Can a Car Dealer Give Me Cash for My Leased Vehicle?

A dealer can only give you cash for your leased vehicle if your car's value exceeds your lease buyout amount. A dealer must pay your leasing bank for the car's value before purchasing. You might be able to find a dealer who wants to purchase your car, but you might make more money by selling the vehicle privately.

Lease Buyout

You can purchase your leased vehicle at any time. If you trade the car to a dealer, it must satisfy your leasing bank to obtain a clear vehicle title, a state requirement for resale. The dealer can then return the leftover vehicle's value after the lease buyout if you decide not to apply it toward another loan. If you want to sell the car privately, you must provide the leasing bank with the buyout amount before you can obtain the title, which is necessary to transfer ownership. You can then keep any profit you make from the sale after satisfying your leasing bank.

Wholesale Versus Private Sale Value

You're likely to make more money from selling your vehicle privately than from trading or selling it to a dealer. Dealers offer wholesale value for trade vehicles, which is the least amount of money you can expect for a car. Private sale values are often thousands more than wholesale value. To gauge the difference in values, go to Edmunds.com, the Kelley Blue Book and NADA Guides websites. All three guides offer differ values, so use a median value to determine your vehicle's worth. Have a dealer appraise your leased vehicle to help you decide if you should sell it privately instead.

Warning

If you decide to end your lease early, you may still owe additional money to your bank. If you've exceeded your wear-and-tear balance or mileage allowance, the bank will charge you for the car's loss of value after you turn in your lease. Unless you trade in the car or sell it, you must still abide by your lease contract. Have an inspection completed before you decide to terminate your lease. Most leasing banks offer a lease inspection before returning the vehicle to avoid extra fees.

Finding a Dealer to Take the Lease

Some dealers may not want to purchase your leased vehicle unless you trade it toward another purchase. Call around to dealers to find out if one will purchase the car from your bank and give you cash for car's value after it pays the leasing bank. If you plan to trade the leased car toward another purchase, and the car's value is more than the buyout amount, consider putting the excess amount toward your new loan to increase your vehicle equity. You might also find that a dealer can pay your last lease payments so you don't have to trade the car.

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Can I Sell My Car Without the Original Title?

The car title is a very important document, because it proves that you own the car. When selling your car, you need to have the title as proof of ownership. Don't trust a car dealer or individual who tries to convince you otherwise, or you could end up in trouble. However, if the original title is lost, you can secure a replacement title.

Legality

A title proves that you, not someone else, owns the car. So, selling a car without a title is not legal and violates state laws. If you own the car with other people, everyone needs to sign off on the title to sell the car, so just having the title might not be enough. Additionally, the title must be in your name. You can't sell a car someone else owns, even if it's a relative or spouse.

Replacement

If you have lost your car's original title, don't worry. You can pick up a replacement car title, then sell the car. Check with your state's Department of Motor Vehicles or similar agency about obtaining a replacement or duplicate car title. For example, Michigan vehicle owners can obtain a new title from the Secretary of State, while California vehicle owners do so at the DMV. You may have to complete paperwork and pay a fee for the replacement title.

Loans

If you financed or leased your car, you may not have the car title because the lending agency holds it. In this case, you need to have the financer release the lien on your car, by signing on the title. You can only do this once you've paid off the balance, so pay up or contact your financer directly to see if you can arrange to sell the car, then reimburse them. For leased cars, you technically cannot sell the car because you do not own it.

Tips

Once you sell the car, transferring the title to the owner releases you from ownership of the vehicle, and thereby from liability. If you do not transfer the title to the new owner, you could be fiscally responsible for parking tickets or citations he incurs, because you technically own it. So not only is selling the car without a title illegal, it could cause you all kinds of financial trouble.

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How to Determine Equity in a Leased Vehicle

If you can purchase your leased vehicle from your bank for less than its resale or trade-in value, the vehicle has equity. Depending on how far along you are in your lease contract, your vehicle might not have any equity at all. Leasing banks charge monthly payments based on expected depreciation, which often evens out at the end of the lease term. The residual value, or the cost of the car that stays out of your payments, is the expected value at the end of the term. The vehicle might have no equity in it until then.

Instructions

1

Call your leasing bank to obtain a buyout amount. The buyout amount is your cost to purchase the vehicle, whether you intend to purchase it yourself, sell it or trade it.

2

Research your car's value using Internet appraisal guides, such as Edmunds.com, the Kelley Blue Book website, NADA Guides website or the Galves book, which you can obtain at a local bookstore. Determine a median value from at least three sources, as all offer different values.

3

Subtract your vehicle's value from its buyout amount. The remaining amount is your current equity.

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How to Finance a Vehicle With a Lien on the Title

A lien on a vehicle is most often due to a previous car loan that is not yet paid in full. If you buy a car that already has a lien and you want to finance it yourself, you'll have to work with the seller to release the existing lien first. Until this happens, you're going to have a problem completing the transaction.

Instructions

1

Negotiate with the seller on the final selling price of the car. If the seller is unable to pay off the lien himself, which would be the normal course of action, you may have to negotiate to pay off the other lien and deduct that amount from your final sale price. Hold off on shaking hands and finalizing the agreement until you consult with your lender regarding the situation and the existing lien. If the lender agrees to assist you with closing this sometimes complex transaction, the lender would probably have to cut two checks --- one to the existing lien holder and another to the seller for the remainder of the sale amount.

2

Draw up a bill of sale that outlines the entire agreement including conditions and contingencies, once you have confirmation that the lender can help you with this transaction. Have a lawyer review the agreement and notarize it with your signature and the seller's.

3

Pay the other lien holder (the contact information is located on the title). Wait to receive a lien release from the existing lien holder as well as the title. See if you can arrange to have it sent to your address or directly to the new lender. The new bank will most likely handle this step.

4

Proceed with the sale at the lender's office, with the seller present. The lender issues final payment to the seller for the remainder of the sale amount per your bill of sale. The seller must sign the back of the title to you as the new owner, then the lender takes the title into possession as the new lien holder. The exact transfer process may vary by lender.

