Does Gap Insurance Cover a Total Loss of My Vehicle Under Full Coverage Insurance

Gap insurance is separate from a full-coverage insurance policy. Although you may purchase gap insurance from your car insurance provider, it pays out for your vehicle's loss differently than a full-coverage insurance policy. To determine whether you should purchase gap insurance or if it will cover your loss, consider its purpose and the terms of coverage.

Full-Coverage Insurance

Full-coverage insurance pays for repairs to your vehicle or for its market value if it is determined a loss by your insurance company, or when repairs exceed the car's market value. When you have a loan on your car, you are required to carry a full-coverage insurance policy. If you experience a total loss, your market-value payout goes to your lender without consideration of your loan balance. If the insurance payout is more than your loan balance, your lender will return the excess payment to you. If you owe more than the car's value, you are responsible for satisfying the balance still due on your loan.

Purpose of Gap Insurance

If your market value payout does not satisfy your loan, gap insurance pays your remaining loan balance so you don't have to. You usually have one opportunity to purchase the policy, which is at the time you purchase your car. Purchase the policy only if you are upside-down in your car loan, meaning you owe more to your lender or leasing bank than the vehicle's market value. You do not receive any money back from a gap insurance policy if you do not use it.

Warning

Gap insurance will pay off your loan balance as long as you abide by your contract. Read your gap insurance contract to make sure you are covered for a total loss. For example, you might find that you'll lose your gap insurance benefits if your full-coverage insurance policy lapses or cancels. If you have let your full-coverage policy expire or decreased your policy coverage, you aren't likely to obtain gap insurance coverage.

Paying Off Your Lender

If you did not abide by the terms of your gap insurance policy and it does not pay off the remaining balance of your loan, you must pay your lender yourself. As stated in your loan contract, you are responsible for the balance due on your loan, whether you have your car or not. Make arrangements with your lender to continue making car payments until your loan is satisfied. Otherwise, your non-payment is reported to the credit bureaus, which negatively affects your credit rating.

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Can I Transfer a Car Title If I Owe Fees?

When you sell or donate a car, the buyer takes full ownership of the vehicle and title. If you happen to owe certain fees related to the vehicle as the current owner, this is a matter of concern for both you and the prospective buyer. Often, the agencies who issue these car-related fees suspect that it will be difficult to collect after the driver has transferred ownership of the car to another individual.

Title Transfer Process

Transferring a title is usually a simple matter of signing it and giving it to the new owner. The new owner must then submit the title, bill of sale and new registration paperwork to the state department of motor vehicles to officially transfer ownership into his name.

Types of Fees

The most common type of fee that may be associated with a vehicle is an unpaid parking ticket. The ticketing agent commonly writes the car's vehicle identification number, or VIN, and description on the ticket. Ticketing agents may also write information from the car's registration sticker, if applicable, on the ticket. In certain cases, a ticket due to a moving violation, such as a speeding violation, may also include identifying information about the car, as well as the individual owner.

The License Plate

Though these car-related fees may include data regarding the vehicle, they're commonly associated with the registered license-plate number, so the fee is issued to the registered individual rather than the car. However, it's important for you to send your plates into the department of motor vehicles as soon as possible to avoid issues. Confusion may occur if the department of motor vehicles believes that you're still in possession of the vehicle, and thus responsible for new fees related to the vehicle. Also, if you use the same plates on another car, you must contact the department of motor vehicles to officially record the transfer.

Considerations

You can usually transfer the vehicle title successfully if you owe fees related to the car. However, there are state-specific exceptions to this rule. In Hawaii, for example, the buyer is responsible for covering parking tickets related to the car if you don't do so before transferring ownership. If the new owner runs into problems registering the car, be prepared to help resolve those issues as the seller. Also, before you assume that the car is clear of all fees, contact the department of motor vehicles and pay for a full vehicle history report. Contact your local parking authority as well to see if you owe any outstanding tickets associated with that VIN.

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How to Sell Classic Automobiles

If you have a classic automobile that you no longer want to keep, you can sell the classic auto to another collector or enthusiast. Selling a classic auto does not differ much from selling a regular vehicle. The main difference is that classic autos typically are higher in value than regular cars. As a result, the differences in selling relate only to the value of the vehicle. Selling a classic auto is something that you can do on your own.

Instructions

1

Consult a professional classic car appraiser to get an appraisal on you classic auto before you attempt to sell it. This gives you a good idea of the worth of the vehicle. Make sure to get a written appraisal so that you can show it to any potential buyers.

2

Look at some popular classic car selling websites, such as Classic Cars and AutoTrader Classics (see Resource section), to see how other sellers are pricing similar classic autos. You can also look in your local newspaper's classified ads.

3

Create an account with an escrow service, such as Escrow.com (see Resource section), for accepting payment for your vehicle sale. Typically, there is no charge to create an escrow account, but there is a commission fee that ranges between one and four percent. Using escrow is a way to ensure payment, but it is not necessary.

4

Take good photos of the classic auto from a variety of angles so that it looks attractive to potential buyers.

5

Post an ad listing your car for sale in popular classic auto sales places, such as the Classic Cars and AutoTrader Classics websites (see Resource section). You can also post an ad in the local newspaper. Alternatively, you can take the car to the some classic auto shows and put a "for sale" sign on it. Prices for posting an ad vary.

6

Sign over the title to the new buyer only after you have received payment in full. If you are selling the car to someone that is a long distance away, have the buyer sign a document that states you are not liable for any damage done to the vehicle while it is in the care of a transport company.

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The Process of Repossessing a Vehicle on a Delinquent Account

Experiencing a vehicle repossession is embarrassing and losing your car to a repossession can have a negative effect on your credit score and possibly stop future auto loan approvals. If an auto lender threatens repossession, it's imperative to understand how the process works and then attempt to avoid losing your car.

What is Repossession?

A car repossession occurs after you stop making your auto loan payment. Auto lenders vary; some may repossess your car after you've missed a couple of payments, whereas other lenders may delay the process for a few months allowing you time to get your loan on track. Buying a car and signing loan documents indicates your willingness to pay back funds borrowed from your lender. Being delinquent on a car payment breaches this contract and lenders have the legal right to take back or reclaim the vehicle.

