What Are the Finance Charges on My Car Payment?

Many consumers need car financing to buy a new or used vehicle. Some buyers use direct lending, meaning they request a loan from a financial institution they have a banking relationship with. Consumers can also take advantage of a dealer financing; dealerships set up loans directly with financial institutions. When obtaining a car loan from either of these sources, a consumer agrees to repay the loan amount plus a finance charge over a period of time.

Vehicle Loan Basics

When determining the loan amount for a used vehicle, lenders go by a used car value as set by the National Automobile Dealers Association or Kelley Blue Book. Dealers set the new-car prices themselves. Some financial institutions finance the full amount of the vehicle cost, including taxes and fees (such as car plates). In most cases, consumers need to pay these charges out of pocket. The loan amount and the interest rate often depend on the applicant's creditworthiness. Buyers also have an option of including an extended warranty and credit insurance into the loan amount. They may choose to pay these charges up front.

Finance Charge

A finance charge is a cost of having a loan. It is based on the term of the loan and the interest rate, which is often referred to as annual percentage rate, or APR. Buyers often choose a longer term of the loan because it gives them a lower monthly payment. However, the longer the term of the loan, the higher the total finance charge paid to the bank. If a consumer includes other options with the loan, such as service contract (extended warranty) or credit insurance, he is paying more in finance charges. Finance charges may include other fees, such as late fees or loan pre-payment penalties. A loan contract states how the lender calculates finance charges and describes the fees the buyer may have to pay.

Front-loaded Interest Loan

Some financial institutions "front-load" vehicle loans. This means that finance charge is calculated for the term of the loan and added to it. Consumers' payments are applied toward the finance charge first, before the principal. This a disadvantage if a consumer pays off the loan early because he has already paid the interest for the full term of the loan. Banks may charge additional pre-payment penalties if a consumer pays off the balance before the loan term ends.

Simple Interest Loan

Simple-interest loans, also known as straight amortization loans, calculate the finance charge based on the average daily balance. A lender can provide a printout of an amortization schedule which will list how the payments will be applied. Loan statements usually break down loan payments into a principal and finance charge. Finance charges may include other fees, such as late payment charges.

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How to Get a Car Loan with Bad Credit & No Down Payment

Getting a car when you have bad credit is challenging, but not impossible. It requires creativity in seeking alternate solutions to traditional financing. The best way to work around bad credit is to have a larger down payment. However, cars can die at unexpected times so potential buyers may not have access to sufficient cash, either. Fortunately, there are ways to get a car even with such limited resources.

Instructions

1

Visit a subprime car dealership that advertises to people with bad credit. Such places often charge high interest and high prices on cars that are older and less reliable. Provide the dealership with check stubs and proof of payment history, and, if necessary, personal references and a co-signer. Trade in another car as down payment rather than putting nothing at all down.

2

Find a car through a private party and ask if the seller will finance it for you. Some sellers may consider this unconventional arrangement, particularly if you are not trying to buy an expensive car. Reassure the buyer that you intend to take the financing as seriously as any other loan. Show pay stubs and other proof of responsible payment history such as utilities and rent and provide references and a co-signer to convince sellers to consider this idea.

3

Purchase a cheap used car from a private seller for a few hundred dollars and use the money that you would spend on car payments on repairs that emerge instead. Repairs might be frequent, but even if you estimate $2,000 worth of repairs in the first year, it still can be less expensive than a year of payments. There is also no guarantee that a more expensive used car would not need repairs.

4

Look for loans that even with no money down allow you to negotiate to a lower interest rate after making payments on time for a certain period. Do not assume that you are stuck with prohibitive terms for the life of the loan. Remember that credit scores can change, and if your credit improves you may have access to a better loan.

5

Continue to investigate conventional dealerships. Do not assume that you can only get a loan from a subprime dealership. Conventional dealerships do work with buyers with bad credit, particularly during bad economic times. Expect to pay a higher interest rate, but it still can be lower than a subprime loan and other payment terms may not be as prohibitive.

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How to Finance Used Cars With a Chapter 13 Bankruptcy

When a consumer files for Chapter 13 bankruptcy, he is restructuring his finances while obtaining relief from overwhelming debt. In exchange for this debt relief, the Bankruptcy Court is entitled to regulate how you spend your money while you are in active bankruptcy. Financing a new vehicle can be challenging, but it is still an attainable goal. The Court will decide what new debt, if any, you are permitted to incur, which can affect the vehicle that you purchase and the financing that you obtain.

Instructions

1

Visit the car dealership and obtain as much information as you can about the vehicle you wish to buy. Be sure to get the vehicle identification number (VIN), year, make, model, price, interest rate and all finance information. Take several pictures of the vehicle.

2

Compare the finance information with your current bankruptcy schedules to ensure that the vehicle is affordable. Your schedules are a snapshot of your financial status, and may need to be adjusted to reflect financial or asset changes. Make any necessary changes to your schedules before you request permission from the court to purchase a vehicle.

3

File a "Motion to Purchase a Vehicle" with the Bankruptcy Court. A motion is a type of legal document that asks the court permission to do something. In some bankruptcy courts, this motion may be captioned, "Motion to Incur New Debt". Be sure to specify why you need to purchase a vehicle, and how the additional costs will be covered in your Chapter 13 plan. This is an acceptable request to make if your family size has changed or if your old vehicle is unreliable or no longer functioning.

4

Respond to any questions or filings from the Trustee, who may object to your motion. Once the Trustee has provided his input, the matter will be set for a hearing. At the hearing, you will need all of your paperwork to show the Judge what you would like to purchase, and the financial impact it will have on you.