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Advice About Not Getting Ripped Off On a Car Lease

Leasing a car can be attractive because it allows you to get a lower payment than if you were buying a car. While it can be effective, you could also get ripped off easily if you are not careful. Lease terms can be confusing, and you need to keep some tips in mind when you talk to the dealer.

Negotiate Price First

When you go into a dealer and find a car that you like, you may be tempted to try to start negotiating on how much you can get the payment down to. While this could help you save a few dollars per month, it is not the best approach to use. Instead of focusing on lease payment, focus on the base price of the car first. Negotiate the total price and then worry about the lease payment.

Down Payment

One of the nice things about leasing a car is that the down payment is negotiable. Even though the advertisements for leases recommend a certain amount of money down, you do not have to put that much down if you do not want to. Part of the down payment might be based on your credit history. If you want a lower down payment, do not be afraid to negotiate with the dealer for it.

Mileage Limits

When negotiating the terms of your lease, make sure that you pay attention to the mileage limits of the contract. With a lease, you are paying for the usage of the car over a certain amount of time. The dealer puts a limit on the amount of miles that you can drive. If you go over the limit, the overcharges will be very large. Make sure that you get enough miles on your lease to accommodate your driving needs.

Question Fees

When you negotiate the terms for a lease, you will notice that the dealer tries to charge you for many different fees. Some of these fees might be legitimate, but many of them are simply a way for the dealer to gouge you for more money. With many leases, the dealer will charge you an acquisition fee for finding the exact car that you want. The dealer may also try to include a large fee for the disposition of the car on the back end of the transaction.

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Ways to Reduce Car Payments

A car payment can eat up a good portion of your monthly earnings, so it's best to plan out how much you want to pay before you purchase the car. Decide on the maximum monthly payment you're willing to make, and the dealer will be able to help you figure out how to achieve it. If you're already paying for a car, there are some things you can do, though your choices are more limited.

Consider Buying Used

You may want a nice new car, but if you can't make the payments on it (or if making the payments would be difficult), then check out some used vehicles. Used doesn't always translate to abused, and there are some great cars out there that have had other owners and are still in great condition. Used cars are much less expensive than new cars, and that makes a big difference in the monthly payments.

Make a Large Down Payment

Save up some money before you head to the car dealership. The bigger your down payment, the less you have to finance. This means your payments will be lower, you'll pay less money in interest and you may even be able to pay off the car sooner. If you buy a car with little to nothing down, you're basically borrowing the entire amount for the car, and you'll have to make much bigger payments to get it paid off on time.

Choose a Long-Term Payment Plan

If your only concern is lowering the monthly payments, you can choose a long-term payment plan. This means you'll have longer to pay off the car, and you won't have to make big payments to do so. The downside to choosing a longer payment plan is you'll end up paying a lot more money in interest. Over time, this option is a lot more expensive.

Refinance

If you're trying to reduce payments on a car you already have, you'll probably need to refinance. First, make sure there aren't any penalties for an early payoff in your current payment contract. Choose a financial institution you want to refinance with. This can be the same institution that you're paying now, or you can go through another bank or credit union. Basically, you'll pay a fee (usually a few hundred or thousand dollars, depending on what you owe), and the new institution will pay off your car loan. Then you'll begin making new payments to your new lender. This will change the terms of your loan, and you will be able to work out smaller payments.

Sell the Car

If you need to reduce your payments a lot because you can't make them or they're interfering with your ability to pay for other things, you may need to sell the car. If you just bought it, this is bad because your car will probably be worth less now than when you bought it. You might have to keep making payments for a while because you won't be able to sell it for the full cost of the loan. However, selling the car would enable you to eventually get rid of car payments altogether, allowing you to start from scratch next time you buy a car.

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Problems with Hybrid Cars

If you are considering the purchase of a hybrid car, there are a few factors you will need to examine prior to purchase. While hybrid cars do offer many advantages, their disadvantages are often overlooked. Many of the disadvantages of a hybrid won't affect your wallet, but a few of these considerations can be quite costly.

Lack of Power

To increase fuel efficiency, hybrids have much less powerful engines, resulting in cars with a considerable drop in power. Both acceleration and pulling power are affected by this.

Cost of Repairs

Engines in hybrid cars are a newer technology that many mechanics are not yet familiar with. This and their more complicated design leads to much higher repair costs.

Battery Life

The average hybrid car battery lasts around 80,000 miles before needing replaced. While that seems like quite a long shelf life, keep in mind that these batteries cost $5,000 to $8,000.

Size

Because the engines produce less power than a typical car, hybrids are much smaller to help improve acceleration and gas efficiency. For this reason, many hybrids have drastically less storage space than their non-hybrid counterparts.

Weight

For more efficient operation and better performance, hybrids are typically much lighter than a normal car. These lighter materials tend to make the car more susceptible to damage.

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How to Deal With a Car Loan

Car loans are a regular part of life for most Americans. The reason for this is that most people cannot afford to pay for a new car outright and must get a loan. Auto loans are typically about four to six years long. It is better to just buy a used car outright than to buy a new car that you can't afford; but if you already have a car loan, you must find a way to deal with the expense.

Instructions

1

Pay extra money on your car loan each month if you can, which will allow you to pay off your loan early and reduce your interest payments. Pay your bill on time too, to build good credit.

2

Keep your car in good shape. Regular maintenance checkups will make your car last longer and cost less over the long run.

3

Consider selling your car. Find a seller who is willing to take over the loan payments or to pay for the loan in full. Most cars quickly become worth less than what the owner owes. You may even have to pay something to have your car sold.

4

Consider taking the car off the road for some time to save on insurance, gas and maintenance. Find another mode of transportation that costs less than the money you are saving by parking your car.

5

Refinance your car loan to get a lower interest loan. Your current loan company is not likely to refinance you, so find another lender.

