October 2011 ~ Managing a Car Loan

Monday, October 31, 2011

When Can I Cancel My Car Insurance After My Car Has Been Repossessed?

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You should cancel your car insurance the moment your vehicle is repossessed. Otherwise, you're paying to insure a vehicle that doesn't belong to you. You should also return your license plates promptly. This way, you will likely receive a refund from your insurance provider and your state for your prepaid registration.

As soon as you are no longer in possession of your vehicle or plan to drive it, cancel your car insurance. If you already know that your vehicle is going to be repossessed and have stopped driving the car, return your plates and call your insurance agent to cancel your policy. Keeping insurance coverage on a car you're not driving or don't own any longer is a waste of money. Additionally, any refund you might receive is based on the day you actually cancel your policy or return your license plates.

You may have to provide your insurance company with proof that your plates have been returned to a motor vehicle office before canceling your policy. If your vehicle was repossessed with your plates still fixed on the car, pick the plates up from the repossession agency that seized the vehicle. If you aren't sure who has your car, call your lender or your police department. If you don't want to get your plates, many states allow vehicle owners to report plates as lost or stolen, so check with your state's motor vehicle department for information.

Aside from proving that you returned your plates, insurance companies have different rules for policy cancellations. Your insurance provider may allow you to cancel over the phone, but you may have to sign cancellation documents. Follow your insurance company's procedures. If you use a local agent or broker, you can go to an insurance office to sign and obtain necessary forms. If your insurance company is not local, handle email and fax correspondence quickly so your insurance cancels in a timely manner.

If you paid your policy in full or one month ahead of time, you should receive a refund for the remainder of your policy or month's payment. Ask your insurance provider for details. Because of the opportunity for a refund, it is important you cancel your insurance as soon as possible. Because you also returned your license plates, you should receive a refund for your vehicle's registration. Some states require a one or two year registration payment at the time of registration. Any portion not used on your registration is refundable or transferable if you plan to register another vehicle.

How to Borrow Money Against Cars

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People can borrow money to buy or refinance cars. People often take loans out against cars they already own because the fixed-term loans have lower rates than unsecured forms of credit. Car loans generally have rates comparable with mortgage rates. When the prime rate falls very low, car rates dip below average mortgage rates. Most banks lend money only against cars less than seven years old. Some private dealers will offer loans on older cars, but normally only for purchases and not refinance or cash-out loans.

Instructions

Find local banks and credit unions and visit their websites. Look at the details of car loans they offer. Generally, credit unions offer lower rates than banks because they are nonprofit institutions. If you meet the membership criteria at a local credit union, you should join it and apply for a loan there. Most credit unions base membership on where you live and the type of job you have.

Go to the bank or credit union with the best advertised rates. Give the loan officer your car's title, driver's license and insurance information. The banker uses the Kelley Blue Book to determine the current value of your car. Most banks lend up to 100 percent of a car's value. Give the banker your Social Security number and your last two pay stubs.

The banker will pull your credit score from one of the three major credit-reporting bureaus: Equifax, Experian or TransUnion. The banks use the information on your credit report to determine your debt level. They use your gross salary to calculate your debt-to-income ratio, which for most car loans cannot exceed 50 percent. If your ratio prevents you from qualifying for a loan for the full amount of the car, lower the loan amount.

Sign the loan documents. Most car loans last for between two and seven years, and shorter terms have lower interest rates. Give the banker your car title. The bank will send the title to the state department of motor vehicles to record the lien. Contact your insurance company and notify it of the lien on the vehicle. If you have only third-party liability insurance, upgrade to comprehensive insurance, which is necessary because you now have a loan on the car.

Ask if you can set up an automatic debit for your car payment. This can be convenient, and many banks reduce the interest rate on the loan if you establish automatic payments.

How to Calculate the Early Payoff of a Vehicle

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Auto loans typically last anywhere from two to eight years, depending on the amount you borrowed and the type of loan you chose. If your loan term is longer than you want it to be, you can make extra payments to pay off your car earlier than expected and save some money on interest.

The amounts and timing of paying off your auto loan early will depend on the terms of your loan. Look up your starting date, interest rate, the length of your loan term and the current loan balance on your most recent statement or by logging into the loan management section of your lender's website. If you cannot find this information, call the lender for help.

Divide the interest rate by 100 to convert it to a decimal and divide by 12 to get the monthly decimal interest rate. For example, 8.5 percent interest becomes 0.007083. Multiply the monthly decimal interest rate by your current loan balance to calculate the interest for the month. For example, multiply a balance of $3,821 by 0.007083 to calculate $27.06 in interest. Subtract the interest from the amount of the payment you plan to make to find out how much of your payment goes toward the principal. for example, with a payment of $800, $772.94 goes toward principal. Subtract the principal payment from your loan balance to find your new principal balance. In this case, $3,821 minus $772.94 leaves a balance of $3,048.06. Repeat the process for each monthly payment you plan to make, and for the last payment, just add the monthly interest to the loan balance to get your final payment amount.

Many websites offer online calculators that will do the math automatically for you. This allows you to try different payment scenarios and see which one best meets your goals for paying off your vehicle. In most cases, you need to enter the interest rate, loan term, original or current loan balance, and the amount of the payment you plan to make each month. The calculator will show you a schedule of payments, your new payoff date and how much money you will save on interest.

Some lenders impose prepayment penalties on people who pay off their auto loans in full before a specific date set in the contract. Look at your contract or contact the lender to find out if you have a prepayment penalty. It might be a specific percent of the remaining balance, a percent of the initial loan amount or a flat fee. If you were planning to pay off your loan during the time in which a penalty is imposed, add that amount to the cost of an early payoff or delay your payoff until after the penalty window is over.

How Badly Will a Lease Surrender Affect My Credit?

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In the mind of a borrower, voluntarily giving back a car -- or lease surrender -- is better than defaulting on the debt and requiring the lender to forcibly take it back. Nevertheless, the credit agencies do not care and voluntary and involuntary repossession affect your credit in the same manner. Voluntary repossession is usually a cheaper option than a forced repossession.

Lease surrender affects your credit, because most car dealerships report auto lease accounts to the national credit bureaus. Repossession means the lender receives less than the amount originally borrowed, so it has a negative impact. Any account that results in a delinquency tends to take several dozen points off of your credit score, and possibly more than a 100 points -- making it the second worst item to a bankruptcy.

Like most negative accounts, a lease surrender drags down your credit score for seven years. However, the FICO scoring system's design reduces the importance of negative items as time goes on. If you continue to use credit, pay bills on time and limit your debt load, your score will eventually recover -- probably well before the seven-year reporting time limit ends, according to Maxine Sweet, head of public education at Experian.

When a lender takes back a car, you will owe any money left on the loan after the car goes up for auction -- called a deficiency balance. If you cannot pay the deficiency balance, the lender could sue for a public judgment, such as wage garnishment. A public judgment will further erode your credit score and cause financial hardship if it interferes with your ability to repay other loans.

You should negotiate with the creditor for a reprieve before the loan defaults beyond recovery. Possible solutions include deferring payments in case of a short-term hardship and a lower interest rate. If you cannot afford the car in any circumstance, voluntary repossession is cheaper, so you at least lower the possible deficiency balance.

How to Settle a Four Year Old Car Repo Debt

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A repossession is damaging to your credit rating. If you want to settle your debt, you can do so, although the repossession may still stay on your credit report for up to seven years. Unless the debt is paid in full, your credit report will be updated with a note that you settled your account for less than the amount owed. However, settling your debt prevents you from being sued by your original lender, and depending on the amount you owe, it may be beneficial to work out a settlement.