5

Bring the court minute entry from the hearing to the car dealership, so that it can be submitted to the finance company. The minute entry may have stipulations regarding interest rate or final cost of the vehicle that the finance company will have to adhere to. This can save you money in the long run.

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New Automobile Vs. Old Car Financial Model

Buying a car is a major commitment, especially if you take out an auto loan to help pay for it. Not only will you continue to make monthly payments for up to five years, but you'll also be entrusting your family's safety and comfort to the vehicle you choose. While there are many different ways to compare cars, selecting between a new or used model is among the first you should make to narrow your search.

Options

The financial model for buying a new automobile or a used car is very much the same. In both cases the dealer will be able to offer you a financing plan through a commercial lender, generally with a payment period between one and five years. New car dealers may work only with an automaker-approved lender, while used car dealers often have relationships with several different banks that provide auto loans. Your local commercial bank is another source of auto loans, so make sure you compare rates and policies before selecting a lender.

Benefits

Financing a new car means you'll have a brand-new automobile with a full factory warranty included in the price. This means you won't have to finance and pay interest on a dealer warranty, which might be the case with a used car. If you order a new model instead of selecting one from the lot, you'll be able to choose the options and color you prefer rather than taking your pick from a limited selection. Finally, new cars qualify for factory incentives and rebates, as well as government tax credits in the case of alternative-fuel vehicles, which can save you money over financing a used model.

Drawbacks

Financing a new car is usually more expensive than financing a similar used model. Cars tend to depreciate quickly, which means that used models don't need to have high mileage or damage to be priced thousands of dollars lower than new models that look and operate identically. If you choose to finance a new car, you may also end up paying interest on the registration fee, which wouldn't be the case with a used car that already has its license plates and registration documents.

Considerations

The price you pay to finance a new or used car is only the largest and most obvious cost associated with ownership. You'll also have to pay for insurance, which can be a major expense in its own right. New vehicles are more likely to have the latest safety features, which will reduce the cost. Some states, such as California, have laws that require you to buy full insurance for a car that you finance. This means you can't reduce the coverage you buy on a used model to save money until you own the vehicle outright.

Effects

The financial implications of buying a car include the cost of service and maintenance for as long as you own it. New models come with factory warranties that can last for as long as 10 years and cover you for many different forms of mechanical failure. Buying a used car with a shorter warranty term means you'll become financially liable for upkeep sooner. If you make on-time payments for either a new or used car, you'll improve your credit score over the course of the loan payment period.

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Can You Trade in a Car Worth More Than the One You Are Buying?

The usual practice is to trade in your old car for a higher-priced automobile, meaning you will have to pay cash or finance the difference in cost. While it is possible to trade in your current car for a cheaper one, you may suffer a slightly greater than usual financial penalty for this transaction.

Typical Trade-in

In a typical trade-in, you will walk into the dealership with your used car and have it inspected to assess its value. The dealer will tell you whether he will accept a trade-in based on the marketability and the condition of your vehicle. If the dealer agrees to a trade, you can then view the vehicles on the lot to narrow your choices down to a few or a single one to begin negotiations. During these negotiations, the dealer will usually quote you a net price only. In other words, you will be told how much you would need to pay for the car you are buying, in addition to giving your old car to the dealer. Dealers are usually reluctant to provide a breakdown, detailing the price of the vehicle on the lot, the value assigned to your used car and the difference between them, which is what you will owe. They instead will tell you only the last, net figure.

Advantages

The advantages of trading in your car are two-fold. First, you will not have to spend time selling your existing car and then purchase another vehicle in a separate transaction. This saves time and ensures that you won't be without transportation. There is also a tax advantage. If you were to sell your existing car for $4,000 and purchase a new car for $8,000, you would pay taxes on the $8,000. If, however, you trade in your car and purchase the same new vehicle for $4,000 you will only pay sales tax on the $4,000 purchase.

Downgrading

Most dealer will allow you to trade in an expensive car to buy a cheaper vehicle. However, when you trade in a car, you will usually get a smaller deduction in the price of the new vehicle than the fair market cash value of your used car. If you could have sold your existing vehicle for $10,000 to a private party, expect to receive $9,000 or less off of your new purchase when you trade it in. If you are trading in a vehicle costing only $1,500 a 10 percent hit will amount to only $150. When trading in a $10,000 vehicle, however, the same percentage loss amounts to $1,000.

Unpaid Vehicles

Keep in mind that if your existing car is not fully paid for, trading it in may increase the amount yo owe instead of reducing the bill. Let's say you still owe $3,000 on your existing vehicle and trade-it in to purchase a car that had a sticker price of $8,000. Do not be surprised if the dealer crunches the numbers only to tell you that you now owe $9,000. If you have recently purchased your vehicle and most of the original car loan is still unpaid, your car may be worth less than what you owe on it. This is called being "upside down" on your loan.

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What Is Per Diem on a Car Loan?

A per diem on a car loan is the amount of interest that accumulates on a daily basis. Lenders will provide a per diem figure to another lender when they are expecting a payoff check.

Significance

To calculate the per diem, you will need the balance owed and the interest rate for the car loan. For example, if the interest rate is 7 percent, (.07), divide it by 360 and multiply the result times the balance, ($10,000). The per diem is $1.94. Interest accrues at a rate of $.194 per day in this example.

Considerations

The per diem figure is reduced if the interest rate is lowered and the balance remains the same. The per diem figure is reduced if the interest rate remains the same and the balance is lowered.