6

Turn your car over to the company that owns the loan, if you can not afford it at all. You may still have to pay the difference between what the car is worth and what you owe.

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How to Find a Monthly Car Payment

Many people have to take out a loan when they buy a car. These loans require monthly payments to repay the amount borrowed plus interest. To find the monthly payment, you need to know how long you will have to repay the loan, the interest rate and the amount you borrowed. You can find your monthly car payment using an online calculator (see Resources) or working out the formula by hand.

Instructions

1

Multiply your annual interest rate by 1/12 to find the monthly interest rate on the car loan. For example, if you have an annual rate of 6.126 percent, you would multiply 0.06126 by 1/12 to get 0.005105.

2

Add 1 to your monthly interest rate on your car loan. In this example, you would add 1 to 0.005105 to get 1.005105.

3

Raise the step 2 sum to the power of the negative number of car loan monthly payments you will make. For this example, if you have a 48-month loan, you would raise 1.005105 to the negative 48th power to get 0.783161257.

4

Subtract the step 3 result from 1. In this example, you would take away 0.783161257 from 1 to get 0.216838743.

5

Divide the monthly interest rate on the car loan by the step 4 result. This will be the decimal of the car loan amount that will be the monthly payment. In this example, you would divide 0.005105 by 0.216838743 to get 0.023542841.

6

Multiply the decimal from step 5 by the amount borrowed to find the car loan monthly payment. Completing the example, if your car loan is for $17,000, you would multiply 0.023542841 by $17,000 to find your monthly payment to be $400.23.

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When to Lease a Car?

Leasing a car is not for everyone, so you need to know when is the right time for you to lease a car and when you should buy one. Many of the factors that go into making the decision are dependent on who is making the decision -- what is right for one person may not be right for another.

Monthly Payments

If the monthly amount you will pay for a vehicle is a big concern or you want a lot of car for the least amount of money, then you may want to lease a vehicle. For the same car, the monthly leasing amount will be significantly less than the monthly payment if you purchased the vehicle. According to Leaseguide.com, with all factors being equal, the monthly lease amount will be 30 to 60 percent less. This is usually true even if the interest on the lease payment is higher than the financing rate on the car loan payment.

Keeping a Nearly New Car

If you like to have a new car every few years because you like the look and low maintenance of a new car, then leasing is probably right for you. With a lease, you are changing cars every two to three years. On the other hand, if you intend to maintain your vehicle and hold onto it until it is no longer drivable, then your choice would probably be to purchase a vehicle because, for long-term usage of a vehicle, it is the cheaper option.

Investment Capital

When you make a payment for a vehicle, either purchased or leased, you are paying for an asset that is losing value. You can minimize this loss by extending the life of the vehicle, which is an option you have if you purchase it. However, with leasing, the way to minimize this loss is to use the difference between a purchase payment and a lease payment as investment capital and put it into a savings account or mutual fund where it will actually gain interest instead of lose value.

High-Crime Area or High-Risk Driver

If you live in a high-crime area or are considered a high-risk driver, leasing can offer you an advantage that purchasing cannot. Most car leases include gap coverage insurance that will pay the difference between what you own on your lease and what the value of the vehicle is if the vehicle is stolen or totaled in an accident. Because new cars lose value more quickly than older cars, gap coverage is a necessity for someone who leases his vehicles. Otherwise, if the car was stolen, you would have to pay the difference between the remaining lease value and what the insurance company pays you for the vehicle.

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How Much Insurance Do You Need to Lease a Car?

Leasing banks require its lessees to carry insurance coverage higher than the state minimums. Because the bank owns the leased vehicle and not the lessee, the bank requires increased limits to protect from loss or non-payment. Before you pursue a lease, consider the necessary coverage requirements and your overall cost.

Full-Coverage Insurance

Leasing banks require full-coverage insurance. This policy covers your car's market value in the event of a loss, even if you were at fault. If this is your first loan and you have only maintained a state liability policy in the past, you can expect to pay more for your car insurance. A liability policy only covers damages to other people or property, not damages to your vehicle. Check the cost of a full-coverage policy with your insurance provider so you can budget for the payment.

Limits

Required bodily injury and property damage limits vary by state. Your leasing bank likely requires you to carry more than the state-required amount and your payment will increase as a result. Ask your leasing bank or the lender you intend to use for the amount of coverage that it requires. Increased limits protect your liability in the event of a serious accident; your insurance coverage will pay for significant damages to other people so you don't have to.

Deductibles

A lender also requires a lower deductible. A deductible is the amount that you pay out for repairs if you make an at-fault claim. For example, if your vehicle requires $4,000 in repairs from an at-fault accident, your insurance company will pay for the repairs, but you must pay a portion of it, which is the deductible amount. Your insurance company may offer a deductible option that ranges from $0 to $1,000, although leasing banks often require a $500 deductible or less.

Gap Insurance

Gap insurance is an additional policy you can purchase from your leasing bank, insurance agent or a third-party provider. A full-coverage policy pays toward the vehicle's market value if it is a total loss, but you are responsible for making any payments due if the lease isn't paid off. Gap insurance covers the "gap" between your vehicle's value and lease amount. Most leasing companies require this coverage. Consider purchasing the policy anyway, even if your lender does not require it.

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How to Pay a Car Note Twice a Month to Cut Interest

Interest on most automobile loans is calculated over the term of the loan. Making multiple payments per month can reduce the total amount due on the loan and help pay the loan off more quickly. This method works because interest is paid only once per month. The second bimonthly payment is devoted to the loan principal.

Instructions

1

Calculate the periodic interest rate. Find the stated rate of interest in your loan promissory note and divide by the number of payment periods in a year.

2

Consult the amortization schedule or a recent statement from your lender to determine the principal balance remaining on the loan.

3

Calculate the amount of your next monthly payment that will be directed to interest. Multiply the principal balance remaining by the periodic interest rate.

