. Getting a car title loan is considered an emergency last resort and should be used carefully because of the risk of losing the vehicle entirely even for an unpaid small cash transaction.

Documents

If you do decide to get a car title loan, some documents are usually required. Having proof of income, proof of insurance, a driver's license, a phone or utility bill from your place of residence and, of course, the car title are typically needed for lenders to transact upon such loans.

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How to Sell a Car You Still Owe Payments On

If you are currently making payments on a car that you do not want to keep or simply cannot afford to keep, you may not know what your options are. Even though you are still making payments on the car, you can sell the car to get rid of it. Since you are still making payments on the car, that means that you still have a car loan outstanding on the vehicle. When you have a loan on the car, this means that you do not have the car title, which is part of what makes it challenging to sell a car that you still owe on.

Instructions

1

Use your car loan payment paperwork to get the contact number for your loan customer service line. Call the line and ask the representative if the option exists to transfer the loan into someone else's name. Not all lenders allow this and those that do require the new person to go through the same credit check process as you did.

2

Look on your statement or ask the loan customer service representative for the loan pay-off amount. Once you know how much you still owe on the vehicle, you will know how much you need to sell it for.

3

Go visit your car loan lender, if you have a local lender such as your bank, with the potential car buyer. Request to have the car title transferred to the buyer's name in the lender's office. Some lenders will allow the buyer to hand over the cash and then immediately close out your loan and let you sign the title over in person to the new buyer. If you financed through the car dealership, you cannot do this.

4

Ask the buyer if they will accept just the bill of sale as proof of ownership until you get the new title in the mail. If the buyer will do this, you can take the buyer's money and pay off the vehicle so that the title is sent to you. Once you get the title you can sign it over to the new buyer. This method does require the new buyer to trust that you will actually get the title to them, so you may not be able to convince a buyer to do this. Showing a statement with the payoff amount listed on it may help convince the buyer.

5

Trade in the vehicle at a car dealership if you have no other way to sell it. When you do this, the dealer will rollover any amount due on the vehicle in excess of its value to your new loan. This can be a costly way of selling a vehicle that you still owe money on.

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Questions to Ask When Buying a Certified Pre-Owned Car

Certified pre-owned (CPO) cars present an ideal way to purchase a newer auto in like-new condition but at a depreciated price. With the help of a checklist, manufacturer-trained mechanics inspect each pre-owned vehicle that is five years old or newer. Once the car passes all the necessary inspections and meets the manufacturer's standards, the vehicle is officially considered a certified pre-owned car. However, it is important to ask the right questions when purchasing a certified pre-owned car.

How Long Does the Warranty Extend and Does it Have a Decuctible?

The warranty details can vary from manufacturer to manufacturer. It is not uncommon to find a pre-owned vehicle with a warranty that extends three years or longer, while another dealer may have a comparable auto with a six-month warranty. It is important to get the specific details, as some warranties cover a certain number of miles rather than offering coverage over a specific period of time.

Manufacturer certified pre-owned vehicle warranties typically do not carry a deductible, but even when a deductible does apply, the amount is minimal, about $50 or less. In contrast, a service contract, or third-party warranty, often applies a deductible on a per-visit or per-repair basis.

Does the Warranty Include Other Incentives?

Manufacturers often include incentives, such as 24-hour roadside assistance, free detailing or a free oil change.

Is This a Manufacturer-CPO-Backed Vehicle?

Manufacturers are not the only ones offering extended warranties on certified vehicles. Independent dealers have joined the certified pre-owned market as well. However, purchasing a manufacturer CPO auto guarantees that manufacturer dealers nationwide will honor the warranty. Manufacturer-backed pre-owned vehicles are newer and in better condition.

Does the Car Have a Third-Party Warranty?

Not all vehicles advertised as certified are factory-certified. Some dealers require that you pay for a third-party warranty when buying one of their certified vehicles. The original manufacturer does not back the warranty on such vehicles. The warranty is included in the price of a genuine manufacturer certified pre-owned vehicle. You should not have to pay separately for the warranty.

What Is the VIN?

Investing in an independent inspection of a pre-owned vehicle is a wise decision. You will need the vehicle identification number (VIN) to ensure that the vehicle has not suffered flood damage or been in a collision accident.