Effects

If the balance and interest rate are both reduced, the per diem will be reduced even further.

Function

When a payoff figure is provided from one lender to another a per diem figure is included with the payoff statement. A per diem allows a lender to add the additional amount if the payoff is going to be received later than the payoff date entered on the statement.

Time Frame

If you are sending in a payoff to your lender, you can calculate the payoff using the per diem. Take the interest rate of 7 percent, (.07) and divide by 360 and multiply by the number of days since the last payment date until the date the payoff is to be made. The result is multiplied times the balance.

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What Is the Average APR When You Buy a Car?

The average annual percentage rate (APR) on an auto loan differs by the type of lender that finances your purchase. Banks tend to offer higher interest rates and shorter loan periods. The major auto finance agencies tend to charge lower interest rates stretched out over longer periods of time. The Federal Reserve compiles this information and makes it publicly available.

Report G19

Around the fifth day of every month, the Federal Reserve releases a statistical report on consumer credit. This is known as statistical release G19. It contains average interest rates for the month before last as well as several prior years and quarters. Data on other types of consumer credit, including credit cards and personal loans, are also on it. To find the report, log onto the Federal Reserve's website at FederalReserve.gov and click on the link marked "Economic Research and Data."

Average Rates

According to the G19 Report issued on Jan. 7, 2011, the average interest rate for a 48-month loan from a commercial bank was 5.87 percent in November 2010. The average interest rate from an auto finance company was 4.6 percent with a period of 62 months. The average amount financed was $27,000.

Other Data

HSH Associates also makes average APRs available according to metropolitan area. Data from HSH show that average auto loan rates were 4.7 percent in Cleveland while they stood at 6.8 percent in Los Angeles in December 2010. Those rates were for loans of $20,000 to borrowers with good credit.

Truth-in-Lending

Because there are variations in the interest rates and the length of loans, you should shop around for the best deal. This doesn't necessarily mean the lowest interest rate. A higher APR with a shorter payoff period may cost you less in interest than a lower interest rate stretched out over a longer period of time. Review the truth-in-lending statement offered to you by the lender before accepting a loan so that you can determine the true cost of credit.

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Auto Repossession Help

With a troubled economy many people are facing creditors who are sometimes extremely aggressive in obtaining repayment on loans and debts. Car finance companies are no exception, and are often heartless when their customers are faced with financial hardships due to job loss or salary reductions. If you are facing vehicle repossession you may have more rights than you think.

Financing New Car

Contracts spell out repayments.

When you decide to finance an automobile there are certain factors to keep in mind. Closely examine the contract to be certain that your rights are clear and you have no misunderstanding as to what you are signing. In some cases a contract may state that if you miss even one payment, or are even a few days late on a payment your car can be repossessed. What is most important to remember is that your financed car is not actually your car until the absolute last payment is made. So your inability to make timely payments as stated in your contract could result in serious consequences. The rights that you have may vary depending on the state in which you live, so be certain to investigate your specific rights when financing your automobile.

Repossession of Your Car

It can be frustrating when you can't make the required payments.

What you need to understand is the act of repossession is often a painful process. If you are late on a payment, or miss a payment, the finance company can take your car with absolutely no warning. They may do so while you are at work or at home sleeping. "Repo" men take pride in their ability to get in and out when it comes to taking back an automobile. You may not even know your car has been repossessed until you head to your car, keys in hand to take a ride and find it is gone.

Keep in mind that these finance companies have some limitations of which you should be aware. State law places limitations and regulations on how your vehicle may be repossessed, and what they might do with it once they have obtained it. If these rules are violated, your finance company may lose their rights to repossess your car and you may even be entitled to damages. For example, if a creditor agrees to take a late payment or to change the payment due date, when your contract states that late payments are not permitted, this may change your contract for the future.

Your Rights

The finance company is allowed to come onto your property.

In repossessing your car, the finance company is allowed to come onto your property to do so and they can take the vehicle regardless of the time of day or whether they provide notice that they will be doing so. However, when they take your car they cannot commit what is termed "breach of the peace." What this means is that they are not permitted to use physical force or threats of physical force. In some states this would also mean that you simply can protest against them taking it, or refuse to allow them into your garage. If there is a "breach of peace" your creditor may be forced to pay a penalty or provide payment for damages if they cause some damage in the process of removing your automobile. If it is found that they are at fault they may also lose their right to collect a deficiency judgment ,which is the difference between what you owe on your loan and the amount for which the finance company is able to resell the vehicle.

Speak With Finance Company

Contact your lender for loan help.

Often if you call the loan company and explain your circumstances they may be able to find a way to lower your payments or increase the term of your loan, thus bringing down the payment amount. If the finance company is not open to this discussion with you than you may need to turn to an auto loan modification company.

The loan modification industry, which previously only helped homeowners with mortgage modifications, has branched out to help consumers obtain loan modifications on their car loans. A loan modification is a renegotiation of your loan terms to help make them more conducive to maintain. These firms can be found across the country and are there to help consumers find ways to keep their cars, even if they can no longer afford their monthly payments.

Auto Loan Modification

A middleman may solve your loan woes.

This could be the solution to your problems. If you would like to keep your car and it is becoming obvious that due to a change in your financial situation, you can no longer make the required payments, seek the help of an auto loan modification company. They will serve as the middleman between you and the loan company. They will renegotiate your terms and try to find a compromise between you and the finance company.

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How Do Auto Loans Work?