Instructions

Call your original lender. You can find the phone number online or in your old banking paperwork. Banks usually sell aged repossession debts to an outside collection company, so if you have been contacted by a different company for settlement, call the collection company instead. If you call the original bank to offer a settlement, a representative may be able to help you directly or provide you with the correct contact information for your collection company.

Let either the bank's collection department or outside collection company know that you want to settle your debt. Provide your Social Security Number and other identifying information, if necessary. The representative will let you know what amount is due.

Write down the amount due. If you need time to decide if you can pay the debt or if you will need to make payments, get off the phone and call back as soon as you come to a decision. Collection companies can be pushy. You may be offered an array of payment plans. Make sure you think your options through before agreeing or providing your card or checking account information.

Ask the representative how you will receive the receipt of your payment before you settle. Before paying, ask if you can have an email or letter sent stating that you owe the stated amount due and if paid, your debt will be paid in full. This may be a long shot, but it will help your credit rating. You can also try to negotiate the repossession off of your credit report entirely if you pay the total amount due.

Wait for your letter or email of credit report update confirmation, if one was made, before paying if you can work out a deal. You can use the letter and receipt for payment as proof that the amount is paid in full to send to the credit bureaus for proper updating of your credit report.

Settle your debt. Pay the amount agreed upon and ask for a receipt to be mailed to you.

Can I Modify My Car Loan?

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If you're currently experiencing financial hardship or have trouble making your car payments, your lender may allow you to modify your car loan. Many banks have programs in place to help distressed borrowers, although the bank may decline to work with you. If so, you may have other options.

Before calling your lender to discuss your options, determine how a loan modification can help you. You may want to discuss deferring payments or extending your loan term to lower your monthly payment amount. If you can't afford your current car payment, figure out how much you can afford so that you can state your intent to your lender. If you are behind on monthly payments, determine when you can catch up and how many partial payments you can make to do so. Have a clear goal in mind before contacting your bank.

Once you have your budget in order and a goal in mind, call your lender. Tell a customer service representative what you hope to accomplish and how much you can pay. Your lender may be able to bring your loan up to date by deferring your monthly payments. If your lender agrees to extend your term, it may require a higher interest rate. Discuss any contract changes, such as term and new payment amount, to determine if the loan modification is affordable even with modification.

You may have to provide proof of financial hardship to obtain loan modification. For example, if you are unemployed, receive help from your state's social services department or are pregnant and unable to work, expect to provide proof. Once the bank approves your modification, you'll have to resign your contract or an agreement to reflect loan changes. Make sure all agreements are in writing; otherwise, a verbal agreement is not likely to prevent your vehicle from being repossessed or bring your loan out of default.

If your bank will not work with you to modify the car loan, you have other options. If your credit has suffered as a result of financial hardship, you can apply for a refinance with a co-signer, who can secure your loan at a lower rate or a longer term. You can also sell your vehicle if its value is in line with your loan payoff amount; you must satisfy your loan to transfer vehicle ownership. Trading your vehicle to a dealership for a cheaper car is also an option, even with slight credit issues.

How Should Gap Insurance Be Applied to the Loan?

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Gap protection is often overlooked by consumers when they are financing a new or used vehicle. It can save a car owner a lot of money if a vehicle is in an accident and declared a total loss. Gap protection covers the difference that may exist between a car insurance payout and the loan balance.

An auto accident may leave your vehicle damaged beyond repair. Your auto insurance will determine and pay a fair market value of the vehicle. This amount is determined by the car market trends, the condition and mileage of the vehicle at the time of the accident. Based on this information, the insurance payout may be more or less than the car loan balance. If it's more, you will receive the excess. If it's less, you have to cover the difference out-of-pocket, unless you have gap insurance that will pay off the remaining balance after the insurance payout.

When a car is damaged in accident, you need to notify the bank that holds the loan and ask for the loan balance. Your insurance agent will need to know this information, as well as the loan number and the bank's mailing address to mail the pay-off check. You will need to wait until your car insurance pays to determine how much the remaining balance is before contacting the gap protection company. The gap protection company will collect the information regarding the accident and the loan details. It will cut a check for the difference and send it directly to your bank to pay off the loan balance.

A regular gap coverage simply pays off the loan balance and you walk away owing nothing. If you have a Gap Plus coverage, it does that and also gives you $1,000 towards a new car loan. When you purchase a new or used vehicle and set up financing, the gap protection company will send a check for $1,000 to the bank, which will apply it to the loan balance. The gap coverage check will not reduce your loan payments, but it will lower the total amount that you owe.

You can purchase gap coverage through a dealer, an insurance agent or the lender who is setting up your auto loan. Dealers generally have higher fees for gap insurance as they add their commission to it. Insurance agents and lenders may offer better prices. When purchasing gap coverage, you can pay for it with cash, a check, an account transfer or a credit card. A lender may finance it with the loan, which will increase the loan amount and your monthly payment. You will also end up paying more for your policy in the end, as interest will accrue on the loan balance.

How to Negotiate a Lease & Car Deal

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If you are interested in getting a new car but do not want to buy it, you can lease it instead. With a car lease, you have monthly payments just like if you were to get a loan to finance the new car. The difference is that at the end of the lease term you either give the car back to the dealer or buy it from the dealer. Typically you need to have top-tier credit to qualify for a car lease. If you have good credit, you can negotiate a lease at a local car dealership.

Instructions

Determine how long of a lease you need because a car lease comes with an allotted amount of miles for each year. Going over those miles is costly. You can use the number of miles on your current car as a guide of how much driving you do. Typically you can get between 10,000 and 15,000 miles per year on a lease. The length of a car lease can be between 24 months and 48 months.

Enter in your zip code and select a car make and model on the True Car website (see Resources) to see what people in your local area are paying for the car that you want to lease. This gives you a good idea of how low you can negotiate and when you are paying too much for the car.

Contact the car dealers in your area to get a bid on a lease for the car that you are interested in leasing. You can do this by phone or online through the dealership's website. Let the dealers know how many months you want the lease for and how many miles you need for each year.

Look at all the bids you get and pull out the lowest bid. You can use this bid against all of the other dealers to see if they will offer to beat it and give you a lower price. If not, you can get your car from the dealer that offered the lowest bid.

Visit the car dealer that offered you the lowest bid to sign your lease agreement. Carefully read over the agreement to make sure everything that was previously agreed to is listed in the lease agreement accurately. If everything is correct, you can sign the lease agreement. If not, you can ask for changes to be made before signing it.

Can You Sell a Car That Has a Co-Signer?

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Most lenders and dealerships complete your motor vehicle paperwork the same time you complete your loan paperwork. Unless you stated otherwise, the lender or dealer probably listed your co-signer's name on the vehicle's title. As long as the titled co-owner agrees to sign the title, you can sell the car.

Take a look at your vehicle's title to determine whether you need the co-owner's signature. Some states titles list "and" or an "or" in between both owners' names. If your title reads "or" between the names, either one of you can sign the vehicle's title to transfer ownership. If the title reads "and" between each name, you both must sign the title to release ownership. You'll need the titled co-owner's permission to sell the vehicle, so obtain her authorization before you attempt to sell your car.

Exact title transfer rules and requirements differ by state. You might need to have both signatures notarized. If so, sign the title and have your signatures notarized before you complete the sale of the vehicle to save time. Most motor vehicle offices in states that require notarized signatures offer the service at local offices. You don't need to have the buyer present to sign your portion of the title. If you don't have a co-owner listed on the vehicle's title and your state doesn't require a notarized signature, wait to sign the title over to your buyer once you complete the sale.