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How to Sell a Private Car Loan

Loaning money to someone for a car loan will give you a profit if you have a signed contract detailing payments that add interest to the price of the car. This investment poses risks that may or may not materialize during the life of the loan. Once the contract is signed you cannot back out of the deal, so you are stuck being the lender. There are financial institutions that will buy this loan from you if the car owner has a good credit rating.

Instructions

1

Approach bank managers and loan officers. Supply a copy of your contract and the title listing your lien.

2

Negotiate a price with any interested parties. Collect three offers from financial institutions.

3

Choose the highest offer from the three choices. Review the contract supplied by the bank. Have an attorney to explain any parts of the contract you do not understand. Sign the sales contract.

4

Sign the title to release your lien. Collect your check from the buyer. Notify the car owner of the sale and direct him to the bank that now owns the loan.

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How to Sell a Car When You're Still Financing

To sell a car that you're still financing, plan ahead to pay off your auto loan provider so you can quickly transfer your vehicle's title to your buyer. Many states do not allow title transfers when a lien exists, so expect to remove the lien from the title or obtain a lien release to provide with the car's title to your buyer. Before you advertise your car for sale, learn about your lender's payoff process and the time frame it requires to process paperwork to better work with a buyer.

Instructions

1

Call your auto loan provider. Ask for your loan's payoff and per-diem amount, or the amount you pay toward interest daily. Write down both figures. Add your per-diem amount to your loan's payoff for every day it takes to pay off your loan.

2

Ask your lender how to pay off your loan balance. Find out if you can go to your lender to receive a title or lien release or how long your lender needs to process paperwork. If your lender is not local, make sure you obtain a time frame to relay to a seller, as it can take several weeks to mail paperwork back and forth.

3

Decide on a price for your vehicle. Use online appraisal guides, such as Edmunds.com or the Kelley Blue Book website, to determine a value. If your vehicle's value is less than your loan payoff amount, ensure you have the remaining funds needed to satisfy the loan, a requirement to release the vehicle's lien.

4

Advertise your car until you find a buyer. You don't have to advertise that your vehicle still has an unsatisfied loan, but let your buyer now your lender's pay off process and how long the title transfer takes if it is not instant.

5

Go with your buyer to your lender to complete the payoff and title transfer paperwork. If you need to pay extra to satisfy the loan, bring your funds with you to complete the transaction promptly. If your lender is not local, call your lender and note your account to allow your buyer to access your payoff information and also pay the lender directly.

6

Sign your vehicle's title once you receive it and provide your buyer with the car's original lien release. Make a copy for yourself if you'd like to keep documentation for your records. Remove your license plates before transferring ownership and call your insurance provider immediately to remove the car from your policy.

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Does My Lease Agreement Require Me to Get Tires at the BMW Dealership?

Vehicle leases are an alternative to obtaining dealer or bank financing and buying a vehicle on your own. The monthly payment of your lease covers all of the maintenance of your vehicle, except for items such as tires. The tires on your BMW are subject to special provisions in your lease that specify the condition and type of tire allowed for the vehicle.

Lease Contract

The lease contract for your BMW contains detailed paragraphs concerning the required condition of the car once you return it to the dealership. Everything from the precise size of body dents and scratches to the level of tint placed on vehicle windows is subject to scrutiny by the BMW dealership upon the car's return. In your lease contract, there is a paragraph that explains the vehicle's tire requirements. Review this paragraph carefully. Typically, BMW requires only that you replace your lease vehicle's tires with a set from the BMW-approved tires list. The seller of the tires is not restricted. However, if you return the car to the dealership with tires that are not approved, the dealership will replace the tires with their own inventory at charge you retail prices.

Tire Clauses

Most vehicle lease contracts specify that the tires on the vehicle and in the spare position must all be the same manufacturer and model. Mismatched tires are a violation of your lease agreement with BMW. The dealership will impose a penalty on your final lease buy-out total that is specified in your lease contract. When replacing tires, match the tires that came with the vehicle or replace all of the tires at once with the same BMW-recommended brand.

Tire Inspection

BMW specifies that tires meet a certain tread depth when you return your leased vehicle to the dealership at the end of your contract. All of your tires, including the spare, must have a tread depth of approximately 1/8th inch or more before you can return the vehicle. Bald, cupped or damaged tires break the terms of your lease agreement.

Penalties

The penalty for violating the tire clause of your BMW lease contract will result in an additional charge at the end of the lease. The charge depends on the type of violation, but is listed in the contract. For example, if one of your tires does not match the others, BMW may charge the price of a replacement tire, the labor fee to replace it and an additional charge for violating the lease.

