November 2011 ~ Managing a Car Loan

Wednesday, November 30, 2011

Can You Take Over an Auto Loan for Someone Else?

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Some auto financing lenders may be willing to transfer a loan provided the new buyer qualifies with appropriate credit and employment history. However, many lenders have restrictions that do not permit an auto loan to be transferred. If the seller is willing to sell and the buyer is able and willing to buy, there may be a way to execute the transaction.

The loan is a legal contract between the lender and the person who purchased the vehicle and signed the loan agreement. That original buyer is responsible for making the payments on time. The title will transfer to him when the loan is paid off. If the new buyer takes possession of the vehicle and does not make payments in full on time, the original buyer's credit will be adversely affected and the original buyer retains responsibility for paying off the loan.

If the lender allows loans to be assumed, the original buyer must contact the lender and identify himself with his personal information and loan number. The new buyer will then need to qualify for the loan, submitting his Social Security number, date of birth, and verification of employment and address. The lender will likely check the new buyer's credit. The new buyer will also need to provide evidence of insurance for the vehicle.

The new buyer could take out a no-collateral, personal loan in the amount of the purchase price of the car. He would give the money to the original buyer, who would use it to pay off the existing loan and then transfer the vehicle to the new buyer.

If the original buyer and the new buyer are friends, they could agree for the new buyer to take possession of the vehicle, have it insured and sign a contract to make regular payments to the original buyer. The original buyer would send these payments to the lender. At payoff, the lender transfers title to the original buyer who transfers title to the new buyer. All is well provided the new buyer makes all payments in full and on time. If the new buyer fails to pay and has possession of the vehicle, the original buyer is at risk of financial loss.

Requirements to Finance a Car

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Whether you're a first-time buyer or a seasoned veteran on the subject of automobile financing, there are certain requirements you must provide to obtain a loan. Meeting those requirements becomes increasingly important with every additional dollar you borrow.

There are times when you can get a car loan with little or no down payment. Most times, however, you need about 10 percent of the full purchase price of the new car as a down payment. A down payment partially shields the lender from the depreciation of the car. In lieu of a cash down payment, you can also offer your old car in trade for the new one. It's the same as a down payment in that it offers the lender protection--except it serves to reduce the loan required instead.

Before making a car loan, most lenders ask permission to contact one or all three of the credit bureaus for your credit report. Each one rates your credit in a different way, but they all rely on your repayment history, current availability of credit and other information about you. In addition, some lenders ask you to fill out a financial statement. The lender will grant you the loan if all of that information meets his criteria.

Many lenders will ask you if you have had the same employer for at least 2 years. It's his way of verifying that you have a steady income. If you have been employed a shorter length of time, you may have to tell him the name of your previous employers. Your lender may also ask for your permission to contact your employer to verify that information.

An automobile lender may ask if you have lived at your current address for at least 2 years and whether you rent or have a mortgage. If you haven't lived at the same address for 2 years, he will likely ask you the address of your previous home; if you are a renter, he'll ask for the name of the landlord and permission to verify that rent has been paid.

Your auto loan will be approved if you meet the lender's minimum standards. If you don't, he'll either increase your interest rate on the loan to cover the added risk or will turn down your request. Most car lenders can tell you the status of your loan application within an hour or two.

How Long Do You Have to Pay on a Vehicle Before You Can Refinance in Your Own Name?

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A co-signer is someone who secures your loan with either his income or good credit standing. People need co-signers for various reasons, so the time it takes before you can re-apply for a car loan depends on your own credit issues. To determine when you can refinance your car loan on your own, consider why you had to use a co-signer in the first place.

Some buyers need to use a co-signer because of income issues. If you don't make enough money for a loan approval, your lender considers your co-signer's income along with yours. If this is the reason you needed a co-signer, you can likely refinance your vehicle after your income increases. Most lenders prefer at least two years of verifiable and steady income. If you used a co-signer for this reason and your income has increased, try to refinance your car after six months to one year of steady and provable income once your income increases.

Lenders decide loan approvals based on a borrower's debt-to-income ratio. Based on the information obtained in your credit report and your income, a lender decides how much you can afford to pay toward your loan each month. Even if you make more money than average, you aren't guaranteed a loan if you have a high debt responsibility. For example, if you already have a car payment, a mortgage and several credit cards that require a payout of $2,000 per month and you make $2,500 per month, your debt-to-income ratio is poor. Refinance your vehicle once you pay off other debt and increase your available funds.

If you have poor credit, it can take years to improve your rating. Items listed on your credit report, such as repossession, bankruptcy, foreclosure or judgments, can substantially reduce your credit score and chances of securing credit. Most of these issues remain on your credit report for at least seven years. Pay off your debts and prove to lenders that you can make payments consistently and on time with your current car loan. The amount of time necessary to improve credit differs by person and payment history.

You may find that you can currently refinance your loan. But the terms may not be favorable. You might obtain a higher interest rate, have a large down payment requirement or term restriction, which lenders may require as a term of approval. A shortened loan term or high interest rate can increase your monthly loan payment by more than $100. To stick to a budget and save money over the term of your loan, you may want to keep your current loan co-signer because of the loan terms you've already secured.

How Will a Home Equity Loan Affect a Car Loan?

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When you apply for a car loan, an existing home equity loan could have an impact on your ability to obtain that loan. Lenders look at your existing debts and how you manage those debts before extending new credit to you. Additionally, you cannot take out a car loan unless you have sufficient income to pay both that new loan and your existing debt payments.

Lenders make regular reports to credit bureaus about your credit management. High balances and payments made more than 30 days late have a negative impact on your credit score. Since houses hold value better than cars, you can obtain a home equity loan with a lower score than the score needed to obtain an automobile loan. Therefore, even if you had good enough credit for an equity loan, you may not qualify for a car loan, and missed payments on your equity loan could jeopardize your chances of even getting a car loan.

You only have so much money to spend each month, and lenders examine your debt-to-income (DTI) ratio to ensure that a new loan will not cause you to have more debt than you can afford. Your DTI reflects your debt payments as a percentage of your overall monthly income. Typically, lenders only allow you to obtain new credit if your DTI ratio does not exceed between 35 and 45 percent. A large home equity payment may not leave you enough spare cash to afford a car payment.

When you have established your home equity loan and your car loan, how you manage one loan has no direct impact on the other. Your home equity lender cannot raise your interest rate or charge penalty fees if you miss a payment on your car loan or vice versa. As long as you keep to the terms of your loan agreement with one lender, a car repossession or home foreclosure related to another loan can have no bearing on that particular loan.

Home equity loans have fixed interest rates, but many banks also offer home equity lines of credit that have variable interest rates and require interest-only payments. You may take out a car loan alongside your low rate equity line of credit and have no problem paying both of the debts. However, most equity lines have very high rate ceilings, which means that your payment could double or triple when interest rates rise. If that happens, your equity line of credit could soon have a big impact on your car loan if you cannot afford to pay both debts and must choose between protecting your home or your car.

Do Insurance Companies Offer Car Replacement for a Totaled Car?

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The auto insurance industry offers a bewildering array of insurance policies and options. The last few decades have seen the basic idea of auto liability and/or collision coverage morph into a wide variety of options. One option is comprehensive coverage, which includes loss from theft or weather-related damage, towing and/or rental car coverage while your vehicle is being repaired, as well as "gap" coverage and new vehicle replacement coverage where you receive a new car and not just the current value of your totaled vehicle.

The basic type of auto insurance is liability insurance, where the driver/vehicle is insured for any damage caused to others that is the driver's fault up to the liability limit. Another common type of car insurance is collision insurance, where you are essentially insured against most damage you do to your own vehicle.