If you haven't satisfied the loan on your vehicle, you might not have a title. Some states send a vehicle's title to the auto loan provider instead of the borrower. If you don't have a title for the car, call your lender to find out about its payoff procedure and whether you need the co-signer's signature to sell the car. If you already paid off your car loan, you'll need to provide the buyer with an original lien release. Most states require proof of the satisfied loan for title transfers. The lien release is still acceptable even if it lists only one name.

Check with your state's motor vehicle agency to find out which other documents it requires for title transfers beside the title. Some states require a bill of sale or an odometer statement. In most cases, only one titled owner needs to sign additional paperwork. If you find you need the co-signer's signature on other forms, plan ahead and have the co-owner sign his portion of additional paperwork. This way, you don't hold up the sales process.

How Soon Can One Refinance a Car?

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In most cases, you can refinance your vehicle whenever you want. Check with your current loan provider, as it may charge early payoff fees. Vehicle equity must be in line with its loan amount for a refinance, which can prove a problem if you just purchased a new car. Consider your resources and whether an immediate refinance is possible.

If your current lender has refinance restrictions or early payoff fees, you'll find the information documented in your loan contract. Call your lender for more information or to find out if additional fees apply. If you financed through a dealership, you may be instructed to wait several months to refinance, although this is usually not necessary. If you refinance soon after using a dealership for financing, the dealer will lose any profit it made from providing your loan. Call your lender directly to find out its requirements; the dealer does not make lender decisions.

An auto loan provider may offer up to 120 percent of your vehicle's bank-determined value for an auto loan, depending on the lender and your credit standing. Some borrowers may obtain as low as a 60 percent loan-to-value ratio. This can become an issue if you just purchased your vehicle as a new car; it becomes a used car as soon as you drive it off the dealer's lot. Additionally, if you financed other items, such as an extended warranty or service plan, you may not obtain an approval for your current loan's total amount.

You may have to provide a down payment for your refinance. If your credit has changed since your original loan, your loan-to-value ratio and approved loan amount may differ from your original loan. Plan ahead for your refinance and decide how much you can offer for a down payment, if any. You may also apply to an auto loan provider to find out if it requests a down payment rather than offer one yourself. Otherwise, you may have to wait until your vehicle's equity and loan amount equal out to avoid providing a down payment.

If your credit has suffered since you initiated your loan, you may not find a refinance worthwhile because of an increase in interest rate, a shortened term as required by your lender or a down payment requirement. If this is the case, you can apply for a loan refinance with a co-signer, or someone with good to excellent credit who secures your loan. Otherwise, continue paying on your current loan until your credit or financial situation improves.

How to Calculate an Auto Loan Payment

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Before you even go to the dealership to shop for a new car, it's a smart idea to do some budgeting tasks to find out what you can and can't afford. Based on your current income, what car payment will fit comfortably in your monthly finances? You can do a simple calculation to estimate your auto loan payment by using a few pieces of information regarding your impending car purchase. Don't step foot into a car dealership, full of professional sales sharks, without having a reasonable point of reference about how much you can afford when you're making your final decision.

Instructions

Determine the average price of the type of car that you are looking to buy, based on the model and body type, such as a sedan, station wagon, convertible or SUV. You need a solid dollar figure for what the dealer will likely charge you. Visit Kelley Blue Book to look up vehicle prices. In this example we will use $10,000 as the purchase price.

Subtract the down payment that you plan to make on the car--and the value of your current car if you plan to do a trade-in--from the purchase price to get the final amount that will be financed. Let's say that you are putting $2,000 down, so that leaves an $8,000 balance to be financed.

Calculate your sales tax on the purchase into the car loan unless you plan to pay the tax out of pocket. Multiply your local sales tax rate by the purchase price--before deductions. So for a 7 percent sales tax rate, there will be a tax fee of $700 built into the loan in our example for a total of $8,700 (principal). Add any other fees that might be charged by the dealership, such as a document processing fee.

Estimate the interest rate that you will pay on your auto loan. Your interest rate will be based mostly on your credit rating. An excellent score of 700 and above may qualify for an interest rate as low as 4.99 percent or lower, while a low score of 500 will be charged a high interest rate, possibly 14 percent or more. In this example let's use a 10 percent interest rate.

Determine the length of the auto loan. Most car loans last for about five years or 60 months, while others can extend as long as 84 months or seven years. We'll use 60 months in this example.

Calculate the monthly payment based on these factors. To do this manually, you will need to use a formula: P (r/12) / (1-( 1+r/12)^-m). "P" stands for principal, "r" stands for the interest rate and "m" stands for the number of months for the loan. The resulting monthly payment in our example is roughly $184.85.

Consumer Guide to Buying Used Cars

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Purchasing a used car requires time and effort to ensure you are getting the best deal possible. Not all used car dealers are honest about a vehicle's history and by the time you realize there is a problem with your newly purchased car it could be too late. Before you begin shopping around for a used car, do your homework to fully understand what to look for in a specific type of vehicle or with a particular dealership.

The Federal Trade Commission mandates that all used cars sold from a dealership come with a buyer's guide. The buyer's guide is a resource consumers may reference during the purchase process. The guide describes whether the vehicle is being sold as-is or if it comes with a warranty. It also details what costs the dealership is responsible for under the warranty. The buyers guide explains the mechanical and electrical systems of the car and what problems the consumer should look out for. Once the sale is complete, the buyer's guide becomes apart of the sales contract. It should reflect any warranty negotiations as well as spoken promises between the consumer and the dealership.

Warranties are an important part of a used car sale. A warranty is a limited guarantee that a vehicle will function properly for a specified period of time and if it does not, the dealership would cover the cost of fixing it. There are several types of warranties and consumers should become familiar with the type of warranty associated with a particular used car. According to the FTC, an implied warranty is an unspoken, unwritten promise from the seller to the buyer. With an implied warranty, it is assumed that the vehicle meets reasonable quality standards. Unfortunately for the consumer, dealerships can sell vehicles "as-is" to eliminate implied warranties, so it is necessary to fully inspect and test drive a vehicle prior to purchasing it.

A full warranty is offered through the car manufacturer. Warranty services apply to anyone who ones the vehicle during the warranty period. Full warranties will typically pay the cost to repair or replace a covered vehicle system. Limited warranties cover some vehicle systems for a specified period of time. The dealer must inform the consumer what type of warranty applies or if no warranty is offered for a particular used vehicle.

Consumers may pay cash for a used vehicle or finance the vehicle purchase. Financing the vehicle increases the total cost of the car because interest and other loan costs are included in the payments. It is important for consumers to shop around for the best loan program to avoid paying too much for a used vehicle.

Dealerships, banks, credit unions and other lenders offer different loan programs for car-buying consumers. All loans have different terms and payment options. When financing a used car, consumers should fully understand the vehicle purchase price, the exact finance amount, financing charges, interest rates, number of payments and the total sales price after all payments are calculated.

Used vehicles are often sold by private owners. Individuals are not bound by the same used car rules as dealerships so consumers should be aware of potential drawbacks to buying a car from a private party. Private vehicles are sold on an as-is basis. There are no warranties if the vehicle does not operate properly. Consumers should find out as much information as possible about the vehicle before making a purchase. Private sellers who sell a vehicle in good faith should have no problems providing the buyer with all the information they need to make an informed buying decision.

Can You Return a Vehicle the Next Day After Purchase?

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Many new car buyers experience "buyer's remorse" shortly after purchasing a vehicle. Once they get the car home, they feel bad about the decision and want to return it. In most cases, you will not be able to return the car, but occasionally, certain programs allow you to give the car back.