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Can You Sell Your Car When the Bank Owns the Title?

You can sell your car even if the bank still owns the title, meaning that the bank is the lien holder. Once you satisfy your lien, the bank will give you your title, which is required to sell your car inmost states. Some states do allow you to transfer ownership while a lien is present, but most buyers know this is risky because of the chance of your non-payment.

Payoff Amount

As soon as you pay your vehicle loan in full, you will become the sole titled owner. Before trying to sell your car, call your bank to get the vehicle's payoff amount. Ask also for the vehicle per-diem amount, which is the cost of interest added to your loan daily. In the case of a higher interest rate or long-term loan, the per-diem amount can cost more than $10 per day. If you can sell your car for more than the payoff amount, you can keep the profit. If not, you must come up with the remaining amount due to put toward the payoff beyond the sale price. Also find out about your bank's procedure for releasing the title. Some may issue the title to you immediately with a lien release. Otherwise, find out how long you can expect to receive either the lien release and title, or the new title without the bank listed as the lien holder.

Advertising

You do not have to advertise that the vehicle has a lien on it or that you do not have the title. You will incur "tire kickers," or people who come by to look at your car but don't intend to buy it at the moment, so you should concentrate on finding a buyer first. Once you do have one, explain that you still owe money on the vehicle. This is not uncommon for a car sale, and your buyer may even need to pursue a loan himself. You should be clear about your lender's title or lien release procedures, so you are able to let your buyer know how long it will take to complete the transfer ownership.

Payoff Procedure

If your bank is local, you can go in with your buyer to pay the loan off in full, whether your'e using just the buyer's money or having to come up with your own. It is advisable to have your buyer go with your to the bank to complete the payment, as you'll likely find the buyer is not comfortable handing a stranger her money without being sure of what you'll do with it. If your bank is not local, place a phone call to your bank to allow the buyer to make payment on the loan. If you owe money in addition to the sale price, pay it off before the buyer pays, this way the bank can let the buyer know the loan has been satisfied with his payment.

Time Frame

The time frame for completing the transaction can be the sameday, or it can take weeks. In states that mail out titles, you can wait up to a month before you receive your lien-free copy. If your bank can provide you with the necessary lien release and title, you can expect the process to take less than a week if it has to be mailed. If your bank is local, you should be able to complete the process very quickly.

Considerations

If your buyer plans to take a loan from the same bank you owe money to, the bank can handle the pay off of your loan and the title. You can also let your buyer know where you have your loan if she has not decided where to finance. You should also be aware of the date of your next payment while trying to sell your car. If you have another payment due during the time your vehicle is for sale, you must make the payment. Be sure to call your bank again to ask for the new payoff amount, as some of your payment likely goes toward interest.

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How Can I Get a Car Loan Without a Cosigner?

You may still obtain a car loan with poor credit or lack of credit. Some lenders may be able to work with you, while others will not take the risk. Explore options that can help you obtain financing; you may have to provide a down payment, work with a dealer or wait until your credit improves.

Apply to a Different Bank

If one auto loan provider turned your loan down, try again. You can apply at banks or credit unions in your area or use an online lender. You might find success applying to a bank where you have a checking or savings account. If your account has remained in good standing and your lender can review your financial habits, you may obtain an approval. If regular auto loan providers continue to decline your loan, apply to a subprime lender, which you can find locally or online. Subprime lenders provide car loans to poor credit buyers, although rates are higher and shorter term or down payment requirements may apply.

Work With a Dealership

Large car dealerships work with a variety of lenders. If you haven't chosen your vehicle yet, consider using a large or new-car dealer for your purchase. You do not have to purchase a new car; new car dealers offer a large selection of used cars as well. Call the dealership or meet with a salesperson to discuss your finance options. Be upfront and explain you're having trouble getting a loan. Many dealers work one-on-one with bank representatives. A dealer may also have access to additional lenders.

Offer a Down Payment

Even with poor or no credit, you may still obtain a loan with a large down payment. You are more likely to obtain an approval if you can create equity in the vehicle you purchase. If you can't find a co-signer, consider offering a large down payment, which decreases your requested loan amount. Lenders determine a total loan amount based on a vehicle's market value, so if you can put down half of its value, your lender will assume less risk when extending you a loan.