Loan Terms

Most auto loans come as three, four, five or six-year loans. Buyers with excellent credit histories will most likely get the on-going market rate for interest rates. Websites like Bankrate.com provide a good service for comparing interest rates in the different areas of the country. See a link in resources below. The longer a loan term, the more a borrower pays eventually in interest. A good online calculator can also help in figuring out monthly payments and interest rates paid over the life of a loan as well as creating an amortization schedule.

For example borrowing $10,000 toward the purchase of a car at a 6 percent interest rate for five years will result in a monthly payment of $193.33. Like in most amortized loans, more of the monthly payment goes toward interest and less toward principal and vice versa as the loan ages. For the first month the interest payment will be $50 ($10,000 x 6% / 12). Therefore $50 of the monthly payment will go toward interest and the rest toward the principal. For the next month the interest payment will be slightly lower and the payment toward principal slightly higher, based on the new principal balance. This will go on until the principal balance is zero and the loan is paid off. A table showing how much of each monthly payment goes toward principal and interest payments for the life of the loan is called an amortization schedule. Paying a little extra each month will result in the loan being paid of early and savings in interest payments.

Shopping for an Auto Loan and for a Car

Before shopping for an auto loan or for a vehicle, it is best to get a copy of one's credit report and credit score. The lenders are going to be looking at the same information. Those with less than perfect credit typically get more expensive loans as their interest rates will be higher. It may be worth it to wait a few months and clean up credit problems before applying for an auto loan.

People with excellent credit typically get the best deals. These could include zero percent interest rate, rebates and 100 percent financing with very low or zero interest rate. Shopping for a loan and getting approved before going to a car dealership allows one to bargain like a cash buyer. Capital One has a blank check auto loan program. Once approved, the borrower gets a blank check that can be used to purchase a vehicle up to the maximum amount approved.

Car loans approved at car dealerships are not always the best deals. The atmosphere is not always conducive to taking one's time to read the fine print. People have been known to sign off on and accept loans that are not of the most favorable terms because they were being forced to rush through the paperwork by a sales person. If you must get a loan at a car dealership, make sure you take the paperwork home and read it before signing anything.

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Auto Financing After Bankruptcy Discharge

Someone might file bankruptcy for many reasons. A common concern among filers is the ability to reestablish credit after the bankruptcy is discharged. Credit is obtainable after a discharged Chapter 7 or Chapter 13 bankruptcy, particularly for auto financing. You should keep some things in mind before attempting to acquire a car loan after bankruptcy.

Time

The longer it has been since your bankruptcy discharge, the easier it will be to obtain financing. This only holds true if you have made an effort to rebuild credit and have responsibly used any new credit. One way to reestablish credit before attempting to obtain a vehicle is to get a secured credit card through your bank or credit union and maintain a low balance, with on-time payments. Also keep in mind that a Chapter 7 bankruptcy is discharged within months of filing, while a Chapter 13 bankruptcy isn't discharged until all the payments are made--usually three to five years later. However, some auto lenders will provide loans to those with an open Chapter 13 case, provided the bankruptcy trustee approves, and the borrower meets the lender's requirements.

Money

Be prepared to have a substantial down payment, particularly if you are trying to obtain a vehicle within a short time from discharge. Some lenders might want up to 30 percent down. Some dealerships selling older, possibly less-reliable, vehicles might accept a smaller down, such as $1,000. This might be in conjunction with an in-house financing program, where the dealership carries the note. Also shop for a vehicle in your budget. Ideally, your payments should be less than 15 percent of your monthly income to increase your chances of approval. After reestablishing credit for a longer period of time, you will require less of a down payment, and a zero-down loan might eventually be a possibility.

Interest

Expect to pay a higher interest rate than you did before bankruptcy. According to Michael Doan of the Bankruptcy Law Network, some borrowers might find rates as low as 8.99 percent, but around 15 percent is more typical. Some in-house-financing dealers might have much higher rates. A credit union might offer you a lower interest rate, but this is usually only possible for customers with an established banking relationship who have made strides toward rebuilding credit.

Considerations

You will likely find it easier to get financing for a late model used car than a new car. This will probably save you a good chunk of money in interest and depreciation as well. If you had bad credit for a long time before filing for bankruptcy, you might find it's easier to buy a car with a discharged bankruptcy than it was with charge-offs and open, unpaid collections. The reason is lenders know you have recently filed bankruptcy and won't be able to file for up to eight years from the discharge date and also realize you are less likely to default after clearing away all your previous bad debt.

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I Transferred the Vehicle Title, But the Buyer Didn't Pay in Full

When a vehicle buyer fails to pay in full after you've already transferred the title, you have a range of options that become considerably narrower if you don't have a written security agreement and a lien on the vehicle title. If you've sold a car without any written documentation of the deal, you can still prevail; however, you'll have to climb a steeper hill than someone who insisted on a security agreement and lien.

Breach of Contract

Although you may not have a written contract of sale with the buyer, you still have an oral contract upon which you can sue. The two main difficulties that usually arise with oral contracts, though, are proving their existence and proving their terms. The buyer could dispute your version of the price, or could allege that you made representations or additional promises that you failed to fulfill -- such as guaranteeing the vehicle's functionality, or agreeing to make certain repairs before the sale went through. Depending on your relationship with the buyer, the buyer could allege you made him a gift of the vehicle, or that he accepted it as payment for a debt you owed to him.

Claim and Delivery

In a case involving a motor vehicle, you may be able to make use of your state's "claim and delivery" procedures. Claim and delivery involves getting possession of personal property in the hands of another party, a frequent necessity in auto sale cases. With claim and delivery, you ask the court to order the sheriff of the county where the vehicle is located to seize the vehicle and hold it until the court rules on your breach of contract case -- this stops the buyer from selling or hiding the car. Generally, though, you'll have to post a bond equal to 1.5 times or more the value of the vehicle.