Notification

Rarely will a lender show up to repossess a vehicle without first sending notification. Lenders typically begin contacting borrowers once payments are late by telephone or letter. If a borrower ignores these letters, lenders then send a notification alerting borrowers to the possibility of repossession. Borrowers can speak with their lender and ask for assistance to avert a repossession. Depending on a borrower's situation, the lender may modify the auto loan terms to reduce the payment or grant a forbearance period, or an option to skip a payment.

Repossession Process

If a borrower is unable to get out of default, auto lenders have no other recourse than to repossess the vehicle. The auto lender contracts a repossession company or uses an in-house repo team to track down the vehicle. This company or team typically visits the borrower's home or place of business to get possession of the vehicle.

After Repossession

Auto lenders do not keep repossessed vehicles. These vehicles are generally sold at auction. But before the auction date, original borrowers can remove personal belonging from their vehicle. What's more, auto lenders will return repossessed cars if original borrowers are able to pay off the delinquent balance in full, plus any late fees or repossession fees. If not, the lender sells the car to a new buyer. If the auction sale price is less than the balance owed to the auto lender, original borrowers are responsible for the deficiency balance and will owe taxes on this amount.

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How Does Refinancing an Auto Loan Work?

Auto loans typically have higher interest rates than other types of property. This is due to the rapid depreciation in value of an automobile. Consumers with a high interest rate auto loan may be able to save significantly by refinancing their auto loan to a lower rate. Before starting the process to refinance an auto loan, borrowers should understand how the process works and how to improve the odds of successfully refinancing their auto loan.

Refinance Process

As with any refinance, an auto loan refinance begins with a borrower applying for a loan. The lender then gathers information on the property. Lenders will determine the value of the vehicle by using a price guide based upon the make, model, mileage and other factors. The lender will also look at the borrower's ability to repay the loan by examining the borrower's credit score and other financial obligations. Lenders will base the approval of the loan and the interest rate offered upon the perceived risk of loan default.

Locating Lenders

Borrowers may contact local banks and credit unions to determine whether or not these institutions write auto refinance loans and what terms they may offer. Another option is to use online loan services. These services gather information on the vehicle and the borrower and offer the loan to a number of lenders. The service then gathers loan offers and presents them to the borrower. The borrower chooses the lender they are interested in working with and contacts them to complete the refinance process.

Vehicle Equity

Lenders are more likely to approve loans for borrowers who have equity in their vehicles. Many borrowers are upside down in their auto loan, meaning they owe more than the vehicle is worth. This makes refinancing the loan difficult or impossible. Various sources, such as Kelley Blue Book and NADA, publish price guides that consumers can use to determine the fair value of their vehicle. Borrowers may need to pay down the auto loan balance before being able to refinance to a lower interest rate with a new lender.

Credit Worthiness

As with any loan, the borrower's credit score, debt levels and income all play a role in the loan approval process. Before seeking to refinance an auto loan, borrowers should request a copy of their credit report and review it for inaccuracies. Borrowers that find problems should follow the credit reporting agency's procedure for making corrections. Borrowers should also take steps to reduce their debt level, increase their income and pay all bills on time to increase their attractiveness to lenders.

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Who is the Lien Holder on a Car Title?

After home purchases, buying a vehicle is the second-most expensive purchase that most people make in their lifetimes. Unlike real estate, though, there is much less paperwork involved in a vehicle purchase. Therefore, consumers often must protect themselves by understanding the process and the potential impasses. One issue that crops up often is the existence of a lien on a vehicle. A lien can stop the vehicle title from being transferred from a seller to the buyer. Therefore, it is important to understand who might have a lien on a vehicle and how to check on lien holders.

New Cars

When new cars are purchased, the title is given to the buyer only if there is no creditor with an interest in the vehicle. In most vehicle purchases, the buyer obtains a car loan to be used for the purchase of the vehicle. The creditor becomes a lien holder on the vehicle. This means that the creditor has an ownership interest in the vehicle. This lien remains in place until the creditor releases it. Generally, that takes place when the car loan is paid in full.

Used Cars

When a used car is sold by the owner, there might not be any lien holder. The owner should have the title, and if it shows no lien holder, the buyer can be assured of a smooth transaction. In some cases, though, a consumer sells the vehicle before the car loan is paid in full. When this happens, the sales process cannot be completed until title is transferred, and that does not take place until the original auto loan is paid. Only then will the creditor release the lien. Because many owners do not want to give their money to the seller until the seller can provide a clear title to the used vehicle, many times the sales process takes place at the site of the lien holder. This allows the buyer to witness the seller paying off the lien, and the buyer receives the clear title to the vehicle at the same time.

Other Lien Holders

In some cases, vehicle owners who do not have auto loans still have liens on their vehicles. These liens are often created because vehicle owners use their vehicles as collateral to acquire other loans, including short-term loans from companies such as American General Finance. In these instances, the question of who holds a lien on the vehicle is more complex. The vehicle owner is less likely to be aware of the lien, and it might require a title inquiry by the vehicle owner to determine who has a lien on the vehicle. This could be the case when an individual is named the executor in a will and is charged with awarding ownership of a vehicle to the individual named in the will. It is also possible for an individual to establish a lien on a vehicle. Regardless of who holds the lien, the information regarding the lien should be listed on the vehicle title. It is important for a vehicle buyer to contact all parties listed as current or former lien holders prior to completing the purchase of a vehicle. The buyer can ask each person whether the lien has been removed.

Title Lien Search

While property title searches often require the use of a title search company or a private attorney, the average consumer can perform a vehicle title history search to determine all liens on a vehicle title. The National Motor Vehicle Title Information System was created by a federal law and is administered by the U.S. Department of Justice. The NMVTIS uses three vendors to provide title searches for consumers, law enforcement and other entities who might inquire about a vehicle's title. Generally, consumers are allowed to use the system only when they are buying a vehicle. By using the service, consumers can obtain a list of all current and past lien holders on a vehicle. Thie system's vendors obtain this information from its network of state departments of motor vehicles. The service provides great help when a vehicle is being purchased and the seller has not disclosed the existence of one or more lien holders. In some cases, the seller might not be aware of a lien. Therefore, it is important to do a search even when a seller seems to be honest and forthright.