The three-day cooling off rule was put into effect in 1972 and protects consumers from being stuck with certain items with which they are not happy. However, the three-day cooling off law does not apply to new vehicles, only to items sold for more than $25 in locations other than the company's normal place of business.

In some cases, buyers can take advantage of manufacturer programs that provide a return policy. For example, in 2009, General Motors Co. offered a 60-day return policy that allowed consumers to return a car for any reason. Most car manufacturers do not offer this type of program, but occasionally, special programs arise. If you wish to take advantage of this program, you must abide by the rules of the return policy.

You might be able to return a car if you purchased it from a used-car dealer. While most new car companies do not have a return policy, some used-car sellers offer a return policy for vehicles. This is to ease customers' fears about buying a car that does not run well or has some other issues.

If you take the car home and realize it has something significantly wrong with it, you might be able to take advantage of lemon laws. Every state has lemon laws that protect consumers from buying cars that do not work. If the car has something significantly wrong with it, you might be able to return it after giving the dealer a chance to fix the problem.

How to Sell a Used Car With a Loan

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You can sell your car even if you still owe money on it. Once you sell the vehicle, you'll be able to bring the money to the bank and obtain a lien release or the title (if your state holds it while money is owed) to give to the new owner. If you owe more money than you can sell the car for, you have to come up with the rest of the money to cover the payoff amount.

Instructions

Call the bank to which you make payments. Ask the representative for your payoff amount. Also ask for the per diem amount, which is the interest charge added on a daily basis. Add the per diem amount to the payoff each day until your car is sold to determine the payoff amount. Write this number down. If you make a payment during this time, you should call and get an updated payoff figure.

Search Internet used-car appraisal guides to determine how much money you could get by selling your vehicle. Several guides are listed in the resource section on this page. Make sure to research the private sale value---you'll have several sale-type options. Check more than one guide and select a median figure between the difference in prices, or check online to see how much similar vehicles are selling for in your area. If you owe more than you're able to sell the car for, you will have to come up with the remaining money owed to pay off your car to release the lien for the new owner. If you owe less, you could make a profit.

Advertise your car for sale. Check local Internet classified sites like the ones listed below on the "resources" section. Advertise online through your newspaper, pay for a print or online advertisement, or do both. Park your vehicle in a high-traffic area. Affix a "for sale" sign, or write this on your back window with a paint marker meant for glass.

Accept cash or a bank check for your vehicle to protect yourself once you find a buyer. Do not accept a personal check. Bring your buyer to the bank to pay off your loan. If you live in a non-title-holding state, your lien release is given to you immediately, which goes with your title to give to the buyer. Your buyer does not need to be present for this transaction, but may want to be present to protect his own funds and complete the transaction. Any additional money beyond the sale amount that is owed on the vehicle must be given to the bank at this time.

How to Turn in a Leased Car When the Lease Is Up

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Leasing banks may differ slightly on lease-return requirements. Most lessors send out mail that details your end-of-lease options and offers instructions for the return procedure. Many banks also offer or require an inspection process, free of charge to you. The bank will provide you with a number to call to arrange an inspection so you'll have time to repair or service the vehicle before the end of your lease. Unless your car is in perfect condition, consider completing an inspection to ensure you won't pay end-of-lease fees for excess wear and tear.

Instructions

Contact your leasing bank several months before the end of your lease to inquire about the lease-end process. You might be instructed to sign into your lease account at the lessor's website to print forms and receive instruction. If you don't want to use the online option, ask to have documents and an explanation of the process mailed to you.

Ask your lessor if it provides a free vehicle inspection. If so, contact the inspector and make arrangements to have your vehicle inspected at your convenience. Some inspectors come to your home or work, or you may have to meet at a dealership.

Fix any issues suggested by the inspector. Body damage might require an insurance claim or you might need to take your vehicle to a service shop to complete required maintenance, such as tire replacement. If you don't take advantage of the inspector's suggestions, you'll likely owe your leasing bank money for excess wear and tear fees.

Complete any forms required by your bank before returning the lease. Call a dealer to make an appointment for the return and clean out your vehicle completely. Wash and detail the vehicle before your appointment.

Arrive at your appointment with your paperwork and any items that came with your vehicle, such as extra keys, accessories and the owner's manual. Provide your completed paperwork to the person handling your lease return. Sign additional paperwork with your dealer representative, such as an odometer statement and a statement documenting the items returned with the vehicle.

Ask the dealer representative to make copies of any documents you signed so you may keep them for your records. Check your vehicle over one last time to ensure you removed your belongings. Remove your insurance cards from the glove compartment and make sure you didn't leave any original lease paperwork in the owner's manual.

Remove your license plates from the vehicle and leave the car behind. Save the copies of your signed documents for several months after the lease return in case the leasing bank makes an error, such as charging you over-mileage fees or for an extra set of keys.

The Lemon Law Guide

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When buying a new car, you want to know that it will perform as it should and drive without any problems. If your new car has a problem that keeps it from driving, you may have a lemon on your hands. Lemon laws can work in your favor to help you get a replacement car.

When you buy a new car that breaks down shortly after you purchase it, lemon laws can protect you. A lemon is defined as a new car that has a substantial problem that has not been fixed within a reasonable number of tries. It could also be a car that has been out of service for a certain amount of time. Each state defines these terms differently depending on their own state laws. If your car is determined to be a lemon, you could get a replacement car from the dealer that sold it to you.

To qualify as a lemon, your car has to have some serious problems. For example, if your car will not start or dies while you are driving, this could be classified as a lemon. If you have a car that has serious safety issues, like the brakes not working, it could also fall under lemon laws. The issues for your car have to be relatively serious before you can expect a dealer to replace the car. Before you can file a lawsuit against a dealer, you must be able to show that your car has serious problems.

Each state has different rules when it comes to how many times a dealer is allowed to try to fix a problem with a car. In most cases, the dealer or manufacturer has four tries to fix a substantial defect with the car. They also can try to fix a serious safety issue with the car twice. As far as total time is concerned, the car can be out of commission for 30 days while the dealer is trying to fix it. If these limits are exceeded, your car may qualify as a lemon.

If you think that you might have a lemon car, you may want to consult an attorney. Your attorney will be able to look at your situation and determine if a lawsuit would be in your best interest. You can sue the car dealer for a violation of the Magnuson-Moss Warranty Act. This is a federal law that deals with warranties on any product over $25. You could also sue based on your state's lemon laws. If you win, you can get the car replaced and you may be able to get reimbursed for attorney fees. If you lose, you might have to pay the manufacturer's attorney fees.

What Does It Mean to Refinance a Car Loan?

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Refinancing a car loan is essentially replacing the current car's loan with another. Reasons for wanting to do this vary, but some reasons include wanting a better interest rate or needing a longer term to lower payments. Learn more about why you might consider a vehicle refinance and how to go about pursuing one.

Some borrowers may have purchased a vehicle during a time when their credit was not in good standing, resulting in a higher than average interest rate. Perhaps rates have dropped or a potential lender provides special offers for car loans that would benefit the borrower. To fully gauge the effect an interest rate has on an overall loan payback amount, use an auto loan calculator: enter in a loan amount and change the interest rate to gauge differences. The Edmunds website offers one free to use.

A borrower might also want to refinance to lengthen the term of his loan, which often results in a lower payment. If a borrower has several thousand dollars to put toward her loan amount, doing so toward the original loan will not lower the payment; it will only allow her to pay off the loan early. Borrowers can refinance their current loan and put money toward it to enjoy a lower payment. Every $1,000 put toward a loan equals about $20 per month in payment, which can benefit some borrowers who need to modify their loan amounts.