New vehicle replacement coverage is insurance coverage that will replace your vehicle with a new vehicle of the same make, model and factory equipment as the totaled vehicle or the cash equivalent. New vehicle replacement insurance, however, is relatively expensive and is generally only available for the first year of car ownership.

Gap insurance coverage, also called loan/lease coverage, protects the buyer of a new car from the immediate 15 to 25 percent depreciation of buying a new car. Let's say you got in an accident and totaled your $25,000 car just four months after buying it. The insurance company will only pay you the actual cash value of the vehicle, which could be as low as $20,000, and assuming a $1,000 down payment and four $300 payments, you will still owe the financing company around $2,800. Gap insurance would cover this amount. Gap insurance is relatively inexpensive and is typically chosen by those who are leasing or making small down payments on new vehicles.

Rental car coverage will cover the costs of a rental vehicle while your vehicle is being repaired or otherwise for some specified period of time -- usually from a week to 30 days. Rental car insurance is inexpensive and commonly packaged with emergency roadside assistance insurance as a low-cost or free additional service.

Predatory Car Loan Lending Laws

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Predatory auto loans are those that are comparatively more expensive than regular auto loans. They may exhibit variable interest rates, high fees or unusually high annual percentage rates. Those who fall victim to predatory lending tend to be the most financially vulnerable. Few federal laws are in place to regulate the practice.

Generally, a car loan can be considered predatory if the interest rate of the loan is considerably higher than that of others. Such loans not only target customers with low or no credit scores, but may also trick some into thinking they are unwittingly entering a superior deal when in fact they are not. Many such loan agreements tend to be equipped with what is termed "mandatory arbitration"; when an agreement is signed by a borrower, this waives her rights to sue the dealership once she has realized she entered the agreement on unfavorable terms.

One of the basic types of predatory auto loans is that of a varying interest rate. When the buyer first takes out the loan, he is given a very low introductory rate known as the buy rate. The dealer is then able to increase the rate at his discretion. Because dealers profit from increased rates, they are very likely to increase them. Another method is to insert an assortment of fees and charges onto to the loan, which adds to the outstanding balance. This increased balance raises the amount of interest owed.

The net effect of predatory auto loans is almost always toward the benefit of the dealer at the expense of the borrower. People who had previously good credit, and who may have otherwise qualified for a loan with more favorable terms, can see their credit rating plummet. Furthermore, those who took out predatory loans because of their poor credit history find themselves in an even worse financial situation than before. According to "Predatory Lending: A New Face of Justice," predatory lending cost consumers $1 billion a year as of 2005.

Unlike the mortgage industry, which in 2010 saw some new regulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act, very little legislation has been put in place to regulate auto loans. The Dodd-Frank Act did, however, introduce the establishment of the United States Consumer Financial Protection Bureau, which will oversee and promote financial awareness among the American public. The bureau will also be charged with researching and investigating any new problems in the loan market so that it can mitigate its negative effects.

If I Have a Car Repossessed How Can I Get a Good Credit Score Again?

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Having a car repossessed can be a traumatic experience resulting in additional financial hardship. On the upside, it can also be a stark reminder that it's time to get back on track with finances. It's not impossible to get a good credit score again after having a car repossessed, but it will take some time, discipline and motivation. Researching ways to improve credit scores after your car is repossessed will help you decide which course of action makes the most sense for your situation.

Repossession happens when your secured debt is tied to an asset. Most car financing agreements permit lenders to repossess your car at any time, without notice, once you've begun defaulting on payments, according to the Federal Trade Commission. To get the car back, you may have to pay the entire balance on the loan back, plus the costs of towing and storing the car as part of the repossession process. Borrowers having problems making payments are better off selling the car and using resulting money to pay off the loan, since repossession leaves a dark mark on your credit score.

If possible, pay off the balance for the car that was repossessed and any fees associated with storage or preparing the car for auction. While this won't remove the repossession event from your credit report, future lenders, landlords or other professionals viewing your credit report will see that you've taken care of the debt. Paying down debt will help you move toward a good credit score.

Credit scores reflect your ability to handle credit, and one way to build up a credit score is to take out and reliably pay back another loan. Securing a loan can be tough after lenders see that your car was repossessed, but allow some time to pass as you gradually build up better credit by paying credit card bills, student loan payments and other financial obligations on time. After six months of good payment habits, your credit score may rise enough to take out another credit line to purchase another car, if desired. If you can wait two or three years, it'll be less likely that you'll need to take out a loan from a subprime lender, which comes with higher interest rates and fees.

Contact TransUnion, Equifax and Experian credit reporting agencies and add a short note to your report explaining your side of the repossession. Lenders may take your explanation into consideration when reviewing your report.

Far from being a magical bandage to resolve your financial woes, including repossession, bankruptcy is a very serious financial measure considered to be a last resort because of the lasting negative effect it can have on your credit report---up to 10 years, according to the Federal Trade Commission. While declaring bankruptcy can stop repossessions and other punitive measures, it won't help you much after a car has already been repossessed and certainly won't make it easier for you to get a good credit score.

Tips on Knowing When to Sell or Trade in Your Car

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Dealing with an old car is one of the more difficult parts of buying a new car. Buyers of a new car have to weigh the importance of getting the best possible deal on their old car against the amount of time spent selling the car. Though the decision to trade in or sell the car is a personal one, there are a number of factors that new car buyers should consider when getting rid of their old vehicles.

Before either selling or trading in a used car, determine the fair market value for the vehicle. There are a number of print and online price guides that a consumer can use to determine value. Some well-known examples are NADA and the "Kelly Blue Book." These guides use a vehicle's make, model, condition, mileage and other factors to determine market value. Price guides will give figures for both retail value and trade-in value for the vehicle. Consumers can also use Internet car listings to look at prices that comparable vehicles are selling for in their areas.

The primary advantage of trading in a vehicle to the dealer is convenience. A typical trade-in consists of taking the vehicle to the dealer for inspection and receiving an offer. Consumers can negotiate the price with the dealer, but the process is relatively simple. Trading in a vehicle is also less of a hassle, as the dealers will also handle the paperwork needed to transfer the title and documentation for the vehicle.

The primary advantage of selling a car over trading it in is that a private sale will typically result in a larger financial return for the vehicle. When a car dealer buys a car, he is buying it to sell. This means he will offer less than the retail value of the car, as he needs to be able to sell it for a profit. Selling a car also allows consumers to get rid of the car when they are ready, allowing them to concentrate on buying the new car instead of preparing the old one.

In some cases, dealers may offer customers as much or more for a trade-in as the customer could get selling it himself. As part of the new car buying process, it is always a good idea to see what the dealer will offer for the vehicle. Certain vehicles are more in demand in some areas, and this will greatly influence the time it takes a consumer to sell the used car, as well as the price.

What to Know Before Buying a Car

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Buying a car and getting a good price and interest rate requires savvy skills. Car salesmen and dealerships want to make a certain amount of money on each purchase, and lenders base interest rates for auto loans on credit scores. For these reasons, there are several things to take into account before buying a car.

The sticker price on a new automobile is what the dealer hopes to receive for a new car purchase. However, the invoice price is what they paid the manufacturer for the car, and knowing the invoice price paid by dealerships provides a price point to begin negotiating the price of the car. Find invoice prices for various automobiles with car buying guides such as Edmunds.com and Kelley Blue Book. Enter the make, model and year of the automobile to learn what dealerships paid.