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How to Figure the Residuals for a Lease

The term "lease residual value" describes a car's bank-determined future market value or purchase price at the end of a lease term. The residual value, expressed as a decimal, is a percentage of the car's sticker price, even if you negotiate a lower price or provide a down payment. Exact residual percentages often change monthly and differ by vehicle type and lease term, such as the vehicle's model level, mileage allowance and the length of the lease. These factors affect depreciation and future value.

Instructions

1

Calculate the leased vehicle's sticker price. Obtain the car's sticker price by searching a dealer's inventory online or in person. Visit the manufacturer's website to obtain the cost of its vehicles with or without available options and features.

2

Choose the terms of your lease by visiting the dealer or manufacture's website, where you can find term options. Mileage allowances vary from 10,000 to 15,000 miles per year and lease terms often vary from 24 to 48 months.

3

Contact a dealership and ask a salesperson or manager for the car's residual value. Supply the vehicle type and lease terms you chose. If you aren't sure where to find a dealer in your area, use the "locate a dealer" function from the manufacturer's website.

4

Multiply the vehicle's sticker price by the residual value. For example, if the vehicle's sticker price is $20,000 and the residual is .63 percent, your residual value is $12,600.

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How to Sell a Car With a Lien & New York's Laws

An outstanding lien on a vehicle means that the vehicle serves as collateral for an unsatisfied debt. The lender who financed your car probably obtained a lien against your vehicle -- filing the lien with the New York Department of Motor Vehicles until you satisfy the debt. If you default on the lien, your lender may repossess the vehicle. Selling the vehicle does not remove a lien against it, unless you use the money from the transaction to fulfill the loan.

Title Transfer

Lien-holders in many U.S. states keep the title certificate on a vehicle until the buyer pays the loan in full. New York, however, does not have such provisions and allows the purchaser of a vehicle to possess the title certificate, though the certificate will list any outstanding liens against it. If you sell your car in New York before you finish paying for it, you may transfer the title to the new owner while the lien is still intact.

Removing the Title Lien

Once the buyer purchases your vehicle, you must sign over the title to the new buyer, which he will use to register the vehicle in his name. Though you may have satisfied your loan terms and officially removed the lien from the vehicle, the title in your possession prior to satisfying the lien will still list the original lien against the car. The new buyer may attach the original lender's proof of lien release to the title, or may wish to acquire a fresh title free of the previous lien.

The latter requires that the new owner apply for a release of lien by sending the existing title and lender's proof of lien fulfillment to the Commissioner of Motor Vehicles at the New York Department of Motor Vehicles Title Services department in Albany, New York. There is a $20 fee for title lien removal payable by check or money order.

Financing

According to a Kelley Blue Book consumer study in 2010, 58 percent of used car buyers finance at least a portion of their car purchase. If you wish to sell your vehicle with the lien still on it, look for buyers prepared to pay in full through cash or bank-financing. Seller-financing is difficult if your car has a lien against it. Buyers may not be inclined to make car payments to you in confidence that you will use the money to satisfy the loan. Though a buyer may agree to a title transfer while you still owe money on the vehicle, a default on your part may cause the lender to repossess the vehicle, leaving the new owner without a car.

Considerations

An Automotive News report says that approximately 30 percent of car owners looking to purchase another car are upside down on their existing loans -- meaning they owe more for the car than it's worth. If you currently owe more money on your vehicle than you will be able to sell it for, you may have to wait until the loan value catches up to the retail value before conducting a private party sale. If you must free yourself of the car, consider trading it in for another vehicle from a licensed automotive dealer. Dealers don't mind accepting trade-ins for vehicles with outstanding liens and your lender can roll over your unpaid loan debt into your new loan when you finance your new car.

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How Much Negative Equity Can Be Put Into a New Car?

Trading in your vehicle toward another purchase while owing more money than the vehicle is worth, referred to as negative equity, is a possibility. Not all borrowers, however, are approved for the loan. A lender may decline your application if your vehicle's value isn't comparable to the amount you're asking to borrow. You might have to provide a down payment, depending on your lender's loan requirements.

Lending Value

The amount you can finance when rolling over negative equity into a new car loan differs by your individual credit situation and vehicle purchase price. The vehicle's lending value is based on MSRP, or the manufacturer's suggested retail price. Depending on credit, a borrower might obtain a loan approval for less or more than the car's lending value, known as a loan-to-value ratio. You'll have to apply for a loan to find out your loan-to-value ratio. Some borrowers may obtain an approval for thousands over MSRP, while others have to provide a down payment to increase vehicle equity, without negative equity allowed.

Trade-in Value

You might fare better selling your car privately instead of trading it in to a dealer. To satisfy your old loan, you'll have to provide a down payment to your lender after the cars sales price. You'll make more money when selling your car privately. To gauge the difference in values, check appraisal websites to determine your car's trade-in and private sale value. Your vehicle might be worth thousands more, which minimizes any amount you'll pay out-of-pocket or transfer to your new loan balance. You'll also pay less in interest charges and avoid a negative equity situation in the future.

Rebates and Discounts

Rebates help to cover up negative equity. Although rebates are instant discounts off a vehicle's MSRP, the discounts are viewed as a down payment to lenders. If you have trouble getting a loan or are asked to provide a down payment, shop for a vehicle with large rebates and negotiate the car's sticker price to roll over more negative equity. Previous model years usually carry hefty discounts. Search online for discount information, which is readily available on manufacturer websites.

Considerations

If youre approved for a loan with negative equity, consider the interest youll pay on the money you carry over to the new loan. Every $1,000 financed is equal to about $22 in a monthly payment amount, which might create issues with your budget. Carrying over just $2,000 in negative equity creates an increase of over $40 per month for your monthly payment. Dont extend your loan term to balance the difference in payment, as youll prolong your negative equity situation and pay more in interest.