To refinance a loan, you must obtain the total payoff amount due to your original lender. You can apply to a bank of your choice either online or in person. Once you obtain an approval, you must provide proof of insurance to your bank. Your new bank, as the vehicle's new lien holder, will contact your old bank to satisfy the loan amount and get the title (if in a title holding state). Otherwise, the lien release is sent to the bank, who notifies the state's Department of Motor Vehicles of the vehicle's new lien and cancellation of the old one. You will receive a new title reflecting the lien change.

Some borrowers will not be able to refinance their car loan. If the borrower originally carried money over to a current loan or paid more for the car than they should have, loan-to-value ratios will be inconsistent with bank lending requirements. For example, you cannot borrow $15,000 for a vehicle only worth $8,000, even with excellent credit. Work with your bank if this is an issue; you may have to put money toward the refinance to obtain an approval.

How to Recover Personal Items From a Repossession

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During difficult financial times, consumers find themselves having to let go of their cars through repossession. However, just because you lose your car does not mean you have to lose your personal belongings that were in the car at the time of its repossession. You can seek legal action in small claims court if the repossession company does not give you your items back.

Instructions

Make a list. Try to remember everything you had in your car. Document items such as car seats, books, CDs or other equipment you may have had in your car. Do not leave anything off the list, but on the other hand do not add things that were not in your car.

Obtain the phone number and mailing address for both your creditor and the tow company. Call each company and ask whether it has a specific form to request the return of your personal property. If they do, ask how to get one and where to send it. If they do not, send a letter requesting the return of the items left in your car and include the list. Let the repossession company know that you did not abandon the items and you intend to get them back.

Write a request. Include your name, address, telephone number and identify the car by giving the date it was repossessed, the make, model and year. List a few different dates you are available to pick the items up and ask the company to select one of them.

Mail the request to both the tow company and creditor. To document receipt of your request purchase proof of delivery from the post office, which you can track online. If you want your items back in a timely manner, send the request priority mail or overnight to ensure that the companies get the request within the next few days.

Follow up. If you do not hear about the return of your items within a couple weeks, check back with the creditor and tow company. Make sure they received your request for return and inquire how long the process will take.

How to Calculate Finance Charges on a Car Loan

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An individual may borrow a certain amount of money to buy a new or used car from a bank or other lender. The loan amount is commonly referred as the principal. Under the car loan agreement, the money is paid back in regular monthly installments over a designated period of time. Since the lender typically provides the money at a specified annual percentage rate (APR), you will pay back not only the principal, but also a certain amount of the interest (finance charges). As an example, calculate the finance charge for a $25,000 car loan given with APR of 6.0 percent for five years.

Instructions

Calculate the loan duration in months by multiplying the number of years and 12. In this example, the five-year loan would be multiplied by 12 to give you 60 months.

Divide the loan APR by 12 and 100 to calculate the interest rate per month. In our example, the monthly interest rate is 6.0 percent / (12 x 100) = 0.005.

Add 1 to the monthly interest rate; then raise the sum to the power that equals to the loan duration in months. In our example, the value is (1 + 0.005)^60 = (1.005)^60 = 1.34885.

Subtract 1 from the value computed in Step 3; 1.34885-1 = 0.34885

Multiply the monthly interest rate and the value computed in Step 3, and divide the product by the number obtained in Step 4. In the example, (0.005 x 1.34885) / 0.34885 = 0.019333.

Multiply the loan amount by the number from Step 5 to calculate loan monthly installment payments. In the example, payments are $25,000 x 0.019333 = $483.32

Multiply the monthly payment by the loan duration to compute the total amount of money you will pay. Given the monthly payment of $483.32, you would pay 483.32 x 60 months = $28,999.20

Subtract the car loan principal from the total amount (Step 7); the difference is the finance charge for your loan. in our example, the finance charge is $28,999.20 - $25,000 = $3,999.20.

Tips for Purchasing Used Vehicles

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If you buy a used vehicle that has been well cared for, has low mileage and is less than three years old, you will pay thousands of dollars less than if you bought new, and get a vehicle that is nearly as good. Keep your wits about you when buying a used vehicle; be willing to walk away if the price isn't right, and you will eventually find what you want.

Take a good long look at the title for the vehicle before you buy it. If there is anything strange about it, have it verified by the Department of Motor Vehicles. The likelihood that the title has been tampered with is small, but it's better to be overly cautious than to get burned with an illegal vehicle. If the seller says he doesn't have a title, or says he will send it to you later, walk away quickly.

You are buying a vehicle to use, so use it before you buy it. Any reputable seller will let you take the vehicle out for at least a couple of hours. Drive it at high speed on the highway, in traffic through town, on rough roads and on smooth roads. Park it in tight spots and take it around sharp corners. Try to fit everything that you might do with the vehicle into the test drive, so you can determine how it behaves in different conditions. The test drive is the most important step in the process of buying a used vehicle.

Be honest with yourself about how much car you really need and you can save a lot of money. Every city has a large number of people driving around in full-size 4x4 pickup trucks that have never seen a log or a bale of hay. A sensible car buyer buys a truck when he needs a truck, and a car when he needs a car. By buying a car that fulfills your needs without being larger than it has to be, you will not only save money on the selling price, but also on fuel and maintenance costs.

Don't be shy about offering less if you feel that the price of the car you want is too high. Most sellers expect buyers to haggle about the price and set their price accordingly. If the seller refuses to come down on the price, it's very easy to walk away. There are many cars in the world and you can certainly find one that isn't overpriced. On the other hand, if you feel the car is underpriced, buy it and be happy.

What Is the Legal Way to Repo a Car in Montana?

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When you take out a loan for a vehicle, you agree to pay the loan back in exchange for the use of the car during the loan period. If you fall behind on your payments, your lender may repossess the vehicle. In Montana, lenders may repossess vehicles either with or without a court order as long as they follow proper procedures.

If a debtor defaults on the obligation to pay back a vehicle loan, the lender may repossess the vehicle without a court order if he can do so peacefully. Peaceful repossession requires the cooperation of the debtor. The repossessor may not take the vehicle without the debtor's consent or while the debtor is not present. The repossessor also may not break into a locked garage or other area to repossess the vehicle.

If the debtor refuses to consent to repossession, the repossessor must get a court order. In this case, the repossessor sues the debtor for the amount of the debt. If the judge agrees that the debt is valid, the repossessor can ask the court to order repossession. The debtor must turn the vehicle over to the lender or allow the lender to repossess it after a court orders the repossession.

If the vehicle is repossessed, the debtor has the right to redeem it prior to sale. The debtor may redeem the vehicle by paying the loan in full plus the cost of towing and storing the vehicle. In Montana, the debtor has 10 days to redeem the vehicle after it is repossessed. After the tenth day, the lender has the right to re-sell the vehicle to cover its losses.

The lender must provide the debtor with written notice of the intention to resell the vehicle. Once the vehicle has been sold, the lender must apply proceeds from the sale to the debtor's outstanding loan. If the sale does not cover the entire balance owed, the debtor must pay the difference. However, if the debtor has paid more than one third of the purchase price and voluntarily gave up the vehicle (e.g. without the repossessor going to court), she cannot be held liable for this amount.

Why Are Older Cars Hard to Finance?

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When you apply for any type of secured loan, your lender has the right to take ownership of the collateral if you default on the loan. The more valuable the collateral, the less risk the lender assumes. The lender has a better chance of recouping its money if it seizes valuable collateral rather than collateral with minimal worth. Because cars lose value over time, older cars are generally harder to finance.