Buyer's Defenses and Counterclaims

When you file your lawsuit against a defaulting buyer for breach of contract on the vehicle sale, he can allege several defenses to your claim. He can say he already paid for it in full, or that it was a gift or debt repayment, and he doesn't have to pay for it at all. He can claim that you let him off the hook for further repayment because the vehicle broke down, or because he did some subsequent work for you and you paid him by canceling the remaining loan balance. He can also counterclaim against you for breach, saying you misrepresented the condition of the vehicle, that the vehicle is basically worthless and he wants back what he's already paid you for it.

Bankruptcy

If the buyer doesn't fight your breach of contract lawsuit, he can still wiggle out of paying you on a valid debt by filing bankruptcy. If you didn't have a valid security interest in the vehicle -- a written security agreement and lien on the title -- you'll be just another unsecured creditor who will be doing well to receive pennies on the dollar.

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Can I Use My Old Vehicle As a Down Payment for a New Car?

Choosing to trade in your vehicle at a dealership and apply the credit to the purchase of a new car or truck is a common practice, and the process is simpler and more secure than selling the vehicle outright on your own. Although you might get less for your trade at a dealership than you would selling it yourself, you will probably save time and get tax savings by trading to a dealership.

Owning Your Vehicle Outright

If you own your vehicle outright, meaning you have the title in your hand and there is no outstanding loan or lease on the vehicle, you can trade in the car or truck to a dealership and use the trade value of the vehicle as a down payment. Owning your vehicle outright also lets the dealership know that your car sale will be relatively easy to complete, because you do not have an outstanding loan that must be paid off in conjunction with your new car purchase.

If You Have a Loan

If you currently have an outstanding loan on your vehicle, the remaining balance on your loan must be rolled into your new car transaction. If you owe more than the dealership offers for your trade, you will actually carry a negative down payment into your new car purchase, meaning that you must finance the negative equity in order to pay off your old loan and get a new car. If you owe a significant amount more than your trade is worth, you might be required to put money down toward your purchase.

If You Have a Lease

Although uncommon, it is possible to trade a leased vehicle and use the trade value as a down payment toward a new car or truck. In order to use a leased vehicle as a down payment, the dealership must purchase the vehicle from the leasing company and offer you more than this purchase amount for your trade. Dealer purchase prices for leased vehicles are often higher than market value, so the likelihood that this scenario would be to your advantage is slim.

Tax Savings

In the event you trade your vehicle at a dealership, you are given a tax credit for the trade value of your old car. For example, if you are given $10,000 for your vehicle and the sales tax rate in your state is 7%, you would save $700 by not having to pay tax on the trade value of your old car.

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How do I Know if a Car Loan Is a Rip Off?

Car loan rip offs are more common than some borrowers may believe. These scams are created by the very establishments that offer automobiles to drivers, various auto loan providers and others who work in the financial departments of car showrooms nationwide. In order to steer clear of being ripped off, smart consumers need to understand the common traps that they may encounter and read the fine print that is contained on the loan paperwork with which they are presented.

Instructions

1

Work through the numbers. Know the total amount that you are paying for the car and the interest rate for the loan, and ensure that you are approved before leaving the dealership, advises CarBuyingTips.com. Sometimes sales associates and managers will hide the interest rate by giving you just the amount of the monthly payment. Insist that all of the loan terms and agreements are clarified on the documents that you are signing, including firm approval, before leaving the dealership with a new car.

2

Do not agree to extra fees at a later point in time. Once you seem to fully understand what you are signing, do not agree to pay any extra charges that could cause your monthly payment to rise. These additional service fees may include items such as repair coverage for a longer period, rental car fees in the event that your car breaks down and other charges that increase your payment amount every month.

3

Use all options at your disposal. For example, the auto dealership may offer you a lower purchase price on the car that you want to buy for trading in your present car or better terms on your loan because you are paying a sizable sum of money for your down payment. Weigh all of the options that are given to you and decide which choices allow you the most leverage when you are dealing with the salesperson.

4

Pay for your purchase with cash. If you are fortunate enough to have the money to pay for your car, rather than taking out a loan on the vehicle, realize that you may be better off in this situation. You may be short of cash for a few months afterward, but, once you get over the initial hurdles of paying a lump sum for your vehicle, you will own your car on a free and clear basis. Remember, owning a car with no monthly payment will mean that you will have more money in the end because you will not have paid any interest.

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Can I Donate My Car to a Family Member Without the Title?

The car title provides proof that you and on one else owns the vehicle. Just as you can only donate or sell vehicles that you own, you must demonstrate proof of ownership by showing the title, then signing it over to your relative. If you just give a relative your car without signing over the title, he doesn't own it. You do.

Significance

The car title proves that you own your car and are the responsible party for tickets or citations that vehicle incurs. When you donate your car to a spouse or other family member, you are no longer the legal owner of the car, your recipient is. To release yourself from liability for that car, and rightfully assign ownership of the car to the relative, you must transfer the title.

Replacing a Title

You can obtain a replacement car title if you've lost the original. States may assess fees for this service -- as of 2011, Alabama charges $15 to replace a title -- so be prepared to pay. Contact your state's Department of Motor Vehicles or similar agency about getting a replacement car title.