Know your credit score and the information listed on your credit report before buying a car. Credit scores and history affect two aspects of buying a car -- approvals and the interest rate on the auto loan. MyFICO.com offers credit scores for a fee, and Annual Credit Report gives consumers access to one free report from the three credit bureaus each year. Some dealerships work with bad-credit applicants and offer sub-prime auto loans. However, a score in the upper 600s and higher makes you a candidate for a desirable interest rate and lower payment on the auto loan.

Know how much you can spend on a new or used auto loan before shopping for a car. Some buyers find a car first, and then submit an application for financing. Finance companies review existing debts and monthly income to determine if you can afford a particular price. Getting pre-approved for an auto loan before going to a dealership alleviates looking at cars that are out of your price range. Plus, pre-approvals let you know in advance if you're even able to qualify for a car loan.

If getting the lowest interest rate and monthly payment are a top priority, save money for a down payment before buying a car. Auto lenders do not require down payments. However, Financial Web recommends putting a sizable down payment on the loan to help you negotiate a lower interest rate. Down payments can be as little as 10 percent of the sale price or as much as half the sale price. Plan to put a minimum of 20 percent down.

What Is Required to Get a Used Auto Loan?

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Buying a used car can be an effective way to avoid the rapid depreciation that comes with buying a new car. If you want to buy a used car, you may need to get financing to help with the purchase. Qualifying for a used car loan requires you to meet certain guidelines.

Getting a used car loan is similar to getting a loan for a new car, but a few key differences are evident. One of the differences between a new and used car loan is in the term. Most of the time, a new car loan will give you a longer term to borrow the money. Another difference is the interest rate. With a used car, the interest rate will usually be higher than that for a new car loan.

One of the most important factors in getting loan approval for a used car loan is your credit score. The lender wants to verify that you have a high credit score before approving your loan. Each lender has different requirements for credit scores. For example, if you have a score above 700, you should qualify for a loan. If your score is lower, you might not qualify or you may have to pay a higher interest rate.

To get a used car loan, you may have to come up with a down payment -- which tends to increase as your credit score goes down. If you have poor credit, the lender wants a larger down payment from you. If you can come up with a large amount of cash, loan approval for a used car is much easier than if you have no money for a down payment.

When you apply for used car loan, the lender usually will verify your employment. The lender wants to know that you have the money to make your car payment every month. If you do not have steady employment, you may not qualify for a loan. The lender may call your employer to verify your employment and how much money you make. At that point, if you meet the other credit requirements, you should qualify for a loan.

How to Buy a Semi With a Bad Credit Score

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Bad credit can affect many financial decisions you make in your life. It can also affect the type of employment you seek. When it comes to semi-truck financing, the best credit scores get the best loans---which can become quite costly. Learning to obtain financing even with bad debt can help you develop your business with an owner-operated semi-truck.

Instructions

Obtain a copy of your credit report. You'll want to know exactly what your credit looks like before you begin seeking financing. Some red flags that lenders will see as increasing a credit risk are charge-offs, judgments, maxed-out credit lines, excessive trade lines (usually over four revolving accounts), delinquencies and any bankruptcies. Attempt to clear up any negative credit before seeking financing.

Limit your search to trucks that are not new. Financing a brand new semi-truck will be exorbitantly expensive---and with bad credit, your monthly payments will most likely be unmanageable. On the other hand, your credit may disqualify you from obtaining older models as the risk will be two-fold: both your creditworthiness and the age and potential viability of the vehicle. As such, look for used truck models with modest miles and a record of solid maintenance. You'll want to mitigate your risk as much as possible with poor credit.

Continue to lease a semi-truck if you have a semi-truck repossession on your credit report. While some lenders may be willing to offer high-cost financing to borrowers with poor credit, virtually no lenders will offer financing to borrowers with a history of truck repossession and poor credit. If you do have a repossession on your credit, continue to repair your report by making on-time payments, paying down your total debt load and generally being a responsible borrower with credit.

Research lenders who extend credit to borrowers with poor credit. It's important to be careful when you begin applying to lenders. Some unethical lenders will prey upon vulnerable and desperate borrowers---often charging illegal rates and fees, and, in the worst cases, defrauding borrowers. It's best to begin your search by asking colleagues in the trucking industry for recommendations. Invariably there are some who've used high-cost financing and have had positive experiences. Remember to research all potential lenders on the Better Business Bureau website to make sure their lending records are clear of complaints and charges of predatory lending.

Apply to two to three lenders. Stay abreast of the loan process---sit down with your loan officer if any terms change. Do your own personal DIR calculation (Debt to Income). For example, if your total monthly income (before taxes) is $3,000 and your monthly obligations (including a proposed loan payment for the semi) is $1,900, your DIR is 63 percent---which is too high. You'll want to stay under 50 percent to make sure you can afford the payment.

How to Refinance a Motorhome

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When you financed your motorhome, your lender gave you a set interest rate that helped to determine your monthly payment. That interest rate was based on the average interest rates at the time of your purchase, your credit and the basic policies of your lender. Motorhomes can take more than a decade to pay off, and some of those variables can shift during that long period of time. Refinancing your motorhome could give you a better interest rate, lowering your monthly payment and reducing the amount you pay altogether at the end of your contract.

Instructions

Obtain a free copy of your credit report. If your credit is worse than when you first financed your motorhome, you may not want to refinance until it has improved. You can get a copy of your credit report from TransUnion, Equifax and Experian once each year at the AnnualCreditReport Web site (see Resources).

Gather your motorhome purchase agreement, your last two tax returns with W-2s and any other documents that show your income and ability to make payments on your motorhome.

Find a refinance company online who can give you rates from several different lenders. There are several motorhome refinance companies listed in the Resources section to help you get started. Many of them tell you the credit score they require up front, so you know whether you can be approved before applying. Some companies will only refinance you if you have a base amount or more left on your loan.

Select "Refinance," "RV Refinancing Application" or "Apply" to start your application. You'll have to give your personal information, including your name, address and Social Security number. You'll also have to put in the make, model and year of your motorhome, as well as the lender you're currently with and how much money you still owe. You may have to include your employment information.

Choose "Submit" or "Apply"' once you've put in all your information. Depending on the company, you may be given offers to consider right then, or you may have to wait to receive a phone call later with your offers.

Accept an offer that has a lower interest rate. The new lender will contact your old lender about the payoff of your original loan. Sign the paperwork for your new loan terms with the new lender. You may have to pay closing costs again or even the entire down payment, so check with your new lender about the final costs of refinancing before you close your old loan.

Tips on Getting a Car Loan

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Reliable transportation is a must for busy adults. And while many people would prefer paying cash for an automobile and avoiding a car payment, not everyone has this kind of cash on hand. Fortunately, auto lenders provide financing, which allows buyers to purchase a new or used vehicle. But before applying for an auto loan, it's smart to familiarize yourself with lending requirements.

You don't need perfect credit to get approved for an auto loan, and many lenders work with people who have bad credit and no credit history. But just because you can finance an automobile with poor credit doesn't mean you should. Your credit rating determines your finance rate, which in turn impacts your monthly payment. Someone with an excellent credit history may qualify for a 4 percent interest rate, whereas someone with bad credit may acquire an interest rate of 9 percent or higher. Fix your credit before completing an application. Pay your bills on time and pay down your debts. Check your credit score after a few months to assess your improvements. A score of 700 or higher can help you get the best rates.

A steady source of income is another requirement for getting a car loan. Self-employed individuals will need to provide tax returns for the past two years, whereas someone with an outside job will need to supply his most recent paycheck stubs. Some lenders will contact employers to verify length of employment, whereas others do not require proof of income if the borrower meets the minimum credit score requirement.

Interest rates and monthly payments determine whether you're able to afford a used or new automobile. And if the auto lender is hesitant to approve you for a low rate auto loan, putting money down on the vehicle or having a co-signer can help you negotiate a better rate.