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Can You Legally Get Out of an Automotive Sales Contract Due to it Not Being Affordable?

Although there are legal ways to get out of an automotive sales contract, most still leave you financially responsible for the outstanding loan balance. The best option is to speak with your car financing company and discuss whether they can do anything to help make your payments more affordable.

Selling the Car

You can try to sell the car for an asking price that is the same as the balance on your loan. After the sale, you pay off your car loan and get a new title that no longer lists the finance company as a lien holder. You then will have to sign the car over to the new owner so he can register it. If you cannot sell the car for what you owe on it, you may want to sell it for what you can get and put that money toward your loan. In this case, you will still have to make the remaining payments.

Loan Assumption

One option of getting out of your car loan contract is to have someone assume or take over the loan payments. This usually means that the person assuming you car loan will have to qualify for a loan. Her loan amount will be the remaining balance of your car loan. After she qualifies, the car loan goes into her name and out of your name. At that time, you are no longer legally responsible for the loan. You should check with your financing company to make sure that your car loan is assumable.

Voluntary Repossession

You can turn your car into the car dealership in an act known as voluntary repossession. You should be aware though, that doing so does not absolve you from being financially responsible for the remaining balance on the car. What will happen here is that the dealership will sell the car at auction, apply the proceeds minus any fees to your outstanding loan balance. Voluntary repossession should be a last resort as it will negatively affect your credit score and you will still have to pay the difference between the balance of your loan and the auction sale price of the car.

Considerations

As soon as you realize you can no longer afford your car payments, you should contact the loan company. They may have options for you such as a deferment of payments or a temporary forbearance of payments. These options allow you to time to right your financial situation. If the only option you have left is to give the car up, remember that there is little difference between a voluntary and involuntary repossession. You should consider your options very carefully before going either route.

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Things to Do After Buying a Used Car

Buying a used car can be quite a chore. Most people will take a number of different steps to make sure the car is going to be reliable before they make the purchase. Many people often fail to take the next step, however, and do the other things that are necessary after buying the car.

Mechanical Checks

Ideally, you should have the car inspected by a mechanic you trust before you ever make a purchase on a used car. However, if you happened to make an impulse buy, take your car to a mechanic and have it looked at immediately. Many major brake and tire chains will do free inspections for you and usually have some kind of code of ethics that they follow, so you will not have to worry about them trying to unnecessarily sell you something you do not need. Tires and brakes are the most important to check. After that you may wish to take the car somewhere else for a more thorough inspection to look at the engine and the electrical systems.

Getting a Warranty

If you bought a car from a private seller and the vehicle does not have a transferable warranty or the original transferable warranty has expired, you may wish to look into getting a warranty that covers major repairs like transmissions. A transmission repair can cost upwards of $2,000 or more, depending upon the type of vehicle. A vehicle warranty may cost you a monthly premium and you may have to pay a small deductible in the event of a repair. Pay special attention to the details of any warranty you purchase. Review all details regarding what the warranty covers, what your deductible and premium will be and when it will expire.

Cleaning

Cleaning your car immediately after you bought it can be another important step in preserving the longevity of your vehicle. Even if you bought your car from a dealership that details your car before you leave the lot, it can be advantageous to run your car through an automatic car wash that provides undercarriage cleaning. You should also plan on cleaning under the hood in order to ensure that you have not missed any damage or wear and tear in the engine area. If your car was not detailed by the dealership, wash it and wax it to assure the longevity of your car's exterior.

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The Penalty for Turning in a Car Early on a Lease

The penalty for turning a car in early on a lease includes paying all remaining lease payments and the other fees that constitute the early termination fee for the lease. Although the exact fees charged for an early termination vary between lenders, the amount normally includes all remaining lease payments, a disposition fee, and charges for any mileage on the vehicle in excess of the contracted amount. This total dollar amount is often higher than expected by lessees, particularly because all remaining lease payments must be made to end the lease early.

Remaining Payments

The majority of the penalty charged for returning a leased vehicle early requires paying all remaining lease payments. Unlike a traditional loan, where you can trade a vehicle in and receive a trade credit, a lease is more like a long-term rental or apartment lease than a traditional car loan. As such, substantial fees are charged if you want to end the lease early. For example, if your monthly lease payments are $300, and you want to get out of a 48 month lease after 12 months, the 36 remaining payments total a surprising $10,800.

Disposition Fee

Most leases require a disposition fee to be paid to the lender at the completion of the lease term. This fee is due whether the lease is terminated early or if it ends at its scheduled maturation date. The only exceptions to paying a disposition fee occur when you turn in your leased vehicle in order to lease another from the same leasing company. Many consumers do not consider the disposition fee when they first lease a car or truck, so be prepared to pay this amount when considering an early lease termination.

Mileage Fees

All leases have a contracted mileage amount, referring to the total number of miles that can be driven over the lease term. Common terms include between 10,000 and 15,000 allowable miles per year. However, in the event that the mileage is exceeded, mileage charges are assessed. Typical mileage charges range between 15 and 25 cents per mile. If you have driven more than the allowable mileage before you choose to terminate your lease early, you will be liable for the excess mileage.

Consequences of Not Paying the Fees

If you elect to return your leased car or truck to a dealership before the scheduled maturation date, but you fail to pay the early termination amount, the remaining balance on your lease could be sold to a collection agency where your non-payment will be reported to the three major credit bureaus: Equifax, Experian and TransUnion. The collection accounts associated with non-payment will make it difficult to secure an additional auto loan or lease, so budget for these charges or roll them into your new loan or lease to ensure they are paid.

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The Average Used Car Finance Rate

The average finance rates for used car loans can vary depending on your credit score, geographic location and price you are paying for the car. Interest rates also vary among lenders. Although several factors can affect car finance rates, it pays to shop different lenders when looking for the best auto loan deal.