Title Transfer

To give your car to your relative, you must properly complete the title. Enter the vehicle's mileage at time of donation. Then writer your family member's name on the "Buyer" or "Purchaser" line and your own name on the "Seller" line. Once both of you sign on the appropriate lines, transfer of the vehicle is complete and you are no longer liable for the car, financially.

Considerations

Some states may have exceptions for old vehicles. For example, Connecticut allows you to transfer cars made before 1981 to family members without having a title. Additionally, you may need to complete other paperwork to finish donating the car. The state of California requires you to pay a transfer fee and complete a Statement of Facts for smog exemption and use tax. Your relative will also need car insurance before she can register the vehicle in her name.

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How to Cut Car Payments When Unemployed

Your lender may be able to offer loan assistance if you become unemployed. If your lender changes the terms of your loan, the process is known as a loan modification. Rather than repossess a vehicle for nonpayment, many lenders have programs in place to help distressed borrowers. Determine your budget and loan goals before contacting your lender. You can likely bring your loan current if you've defaulted or lengthen your loan term to decrease your monthly payment amount.

Instructions

1

Go over your budget to determine how much you can afford to pay toward your loan payment. If you are behind on payments, determine how long it will take you to catch up on your past-due amount. Figuring you budget ahead of time can help you to work out an affordable plan with your lender.

2

Make a copy of your unemployment paperwork. Expect your lender to ask for this piece of information to provide proof of financial hardship. Locate your bank's contact number and account number.

3

Call your lender and speak to a customer loan representative. Or, if your lender is local, go to a local branch with your unemployment paperwork. Tell the representative that you've become unemployed and ask if your lender can help with car payments or modify your loan.

4

Go over your loan and payment options with your lender. Ask about loan deferment, which allows you to skip up to several monthly payments without penalty or credit bureau reporting. This can also help to take your loan account out of default if you have already missed payments.

5

Talk about any other options available to you, such as paying less than your monthly payment amount for a period of time or extending your loan term to decrease your monthly payment. Ensure any agreements are affordable and do not exceed the payments you've budgeted for earlier.

6

Give your lending representative your proof of unemployment paperwork. If your lender is not local, expect to provide the proof through mail. Get any term or payment changes in writing.

7

Sign any paperwork that the bank requires in order to complete the loan modification process. Mail your paperwork back promptly if your lender is not local. Make or keep copies of any paperwork you sign.

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Advice on Auto Leasing vs. Purchasing

You might have spent days, weeks or months agonizing over which car to take home. After you've made your decision, there's another debate to settle -- buying or leasing your new vehicle. Buying has long-term advantages, but if you're looking for something short term then leasing might be a better option. Plus, each idea has other intangible benefits.

Leasing for the Short Term

If you're looking for a short-term commitment then leasing is best for you. Your reasoning could be that you're living temporarily in a different city. Or maybe you were recently married and while you and your spouse like that sports car, a more family-friendly vehicle is going to be necessary when you start having kids. Lease terms typically run 36 to 60 months, or three to five years.

Lease to Get the Car You Want

Say, for example, you are in love with a certain high-end luxury vehicle. But it costs $40,000. Or maybe the car you need costs $15,000. Either way, you don't have the financial resources to buy that car. Leasing allows you to get the car you want and pay much less for it. Instead of paying full value for the car, you only pay a fraction while enjoying its full benefits.

Buy to Save Long Term

If you need a car for the long term then it is a better idea to buy your car. Leasing costs more in the long run. While monthly payments when buying are usually more, your total investment is less. For example, you paid $20,580 for a car and it took you six years to pay it off. You lease the same car for three years at $289 per month, plus $2,000 for a down payment. Your total cost after 36 months is $12,404. Then you spend the same on your next car. Over six years, you've spent $24,808, more than what you could have for buying the car and owned it longer.

Buying Means Ownership

For some, there is a sense of pride in owning your own car. It's yours -- it doesn't belong to anyone else. But what may be perhaps more important is that owning a car provides you with equity. It adds to your net worth. If you were to walk into your bank for a needed loan, you can use your car as collateral, for example.

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How to Get a Car Loan Without a Job

Getting a car loan without a job can be done under various circumstances. Most companies that offer loans to people who are out of work will want to protect their investment by looking at criteria such as your credit history,l credit score, and current assets. It is important to speak to different lenders and take your time to find one who offers terms with which you feel comfortable.

Instructions

1

Prove you can meet the monthly car loan payments. Borrowers who are not currently employed may be able to pay for their monthly debt obligations by using funds from a savings account, unemployment benefits, or money received as a result of being injured while on a previous job. If you can demonstrate you can pay your car loan, you stand a better shot of securing one.

2

Submit to a credit check. Any lender will want to see what type of credit risk you pose as a potential borrower. Borrowers who have an excellent track record of making payments on time, have little debt, and whose credit cards are below their limits are seen as better candidates for a car loan.

3

Show the lender you are not moving any time soon. Borrowers who have lived at a certain location for at least two years appear to be less of a risk. Keep in mind that banks may also want to know your prior addresses.

4

Put a larger sum of cash towards your auto purchase. Lenders prefer when you place more of your own funds in an auto loan transaction because it shows you are not likely to default on your payments. When you have money invested in the deal, you can lose that cash if you stop paying your loan.

5

Find another party to sign your loan application. If you have a family member or friend who wants to help you out by placing their name on your car loan application, this enhances your chances of securing a loan. However, this person must be prepared to come up with your monthly payments if you skip any.

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Is Income Taken Into Consideration for Auto Loan?