A down payment lowers the amount you'll need to finance, which reduces your monthly payment. Put down as much as you can afford, but typical down payments range between 10 and 20 percent of the sale price. Co-signers are beneficial when you don't have good credit or a long credit history. But to benefit from a co-signer, you'll need to select someone with good credit and an income source.

Dealerships want you to use their finance department so that they can also make money on the deal. The finance company charges an interest rate, but the dealer may increase the rate to add to its bottom line. Shopping around and securing your own financing from your personal bank or credit union can help you acquire the lowest rate on the auto loan.

What Forms Do I Need to Sell a Car?

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Selling your car allows you to rid yourself of an unwanted vehicle and make some money in the process. Additionally, selling your vehicle will allow you to put funds toward purchasing a new vehicle. Although selling your car is a simple process, you need to turn in a few forms at the time of sale.

A car title is a legal form that establishes proof of an individual's ownership of a given vehicle. Although car titles vary slightly from state to state, they typically contain information such as the owner's name, Social Security number and home address, as well as the car's make, model, color, year and vehicle identification number, or VIN. Additionally, vehicle titles typically include important car data, including mileage, outstanding liens or loans and past selling price. For legal and security reasons, virtually all car sellers must present a copy of a vehicle's title to a buyer.

Individuals may need to present a bill of sale document when selling a car. Like a car title, a bill of sale contains key information such as the car's VIN, year, make and model, as well as a statement that the seller is the legal vehicle owner. However, the bill of sale also contains a formal statement transferring ownership from the seller (you) to the buyer (another individual or car dealership). Additionally, car bills of sale contain a statement from the seller on the condition of the car, affirm the correctness and currency of the title, and lay out the responsibilities of the seller and buyer.

In addition to the vehicle title and bill of sale, certain state and local governments require car sellers to present additional, location-specific paperwork to buyers. For example, some California locations require individuals to present receipts of smog certification and emissions testing. You should check with your state's department of motor vehicles to see which location-specific documents you should present when selling your car.

How to Calculate the Monthly Payments on Buying a Car

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Several online calculators on the Internet allows you to calculate monthly payments on car loans. However, if you want to crunch the numbers yourself, you can follow a simple formula to find the monthly payment amount. Both methods allow you to tweak the interest rate and other inputs to see how changes affect the monthly payment amount. As long as you know the price, down payment amount, interest rate and loan term, you can perform simple calculations to find the monthly payments.

Instructions

Launch your Internet browser.

Go to the web page of an online car loan calculator such as MSN Autos Affordability Calculator or Auto123.com Car Calculator (see Resources).

Enter the down payment, car price, interest rate and term of the loan. The online calculator will show the amount of monthly payment you have to make.

Write down the loan amount, annual interest rate and the loan term in months. The car price minus the down payment equals the loan amount.

Use letters to represent the various figures. P stands for principal amount or loan amount, r indicates interest rate and m signifies the number of months.

Plug the numbers into this formula: [ P ( r / 12 )] / [ 1 - (( 1 + r / 12 ) ^ -m )]. For example, if the loan amount is $15,000 at seven percent interest per annum and the loan term is three years, the calculation would be: [ 15,000 ( 0.07 / 12 )] / [ 1 - (( 1 + 0.07 / 12 ) ^ -36 )].

Perform the calculations according to the formula to obtain the amount of monthly payment. In the example, the monthly payment would be $463.16.

Tips on Buying a Used Vehicle

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Buying a used vehicle can save you a substantial amount of money since the moment a new car is driven off the lot, the value of the car drops by several thousand dollars, according to Car Search. After three years, a car is only worth 60 to 70 percent of what was paid for it new. Although buying a used car makes economic sense, if you do not go about it in the right way, you risk problems such as having to repair damage you did not see and suffering from a bad deal from an unscrupulous car dealer. Take the right approach and your pocketbook will profit while you enjoy your vehicle.

Before looking for cars, decide on the price range you will pay. Include an estimate of financing costs in your calculation. If you have a certain model in mind, research the model online to make sure there have been no problems with it such as recalls from the manufacturer. Check on mileage efficiency, since the cost of gasoline is another consideration.

Look for individuals selling used cars directly. A private seller wants to sell the car quickly since he advertised the car directly, according to the site Autos. Private sellers may give you a lower price than used car dealers who must mark up the cars to make a profit. A private seller also knows more about the history of his car than a used car dealer moving hundreds of cars each month. Look for private sellers in newspaper ads, at classified ad sites like Craigslist or on any local classified advertising site.

If you are buying your car from a used car dealer, check on the dealer's reputation with consumer reporting agencies. When the salesman asks the price range you are willing to pay, do not share the highest price, so that you leave room for negotiation.

Speak with several dealers and sellers, and let them know you are looking elsewhere. Checking multiple places will give you a better understanding of the market and what you can expect to pay.

Before buying any used vehicle, get the vehicle identification number (VIN) for the car and obtain a vehicle history report. A vehicle history report contains a record of accidents, some that may be hidden from normal view when inspecting a car.

Does a Vehicle Lease Show on Your Credit Report?

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A vehicle lease does not appear on your credit report, but some facets of the leasing account are shown. Some banks may only report to one credit bureau, while others report to all three. Consider which lease information is reported to the bureaus and how your payment history may affect your chances to pursue other lines of credit.

Your leasing bank may report your account information to one or all three of the major credit bureaus -- Experian, Equifax and TransUnion. Various lease account information appears on your credit report. Your report lists your total lease amount, or the amount you're expected to pay toward your lease over your contract term. For example, if you will make a total of $12,000 in lease payments, the amount is shown on your report as the amount you borrowed. The name of the bank from which you are leasing is also listed on your credit report.

The monthly lease payment is also listed on your credit report. For example, if you pay $200 per month, the amount is listed as a portion of your lease account information. The number of payments you've already made is also reported, so it changes monthly. If you've made lease payments late, your credit history reflects the number of times you've made late payments and how late the payments were. For example, if you made lease payments 30 days late three times over the course of your lease, your credit report will list "30 3" next to your account information.

Repossessions are also shown on your history report. If you brought your vehicle back to your bank, this is shown as a voluntary repossession. If the bank had to seize the vehicle for nonpayment, your credit report shows your car was involuntarily repossessed. Despite the different terms, both types of repossession affect your credit score the same. If you failed to make payments toward your lease after the vehicle was returned -- such as for over-mileage, lease-end fees or other penalties -- your account will appear as past due.

Other creditors can view the complete payment history on your lease account. If you made every lease payment on time, your account is reported as closed and paid satisfactorily, allowing you to maintain your good credit standing. If you defaulted on your lease, your credit score is likely affected. If your account wasn't paid satisfactorily or on time, you might find it difficult to obtain another lease approval or other lines of credit.

Advice For Buying a New Car on the Internet

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Many consumers have turned to the Internet to purchase new cars instead of going to the dealership. This process might seem uncomfortable for you if you have never done it before, but it could potentially save you a great deal of time and money. When shopping online, it is important to keep some basic tips in mind.

When you are shopping online for a new car, the first thing you need to do is determine what car you want to look for. At that point, you need to do a great deal of research on the car itself. You can go online and read about vehicles on websites like JD Power. Look at information like gas mileage, crash test ratings and customer reviews. Before becoming a serious shopper, you need to become very educated about the car. In the dealership, the salesperson would educate you, but on the Internet it is up to you.

Once you do your research, it is time to take the car for a test drive. Even though you can do most of your shopping and research online, you need to actually go to the dealership to check out the car in person. You can simply ask for a test drive in the car with no obligation to buy from the dealership. You need to know how the car handles and whether you enjoy driving it. Then you can go back to your online shopping. You are welcome to skip this step, but most buyers like to try out a car in person before making a large purchase.