4

Subtract the amount of your next monthly payment directed to interest from the full amount of the monthly payment. Reduce the principal amount remaining on the loan by this amount.

5

Indicate in your second monthly payment that it should be "applied to principal only" on the memo line of the check or on the payment stub. Deduct the complete payment amount from the principal amount remaining. Interest is calculated monthly; there is no interest accrued mid-month.

6

Repeat steps 3 and 4 each time you make an extra payment. Your extra monthly payment reduces the principal balance on which interest accrues because no portion of the mid-month payment is attributable to interest.

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What Are the Disadvantages of Leasing an Automobile?

Leasing an automobile may have some advantages, but it is very important to be aware of the disadvantages prior to entering into an agreement. Once you have carefully thought through the advantages and disadvantages of leasing, and compared these to your personal situation, you will be in a better position to make an informed decision.

Payments

When leasing a car, you are making payments on a vehicle that you do not own and will not own. Leasing allows you, in most cases, to pay a lower monthly payment than you would pay if your were financing the car for purchase, but when the lease is over, you do not own the car, and you cannot trade in the car toward another. You have paid every payment and have built up zero equity. At the end of the lease term, you may have the option to purchase the car and own it for a lump sum payment. This lump sum payment is often thousands of dollars.

Miles

When leasing a vehicle you agree to not go over a set mileage. Going over this set mileage can cost you a significant amount of money as you are charged a fee per mile. Before agreeing to lease a vehicle, you should be certain you will not go over the set mileage.

Damages

Leasing a vehicle leaves you susceptible to pay for damages to the vehicle. Normal wear and tear is a very subjective finding, and what you consider normal wear and tear may not be what the leasing company considers normal wear and tear. Any dent, damage, stain or excessive scratching could be your responsibility at the end of the lease.

Early Termination

Terminating a lease early could result in a stiff penalty. Before entering into a lease, you should be as certain as possible that this is the car you wish to have until the lease has ended. You will not have the flexibility to trade in to purchase a new vehicle as you do when you buy a car.

Maintenance

You are required, by the lease terms, to perform all the recommended maintenance on the vehicle. The cost of the maintenance is out of your pocket, and you should keep all receipts, and have proof of the maintenance. Failure to do so could result in penalties or a warranty repair being denied. This recommended maintenance can be oil changes, tune ups, belts changed or any other maintenance that is recommended by the vehicle manufacturer. Review the recommendations prior to signing a lease so you know what you are agreeing to.

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Vehicle Finance Problems

Various vehicle finance problems exists, which are mainly the result of credit issues or other information reviewed by the bank that may result in a declined application, such as employment, income or address history. Whichever the case, solutions do exist for common finance issues. You may have alternatives to consider for your vehicle purchase if you run in to finance problems.

Types

Several types of vehicle finance problems exist. A declined finance application means you cannot finance through the particular lender you applied to. Or, maybe the dealership let you take a vehicle, had you sign the contracts but later called to tell you to bring the vehicle back or that you have to come in to re-sign your paperwork because of a higher interest rate. Other issues may include having to put money down because of loan-to-value ratio, meaning the bank only wants to lend a certain percentage of the vehicle's value. This can happen because of inflated sales price or trying to carry over money from another loan, known as being upside-down. Debt-to-income ratio problems mean you do not make enough money to afford the vehicle's payment, as determined by the bank.

Credit and Personal Informatiom

Many vehicle finance problems are a direct result of credit history and score or income, job and address history. A lender prefers to see stability in a borrower's address and job history. A two-year history with your employer and at your address is a preference for most banks. Your credit information is also a consideration. Your time on the job and at your address may not matter if your credit score is in the good to excellent range. At the same time, if you have long-term standing at both your address and job, the bank may be more lenient with you even without an excellent credit score. Income is also a consideration. You cannot lie about your mortgage or monthly credit card bills; major revolving debts are listed on your credit report. Even if you share your expenses with someone else and have been turned down because you pay out more than you make, you cannot state you pay for half of the cost if you are the sole person on the mortgage or an additional car loan listed on your credit report.

Solution

Finding a co-signer will solve most vehicle finance problems. A co-signer joins you on the loan and becomes responsible for the vehicle's payment, even though she is not the main borrower. The co-signer's income, debts and personal information is used to determine risk. A co-signer with a good to excellent credit history can help if you do not make enough income to borrow, lack credit history, have bad credit, want a lower interest rate or longer term or even if you do not want to put money down.

Alternative Options

If you do not have excellent credit and were turned down for leasing or a manufacturer's offer in which good to excellent credit is required, you may be able to apply for traditional financing. You may not get a preferred rate, but traditional lenders, such as Chase, Bank of America, HSBC or even your local credit union may approve your application with a slightly higher interest rate. Subprime financing, which exists for risky borrowers with poor credit history may prove another option, but you can expect a high interest rate. Putting money down to increase equity in the vehicle you want to finance may also get you an approval. Sometimes putting down as much as half of the vehicle's value can warrant you a loan.

Warning

Keep your budget in mind. If you run into any vehicle finance problems, do not make a desperate decision to purchase a car you cannot afford. High interest rates can increase a car payment more than $100 per month in comparison to regular, competitive rates. You may also be required to go a shorter term than you originally intended, which again can significantly increase your monthly payment. If you need time to find a co-signer or fix your credit, do so instead of agreeing to a loan you may not be able to afford.

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Do I Need Good Credit to Lease a Car?

Good credit is normally required to lease a car. In most cases, a credit score above 680 or a lower score with a good repayment history on prior auto loans and leases is necessary to ensure the most attractive lease offers. To avoid being blindsided by a dealership telling you about your poor credit position, you should check your credit score before visiting the dealership, just so you are not taken aback if things do not go as expected in the showroom.

Credit Scores Measure Risk

Leasing companies consider credit scores when assessing the creditworthiness of prospective lessees. The credit score is a numerical value used to rate the overall quality of your credit history and the timeliness with which you pay bills. In addition to providing basic account information, the detailed credit report even shows possible lenders the balances you carry on your accounts and the minimum monthly payments that you must pay. This helps lenders gauge your ability to successfully repay the loan.