Most vehicles have some kind of warranty that protects both the car owner and the lender against financial loss stemming from mechanical problems that may emerge with the car. Warranties often expire after three or four years; thereafter car owners must pay for repairs out of their own pocket. High maintenance costs sometimes leave car owners with insufficient funds to cover their loan payments. Therefore, this exposes the lender to greater level of risk. Additionally, if the lender stretches out a loan term over a long period of time, the borrower's payments may not pay down the car fast enough to ensure the loan balance does not exceed the vehicle's falling value. This means the lender may not recoup its losses if it has to repossess an old car with a long loan term.

Due to falling values, most lenders only finance cars that are a certain number of years old. If you buy a brand new car, you can normally finance it over five or six years. Lenders typically reduce the maximum loan term on a year-for-year basis by taking into account the age of the car. Therefore, if your lender finances cars up to six-years-old, then if you buy a four-year-old car, your loan term cannot exceed two years. This means many people are unable to obtain financing from major lenders to purchase older used vehicles.

If you stretch out your car payments over a five- or six-year period, your monthly payments are much smaller than if you paid off the same loan amount within just two years. If you buy a four-year-old luxury car, you must contend with very high monthly payments. Your lender examines your income level and your current debt obligations to determine whether you can afford such a payment. Consequently, many people who are not high earners cannot qualify for short-term loans on used cars. It usually works out cheaper to buy a brand-new but more basic type of car.

While cars generally lose value over time, some cars actually grow in value. Vintage cars and special edition models often become collector's items. These cars have high maintenance costs and are expensive to run but some continue to grow in value over the decades. Lenders are more willing to finance vintage cars because, in the event the borrower defaults on the loan, the lender has a very good chance of recouping its losses by selling the vintage car to a collector.

Some lenders do offer loans on older non-vintage vehicles but charge very high interest rates which make these loans very expensive.

True Market Value of a Used Car

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Whether you're planning to buy or sell a used car in the near future, you should understand the concepts and methods of determining vehicle market values. Knowing the true value of a vehicle puts you in a position to get the best possible deal as a buyer and to set a realistic starting price as a seller.

Before you start exploring the value of a used car, it's important to fully understand market value. A market value of any asset is just an estimate. True market value is what a buyer would pay for the item under normal conditions. Unless you have one or more buyers before you with offers, you can't be entirely sure of the true market value of the property. However, you can estimate the market value in other ways.

One of the most trusted resources that car buyers, sellers and dealers use to estimate the market value of a used car is the Kelley Blue Book. The published values are based on the opinions of experts and car industry information. This resource use to publish as an actual book for dealers but now any interested party can look up blue book values online to estimate the true market value of a used car.

One of the most important details that goes into determining the true market value of a car is the condition of the vehicle. Kelley Blue Book rates used cars on a scale from poor to excellent. A poor condition car has severe problems while a car in excellent condition looks and works like new. In between the two extremes is "good" (minor defects) and "fair" (some problems) condition vehicles. The true market value of the car will vary depending on the car condition.

If you're trying to sell your car, keep in mind that the market value of a car varies depending on the type of buyer. If you try to sell the car to a dealership (or do a trade-in for another car) the amount the dealer quotes might be less than what a private party might be willing to pay. For this reason, as a seller you should try to sell the car on the private market first to see what offers you get before getting an estimate for a trade-in from your local dealer.

What Is a Co-Sign Car Loan in California?

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Banks in California may require a co-signer for potential car buyers who have credit history blights or a lack of credit history. A co-signed loan has two signatures on it, one for the buyer and one from another person who won't use the vehicle. Before you enter into a co-signed loan, learn a little more about how the contract will affect both parties.

California law defines a co-signer as someone who signs the loan or lease for a motor vehicle but does not take possession of it. In other words, they take the responsibility for the loan, but do not benefit from using the vehicle in question. The co-signer will be held liable for the payments if the car's owner does not repay the loan.

California drivers who need a vehicle but cannot get a car loan because of credit problems or little credit history can ask someone they know, usually a close friend or family member, to sign with them for the car loan. The bank or lender then looks at both individuals' credit ratings when making the determination about the loan approval. If the co-signer has a strong credit score, the likelihood of getting approval for the loan is higher. This scenario often occurs when a parent co-signs for a loan on behalf of their teenage driver.

The main benefit of a co-signed loan in California is for the car's owner. By using a co-signer, the owner is able to purchase a car using a car loan even when his or her credit is too poor to warrant such action. There is not any benefit to the co-signer except the potential satisfaction of helping a friend or relative in need.

Co-signing for a loan is a financial risk. The Federal Trade Commission warns co-signers that they are taking a risk that lenders were unwilling to take. There are two strong dangers for the co-signer in a California co-signed loan. The first is that the car's actual owner will default on the loan payments. If this occurs, the co-signer is held responsible for the repayment. Yet, the co-signer may not be aware that the loan is not being paid, and eventually this could cause credit problems. A second danger is in the way the state interprets ownership and liability in crashes. In California, a co-signer is viewed as a liable party if someone is injured due to a collision involving that vehicle.

Reasons to Trade in a Car

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Unless you must immediately replace your vehicle following a devastating accident or a major mechanical breakdown, the time is going to come when you'll need to make the decision to bid your trusty -- or not-so-trusty -- car goodbye, trade it in and get a new ride. Determining when it's time to trade up can be difficult sometimes, although many vehicle owners have common reasons for trading in their car for something better.

Gas prices might have risen dramatically since you purchased your SUV, and paying $120 each time you fill your tank may no longer be an option. Before you trade in a gas guzzler for a fuel-efficient compact, look past the immediate savings in gas prices. Sure, you'll be saving 60 percent on fuel costs each month, but how long will it take for those savings to recoup potentially higher car payments, insurance and licensing fees? Calculate the cost of your new vehicle against the savings at the pump to determine if this is a sound decision to trade your car in.

Owning a car you've paid for in full is great, but if frequent trips to the garage start chipping away at your savings, it may be time to consider trading up for something more reliable. Although it's almost always cheaper to repair an old car than buy a new one, frequent breakdowns and the hassles associated with car problems may quickly tip the balance in favor of trading a car in. If the cost of a repair exceeds the value of the vehicle or a year's worth of payments on a new one, you're best served trading the clunker in.

All vehicles are a depreciating asset, so it's unlikely you'll sell yours for the same amount you purchased it for, particularly if you bought it new. Depending upon the type of vehicle you drive, its value may hold relatively stable for several years, then steeply begin to decline after it reaches the five- or six-year mark. Your trade in will be worth much more if you time your new car purchase just before your car's value starts plummeting quickly.

Sometimes the decision to trade in a car has nothing to do with financial matters, but changes in your lifestyle. The two-door coupe you purchased shortly after you got married was great for a while, but it's impractical now that you have a family. That rear-wheel drive sports car was fun when you lived in the Sun Belt, but after moving, you discovered it's a nightmare on Colorado's snowy roads. Holding onto a car because it makes good money sense is only an option if holding onto the car itself makes sense.

Will My Car Be Repossessed After 2 Months?

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Your purchase contract specifies when and why your vehicle can be repossessed. In most cases, the bank can repossess the car as soon as you miss a payment, although most banks typically do not act that quickly. If your account is past due, immediately call your bank to avoid repossession. Repossession is reported to the credit bureaus and damages your credit.

If you financed through a dealer, you usually have 30 to 45 days until your first payment is due. If for some reason you did not get your loan information or a payment booklet from your lender, call your dealer to obtain the lender information. Check your lending contract if you are unsure who financed your loan; the bank's phone number and address is listed on the front of the contract. Call your bank to pay the amount past due.