What you make on the job is an important factor lenders consider whenever consumers seek an auto loan or make any request for new credit. Whether applying for credit through the dealer's Finance and Insurance Department, at a local bank or through your credit union, you will be required to fill out a credit application that will ask you about your current employment status, income and other credit-determining factors.

Credit Application

Your credit application will ask you about your sources of income.

The first step you will take in securing an auto loan is to fill out a credit application. That application will ask you for your name, address, contact phone number and your Social Security number. Previous addresses, length of stay at each address, current and former employers and sources of income are also asked. Your income can come from several sources including pensions, alimony payments and income derived from work. You may be asked for your current occupation and monthly income. If you are retired, then creditors may still give you a loan provided your income is sufficient to make payments.

Credit Reports

Your credit report contains detailed information about your financial strength.

Once your credit application is received, lenders will also obtain a copy of your credit report and your credit score. Your credit report will be scrutinized to determine your credit behavior, including whether you make your payments on time, your current lines of credit and your outstanding balances. A credit score in excess of 700 is indicative of a person who manages his credit wisely, according to the Consumer Federation of America and Fair Isaac Corporation. You may still qualify for credit if you have a lower score, but be prepared to pay a higher annual percentage rate on your loans.

Possible Problems

A larger down payment may offset your low income.

If your income is considered too low by a creditor, then you may not be approved for a loan based on that factor alone. However, you may be given the chance to increase your down payment, which would lower your loan payments. In addition, if your income is too low, the lender may suggest that you seek a co-signer. If someone agrees to co-sign your loan, they will be held accountable should you default on your loan. Lending is all about risk -- if the creditor feels you are too big of a risk, then your loan application will be denied.

Considerations

You may need to change or put off your purchase decision if your budget needs help first.

Income, which demonstrates your ability to repay a loan, is an important factor used by creditors when reviewing your loan application. If you cannot put more money down and are not willing and or are unable to get a co-signer, you may need to settle for a cheaper-priced car or put off your purchase decision until you have sufficient funds.

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The Average Auto Loan Rates

A vehicle always costs more than its sticker price when you pay for it with an auto loan. Though the difference between the sticker price and the real price may be shocking, you can predict how much you will pay, to a degree before, you even step foot on the lot.

Average Rates

Though new cars typically cost more than their used counterparts, the interest rate on an auto loan for a new car is lower than that for a used car. According to Bankrate, the average rate on a new car is 3.85 percent as of May 2011. It's about 4.79 percent for a used car. In addition, a four-year loan term costs slightly more in interest than a three-year term. The interest rates are 4.36 percent and 4.28 percent respectively.

Changes in Interest Rates

Auto loan interest rates are subject to change between dealerships and through time. In fact, they change weekly according to the Bankrate website. Check the average interest rates in your area at least once every week while you shop for a car. You could miss out on a deal by not doing your homework.

Your Credit Score

Your credit score can significantly impact the rate you receive on an auto loan. A credit score of at least 700 almost guarantees you low rates while a score of 720 or higher practically guarantees you the lowest rates possible. According to CreditReport.com, this can be as many as four percentage points less than dealers offer other customers. Request your credit score from TransUnion, Equifax or Experian --- or all three --- to see where you stand. For about $40 you can get your scores from all three agencies through Experian.

Comparing Loans

Don't consider just the interest rate on a loan, but also consider the monthly payments. Since a debt-to-income ratio greater than 36 percent can make it more difficult for you to get a car loan in the future, opt for the least expensive car you can enjoy. To find out whether payments will make your debt-to-income ratio too high, multiply your monthly income by 0.36. The result should not exceed what you pay every month for your car.

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What Is the Usual APR on Auto Loans?

If you're interested in buying a car and using a loan to finance the purchase, you should take the time to investigate the average interest rates lenders charge. These rates change over time and can differ considerably among lenders, so taking the time to shop around may reap significant financial rewards.

New-Car Loans

New-car loans make up an important part of a lender's loan portfolio. The annual interest rates (APRs) lenders charge for these loans, like all loans, differ over time as the general economy changes and the interest rates offered by the Federal Reserve rise or fall. Bankrate.com reports that as of March 31, 2011, the average three-year, 36-month new-car loan was 4.28 percent APR.

Used-Car Loans

Used-car loans typically have a higher average interest rate than loans for new cars, even if the amount of money borrowed is the same. Bankrate.com reports that the average national rate for a 48-month used car loan was 5.41 percent as of March 31, 2011, while a comparable new-car loan came with an average interest rate of 4.38 percent.

Loan Length

Another factor affecting the interest rates on car loans is the length of the loan. A three-year, 36-month loan, for example, typically comes with a lower interest rate than a five-year, 48-month loan. For example, take a credit union that offers a range of loans from 36 months to 84 months. The lowest interest rate for a 36-month new-car loan will be lower than the lowest rate for an 84-month new-car loan.

Other Factors

The average loan rate also differs based on your credit history. For example, take a credit union offering used-vehicle loans with interest rates ranging between 3.5 percent and 15 percent. Only borrowers with excellent credit histories qualify for the lowest interest rate loans, while borrowers with bad credit can expect much higher interest rates.

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What Do You Do With a Leased Car When the Owner Is Deceased?

Leasing a car can often be a way to afford a car that you would otherwise not be able to get. When the owner of a car lease passes away, the executor of the estate must figure out what to do with the car at that point. If you find yourself in this situation, examine the lease agreement to see what your options are.

Is the Lease Canceled?

When a loved one passes away with an auto lease, you may believe that the lease is automatically canceled because he is no longer around to make the payments. In most cases, the lease is not automatically canceled upon the death of the owner. Like other financial obligations, they still exist even if the individual passed away. This means that the lease is typically dealt with in the process of settling the estate.