Once you are certain that you want to move forward with the buying process, it is time to start researching the prices of this type of car. You can go online and check out the Kelley Blue Book value of the car. You can also go to Edmunds to check out the true market value of the car and what other people are paying for it in your area. Looking at the manufacturer's website can also let you know if they are offering any financial incentives at the present time.

Once you have all of the information that you need, you can move on with the actual purchase of the car. You can buy new cars from dealer websites in your local area, or you could potentially buy from a car broker website such as Cars Direct. This type of service will help you come up with the best deal that you can find, and then help you complete the transaction. Many website dealers will even deliver the car to you as part of the deal.

Credit Issues with Car Financing

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Credit issues will not necessarily prevent financing a car. However, this may require employing specific techniques to ensure you get a car loan. Auto lenders work with all types of borrowers; and regardless of whether you have bad credit or no credit history, financing options are available to you.

Credit issues can prevent applying for a car loan on your own. To help ensure that you are approved for a car loan, consider using a co-signer on the auto loan. This can be anyone you trust with a good credit history, perhaps a parent, sibling or spouse. As a co-signer, this individual signs the loan documentations with you, and they accept responsibility for the car loan if you were to default on the loan.

Down payments with credit issues can help in two ways. For starters, a down payment can compensate for a low credit score and help you get approved for a loan; with a down payment, the auto lender may offer a better interest rate on the auto loan. Interest rates affect the payment, and larger down payments help reduce the loan balance. Ideal down payments for a vehicle loan range from 20 to 25 percent of the sale price.

Some auto lenders do not require proof of income if your credit score falls within a high range. But with a low credit score or credit issues, expect to bring copies of your most recent income statements. Earning enough income to afford a car can make up for a bad credit history. Retain copies of all documentations used to provide proof of income, such as bank statements and paycheck stubs. If self employed, show copies of your tax returns for the previous two years.

Everyone financing a car should shop around for the best terms -- especially those with credit issues. The interest rate on car loans can vary from bank to bank; while one financial institution may quote a high rate on a bad credit auto, another bank may quote an interest rate that's a percentage point cheaper, saving borrowers money on their monthly payment. Plan to talk with at least three banks to get a free auto loan quote before making a final decision.

Options for Getting Out of a Car Lease

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Car leases typically offer lower monthly payments, and you have the option of driving a new car every few years. But oftentimes, situations occur wherein those who lease cars have to get rid of their vehicle. There are multiple ways to get out of a car lease. And sometimes, you can get out of a lease without ruining your credit score.

If you have buyer's remorse or simply don't want a leased vehicle anymore, several options are available. Depending on your state and the details of your lease agreement, the dealership may allow you to return a newly leased vehicle within a few days of signing the agreement. Returning the vehicle within this small window lets you cancel the lease agreement without penalty. Read your lease agreement carefully and contact the dealership to see if you're eligible for this provision.

If not, there's also the option of returning the leased vehicle to the dealership before the end of the lease term, and paying the remaining balance. Of course, this may not be feasible if you owe several thousand dollars. But if you're nearing the end of your lease agreement and you're ready to get out of the lease, paying off the lease can quickly terminate the agreement without penalty.

Contact your leasing company and see if you're eligible for a lease transfer. If so, you can find someone (friend, relative or stranger) to assume responsibility for your lease and take over the payments. You can always ask a trusted friend or relative to take over your lease without completing a lease transfer. But in this case, you're still financially responsible for the vehicle, and if they stop paying the monthly payments, the leasing company will come after you for the cash.

With a lease transfer, the leasing company approves the new party for the lease, and the new party is required to sign lease documents. You relinquish all rights to the vehicle, and you're no longer responsible for the payments.

It's possible to sell a leased car. And if you can't find someone to take over the lease, consider selling the car and using the profit to payoff the leasing company.

First, call your leasing company and request information on your car buyout--which is basically the amount necessary to pay off the vehicle. Inform the leasing company of your plans to sell the vehicle, then place classified ads in local circulars.

The Pros of Auto Leasing

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Many who are in the market for a car have a hard time deciding between buying and leasing. While buying a car can be beneficial in certain situations, leasing also has some major advantages for certain consumers. Those who lease cars get benefits such as lower payments and fewer maintenance issues.

When you buy a car, you are limited to the type of car that you can afford. When the monthly payment is calculated, many people find that they cannot afford the car that they really wanted. With leasing, this is not as big of an issue. By leasing, you can often afford to get a car that is more expensive and you will not have to stretch your budget too far.

If you are more interested in saving money, leasing can provide you with a much lower payment than an auto loan could. With leasing, you are only paying for the portion of the useful life of the car that you use. This makes the payment substantially lower than a loan payment in most cases. If you are on a tight budget, you can get a new car for a fraction of what you would otherwise have to pay for it on a monthly basis.

Another benefit of leasing a car is that you will have fewer maintenance issues to worry about. If the car breaks down, you simply take it back to the dealership and they fix it for you for free. If you buy a car and something breaks that is not under warranty, you have to pay for the repairs out of pocket. This can be a substantial cost if you choose a car that is low quality.

When leasing a car, you can also save money on the taxes. When you purchase a car, you have to pay taxes on the entire value of it. With a lease, you only pay taxes on the amount of the car that you will be using through the lease. This can help you save a bit on the sales tax bill overall.

When you are done with a leased car, you simply take it back to the dealership and hand them the keys. When you buy a car, you have to deal with selling the used car to another party or trading it in. When you trade a car in to a dealer, you will likely get much less than what it is worth. With a lease, you can have more control over what happens when the lease expires.

How to Sell a Financed Vehicle

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If you have an auto loan on a vehicle that you do not want to keep, that does not have to stop you from selling the vehicle. While it can be difficult to sell a financed vehicle, it can be done. As long as you can find a trusting buyer, you can make the sale without the car title and give it to the buyer after the loan has been paid in full.

Instructions

Check the fair market value of your vehicle by using the Kelley Blue Book or NADA Guides website (see Resources). This gives you an idea of what you can get for your car when you sell it.

Call your auto loan company to get the pay-off amount for your car loan and how long that pay-off amount is good for. If you manage your loan online, you may be able to get the pay-off amount by logging into your online account. Once you have the pay-off amount, you can compare it to the fair market value. If the loan amount is higher than the value, you owe more on the car than it is worth. This is referred to as negative equity or being upside down on the car.

List your vehicle for sale in car classified ads, such as in your local newspaper and on sites like Auto Trader, eBay Motors and Craig's list (see Resources). Include photos and disclose that there is currently a lien on the car. This lets the potential buyer know that you won't have the title. Once you find a buyer, you must use their money to pay off the car loan. If you have negative equity, you must come up with the difference to pay off the loan. After the loan is paid off and the title is sent to you, it must be signed over to the new owner.

Trade your car in at a car dealership, if you can't sell it on your own. Even if you have negative equity, a car lot will typically take your trade-in if you are buying another vehicle. If you do this, you end up with the negative equity transferred onto the new car loan.

How Is an Auto Loan Calculated?

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Typically, financial institutions offer auto loans for 36 to 72 months, which will affect how the loan is calculated. The length of the loan, also called the term of the loan, affects the monthly payment the buyer will make. The down payment, if any, also affects the amount of the monthly payment. Some financial institutions may have special offers such as 100-percent financing, especially with new auto purchases. The year of the vehicle, whether it is new or used, can affect the number of months the financial institution is willing to finance the vehicle.