Leasing Restrictions for Low Credit Scores

If your credit score falls below the benchmark leasing minimum of 680, you may be required to pay more interest on each monthly payment. This occurs when the leasing company uses a tiered system to determine interest rates. With a tiered system, the most creditworthy clients pay lower rates while buyers in less certain credit positions pay higher rates. In some cases, lessees with lower credit scores may be required to pay a security deposit or place a significant down payment to help offset the risk associated with the lease.

Bolstering a Credit Application

If you are in a position where getting a car lease is difficult or you cannot qualify for the best advertised lease offers, you may want to consider finding a co-signer with a good credit history who can bolster your application. A co-signer may be reluctant to include his name on the lease if he has any doubts about you making the payments. A co-signer is individually responsible for any payments you miss, and his good credit history could be sacrificed if you fail to pay as agreed.

Rationale for Credit Requirements

Leasing companies have strict requirements for lessees because a lease is a large financial investment made over a short amount of time. Additionally, the finance company has a greater interest in the vehicle than in a normal purchase agreement, as part of their leasing business is reliant on reselling vehicles once they are turned in at lease maturation. If a vehicle is returned with damage or driven more than the contracted mileage and you fail to pay the difference, the leasing company could struggle to turn a profit when the total cost of your lease is considered.

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Can I Discharge a Car Note With a Bonded Promissory Note?

Every now and then, a debt consolidation agency or salesperson may come around and offer a borrower the opportunity to discharge his car loans with a bonded promissory note. This might seem like a tempting option, but bonded promissory notes are often the instrument of scams and fraud. Understanding the difference between a legitimate debt arrangement, such as a promissory note, and a potential scam is important to avoiding this kind of fraud.

Using Promissory Notes

A promissory note is a debt agreement between a borrower and a lender that constitutes the legal obligation of the borrower to pay back his loan. There are multiple configurations and payment plans associated with a promissory note, but they are generally long-term debts, sometimes secured against property, that must be paid back in regular installments with interest. In theory, a promissory note could be used to pay another debt -- federal reserve notes are actually promissory notes -- but few creditors accept them as legal tender in lieu of cash.

Bonded Promissory Note

A contract or debt is bonded if it is secured by a indemnity bond purchased by the borrower. An indemnity bond is a type of insurance policy that covers the losses of the creditor in the event that the borrower fails to make good on his obligation. Indemnity bonds are offered by a surety, or a third party that agrees to make good on the contract or note in the borrower's behalf.

Bonded Promissory Notes in Scams

Borrowers should be highly wary of anyone offering them the opportunity to discharge their car loans or any other debts with a bonded promissory note. In the past, scammers have been able to use these instruments to defraud borrowers and creditors, due to the difficulty in verifying a bond. Creditors usually do not accept bonded promissory notes as payment for a car loan, as they must be able to collect cash to fulfill the borrower's obligations. Many bonded promissory notes are not only unsecured by a bond, they're often not even legally valid documents. Those using them to try to discharge a debt can, in some cases, face criminal penalties.

Discharging Car Loans in Bankruptcy

In most cases, full payment in cash is the only viable way to discharge a car note. In some cases, the borrower is released from a car loan through the process of bankruptcy, though these situations usually require the borrower to surrender the vehicle. This is because the car loan is usually secured against the vehicle as an asset, giving the lender the right of repossession in the case of default. In Chapter 13 bankruptcy, loan discharges are generally associated with a court-ordered debt payment plan.

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How to Get the Best Car Lease

Car leases are desirable because they typically feature lower monthly payments. However, several factors determine whether you get a good car lease deal. If you're looking to lease a new car, and you want to get the best car lease, familiarize yourself with the leasing process beforehand. Ask questions and determine whether a lease is right for you.

Instructions

1

Increase your credit score. To get the best car lease, check your credit report and score before submitting an application. Credit scores impact interest rates. And individuals with lower scores pay a higher finance rate. Improve your credit by paying your bills on time and decreasing your debts.

2

Save money for a down payment. Although leasing companies don't require down payments, having one can persuade a lender to reduce your interest rate, which can lower your lease payments. Save at least 10 to 20 percent of the lease price.

3

Choose a shorter lease term. Shorter lease terms are typically 2 to 3 years. These terms feature a lower interest rate, and they're ideal if you prefer driving a new vehicle every couple of years.

4

Purchase additional mileage. If you lease an automobile you receive (on average) 12,000 miles a year. Exceeding the allotted mileage results in additional fees, approximately $.25 per additional mile. To get the best car lease and avoid additional charges, purchase additional mileage from the leasing company.

5

Compare car lease rates. Talk with several leasing companies before applying for a car lease. Auto brokers can connect you with various leasing companies. Request a no-obligation rate quote, compare the offers and choose the leasing company that offers the best car loan deal.

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Leasing Verses Purchasing an Automobile

Leasing and buying an automobile have similarities. Through each option, you gain access to a vehicle and make monthly payments to the agency that provided it. Yet leasing and buying are inherently different in nature, a difference akin to renting versus purchasing a home. Financial and automobile resources assert that each option has advantages and disadvantages.

Leasing Advantages

According to online financial resource Smart Money, leasing a car requires a lower down payment than buying a car. A down payment is the amount of money that a lessee pays upfront upon signing a lease agreement. Monthly payments are also lower on leased automobiles, since the lessee is paying for only depreciation. For instance, if a $50,000 vehicle is leased and will resell after termination of the lease for $35,000, the lessee pays only the difference, or $15,000. Furthermore, most lease agreements last for three to five years. Therefore, the lessee always has a relatively new car and pays less in repair costs because the lease terminates before the warranty.