If you have already missed two car payments, your bank will likely start the repossession process soon, if it hasn't already. Your contract specifically states your amount due and due dates, which you agreed to when you signed your loan contract. Call your bank right away to discuss your options and avoid repossession. If you are experiencing financial hardship, your bank may allow you to make a partial payment or offer other payment assistance.

Your car can be repossessed from your home, work or even a parking lot or gas station. Once the vehicle is repossessed, your lender may offer you an opportunity to pay your past due amount, late charges and repossession fees to get it back. If you do not pay, the car is sold privately or at auction. If your loan balance exceeds the sales price, you must pay the outstanding amount or the bank can sue you and eventually garnish your wages. If you owe less than the vehicle's sales price, the bank will issue you check for the excess amount.

Call your lender to discuss payment issues. Because you probably owe more than your vehicle's value, the bank would better benefit from working out a payment plan with you instead of repossessing the car. You may be able to defer your payments, meaning you can skip one or several payments. This can buy you time until your finances are back in order. Depending on your payment history, your bank can also extend your term to lower your payment.

How to Refinance a Vehicle to Take a Co-Signer Off

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Removing a co-signer from your auto loan will require that you reestablish the loan by yourself or with the aid of another co-signer. You can choose to refinance the auto loan through the original lender or begin financing with another lender. The process will entail reworking the loan to have the credentials of the co-signer excluded from the evaluation. If you or you and your new cosigner are not able to secure financing, you will not be able to modify or refinance the loan, and the co-signer will still be held to account for the auto loan.

Instructions

Search online for auto loan finance companies and banks. Inquire through the website or by contacting an agent to determine associated fees for refinancing your auto loan, including reregistration fees and transfer of lien holder fees.

Contact the lender through which you currently finance your vehicle to find out if there are any prepayment penalties associated with satisfying your loan before the scheduled end of the terms.

Calculate the payoff amount for your loan. Contact the original lender or consult your most recent statement to determine the total amount you will need to refinance.

Apply for a refinance with the company through which you already have the loan before seeking a refinance through another lender. The original lender may be more likely to refinance, as it already has a stake in the vehicle and is familiar with your history of payment.

Secure another co-signer if you are unable to refinance on the strength of your credentials.

Explore options through the lender to bolster your credit worthiness. Options include shortening the terms, paying a larger down payment or establishing an automatic deduction from a deposit account (savings or checking).

Tips for Negotiating Car Interest Rates

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The negotiation process involved with buying a new or used car can be an intimidating experience for the unprepared. Certain financial numbers, like an auto loan's interest rate, can significantly impact the overall price you are required to pay for an automobile. There are several strategies you may employ when negotiating an interest rate with your dealership or bank, which can put you in the best possible position to secure a low rate.

Knowing your credit score, especially if your score is over 760, which is considered good credit, is a useful tool in negotiating the interest rate for an auto loan. Arming yourself with this knowledge can allow you to easily deflect a high interest rate offer from a bank or a dealership. If the dealership or bank has run your credit, they know your score is above average and are simply trying to make some extra money off of you. If you feel the interest rate is too high, get up and walk away from the deal. You may be surprised at the rate the loan officer comes back with after you get up and reach for your coat.

A cash down payment on an automobile is applied directly to the principle. This lowers the overall amount a bank may need to finance when you apply for an auto loan. A lower finance amount can mean a lower interest rate since the bank is taking less of a financial risk. A bank may also see a large cash down payment as a serious commitment to the purchase and may approve your loan even if you don't have an ideal credit score.

Negotiating the length of your loan term can also have an impact on your overall interest rate. If you are able to accept a loan that is repaid over five years, as opposed to six, you may secure a lower interest rate because the bank is taking less of a risk. The problem with this strategy is the monthly payments on your loan will be higher even though you're actually paying less over time.

Watch out for dealership add-ons to the price of your vehicle like rustproofing and undercoating. These unnecessary items can jack up the overall price of your vehicle and raise your potential loan's interest rate. Being prepared to review all the documents regarding your vehicle's final price can help you request these items be removed.

How to Find Car Loans for People With Poor Credit

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Credit problems can make it difficult to find a dealership or car lot to purchase a car. The car dealerships may use in-house financing or have a partnership with a bank or financing company to provide loans for their vehicle purchases. The credit requirements for the financing companies may vary greatly, and knowing how to find a dealership that has options available for bad credit borrowers will save you time and money.

Instructions

Search for dealerships that do not do credit checks or who specialize in bad credit borrowers. These dealerships may be of a buy here, pay here variety where the dealership finances the car loan itself. Other dealerships may have deals with financing companies that offer bad credit loans in return for higher down payments or higher interest rates.

Call dealerships you are interested in and ask to speak with the finance managers or the financing department. While the dealership may be unable to give you a specific credit profile or score that they are looking for, the department can tell you generally whether bad credit financing is offered.

Secure your own financing through a credit union or a bank before going to a dealership. Talk to the loan officer in person if possible and explain the circumstances surrounding your poor credit situation. Credit unions and smaller banks may have bad credit loan products or may be willing to work with you, if you prove you can make the payments.

Ask a friend, family member or spouse with good credit to co-sign the loan with you. Co-signing makes that person responsible if you fail to make a payment. You benefit from a co-signer by qualifying for a loan you may otherwise be unable to do. However, it may be hard to find a co-signer since the loan affects the co-signer's credit as well.

What Are the Options When Upside Down on a Car Loan?

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When people shop for a new vehicle, there is a 40 percent chance they owe more on their old vehicle's loan than the car's fair market value, according to the financial website Bankrate.com. This is known as an "upside down" auto loan and occurs mostly because cars depreciate as much as 50 percent during the first two years of their life. Sometimes the best option is to stick with the status quo.

Auto loan experts, such as Philip Reed, senior consumer advice editor for Edmunds.com, believe the best course of action for an upside down vehicle loan is to stay put. You cannot hand the keys over to the bank, and even if you total the vehicle in an accident, the insurance company only pays for the value of the vehicle, not the loan. Having an underwater loan does not harm your credit score as long as you keep up with your bills.

Selling the car for as much as you can get to a private party should net you the best return, but avoid buying a new vehicle right away. Pay off the rest of the balance so you can shop for a new vehicle without the pressure of paying for a car you no longer own. Some auto loan agreements stipulate that you must pay off the loan upon sale of the car. The bank may turn the deficient balance into a personal loan if you have good credit.

One of the worst options for a borrower burdened by a depreciating car is adding the upside loan to a new vehicle loan. Dealers often agree to take a vehicle and pay off the old loan as part of a deal to sell the customer a new car. This does little to alleviate your situation and usually makes it worse, because the dealer typically adds the negative equity to the price of the new car and you have another vehicle loan to pay.

The Financial Web website recommends purchasing gap coverage for your vehicle. Gap coverage pays for any deficient balance if your vehicle is in an accident. Say you have $15,000 left to pay on a vehicle worth $10,000, and the car is totaled in an accident. Gap insurance covers that extra $5,000 you owe to the bank. In the future, consider buying a used car, put as much down as possible and finance with a loan with the largest monthly payment and shortest life.

Do They Check Your Credit When You Lease a Car?

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Leasing banks check the credit reports of anyone applying for a lease. You must have good to excellent credit to lease a vehicle. Financing may prove a better option for those with poor credit. Determine your credit standing before you apply for a lease and learn which other information banks use to determine your application approval.

Obtain a copy of your credit report from the three major bureaus to determine your own credit standing. Leasing banks may review your credit information from one or all three bureaus. AnnualCreditReport.com offers one free report from each bureau per year. Check your credit report to ensure your accounts are reported accurately. To obtain a vehicle lease, expect to have minimal credit issues, if any at all. All accounts must show as current (you can't be late on payments) and your history should reflect consistent, on-time payments and several long-term accounts. You are not likely to obtain a lease approval if any judgments, bankruptcies, collection accounts or repossessions are on your credit report.