Credit Standing

Borrowers with high credit scores qualify for the best financing rates. A high credit score makes you less of a risk to the lender. For that reason, a score of 720 or better will get you the lowest interest rate on a car loan. A healthy credit score can give you more negotiating power with the dealership, especially if you apply for dealer financing. Even with good credit most auto dealers will offer you an interest rate higher than what a bank would offer you. However, the lower the interest rate you pay on the loan, the lower your monthly car payments will be.

Interest Rates

Generally, banks and other lending institutions offer borrowers a rate of interest on auto loans for used vehicles that averages around 7 percent at the time of publication, according to CarsDirect. Depending on your credit score, you may be able to lock in a lower fixed rate. Although credit unions issue fewer than 20 percent of all auto loans nationwide, they usually offer lower rates than banks. In 2009 the average credit union interest rate for a used car loan was 5.4 percent compared to 6.9 percent offered by banks, reports the National Credit Union Administration.

Getting a Lower Interest Rate

There are ways you can get a lower interest rate when you finance the purchase of a used car. Consider the price of the vehicle. The lower the price tag on the car, the lower the rate of interest you will pay. If you finance the loan for a shorter term, a lender will usually offer you a lower interest rate. Your monthly payments will be higher, but you will be paying back less in interest. Other factors that can get you a lower interest rate include making a down payment of 25 percent or more of the total amount of the loan and showing that you have cash reserves set aside in the bank.

Finding the Cheapest Deal

When it comes down to it, buying a used car might not necessarily save you the most money. Downturns in the economy can drive up the prices of used cars. In some cases, a new car may not be that much more expensive than a used model that is already two or three years old. Dealers are offering lower financing rates for new models, sometimes even to people with lower credit scores.

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What Is Gap Insurance for a Vehicle?

If you have a loan on your vehicle, you are likely required to carry a full-coverage insurance policy. In the event of a loss, including an accident or theft, your insurance company pays the market value of the car to your lender. For people who owe more than their car is worth, gap insurance is available, which covers the 'gap' between your vehicle's value and your loan amount.

Warnings

If you just took a loan for a brand-new car and didn't put money down, you are likely upside-down in your car loan. While your insurance company would pay the vehicle's market value toward your loan, you still may owe $6,000 to your lender. You can expect to continue making payments until the car is paid off, as you promised in your contract. Additionally, because you still have an active car loan on your credit report, you may find you can't obtain financing for another car until the old balance is satisfied.

Benefits

In the same scenario, your gap insurance would pay for the remaining balance due to your lender so you don't have to pay. On average, a new car bought at or close to invoice pricing maintains only 81 percent of its value at the end of one year. Rather than make the payments yourself, gap insurance takes care of the rest, allowing you to save money rather than spend it for a car you no longer own. Additionally, you can start car shopping again once the loan is satisfied, instead of remaining without a car until the loan is paid in full.

Shopping for Coverage

Gap insurance is not terribly expensive, depending on where you buy it. Some dealers may charge $100 for the extra coverage while some charge over $500. Your loan provider or insurance company may also offer gap insurance. Be sure to check with your loan provider to find out if gap insurance is included with your loan or how much it costs to purchase it directly from them. Insurance providers may also offer the coverage at a discounted rate. Make gap Insurance part of your shopping price criteria if you need it, as dealers mark up the cost for profit.

When to Buy

Purchase gap insurance coverage if you owe more than your car is worth. Use appraisal websites to determine your vehicle's market value, such as Edmunds.com or Kelley Blue Book, before you complete your paperwork. When you check values, input your vehicle as a used car with 15,000 miles more (or how ever many you drive in a year) on the odometer than you have now to gauge value differences. If your loan amount is less than this, you probably do not need gap insurance. If it is higher, purchase the policy to protect your funds.

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How to Pay Down Your Car Loan

Paying down a car loan can lower your debt-to-income ratio and help you pay off your car early. The average car buyer pays on a vehicle for 60 months. While typical, it's possible to pay down a car loan early and eliminate the debt. There are numerous ways to accomplish this goal. But to achieve this, you'll need to select a realistic strategy and stick with the plan.

Instructions

1

Use your extra money to increase payments. Rather than pay your regular car payment amount each month, add extra money to each payment (perhaps $50 or $100) to reduce the balance quicker and pay off the loan early. To slash your auto loan term in half, double your monthly payments every month, if feasible. Find ways to cut your personal expenses to create additional cash.

2

Modify your loan term. Assess your finances to see if you can pay half of your car payment every other week. Bi-weekly payments reduce the interest paid on auto loans, which helps pay down the balance quicker.

3

Refinance the auto loan. Contact your auto lender to refinance the vehicle loan and opt for a shorter term such as a three-year loan. You'll pay less interest and you'll reduce the auto loan balance faster.

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Can I Refinance a Vehicle After It's Been Paid Off?

Banks, credit unions and car dealerships will loan you money to purchase a new car if your credit is good. Financing is available for up to six or seven years with little or no down payment. Your credit and your down payment determine the maximum term of the loan and your interest rate. Once you pay your loan off, it is possible to refinance your car if you need cash or need to re-establish credit. Lenders consider refinancing a paid-off loan to be a higher credit risk than a purchase loan, so terms are usually shorter and interest rates are higher.

Refinance

If you have an established relationship with a credit union, there is a chance that it will refinance your vehicle. Banks rarely refinance automobiles, but finance companies will usually be able to help you. The interest rate will be considerably higher than your purchase-money interest rate, but it should be lower than a personal loan. Refinance rates vary considerably. Shop for the best loan.

Loan Requirements

When you buy a new vehicle, the dealer is primarily interested in your credit history. When you refinance, the lender will require your employment history, a current pay stub or tax return (if you are self-employed) and he will inspect your vehicle. Since you are financing a used vehicle, the maximum he will loan you will be a percentage of the car's current value. The actual percentage will depend on your credit history and your financial situation.

Loan Sources

Talk to several lenders to get the best deal. The Internet can be a good source for auto refinance loans. Most lenders will not refinance their own loans if there is a loan balance. If you recently paid off your loan, ask your previous lender. It has a history with you. If you have excellent credit, ask your bank whether they will give you an unsecured loan.