Probate

During the probate process, the lease will be handled. Probate involves collecting all of the outstanding assets and liabilities. The executor uses any remaining assets in the estate to pay liabilities in the proper order of priority. The probate court will offer guidance as to which bills need to be paid first. Any bills that are not paid after the money runs out are then forgiven by the creditors. If the lease is left after the money runs out, then it will be canceled.

Returning the Car

When a loved one with a lease passes away, you should not randomly return the car to the dealer thinking that this will get you out of the lease. While some people have taken this approach, it does not necessarily get rid of the lease. When a loved one passes away, check the lease agreement and find out if any provisions are available for deceased individuals. Some companies allow you to pay a fee and stop the lease payments when the car owner dies.

Considerations

In some cases, you may be better off to transfer the lease to someone else. By transferring the lease, you typically only have to pay a nominal transfer fee to the dealership. Then another individual takes over the payments and starts using the car. If you have a family member who needs a vehicle, this is often a cheaper option than buying out the lease or trying to settle it. Check with the dealer to find out the process for transferring the lease.

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The Safe Way to Sell a Car With Installment Payments

Some auto owners decide to trade in their old vehicles when buying a new one; but to get the most money for their vehicle, other owners decide to sell their car privately. Several methods can help sell a car privately, and when someone interested in the vehicle can't qualify for a loan or doesn't have the cash to pay outright, you may agree to accept installment payments for the vehicles.

Instructions

1

Know the fair market value by visiting Kelley Blue Book online. This website provides information on prices for private sales and trade-in values based on the make, model and condition of the automobile.

2

Place ads to find a buyer for your car. After deciding a price for the car, advertise for buyers with classified ads in the automotive section of the newspaper or put a "for sale" sign inside the window of the car. Include your telephone number, make, model, price and overall condition of the vehicle. Mention your willingness to accept installment payments in the car ad.

3

Negotiate the price and terms. Meet with potential buyers to agree on a sale price; and once you've decided in a price, discuss terms for the installment loan. In other words, find out how much the buyer will pay each month, and for how long.

4

Write the contract and include information regarding the installment payments. Put everything in writing before giving the buyer possession of the automobile. The contract need include the name of both parties, the sale price, the monthly payment, due dates, penalties for missed payments and installment term. Include a space for both parties to sign, and have the document notarized. Give the buyer a copy, and keep a copy for yourself.

5

Complete the bill of sale to finalize the deal. Transfer ownership by completing the bill of sale located on the back of the car's title. Make a copy for yourself and the give the buyer the original copy. Indicate terms of the installment agreement on the bill of sale.

6

Send a lien release. Once the buyer makes the final installment payment, present them with a lien release form, which indicates that they satisfied the term of the agreement. Download forms from the Department of Motor Vehicle's Official website.

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Tips on Dealing With Salesmen & Buying a Car

The thought of buying a car sometimes invokes the negative image of a fast-talking car salesman trying to sell you a lemon. The reality is that there are tips on dealing with salesmen and buying a car that can help you utilize the salesman's services to get the deal you need. The key is knowing when to listen to a car salesman and when to feel confident in your own information.

Be Concise

Car salesmen attempt to put together a sales pitch that appeals to your emotions rather than your needs. That is why they try to get you to talk about yourself, according to the financial experts on the Motley Fool website. Only offer information that is pertinent to the purchase of the vehicle. Any personal information that is not relevant to the sale needs to be kept to yourself. Do not allow the salesman to get you buying on emotion rather than need.

Test Drive Advice

The test drive is a time when the car salesman will try to get you worked up about buying the vehicle and get important information from you, according to the consumer website CarBuyingTips.com. Some consumers get a bit excited when it is time for the test drive and the car salesman will try to boost the enthusiasm by playing on that emotion. Do not show any increased emotion prior to the test drive. Remain calm and stay focused on determining if this is the car for you. During the test drive, if the salesman feels it is going well, he will try to get you to talk about a trade-in, a down payment and the monthly payments you feel you can afford. Avoid giving this information until you are ready to talk about the deal. When you are driving, you are focused on the road and not thinking about what you are saying. If the salesman tries to talk to you during the test drive, ask him to allow you to safely drive the car and focus on the vehicle rather than discussing the sales agreement.

Focus on You

Automotive journalist Chandler Phillips wrote a series of essays for Edmunds.com entitled "Confessions of a Car Salesman." In it, Phillips reveals the many secrets of being a car salesman and how car salesmen operate. One of the things that Phillips emphasized throughout the essays is that the car salesman is only focused on what is best for him, so you should focus on what is best for you. The car salesman will tell you he is on your side, say some things that may lead you to believe he is trying to get you the best deal and give you the impression he is fighting his manager to get you the best deal. In reality, the car salesman is trying to get you put up on the board as a sale. If he can make extra money by getting you to use a particular lender, he will push you in that direction. Granted, not every car salesman operates this way. Phillips found out that many do act like this. Rather than trying to determine which salesman is genuine and which is out for themselves, your best bet is to focus on getting the best deal for you and not worrying about what is best for the salesman.

Don't Go Alone

As the negotiations move along with a car salesman, it can sometimes be difficult for you to remain objective. If you become fixated on a car, you may be willing to take a deal that is not in your best interest. Always take a friend with you that understands how to negotiate and is not afraid to speak up. Be prepared to listen to that friend no matter how badly you want the vehicle. Your friend could wind up saving you hundreds, and possibly thousands, of dollars.

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