Financial institutions offer various interest rates for auto loans, which affects how the auto loan monthly payment is calculated. A number of factors control the interest rate offered to each customer. These factors may include the buyer's individual credit rating, the model year of the vehicle and the number of months of financing the customer accepts. In addition, the down payment amount may affect the interest rate offered on the auto loan. Occasionally vehicle manufactures may offer zero percent financing on new vehicle purchases for 24 to 36 months of financing, which significantly affects the loan calculation.

When it comes time to sign the auto loan documents, financial institutions usually will offer the borrower protection options. One option offered is life insurance that will pay the vehicle loan off if the borrower dies during the loan term. Another popular option is an insurance that will make your auto loan payment each month that you are disabled or unemployed. The monthly costs of these insurance options are added to your monthly loan payment, increasing the amount you pay. If you are considering the purchase of these options, you will need to consider the amounts when calculating your auto loan.

In summary, several factors need to be taken into consideration to calculate your auto loan accurately. These include the amount you need to finance, the number of months desired, the current interest rate offered to you, and additional loan options that you may desire to add. To estimate your monthly loan payment, use an online loan calculator entering the loan amount, current interest rate and terms you are considering, comparing the difference in monthly payment amounts. Keep in mind that your actual interest rate and terms may vary slightly.

How Long Should I Wait to Refinance My Auto Loan?

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Most people depend on their vehicles to get them where they need to go---work, shopping, a friend's house, church. Most people also have to take out a loan to cover part or all of the cost of their ride. Refinancing can save a person with an auto loan hundreds or even thousands of dollars, but it isn't always clear when the refinancing should be done.

Consider who provided the loan. If your loan is from a dealership, then you probably didn't get a very good deal in terms of the interest rate. This is one of the reasons people often become "upside down" on their auto loans (they owe more than the car is worth)---the interest rate won't let them get ahead. Check to see if you can get a loan from your bank or credit union. Often a refinancing loan from these institutions will have interest rates lower than what the dealerships will offer, even if the interest rate from the bank or credit union is still on the high side. If you can find this kind of deal, then it might be worth looking into refinancing immediately.

Check your credit score. If it has been a year or more since you financed your auto loan, and you have been meticulous about paying payments on that (and other) debt, your credit score may have improved enough so that the dealership or other financial institution may be willing to give you a better rate of interest. The longer you take to be consistent with your debt repayments, the longer it will take to improve your credit score and get the better refinancing interest rate.

Look at the yearly calendar. Many financial institutions and dealerships offer holiday specials for loan refinancing or first-time sales. These are given as incentives to customers to make purchases or to switch financial service providers. Similar incentives may be offered even on nonholidays by institutions that are new in order to get a foot in the door among competitors. These are good times to refinance.

Ask yourself if you are going to consolidate any of your other debts soon. If you are, then you might not want to wait to refinance your auto loan separately, because consolidation may give you a better interest rate than keeping the auto loan separate. You can just include the auto loan into the consolidation and refinance that way.

The amount of time that should pass before auto refinancing is not able to be determined simply because there are so many different opportunities to acquire a better rate of interest. Refinance whenever you know that the rate of interest gained through refinancing will more than pay for any refinancing fees, even if it's only been a short time since acquiring the original loan.

What Are the Buyout Options After a Lease Is Done?

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Those who lease cars typically do so to save money on their monthly payment and to avoid the hassles of owning a vehicle. In some cases, though, you may consider buying the vehicle toward the end of your lease agreement. In this situation, you have a few different options to look at before making a decision.

Towards the end of your lease, you may wish to buy the car. When you find a car you love, sometimes it is hard to let go. At any point during the lease term, you have the option of buying the vehicle. The leasing company can give you a quote on the current buyout amount at any point. When you decide that you want to buy the car, simply called the car dealership and find out what the buyout amount is. At that point, you can buy the car for that amount.

If you wait until the end of your lease, you will have a few options to consider. At that point, the dealer will typically allow you to buy the car for a predetermined amount. When you signed the lease, the dealer most likely provided you with the residual value of the car at the end of the lease. Typically, you can buy the car for the residual value plus a little extra.

In this situation, you also have the option to negotiate a price for the car. Even though the dealer will most likely try to get you to buy the car for the residual value, the purchase price of the car is negotiable. It can be difficult for the dealer to calculate exactly how much the value of the car will be three years in advance. The market sets car values, and if the car market is struggling, it lowers the value of your car.

If you want to purchase the car after the end of your lease, you also may have the option to finance it through your dealer. Once the dealer knows that you want to buy the car, you may be able to apply for a loan through the dealership. If the dealer knows that you are going to finance the purchase through its financing programs, it may give you a better deal on the actual price of the car.

Alternative Vehicle Financing

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Alternative financing for vehicles includes subprime bank loans and buy-here, pay-here programs. Both options allow people who do not have good credit, also known as high-risk buyers, to purchase a vehicle without having to pay cash. Before pursuing a car purchase using either of these sources, consider the benefits and disadvantages to decide which is financially best for you.

For a customer with poor credit, subprime financing or specialty lots may prove the only option to purchase a vehicle without cash on hand. Some buy-here, pay-here lots and most subprime lenders report to the three major credit bureaus, which can improve your credit score over the term of the loan. If you make your payments on time and carry out the term of the loan, you can establish a positive borrowing history. In the future, you may not have to use alternative finance methods.

One downfall of alternative lending is the interest rate offered for the loan. In some states, subprime lenders can charge an interest rate as high as 29 percent. This will affect the vehicle that you choose because of budgeting issues. Without putting significant money down, you may find that a $5,000 loan warrants you a payment of more than $300 a month with such an interest rate. Alternative finance providers also limit your term, so even a car loan for $5,000 may have to be paid off within a year to 18 months.

In addition to term and rate, many alternative lenders want a decent amount of money down. While this differs by lender, you can expect to put around $1,000 or more toward your loan. Some subprime lenders require half of the vehicle's value as down payment, affecting the year and mileage of the car you pick out. If you have to pick out an older car with high mileage, you aren't likely to have a warranty on the vehicle. For this reason, take the vehicle to a mechanic before you buy. Otherwise, you may be forced to pay for repairs.

Find out about the lender's repossession rules. A repossession can damage your credit even more. Alternative financing companies do not offer much of a grace period for late payments, so find out how long your payment grace period is. Ask about late fees, as well. Some buy-here, pay-here lots put a vehicle deactivating and tracking device in the car, meaning that it will not start if your payment is late. To avoid expenses or further damage to your credit, ensure you know about the bank's payment and repossession procedures before you sign a contract.

How to Use a Credit Card for a Down Payment on a Car

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Consumers use credit cards to finance many transactions because they do not have cash available, or they would rather put it on a card now and pay it off at a later date. However, people may not realize that it is possible to make a down payment for an automobile with a credit card. Car dealers see credit cards as cash when used to fund an initial down payment amount, and buyers who are wise enough to use a credit card with a rate of 0 percent interest can end up not paying any interest at all on the transaction.

Instructions

Look for a card that has excellent terms. Attractive features include: low interest rates; no or low annual card fees; and cash back from purchases made with the card.

Contact the customer service department of your credit card you select. Ask if they offer any deals for car buyers who use cards to pay for a down payment. Consider asking them to raise your credit limit if you need extra money to come up with the down payment. Ask to speak to a supervisor if the first person you speak to does not have enough authority to authorize such a deal.

Ask car dealers if they have a maximum down payment amount. Understand that some companies choose to limit the amount of money they will accept for a down payment because of the credit card merchant fees they are charged. Keep in mind that some car dealers may not accept cards because they do not like to pay these fees, which can sometimes be as high as 3 percent.