Considerations

If you are on a tight budget and are ready to buy a new vehicle, consider financing it for the longest term available. You will have a lower minimum payment, and the interest rate will usually be the same or slightly higher than a shorter-term loan. If you currently have a balance on your auto loan, you may be able to refinance the balance at a lower rate than you are paying. An interest rate that is one percentage point lower can substantially reduce your payment. Lenders will usually require that you have a minimum balance of $7,000 to $10,000.

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Can I Finance a Car With a Learner's Permit?

A learner's permit is an acceptable form of identification, which a lender requires for an auto loan. To obtain an auto loan, you must purchase a full-coverage insurance policy for the vehicle and maintain it throughout the loan term. If you're an inexperienced driver, you're likely to pay higher costs for auto insurance. Consider your insurance needs and costs to determine if pursuing an auto loan while you have a learner's permit is worthwhile.

Credit Requirements

Auto loan providers aren't interested in your driving history. You don't need a driver's license to apply for a loan or obtain an approval. Auto loan providers require a valid Social Security number to check your credit history. Expect to also prove your income. Most auto loan providers prefer that a borrower have at least a two year employment and address history. You'll also prove your income by providing your most recent paystub or tax information if you're self employed. Some lenders may require additional information, such as references, proof of address or proof of paid debts.

Auto Insurance Requirements

Most states require drivers to purchase and maintain a liability insurance policy for registered vehicles, but lenders require more coverage. To protect itself from loss, your lender requires you to purchase a full-coverage insurance policy and maintain it for the term of your loan. Full-coverage insurance, which includes collision and comprehensive coverage, is the most expensive policy you can purchase. Auto loan providers also require higher coverage limits and lower deductibles, which also raise insurance cost. Without a driver's license or driving experience, you might find it difficult to afford the coverage you need for an auto loan.

Insurance Issues

Most lenders do not allow a lone borrower to insure a financed vehicle in a different person's name. If you have a cosigner, you may choose to register and insure the vehicle in your co-owner's name, while your name still remains on the vehicle's title and loan. Ask your auto loan provider for its rules before you sign any paperwork. Many states also require that the registered owner of a vehicle provide insurance coverage, so registering the vehicle and insuring it in another person's name might not be an option even if your lender allows it.

Lowering Your Insurance Cost

If you find that you can't afford your own insurance with a learner's permit, ask someone else to add you to his insurance policy, which is a cheaper option. You might ask someone in your household to help. If you have to purchase your own policy, consider shopping around to brokers or online providers, as these providers can usually provide lower insurance costs. You may have to wait until you're fully licensed before pursuing your own insurance policy and auto loan.

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What Is Actual Cash Value for Car?

Whether you are buying or selling a car, it is good to know what the current market value for the car is so that you can be sure that you are getting a fair deal. A number of factors go into the cash value, and you should take all of these into account in determining how much it is worth.

New vs. Used

The value of a new car is much easier to calculate than the value of a used car. If you go to a manufacturer's website, you can "build" the car in question and add the applicable features. The site will give you an MSRP (manufacturer's suggested retail price), and with taxes and dealership fees, you should expect the market price to be slightly higher than this. Anything below MSRP is a good deal. The calculation of a used vehicle's value, however, is less exact. The industry standard measurement for used car value is Kelley Blue Book.

Make and Model

The make and model of a vehicle are the first two factors of determining its value. Even if two vehicles are similar (both midsize sedans, for instance), they may have significantly different values because of the make and model. This can come due to an actual or perceived difference in durability or quality of manufacture, but it can also come due to the availability of parts (as it may be more difficult to find parts for foreign makes and models than for domestic ones) or due to other market factors such as current fuel prices. When fuel prices are high, cars that use a lot of fuel lose value in the market.

Condition

The general condition of a car makes up a big part of its value. If engine or transmission problems are audible, this may detract from the cash value. Even if the vehicle runs well, though, cosmetic problems such as chipping paint, dents, scratches, cracked windshields, dirty rugs and inoperative electronics can also decrease its cash value. Take all such issues into consideration.

Odometer and Model Year

Even if the previous owner of a car has taken good care of it by making all necessary repairs, getting it regularly serviced and keeping it clean and undamaged, the car will still lose value as it ages and adds mileage to its odometer. The only exception to this would be a car that has become a collector's item due to its rarity and special appeal.

Previous Owners

A car loses value when it has had multiple previous owners. This is because the fact that it has been bought and sold multiple times suggests that there may be something wrong with it that would cause an owner to want to get rid of it. It also increases the likelihood that it may have passed through the hands of someone who did not service it as he should have by doing things such as changing the oil and transmission fluid.

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What Does Auto Loan Securitization Mean?

The process of auto loan securitization involves packaging auto loans together and selling them to investors. The securitization process essentially helps convert an asset that is not liquid into a security that can be traded or held. This process could affect your auto loan after it is originated by the lender.

Holding Loans

In the past, the banking industry held onto loans after they were originated. When you would go to the bank and get a loan for the purchase of a car, after it was originated, the lender would service it. You would make your payment directly to the lender and if you had a problem, you would talk to the lender. With securitization, the lender now has the ability to group your loan together with other similar loans and sell that package to investment banks.

How It Works

Banks write a relatively large number of auto, mortgage and personal loans, which can then be packaged into securities by interest rate and risk. These securitized loans are then sold to investors and investment banks. Then when consumers make payments on their loans, this money goes to the investors as a return for their investment. If low-risk loans are used, this type of investment can be relatively safe for investors.

Issues for Investors

While auto loan securitization can be attractive for investors, it can also lead to some issues. For example, when interest rates in the market fall, it often leads to consumers refinancing their loans. When this happens, the loans in the group are paid off and the investors stop earning returns on their investment. When the economy is down, it can also lead to repossessions. When this happens, the loans no longer earn interest, which negatively impacts the investors.

Rating Agency

To make this process work, rating agencies become involved. Entities like Standard & Poor's and Moody's issue ratings on securitization vehicles. To do this, they will analyze the underlying risk of the loans in the group. Then the rating agency issues a relative risk rating for the security. For example, when the security has a AAA rating attached to it, it appears to be very safe to investors. Securities with lower ratings have higher interest rates attached.