Wait

If you don't have a down payment to offer, you may want to wait until your credit improves before pursuing a car purchase. If you're declined for a loan, expect to receive a letter stating why you were turned down. Keep the letters you receive; you can obtain a free copy of your credit report using the information provided in the letter. Review your credit to determine how you can improve your rating for future lending opportunities. Examples include establishing longer accounts, paying off past due debt or correcting inaccurate information that harm your credit standing.

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Can I Trade in My New Car for a Cheaper One?

New car buyers may find themselves in a situation where they can't afford to make the payments on the vehicle, or simply are not happy with their purchase. It may be possible to trade in the vehicle for a cheaper one, although this is not always easy. If the vehicle is financed, any transaction becomes more complicated, and it can be difficult to avoid losing money on the transaction due in part to a new vehicle's rapid depreciation.

Upside Down

A vehicle depreciates by as much as 20 percent as soon as it is driven off the lot. If you financed the vehicle, you may find yourself "upside down" in your loan, meaning you owe more on the vehicle than it is actually worth. If you trade in your new car for a less expensive model, any remaining amount you still owe will be rolled into your new loan. As a result, you may not come out ahead in the new transaction.

Low or No Loan Balance

Perhaps you made a large down payment for your new vehicle and didn't have to take out a large loan, or maybe you paid the total amount in cash. If so, your transaction should be much easier. If your vehicle is worth $10,000 and you only owe $7,000, you can pay off the loan and subtract the $3,000 difference from the price of the cheaper vehicle when you trade it in. Likewise, if you are trading in the new vehicle for one with a lesser value and no financing is involved, you can also subtract the difference from the cheaper car's price.

Private Transaction

Another option is to sell the car privately instead of trading it in at the dealer. You may be able to get a much better price for the vehicle than if you traded it in, perhaps even enough to pay off your loan in full. You could also "swap" vehicles with someone who owns a cheaper vehicle, assuming you or the other party can make any necessary financing arrangements for the remaining loan balance that might still be owed.

Leased Vehicle

If you leased the vehicle instead of purchasing it, your options are a bit more limited. If you attempt to "trade in" a leased vehicle for a cheaper model before the end of the leasing term, your leasing company will likely charge you a substantial penalty for breaking the lease early. However, you may be able to engage in a practice known as "lease swapping" where you locate a "buyer" who will assume the lease for you, allowing you to then lease a less expensive vehicle.

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Can I Get an Auto Loan for $2,000?

Many auto loan providers have lending restrictions for used car loans. Expect to meet a minimum lending threshold for your loan approval, which differs by lender. To ultimately determine whether an auto loan provider offers a $2,000 loan option, you'll have to contact different loan providers for information. If you can't find a lender for your car loan, you may have other options.

Resources

To find out whether any auto loan providers in your area offer auto loans for $2,000, call around to bank and credit unions. Call large dealerships, too. Large dealerships work with numerous lenders and are familiar with each lender's loan guidelines. A dealer may be able to direct you to an auto loan provider. Online lenders and some car insurance companies also offer auto loans. If you can't find a lender who offers a $2,000 loan options, ask for each lender's minimum lending amount.

Increasing Your Loan Amount

You may want to increase your loan amount to purchase a more expensive vehicle. This way, your lender options aren't restricted and you can also purchase a vehicle that is either newer or with lower mileage than you had originally intended. A newer vehicle is likely to have less mechanical problems. Check with a lender to discuss your monthly payment budget. You may find that you can obtain an approval for a higher-priced car and still pay an affordable monthly payment.

Other Lending Options

If you want to stick to your original $2,000 loan amount but can't find an auto loan provider to approve your loan, pursue a personal loan instead. A personal loan has lower borrowing restrictions than auto loans, although interest rates are slightly higher. Also, pursuing a personal loan is easier, as you don't have to abide by various lending guidelines that an auto loan requires. For example, lenders often require that you purchase a vehicle a certain age or newer and also restrict odometer mileage. Personal loans do not.

Insurance Considerations

Auto loan contracts require that you maintain a full-coverage insurance policy until your car loan is satisfied. It is probably not worthwhile to purchase a full-coverage insurance policy for a $2,000 vehicle, as the price of coverage is likely high. Older vehicles with higher mileage pose more of a risk to insurance companies, so a liability policy with or without comprehensive coverage is often ideal and affordable coverage. If you pursue a personal loan, you won't have to maintain expensive insurance coverage for the vehicle.