Leasing Disadvantages

Leasing an automobile has a full span of disadvantages to go along with the advantages. According to automotive resource Edmunds, leasing a vehicle in the long term is more expensive than buying one, despite the lower payments. The reason for this is simple: a purchased car can be resold to recoup some of the expenses of the purchase price, while a leased car is returned to the dealer. Simply put, leasing a car is paying for something you will never own. Smart Money further points out that insurance companies do not generally recoup the entire expense of a leased car if it is totaled.

Buying Advantages

One major advantage to buying an automobile is that once the car is driven off the lot, it belongs to the buyer. An owned vehicle can be sold through a dealership or a personally brokered deal by the owner to recoup some of the expenses of the purchase price. Online resource Lease Guide points out that those who own vehicles are not burdened with monthly payments once the cost of the car has been paid off. Furthermore, used cars can be purchased at lower prices than new cars, allowing owners to pay off a larger chunk of the purchase price with the down payment and have a lower monthly payment.

Owning Disadvantages

While it's true that the owner of a vehicle isn't required to make monthly payments once the cost is paid off, the payments required on new vehicles are much steeper than those on leased vehicles. Edmunds further points out that car owners inevitably pay substantially more money on car repairs than do lessees because owners are responsible for maintaining a car as it ages and the warranty expires. In lease situations, such responsibility falls to the dealership. Lease Guide, meanwhile, points out that the mid-term cost of leasing versus buying is about the same, so those who don't plan on keeping a purchased vehicle in the long term should consider leasing.

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How to Let Someone Take Over Your Auto Loan

If you want to sell a vehicle and you are still making payments on the car loan, you can do so. You just need to find someone who is willing to take over your monthly payments. To do this, you need to have the person submit a credit application and legally take over your auto loan. This releases you from liability for the vehicle and makes the other person the legally responsible party for it. Not all auto loan companies let someone take over an auto loan. For those that do, the process is the same.

Instructions

1

Get the contact number for the auto loan company from one of your loan statements or your loan paperwork.

2

Call the auto loan customer service phone number in the presence of the potential new owner. You need to have the potential owner with you because the loan company will not allow you to give the other person's information for the credit file.

3

Let the representative know that you are calling to inquire about having someone else take over the auto loan from you. Give the representative the auto loan account number and grant account access to the potential owner for the phone call. You must do this to give the auto loan company permission to discuss your account with the potential owner during the call. Otherwise, the loan company can discuss the account only with you.

4

Give the phone to the potential owner. The representative will ask for that person's name, address, phone number, date of birth, Social Security number and work information so a credit report can be run. To take over an auto loan, the potential owner must be able to meet the same credit requirements that applied to you. The credit requirements vary by loan and by lender.

5

Wait for the new loan agreement to arrive by mail at the potential owner's home. Once the potential owner sends back the loan agreement and proof of insurance, the car is no longer your legal responsibility.

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Is it Good for Your Credit to Pay a Car Off Early?

If you're looking for ways to improve your credit score, paying off your loans is a good start. Some loans, such as an auto loan, are easier to pay off than other loans, such as a mortgage. However, before you decide to pay off your auto loan, it's important to consider any possible penalties and whether or not you can afford to do so.

How it Can Help Your Credit

Anytime you pay off a loan, you will see your credit score respond positively. Paying off an auto loan means that you have one less loan, which means that your debt-to-income ratio has gone down. Lenders look at your debt-to-income ratio when deciding whether or not to approve you for a loan; a high debt-to-income ratio tells lenders that you're a risk. While your credit will certainly improve if you pay off your auto loan, it's impossible to estimate how much it will improve. If you have other factors bringing down your credit, such as late payments, there will be little improvement.

Prepayment Penalty

Look at your loan agreement. Some lenders impose a prepayment penalty, which means that you're going to pay more if you pay the loan off early. According to All Things Frugal, most prepayment penalties are attached to high interest loans given to people with bad credit. If you have a low interest auto loan, chances are there is no prepayment penalty. Fourteen states allow prepayment penalties, according to All Things Frugal.

Affording a Payoff

Consider your financial situation. You should never dip into your emergency fund to pay off an auto loan, because it's simply not worth it. If you have the extra money sitting around, and it won't hurt you financially if an emergency comes up, then paying off your car may be a good idea.

When to Pay it Off

The reason people finance a car is either to build credit or because they can't purchase the car outright. Your credit worthiness is partially determined by your payment history. If you pay off a loan three months after you take it out, you're not going to see a huge improvement to your credit. Cars Direct suggests waiting 12 to 24 months to pay off a loan so that the payment history will improve your credit rating.

Insurance

You can drop your full coverage auto insurance after paying off your auto loan. Full coverage auto insurance is required by most lenders. However, full coverage insurance tends to cost more than other forms, such as liability-only insurance. Once you pay off the loan you can drop full coverage and choose another type of insurance.

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How to Return a Car After Purchase

Many factors may cause a car buyer to return a newly purchased car, such as mechanical issues or falling behind on payments. Many car dealers have a "money-back guarantee" that allows the car to be returned after a three-day period if the buyer is dissatisfied. Many states also have "Lemon Laws" that protect consumers if a dealer fails to repair mechanical problems on a newly purchased car. Before returning the car, all options that are best for the consumer should be explored and the pros and cons must be considered.

Instructions

1

Inquire about the dealer's return policy. Don't accept a spoken agreement between you and the seller that you may return the car. Get a statement in writing or a clause added to the contract that states you may return the car if you are dissatisfied.

2

Contact your lender or another financial adviser to seek consultation in deciding the best option for your financial situation. If you are behind in your payments, inquire about a repayment plan that may help you become current on the loan. The lender may even work out a more-affordable payment plan.

3

Have the car voluntarily repossessed. Using this option means that you voluntarily return the car to the finance company if you are too far behind on your payments and can't recover. If you decide to return the car, the finance company may pick up the vehicle or it may require that you return the car to its location.