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How to Purchase a Tractor Trailer With Bad Credit

Owning a tractor-trailer gives a driver more control over their professional future. Drivers who do not rely on using company tractor-trailers are able to start their own businesses or to apply for positions with companies that require drivers to own their own tractor-trailers. Purchasing a tractor-trailer with bad credit is not impossible. There are ways to buy a tractor-trailer with repossessions, collection accounts or bankruptcies on your credit report.

Instructions

Owner Financing

1

Search for tractor-trailer private sale listings in your area. Check local newspapers and Internet classified website ads. Also, visit local trucking website communities, and search for posts made by people who want to sell their tractor trailers.

2

Contact a tractor-trailer owner who is willing to sell. Explain your credit situation, ask for owner financing and offer to make a large down payment. If the debts damaging your credit report are old or incorrect show the seller proof that those bills were paid. Suggest setting up automatic bank transfers to make your monthly payment. Be willing to provide the seller with proof of employment and your home address.

3

Request or prepare a sales agreement documenting the down payment and monthly payment amount. Include a payment due date in the agreement along with acceptable payment methods. Sign and notarize the agreement with the original owner to complete the transaction.

Employer Financing

4

Talk to your employer about the possibility of buying the tractor-trailer you are currently driving. Companies searching for ways to replace older tractor-trailers are often willing to sell to employees. Financing through an employer is a low-interest or interest-free alternative to dealership financing. Offer to make a down payment, if necessary to reduce the amount you need to finance.

5

Sign an agreement with your employer that outlines the payment terms and due dates. The employer may require a clause allowing them to take possession of the tractor-trailer if you resign before making the last payment.

6

Negotiate payment terms and arrangements with your employer. Find out the total amount of the vehicle and the amount of money you will pay monthly. Request to have payments taken from each paycheck, especially if the loan is interest-free.

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How Long Will it Take Before I Develop a Credit File to Get a Car Loan?

The amount of time necessary to develop a credit file substantive enough to get a car loan varies based on your personal credit history. For young adults who have just started establishing credit, it can take a few years to get an adequate number of accounts and establish your good payment history. For borrowers with some bumps in their past, it may also take a few years for such blemishes to come off the credit report. While there is no definite time frame for building a credit file significant enough to get financed, making good choices helps improve your credit standing.

Payment History

The largest factor in calculating your credit score is your payment history. As MyFICO.com notes, 35 percent percent of your credit score is reliant on the payment history shown in your credit file. For young borrowers, it is especially important to pay bills on time, as they may have less open trade lines to offset late payments. When getting a car loan, your prior payment history on car loans is also pivotal. If you have a repossession or excessive late payments on an auto loan, it can be very difficult to obtain another.

Amounts Owed

MyFICO.com notes that the total amounts owed to creditors relative to your credit limits accounts for 30 percent of your FICO score, meaning that you should avoid having maxed-out accounts if you want to build your credit file sufficiently to get an auto loan. Although credit approvals for car loans are situational -- meaning that each borrower may have different requirements based on income level and other factors -- avoid carrying large balances on revolving forms of credit like credit cards.

New Credit

The number of new credit accounts and recent credit inquiries shown on your file also has a bearing on your ability to get a car loan. If you regularly apply for new forms of credit, your credit score may be lower as a result of frequent inquiries. Similarly, if you have a large number of new accounts, your credit score can be similarly impacted, as many new accounts can make you look desperate in the eyes of lenders.

Types of Credit Used

The variety of loans and credit cards on your credit report accounts for 10 percent of your credit score. To qualify for an auto loan, your credit file should include a range of credit types, including credit cards, student loans, lines of credit and retail charge accounts. Although meeting these qualifications does not guarantee credit approval, being proactive about your credit history can make waiting for an approval less stressful.

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Used Car Sales Laws in Tennessee

Tennessee's lemon law, which protects consumers against dud cars, doesn't apply to used cars. However, if you've purchased a car that's a lemon, you may have some recourse against the seller with a number of other laws in Tennessee that protect consumers. If you can't find a specific law that covers your purchase, you may still be covered by federal consumer protections laws.

Warranties

Several warranty laws protect Tennessee consumers against used cars that are lemons. They include the Magnuson-Moss Warranty act, which protects purchasers of used vehicles by stating the manufacturer must abide by the vehicle's warranty: this includes service contracts, written warranties and implied warranties. According to Tennessee law, a dealer has an implied obligation to sell a sound car. However, a dealer can skirt around the law by selling a car "as is."

Warrant of Merchability

When you purchase a car, your expectation is that you should be able to drive the car away from the lot and that it's in good working condition. The warrant of merchability states that the vehicle should run like it's supposed to after you purchased it. If there's a defect that stops the car from working as it should, you should be able to get recourse. However, you must prove that the defect was present at the time of sale.

Uniform Commercial Code

If you make a claim under the warrant of merchability, the expectation is that you should be able to get your money back. However, it's possible that the dealer will claim the defect was not present at the time of sale and will deny you claim. If that happens, you may be able to get recourse under the federal Uniform Commercial Code, which can theoretically be used to cancel the sale of used cars.

Federal Laws Protecting Tennessee Consumers

The Federal Trade Commissions Used Car Rule mandates that Tennessee dealers post a Buyer's Guide on all used cars they sell. The Buyer's Guide contains information about the car and becomes part of your contract. If there is conflicting wording in the sales contract, the buyer's guide overrides that warning. In addition, if the car you purchased isn't that old, you may still be protected by federal lemon laws even though the car was sold as used.

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How to Turn Over a Car Title When Someone Other Than a Financial Institution Has a Lien on It

Most car buyers use banks, credit unions or other traditional financial institutions to obtain a loan. Some people turn to alternative financing for their vehicles. The lender is entitled to place a lien on the title until the debt is paid. A mechanic may also place a lien on your vehicle. Normally, you must pay this debt and clear the lien before you sell the car. But it is possible to sell a car and turn over the title that has a nontraditional lien attached to it.