Speak to the salesperson working with you at the dealership about the total cost of the car, rather than just the monthly payment amount. Ensure the dealer does not attempt to make you pay for any hidden fees which result from the credit card transaction and increase the total cost of the automobile. Remain firm on the price you will pay.

Auto Leasing vs. Buying FAQ

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When you visit an auto dealership with the goal of acquiring a new car, you may be presented with the options to lease or buy it. Many people in this situation find themselves asking some of the same questions and covering the same issues when choosing to lease or buy a car.

Most car dealers will try to convince you that you will save money by leasing rather than buying the car. Dealers like to lease because it lets them make money on a car and then get it back to sell. The least expensive option will depend on several factors including the length of the lease and how much money you put down. If you are looking for short-term costs, the lease will usually be a little cheaper. If you consider long-term costs, buying can save you money.

Whether buying or leasing, you get to take home the car that you want from the dealership. The difference between these two transactions is large, however. With a lease, you essentially pay for the use value of the car for a specified amount of time. When buying the car, you purchase it to use as you please. With both options, the car will depreciate during the first few years, so neither one is a clear cut winner as a better investment.

Regardless of whether you buy or lease, avoid the temptation to try to negotiate the payment for your car first. Many people make the mistake of trying to get their monthly payment down to a level they can afford. The dealer can use all kinds of tricks to lower your payment while making more money in the end. Focus on the base price of the car first, and then decide between leasing and buying.

Many drivers use leasing as a type of deferred purchase program. While you are free to buy the car after the lease expires, this is typically not the best decision. When you buy a car that has just been through a lease, you will end up paying much more for it than if you had simply bought it to begin with. You might be better off purchasing another car at the end of the lease to avoid the extra fees and cost involved with purchasing your lease.

How Much Money Do You Save Buying Out Your Own Car Lease?

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You might not save any money when buying out your car lease. Leasing payments are based on expected depreciation over the term of your contract. The expected value at the end of the contract, known as the residual value, stays out of your payments. For this reason, payments are lower than a comparable finance, but lower payments result in less equity.

Compare your lease purchase price to the vehicle's resale value to determine whether you'll save money by purchasing your lease. Ask your leasing bank for your lease buyout amount. Obtain your car's resale value using appraisal websites like the Kelley Blue Book website, NADA Guides or Edmunds.com. Also check your local classifieds, such as your newspaper, Craigslist and the eBay Motors local classifieds. Your vehicle might be worth more or less depending on where you live and current market conditions.

Your researched values should include only properly equipped vehicles with the same mileage as your leased vehicle. If the resale value of your leased vehicle is more than your lease buyout amount, you'll save money. If you can purchase your same vehicle for less than your lease buyout amount, you'll lose money. When you initiated your lease, the leasing bank guessed its value at the end of the lease. You might find the bank incorrectly estimated the vehicle's value or unforeseen market conditions reduced the value of the car by thousands of dollars.

You must pay taxes and fees when purchasing your leased vehicle, so be sure to add your state's taxes and motor vehicle fees to the of the lease buyout price. Depending on where you live, the tax payment can add thousands to your purchase price. Check with your state motor vehicle department to determine your tax rate. Most states tax only the portion of the vehicle you actually pay for, so you don't pay tax on the vehicle's entire cost when leasing.

Even if you don't save significant money by purchasing your lease, the buyout still offers some benefits. Since you maintained the vehicle, you don't have to worry about it's maintenance and repair history, as you've driven the vehicle since it was brand new. You can also avoid paying penalty fees due at the end of the lease, such as over-mileage or wear-and-tear fees. If you turn in your lease with damage or with more mileage than your lease contract allowed, the bank will charge you for loss of value. Consider the cost of penalty fees (if applicable) to determine if purchasing your lease or returning it saves you more money.

What Is the Difference Between a Co-Applicant & Joint Applicant for a Car Loan?

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Determining whether you want to be a co-applicant or joint applicant on a car loan can be confusing, because different government entities may use the terms interchangeably. However, these are basically the same thing. What you want to watch out for is if the creditor calls you a co-signer.

The actual definition found in Regulation B does not state a difference between the terms co-applicant and joint applicant. These both apply to two or more people who request credit in both names, according to Bankers Online. On a car loan, this means that both parties have their name on the vehicle's title and both are responsible for the debt.

Co-signer and co-joint applicants are completely different entities under state and federal regulation. Most states consider a co-signer as someone who guarantees a loan after the creditor turns down the original applicant. The co-signer has the legal duty to repay the debt, but does not have the right to use the car.

Whether you want to be a co-applicant or joint applicant is up to you, but co-signers come with extra regulation and risk. Creditors must disclose to co-signers the risks they take by co-signing a loan or face a discrimination lawsuit. Credit Practices Rule, or Regulation AA, contains the actual definition of a co-signer. Because the original applicant needed someone to guarantee the loan, co-signing usually is a poor decision.

When you apply for a car loan, make sure the lender knows whether you are a co-applicant, joint applicant or co-signer. In general, it is better to a be joint or co-applicant on a car note so you have legal use of the car in case the other party defaults on the loan. On the other hand, creditors only actually go after a co-signer no more than 75 percent of the time, according to the Federal Trade Commission.

How to Calculate the Percentage Rate When Buying a Car

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It's no secret that car dealerships make money selling cars, but the biggest profit is usually not in the sale of the car itself but in the financing. A common sales tactic of car dealers is to provide you with an out-of-pocket amount and a monthly payment for the car you're interested in buying with the interest rate conveniently left out of the equation. Many buyers sign on the bottom line as long as they can afford the monthly note without realizing that note includes an interest rate far above what they should be charged.

Instructions

Negotiate a price on the car you're interested in and write down the monthly payment information and term of the loan provided by the finance manager.

Ask the finance manager directly for an interest rate on the loan and note that as well.

Do not purchase the car during your visit. Return home instead to do some research.

Access the Internet at home and find a website that will compute the interest rate charged for you by analyzing the total amount of the loan and the monthly payments. You can find websites providing those calculators for free.

Input the total amount to be financed, the monthly payment and the term of the loan into the calculator. The calculator will return the interest rate on the loan.

Use the interest rate calculated to contact alternative financing options to see if you can gain a lower rate.

How to Go About Getting Your Car Back After a Repossession Has Happened

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A loan holder can repossess your car if you fail to make payments. Getting the car back after it has been repossessed can be difficult, and sometimes impossible. The process varies a bit because of different laws in different states, so it is a good idea to contact a lawyer with experience in repossession cases in your state. You also can try to get the car back on your own by contacting the lender and following through with agreed-upon terms.

Instructions

Look over the terms of the loan contract to see if the repossession followed guidelines in the contract. If the repossession seems to be outside of the contract, contact a lawyer for guidance, or contact the loan holder, in writing, and ask for the car back based on the broken contract -- for example, if the loan holder repossessed the car on the 7th but payments weren't due until the 10th of the month.

Write the loan holder a letter asking for requirements to get the car back. For a quicker response, call and ask. But, follow up with the letter to get the response in writing.

Document every step, including dates and times, in a notebook or computer file. Write down the time and date that everything happens, from when the car was repossessed to any communication with the lender. Write down the names of everyone you speak to and make note of the date and time of the phone call and make notes about the conversation.

Follow all requirements for getting the car back. This might mean making a lump-sum payment or installing a tracking device on the vehicle.

Buy the vehicle back from auction if the loan holder doesn't let you attempt to buy back the vehicle. Repossessed vehicles often go up for public auction, where you can bid on the vehicle.

What Does it Mean to Have Your Car Loans Refinanced?