4

If mechanical problems arise, return the car to the dealer for repair. Keep all receipts and work orders of repair. If the dealer fails to repair the problem, contact a lawyer familiar with the lemon laws in your state. Many lawyers offer a free consultation. Most states consider the vehicle a lemon if it has been to the repair shop three or more times and all attempts to repair have failed.

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How to Terminate an Auto Lease

Terminating your auto lease before the end of your contract can prove expensive. Expect to pay early-termination charges in addition to any monthly payments still owed for the contract term. Some leasing companies require that you pay the fees before ending the lease, although some allow for the payments afterward. Follow your bank's specific guidelines for terminating a lease before the contract is up.

Instructions

1

Call the bank that you lease through. Have your account number handy. Record your exact odometer reading on the vehicle, since the representative will ask for the mileage.

2

Follow the prompts to reach a customer service representative. Tell the representative that you want to terminate your lease. Answer any questions you're asked and discuss how much you can expect to pay for ending your lease.

3

Ask if you must have your vehicle inspected before the return, as some leasing companies require this. Find out where you can return the vehicle. Most banks allow you to drop it off at a dealership, while some request returning it to an auction location or a local bank. The bank will provide further details if you're returning the vehicle to a place other than a dealership.

4

Clean your vehicle out completely. Arrange for a vehicle inspection, if you're required to do so, and complete it as soon as possible.

5

Make any payments required before returning the vehicle, unless you were told that you can wait until after the return. Some banks do the wear-and-tear assessment after your vehicle has been collected from the dealership where it was returned. Bring your vehicle to the discussed drop-off location and arrange for a ride.

6

Sign any paperwork required by the dealer, auctioneer or bank when you return the vehicle. This usually entails confirmation of the vehicle's return, the number of keys brought back with the vehicle, a statement from you that describes any previous damage and the present vehicle mileage. Ask for a copy of the return notice before leaving.

7

Pay the bank for any wear-and-tear damages or additional fees, if requested. Not paying lease termination costs can result in a change in your credit rating, as the bank will report nonpayment to the major credit-reporting bureaus.

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Car Financing Rates Guide

Your car financing rate can potentially cost you significant money during the term of your loan. Not everyone is approved for the best rates offered or advertised and rates are as high as 29 percent in some states. Several different types of lenders exist for vehicle financing, which you can use to your advantage to shop around for the best rate or find a lender to fit your needs.

Manufacturer Offers

Manufacturer rates are often the most competitive but are usually only available for new-car purchases. The car companies provide incentives for buying by trumping traditional lending institutions by offering rates such as 0 percent or 1.9 percent financing for 60 months. The rates are often given in lieu of rebates or instant money off the vehicle. You can view any low-rate offers at the manufacturer's website. Most offers change monthly and require buyers to go through a preferred lender.

Traditional Lenders

Traditional lenders, such as local credit unions, military banks (USAA or Navy Federal Credit Union) or large-name banks specific to your area are usually in competition with each other. Rates change with the market, but you can go to any of the bank websites to view current rates. These banks offer approvals on a tier scale, meaning you may not get the best rate advertised. Once approved, your rate may fluctuate by one or more points depending on your tier approval.

Subprime Lenders

Subprime lenders offer loans to risky borrowers or those with poor credit who can find financing elsewhere. The interest rates are not competitive and the bank often requires substantial cash down. Subprime lenders also prefer a shorter loan term, which often result in higher payments. These lenders do not exist in all areas, but you can use the Internet to locate one nationally based, such as Road Loans or Capital One Auto Finance. Many subprime lenders offer loans with interest rates as high as the borrower's state allows.

Considerations

Obtain a loan pre-approval to find out your true interest rate. Banks determine approvals and rates based on numerous bits of information including employment history, income and payment history. Unless you are sure that you qualify for the best rate, apply for a pre-approval. Keep in mind while shopping that the rates that you see advertised on websites are usually for a term up to 60 months for new cars. If you prefer a longer term or want to finance a used car, call the bank to get correct rate offers.

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How to Calculate the Fair Market Value of a Repossessed Car

Fair market values are often used to determine insurance replacement costs or vehicle tax values. Repossessed vehicles are sold at auction for wholesale value or sold privately for retail value. The Internal Revenue Service website states that lenders don't have to sell your vehicle for the best price, just as long as the car is sold in a commercially reasonable manner, meaning the lender can accept a lesser price depending on the market and condition of the vehicle. The vehicle's actual sales price may be below fair market value.

Instructions

1

Access the websites of several appraisal guides, such as Edmunds.com, the Kelley Blue Book website or the NADA Guides website (see Resources). Input your vehicle's year, make, model and level. Choose any extra features that increase your car's value if applicable, such as a sunroof or leather.

2

Input your vehicle's mileage, transmission and engine type for an accurate value. Review the car's trade-in and retail value from each appraisal website. According to the Lendingtee website, a vehicle's fair market value usually falls between the trade-in and retail value, so add the two values together and divide the result by two to obtain a median number.

3

Add the three averages from each site and divide the result by three to calculate the car's fair market value. Check classifieds in your area to determine if the local market affects the price of your vehicle. If the car is selling for less than you determined, recalculate your value accordingly.

4

Subtract any repair costs from your vehicle's fair market value, such as body and interior damage or excess wear and tear, such as bald tires or an inoperable engine. Your vehicle won't sell for fair market value if it's not in good condition.

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How to Terminate a Vehicle Lease Early

Leasing a car and then deciding you no longer want the vehicle puts you in an awkward position. Leasing a car involves signing a contract, wherein you agree to pay a certain amount on a car for a specific term. Dealerships and finance companies expect you to keep the car until the lease ends. But what if you need to get rid of the car sooner? Fortunately, provisions are available to help you terminate a vehicle lease early -- without risking your credit rating.

Instructions

1

Deliver the car to the dealership, and pay any financial obligations. Bring the car back to the original dealership in good condition, and agree to pay off your lease balance to terminate the agreement. If you exceeded the allotted yearly mileage, be prepared to pay additional mileage fees.