Aside from credit history, a leasing bank uses other information to determine your application approval. Expect to provide the leasing bank with your employer and income information. A leasing bank uses your income information to determine your debt-to-income ratio. Your gross annual income should be sufficient enough to cover your monthly debts, all of which are listed on your credit report. For example, someone who makes $100,000 per year may be declined for a lease if his debts exceed $80,000 per year. Mortgage payments, car loans, credit cards or other loan balances and limits are viewable on your credit report. Expect to also have at least two years of verifiable employment and address history.

A leasing bank requires good credit because of the risk it assumes from leasing a car. A leased vehicle's monthly payment is lower than a comparable financed payment, so the vehicle's lease amount and actual value do not often equal out until the end of the leasing term. If a lessee defaults on her lease, the bank can lose a significant amount of money. Lessees are often billed for over-mileage and excess wear-and-tear fees after the vehicle's return, not before. If the lessee does not pay the amount due, non-payment is reported to the credit bureaus. Good to excellent credit consumers are more likely to pay their debts.

If you've been declined for a lease, you can still use a co-signer to obtain a lease approval. Lease approvals are based upon the cosigner's credit score, history and income. If you don't have a cosigner, consider financing the vehicle instead. Auto loan providers offer more flexibility with approval; you may obtain a loan with poor credit, albeit with a higher interest rate, term restriction or a down payment requirement. New car dealers work with a variety of banks and may use a lender suitable for your credit standing.

Can You Combine a Credit Card Into a Car Loan?

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Maintaining positive debt ratios is difficult in times of economic uncertainty. Credit cards are notorious for high interest rates and fees. If you are unable to keep control over the payments, compounding interest can spiral into financial doom. To combat this problem, consumers search for refinance options and invariably wonder if their car loan can do more than pay for the shiny automobile in the garage.

Car loans are lending agreements secured by your vehicle. In the event you default on payments, your lender has the option to take possession of your collateral and report the repossession to your credit. They are not general-purpose loans you can use for anything imaginable. This means you cannot walk into any automobile dealership and request an extra $2,000 to pay off your credit card balance. That being said, there are three ways to combine your credit cards with your car loan: rebates, refinances and title loans.

Automakers offer cash incentives or rebates from time to time as a way to stimulate consumer interest in their brand and help dealers sell units. The way this works is not complicated. The maker offers the incentive on a specific model or model year. If you wish to purchase that vehicle and meet any additional stipulations they place on the sale, you take advantage of the rebate.

The most popular use of these cash incentives is applying it to the total purchase price of the car to obtain lower payments or less of a down payment. Unless the maker writes this into rules, you are under no obligation to use the rebate for the purchase. Instead, wait for the rebate check and use the proceeds to pay off or pay down your existing credit card balance.

The auto loan refinance option only works if your credit history, the vehicle's age and your equity in the car all align. Lenders often require higher credit scores to refinance older vehicles. After a certain age, they will not touch the deal because the car's value continues to decline. If, however, your credit is in good shape, you owe far less than the vehicle's worth and it is not too old, you may apply for a refinance and receive cash back to apply toward your credit card balance. Requirements vary by financial institution, so always check with your lender for specifics.

In the event your car is fully paid and you hold a clean title---one free of outstanding liens---you may qualify for a title loan. For this loan, you request an amount less than or equal to your vehicle's worth using the title as collateral. Keep in mind that title loan companies can charge a higher rate of interest for this loan type than your financial institution. Although this is an option to combine credit cards with car notes, the interest rate or repayment terms can make it an undesirable option.

What Numbers to Look at When Comparing Vehicles to Lease

5:12 AM No comments

No two leases are created equal. Beyond lease residuals, interest rates and cap costs, lease advertisements consist of a predetermined term, mileage allowance and down payment requirement. To compare vehicle lease deals, carefully review the advertisements offered on manufacturers' websites.

Advertised lease terms are flexible; you can alter the term of a lease anywhere from 24 to 60 months. For advertising purposes, the cheapest term is already figured, so changing it will cost you more than the monthly payment you see advertised. Compare leasing term offers against the car's bumper-to-bumper warranty, which differs by manufacturer. You are responsible for all repairs while leasing a car, so ensure your warranty provides enough coverage or consider reducing the lease term to remain under factory coverage. Ideally, the lease term should match factory warranty coverage; otherwise you may have to pay to extend coverage.

Just like the advertised leasing term, the mileage allowance also provides a best-case scenario. Advertisements usually offer 10,000 to 12,000 miles per year, but you can change your allowance up to 18,000 miles per year if necessary. When comparing leases, ensure the mileage is a good match for your driving habits. If you exceed your lease mileage, expect to pay 10 to 20 cents per mile over your allowance, depending on your leasing bank. Match the mileage to your bumper-to-bumper warranty, as well. Make sure you remain under factory coverage during the lease period.

Down payment requirements significantly impact a lease payment. While the lease payment may appear attractive, the money down requirement may prove expensive. Most lease advertisements exclude tax and fees, which differ by area. Note your down payment requirement when comparing and aim to minimize your down payment amount. You can always call a local same-make dealer to find out the price differences for down payment variations. If your vehicle becomes a loss during your lease, you won't recoup any of your down payment or lease payments; insurance payoff goes to your bank, not you.

You can roughly estimate lease payments if you want to alter the advertised down payment amount. Every $1,000 you offer toward your lease reduces your monthly payment by about $30 per month. If you subtract $1,000 from your down payment amount, your monthly lease payment should raise about $30 per month. When comparing on your own, use this method to help identify a fair lease with the same down payment amount. Once you've narrowed it down, a dealer can offer you an exact monthly payment with the down payment you choose.

Monday, October 31, 2011

Cancelling Your Insurance

Returning Your Plates

Insurance Cancellation Requirements

Refunds

Instructions

Look Up Terms

By Hand

Online Calculators

Prepayment Penalty

Sunday, October 30, 2011

Identification

How long Will it Affect Your Credit?

Public Judgment

Tip

Saturday, October 29, 2011

Instructions

Friday, October 28, 2011

Modification Purpose

Dealing With Your Lender

Paperwork and Contracts

Other Options

What Is Gap Insurance?

Applying Gap Insurance to a Loan

Types of GAP Insurance

Purchasing Gap Insurance

Wednesday, October 26, 2011

Instructions

Tuesday, October 25, 2011

Review the Title

Title Transfer Procedure

Title Holding States

Other Documents for Title Transfer

Friday, October 21, 2011

Lender Requirements

Loan-to-Value Issues

Down Payment

Credit Issues

Instructions

Wednesday, October 19, 2011

Buyers Guide

Vehicle Warranty

Financing Options

Private Sales

Tuesday, October 18, 2011

Three-Day Rule

Manufacturer Programs

Used Cars

Lemon Laws

Instructions

Instructions

Sunday, October 16, 2011

Lemon Law

Car Issues

Specifics

Lawsuit

Saturday, October 15, 2011

Interest Rates

Term Adjustment

Process

Considerations

Instructions

Friday, October 14, 2011

Instructions

Thursday, October 13, 2011

Inspect the Title

Test Drive

Buy What You Need

Haggle

Peaceful Repossession

Court Order

Right to Redeem

Resale

Wednesday, October 12, 2011

Depreciating Value

Loan Term

Payment

Exceptions

Tuesday, October 11, 2011

What Is True Market Value?