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Refinancing is a way to replace an existing car loan with a new car loan. Your new lender provides you with a new loan that pays off your old loan. Refinancing on car loans is generally done to help lower monthly payments. The original lender will release its lien on your car after it has been paid off by the new lender, who now has the lien on your car. The original lender no longer has the right to repossess your car, but the new lender will have the right to take it back if you default in your loan payments.

The general purpose for refinancing a car loan is to reduce your monthly payments by either extending your repayment period or taking advantage of reduced interest rates. For example, if your credit has improved significantly since you first took out your car loan then it may be wise to refinance to obtain a lower interest rate. If market interest rates are lower then it may be advantageous to refinance. Additionally, if you have a significant amount of equity in your car, then you may be able to pull some of that equity out as cash when you refinance.

A refinance loan can also help you lower your monthly payments by extending the time by which you have to repay the loan. For example, if you have only two years left on your existing auto loan then you may be able to refinance into a new five-year loan with much lower monthly payments over those five years. Ultimately, this will increase the total amount that you pay in interest on your auto loan, but it can give you more breathing room in your monthly budget.

The effect of a refinance is that your original loan disappears and the new loan takes its place. The new lender will require an application, and upon approval and closing, will pay off the full amount owed to your first lender. Your new loan may have terms that are different than your original loan, including the repayment schedule, interest rate, and in some instances, the payoff or principal balance.

Refinancing may not always be a benefit. First, refinancing sometimes requires a new down payment or the payment of application and lender fees. For example, the new lender may charge you a fee for processing your application or a loan origination fee. Second, if your credit has gone down since you obtained your first loan then you may not get the best interest rate on your refinance loan, which could result in you paying more interest over the life of your loan.

Can You Trade in a Leased Car Early to Buy Another Car From a Different Dealership?

11:06 PM No comments

At any time during your lease, you or someone else can purchase your vehicle from your leasing bank, allowing you to trade in your car to a different dealership than the one holding the original lease. To do so, your dealer must satisfy your leasing bank with the leased vehicle's purchase price, even if you owe more than the vehicle is worth.

Before you decide to trade in your vehicle for another purchase, check your car's value against your lease buyout price. Leased vehicles are often purchased at a higher price than financed vehicles because no negotiations or rebates are involved. You pay for only depreciation during a lease, so if you're trying to end your lease contract early, your buyout likely exceeds your vehicle's trade-in value. Check your car's trade-in value at the Edmunds or Kelley Blue Book websites or in the NADA Guide to determine whether trading the car is worthwhile.

You might save more money by paying to terminate your lease rather than trading it in. Many manufacturers offer some form of lease-end option for competitor or same-make vehicles. If you owe less than a year's worth of payments on your lease contract, ask a dealership if it offers any incentives that help pay for terminating your lease and purchasing a new car. If you decide to lease through the same bank, call the bank to find out if it offers any early lease-end options. Some banks allow lessees to end a lease up to one year early when using the same bank for another purchase or lease.

If the dealer you want to purchase from can't decrease your negative equity through rebates or incentives when trading your lease, consider shopping elsewhere. Many manufacturers offer discounts for buyers trading a competitor's model. If negative equity still exists even after discounts, offer a down payment to avoid a negative equity situation, which can cause problems if you want to trade or sell your new car in the future. Unless you pay off your loan early, you'll remain in a negative equity position until the loan is satisfied.

If you're over-mileage on your lease or exceeded your wear-and-tear allowance, trading your leased vehicle might prove to be the better option. Paying to terminate your lease early, whether you or the dealer pays, does not eliminate any lease-end penalty fees. Give your leasing bank your vehicle's mileage to determine the cost of over-mileage fees. If you trade your vehicle, you won't pay any fees at all because the dealer becomes the new owner of the vehicle after purchasing it from the leasing bank.

Can the Car Dealership Call Me and Change My Interest Rate After Signing the Contract?

1:48 AM No comments

Dealerships don't determine loan interest rates or loan approvals. While you may have already signed a loan contract and motor vehicle paperwork, you don't actually own the vehicle until the dealer receives payment from the lender. The lender may decide to offer different lending terms than the dealer originally quoted.

When you finance through a dealership, the dealer accepts a credit application from you and submits your application electronically to one or several lenders. The dealer can also check your credit score to determine the best lender for you. For example, if you have poor credit, the dealer might choose a subprime lender; if you have excellent credit, the dealer may suggest a credit union. Dealerships also have experience with the lenders; they know the requirements for debt-to-income ratios, loan-to-value ratios, minimum income and credit score requirements. A dealer may think a lender will approve you for a certain rate, but the lender may change its offer if you didn't meet certain criteria.

The lender often changes its lending offer based on stipulations. If the dealer sent your application after business hours, the lender may have sent back a counteroffer to the dealership. Even during business hours, a lender may provide a list of additional items it requires to approve your loan, such as proof of income or residency. If you over-estimated your income, your loan application might approve your loan, but at a different tier, increasing your interest rate. To obtain the loan for the car you want to buy, you'll have to agree to the interest rate.

Jeff Ofstroff of CarBuyingTips.com warns that dealers may try to scam poor credit customers into signing a low interest-rate loan contract, only to call the borrower who has the vehicle to increase the interest rate or down-payment requirement to secure the loan. Some dealers might attempt to make more money from a committed buyer this way, although other dealers actually run into issues with the lender. If you feel like the dealer is taking advantage of you, don't sign the loan contract and return the vehicle. If you don't sign the revised contract, the dealer won't receive payment for the vehicle.

Decide if you want to pursue the loan based on the change of interest rate and monthly payments. You might also apply directly to the lender who approved you to ask questions and negotiate your rate, although the dealer likely already tried to do so. If you have excellent credit, apply to a lender of your choice. If you have poor credit, consider using a co-signer. If you're unhappy with the interest rate, bring the vehicle back to the dealership. If you don't sign the new lending contract, you haven't bought the car. Even with a higher interest rate, try to negotiate with the dealership to reduce the price of the vehicle to keep the original payment quoted.

Wednesday, November 30, 2011

About Loan Responsibility

If Lender Permits Loan to be Assumed

New Buyer Gets Personal Loan

Agreement Between Friends

Tuesday, November 29, 2011

Down Payment

Grant Access To Credit Reports

Job History

Residence

Approval and Timing

Income Issues

Debt-to-Income Ratio

Poor Credit History

Budget Considerations

Monday, November 28, 2011

Credit Score

Debt to Income

Existing Loans

Variable Rate

Basic Types of Auto Insurance

New Vehicle Replacement Coverage

Gap Coverage

Rental Car Coverage

Predatory Car Loans

Types of Predatory Car Loans

Effects

Laws on Predatory Lending

Sunday, November 27, 2011

Repossession

Pay Loan

Additional Loans

Explain

Bankruptcy

Determining Value

Trade In Advantages

Selling Advantages

Other Factors

Saturday, November 26, 2011

Invoice Price

Credit Score

How Much Can You Afford

Down Payments and Interest Rate

Used Car Loan Differences

Credit Requirements

Down Payment

Employment Verification

Friday, November 25, 2011

Instructions

Thursday, November 24, 2011

Instructions

Tuesday, November 22, 2011

Improve Credit History

Income History

Down Payment and Co-signer

Secure Your Own Financing

Monday, November 21, 2011

Car Title

Bill of Sale

Location-Specific Documents

Instructions

Online Calculator

Manual Calculation

Friday, November 18, 2011

Planning

Private Seller

Dealer Negotiation

Shop Around

Vehicle History Report

Wednesday, November 16, 2011

Lease Account Information

Payment History

Repossession

Other Creditors

Research Model

Test Drive

Research Price

Buying the Car

Tuesday, November 15, 2011

Credit Help