Instructions

1

Talk to the lien holder about selling the vehicle. Ask if the holder would be willing to run credit checks and approve a suitable buyer to assume responsibility for the lien.

2

Advertise the car in thrift papers, newspaper classified ads and online. Negotiate with prospective buyers and make the deal. Be open and honest about the lien and the necessity of passing a credit check when speaking with buyers.

3

Have a suitable buyer fill out a credit application. Give it to the lien holder so it can run a credit check. Repeat the application process until the lien holder approves an applicant.

4

Have the lien holder sign a transfer contract releasing you from the debt. Get this document notarized so you can take it with you to the motor vehicles department.

5

Have the buyer sign a purchase contract. Review the document with the person in detail and be sure he understands he is assuming your debt by signing the contract.

6

Provide the lien holder with a copy of the purchase contract. Collect any money you may be getting from the deal and give the keys to the buyer.

7

Sign the title and hand it over to the department of motor vehicles along with copies of all the contracts involved in the sale. Take the buyer with you so she can review the documents with an agent of the DMV and take official possession of the vehicle.

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How to Negotiate a Good Car Lease

Leasing is a financing option available when looking at a new car. With a lease, you pay for the depreciation of the vehicle over the term of the lease. Paying this way will keep your payment lower than if you were buying the same vehicle especially when you negotiate the best deal on a new car lease. It is possible to negotiate a lease deal that saves you money.

Instructions

1

Research different vehicles to see which ones you would like to drive. Check The Edmunds website and Consumer Reports for different reviews of vehicles. Decide if you want to drive a sedan, coupe, sport utility vehicle or truck. A larger family will require a bigger vehicle. If you drive on dirt roads or in other poor road conditions, you may need a four-wheel drive sport utility vehicle or a truck. If you have a long commute, you may want to choose a vehicle with better gas mileage.

2

Go to the Edmunds and Kelley Blue Book websites to check for available leasing incentives and discounts. Many manufacturers subsidize or help fund leases on certain vehicles. If one of these subsidized models is a car you are interested in, this is a chance to save some money.

3

Negotiate the price of the vehicle as if you were buying it. The net capital cost is the amount the leasing company pays the dealership for the vehicle you want to lease. The residual value of the lease subtracted from the net capital cost is the amount you will pay off over the term of the lease. A reduction in the sales price means you pay less. Ask for bids from different dealers to get your best pricing.

4

Sit down with either the salesperson or business manager after you've taken the vehicle for a final test drive. They may try to steer you towards negotiating based on payments. Do not fall for this tactic. Continue to negotiate based on total purchase amounts. Negotiating on payments is deceiving. Many times, the dealer will lengthen the lease term to lower the monthly payment. You will pay less per month, but more over time. They may also increase the down payment amount to lower the monthly payment. If you are trading in a vehicle, the amount allowed for trade in will factor in as well.

5

Figure out the equivalent interest rate on the lease. The equivalent interest rate for a lease should be equal or close to the average interest rate you would be offered on a car loan. Call around to some banks and credit unions to get auto purchase loan interest rates for comparison. Ask the dealer for the money factor on the lease you are taking out from the dealer. The money factor is the interest the leasing company charges on the money it uses to purchase the car and lease it to you. This is a very small number expressed as a decimal. Multiply this number by 2,400 to get a number close to the an interest rate for comparison purposes. This should be around the going interest rate on new cars. If it is considerably higher try to negotiate this down, or walk away to find a better deal.

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Auto Lease Guide

Leasing a vehicle can seem like an attractive option, mostly because the payments always seem to be lower than those for buying. When you lease a vehicle you do not own it; you are liable for any damage that occurs during the lease period that is not covered by insurance and you have restrictions on the use of the vehicle. But some people prefer leasing because they can get into a new vehicle every three years with lower payments than owning.

Payments

The payments on a lease are different than a loan because you are only paying the depreciation value of the vehicle in a lease. If you are looking at a $10,000 car that is estimated to be worth $6,000 after three years, then you would be financing the $4,000 difference instead of the whole $10,000. Your monthly payment would include interest and any fees that you did not pay at closing. That is why leasing payments are lower than buying. The difference is that if you were to finance the $10,000 for 36 months and buy the car outright, you would own it when the term is over. When a lease term is over, you either have to turn the car in, or pay the rest of the value of the vehicle. In our example, if you turned the vehicle in after 36 months you would have to pay the $6,000 you did not pay initially along with interest and fees. So, in the end, a lease can cost you a lot more if you want to buy the car. But if you have no intentions on purchasing the vehicle when the lease is up, then you can save money each month.

Charges and Fees

A lease does not mean the price of the car is non-negotiable. Do not let a car sales person convince you that because you are leasing the price is set in stone. Negotiate the final price of the car before you sign lease papers. Look at the fees the dealership charges when putting together a lease. Some fees, such as the standard delivery fee and taxes, are expected. But if you do not pay attention then the sales person could add on extra fees and attribute them to the lease. Ask for a detailed description of each fee you are being charged; if you are not comfortable with a fee, then take the contract to a lawyer and have it explained to you.

Leasing Versus Buying

If you drive a lot and want to drive your vehicle out of state then leasing may not be for you. One of thee aspects of a lease that can make it an unattractive option is the restrictions put on your ability to drive your vehicle. Most leases state that if you drive more than 15,000 miles per year then you will have to pay for every extra mile. For a 36 month lease that means no more than 45,000 miles for the term of the lease. The per mile fees can range anywhere from a few cents a mile to over a dollar a mile. Read those conditions and understand them before you sign the lease. Most leases will also prevent you from being able to drive your vehicle out of state. If you get in an accident out of state in your leased vehicle, then you may not only face problems with your insurance company, who could choose not to cover the damage, but you would also be violating your lease and could cause the dealership to penalize or even sue you. Your lease may also come with a clause that charges you if you turn in the car before the lease period is up. All of these conditions are not part of an agreement when you buy a car, so make sure leasing is for you before you get involved in it.

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