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Which is the Easiest Car to Lease?

Leases are available for most new vehicles. However, no vehicle lease is "easier" to obtain than another. Approvals are based on your credit standing. Banks require good to excellent credit for lease approvals. Expect to shop leases by term, mileage and down payment requirements. If you have credit issues, you may find that financing your vehicle offers more flexibility.

Comparing Leases

If you're looking for a car that will easily fit your budget, shop lease offers online. Vehicle manufacturers advertise lease programs on their websites. Individual dealers may offer additional leasing programs or discounts, as well. Check the terms of any leases you discover, comparing down payment requirements, mileage allowance and monthly terms. You can also change leasing terms to better fit your driving needs. Call a new car dealer if you want to increase your mileage allowance, change the term or decrease your down payment amount. A dealer can give you exact prices, which may differ from advertised prices.

Credit Considerations

You may benefit from checking your credit before applying for a lease to ensure that negative items haven't been incorrectly reported to the credit bureaus. All of your accounts should be up to date, meaning you aren't behind on any of your credit or loan payments. You should also have established history on your revolving accounts to prove your credit worthiness. If you have no credit, you aren't likely to obtain a lease approval without a cosigner. Expect to prove your income and have at least two years with your employer and at your current address.

Obtaining a Preapproval

To determine if you can obtain a lease approval, apply to a participating bank. Check the manufacturer's website to submit your application online if you prefer to avoid a dealership. You may even receive an instant approval. If you find you can't apply online, many individual dealers also offer an online application process. Call a dealer or visit its website to find out how to apply. If you're declined for a lease, you'll receive a letter from the bank stating why it declined your application. Use the letter to determine how to improve your credit and obtain a lease approval in the future.

Other Options

If you can't obtain a lease approval because of your credit, consider pursuing a loan instead. Auto loan providers are more lenient than leasing banks. You may obtain an approval with a higher interest rate or with terms restrictions, such as a down payment requirement. You can apply for a preapproval before you visit a dealer, as well. If you can't obtain financing on your own at all, consider using a cosigner to secure your loan. You may still obtain a lease approval if you use a cosigner who has good to excellent credit. Or, you may also obtain low-rate financing for an auto loan.

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Dealer Invoice Information

The dealer invoice is a document that lists the dealer cost and suggested retail price of a new vehicle offered for sale. In addition to providing detailed pricing information, the invoice also includes information on the options and packages installed on a new car or truck. The pricing information displayed on dealer invoices is relevant only when purchasing a new car. However, the other information provided on options and packages is relevant for new and used car buyers.

Basic Vehicle Information

Dealer invoices display basic information about each new car offered for sale. Information including the make, model and trim level is found at the top of the invoice. Additional option codes that identify the exterior and interior colors of the vehicle are also printed on the invoice. All invoices also display the vehicle identification number, or VIN, prominently near the top of the invoice. Other basic information, such as the dealership who ordered the vehicle, can help consumers identify whether the car or truck in question has been swapped between dealers.

Factory Wholesale Pricing

Below the basic vehicle information, the dealer invoice shows each option installed on the vehicle. These options can include packages, including power groups that add power windows, mirrors and locks, or standalone options, such as an upgraded radio or navigation system. Listed next to each option is the factory wholesale price, which is commonly referred to as the invoice price. This amount is equal to the amount paid for the vehicle by the dealership.

Suggested Retail Price

In a second column next to the invoice price is the manufacturer's suggested retail price for each feature on the vehicle. This amount, known as the MSRP, equals the MSRP amounts shown on the vehicle's window sticker. The suggested retail price constituges the entire amount of markup that a dealership can play with when negotiating with a consumer. The dealer markup on a new vehicle is much lower than many consumers expect, with margins starting below 10 percent before starting negotiations.

Holdback And Other Considerations

The dealer invoice may also have a line titled "Holdback" or "HB," which refers to an amount of money that is held back by the manufacturer until the point when a car or truck is sold. Although this is often referred to as "hidden profit," it is given to dealerships to help them offset the normal expenses of selling a vehicle. Such expenses include sales commissions and the cost of cleaning and maintaining the inventory. Employee pricing, often used by American manufacturers, is also printed on dealer invoices, as manufacturers require employee purchasers to verify the price listed on the invoice.

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