2

Lease another car, and roll over the balance. Dealerships will terminate a lease agreement early if you decide to lease or purchase another car. Any balance remaining on the old lease rolls over into the new lease or loan. This method increases the price of the new vehicle.

3

Advertise for someone to assume your lease. Place ads in the paper, and look for someone to take over your car lease and assume full responsibility for the car. Talk with your finance company first to get permission and to discuss the requirements. The person interested in your car may have to qualify with the finance company.

4

End the lease, and deal with the credit consequences. Paying off a lease or transferring the lease isn't always doable. If you've exhausted all options, bring the car to the dealership and walk away. This is breach of contract, and you can anticipate a reduced credit rating.

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How Financing a Car Works

When you go to a dealership to purchase a car, you have two purchasing options; you can pay for the car in full at once or you can finance the car. Because a car is a large purchase, many people choose to finance. Automotive.com says that 70 percent of vehicles are financed. An informed consumer is a wise consumer so you should understand the vehicle financing process prior to financing your new car.

Misconceptions

A common misconception is that the dealership is also the lender. You do not obtain your loan from the dealership. The dealership has a list of lenders (finance companies or banks) that it goes through to obtain car loans for their customers, according to Lease Guide. Another common misconception is that the dealership is owned by the car manufacturer. For example, many people think Bob Bell Ford is owned by Ford. Bob Bell Ford is an authorized, independently owned franchise, reports Lease Guide. A final misconception is that the dealership prefers when a customer pays for a vehicle in full instead of financing. In actuality, the dealership prefers when a customer finances a vehicle as it sometimes receive a "finder's fee" from the lender when a customer finances, according to Lease Guide.

Your Credit Score

Lenders look at your credit score to determine your credit worthiness. Generally, the higher your credit score, the better the interest rate will be on your car loan, according to the American Financial Services Association Education Foundation. If your credit score is too low, the bank or financial institution may not be willing to lend to you at all. According to Consumer Federation of America Fair Isaac Corporation, a score above 700 is very good and is a sign that a consumer is financially stable but, when a lender sees a score under 600, it will charge that consumer a high interest rate or refuse to loan to that consumer.

Your Debt to Income Ratio

Your debt to income ratio also has a factor on the lender's decision. The lender looks at your income and asks questions about your financial obligations to ensure that you can afford the monthly payments. Automotive.com says that your car payment should not exceed 20 percent of your net income.

The Financing Process

Now that you have decided which vehicle you want to purchase and the lender has determined that your credit and income are appropriate for your vehicle, there are a few more steps in the financing process. You must show documentation to prove that the information you gave the bank is accurate and valid. This includes pay stubs or a W2 (to show your earnings), proof of identification and other documents as the lender sees fit. The lender does not always determine your interest rate. According to Lease Guide, sometimes, after the lender approves a loan, the dealership may increase the interest rate to add margin (additional profit for the dealership). You then sign a large packet of paperwork. Make sure you carefully read each section of the paperwork, including the fine print.

Monthly Payments and Total Package

Before you sign any paperwork, examine your monthly payment as a function of the car's worth. If you finance a $15,000 car and your monthly payments are $350 per month for 60 months, you are actually paying $21,000 for a $15,000 car. If you are content with this type of package, be aware that this loan will be "upside down" for the majority of the loan's life. When a loan is upside down, the amount the borrower owes exceeds the value of the property purchased with the loan's funds. You will not be able to trade in a car with an upside down loan without paying the upside down amount (amount owed over the property value) in the form of a down payment.

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How Much Can I Afford on an Auto Loan?

The car of your dreams may not always be the car for your budget. Calculating how much you can afford on an auto loan prevents you from eying a vehicle that costs more than you can comfortably afford. After all, even if you take out a loan to buy a vehicle, you must repay the money.

Debt-to-Income Ratio

The amount of debt you already have gives lenders insight into how much you can afford to spend on monthly auto payments. They total your current monthly obligations, such as credit card accounts and mortgage loans, and divide the sum by the amount of your monthly income. Ideally, the result should be no greater than 36 percent. Lenders only include credit accounts and child support payments in this equation and exclude things such as utility bills and rent. Based on this equation, the amount of the auto loan you can afford must not cause your debt-to-income ratio to exceed 36 percent. To determine whether this is the case, multiply your monthly income by 0.36 and subtract your current monthly debts from this number. The result is the highest monthly payment you can afford on an auto loan, including interest. Multiply this number by 60 to determine the total amount of the five-year auto loan, with interest, you can afford.

Other Considerations

In addition to your debt-to-income ratio, auto lenders inquire into your credit history to find out whether you repay creditors on time. If not, you may not be able to get a loan or you may get one, but at a high interest rate. Your credit report includes your payment history as well as the number of credit accounts you have and the amount you owe on those accounts. Using this information, credit reporting agencies assign you a credit score between 300 and 850. If yours it at least 700, you're likely to qualify for the lender's lowest interest rates, increasing the amount of the loan you can take out while staying within your price range.

Knowing Your Budget

Since lenders use formulas to determine your ideal price range, their assessment of your finances may not reflect reality. You may have a debt-to-income ratio of 8 percent, for example, but have other expenses that cause you to live paycheck to paycheck. In this case, what the lender says you can afford is actually too expensive for you. Calculate the maximum amount you can afford to spend on auto payments: Subtract your monthly expenses --- including payments to your savings and retirement funds --- from your monthly income. Then, subtract from this amount your typical expenses for items such as groceries and entertainment. What remains is the maximum you can afford on monthly auto loan payments.

Finding an Affordable Vehicle

The surest way to decrease the amount of your auto loan is to decrease the cost of the vehicle you purchase. Used vehicles are less expensive than brand new counterparts, so shop classified ads and used car dealerships. Take the vehicle to a mechanic for an inspection before completing the purchase to ensure you aren't wasting your money. Save for a large down payment to decrease the size of the loan you must take out, which also reduces the amount of interest you must pay. If you save enough to pay entirely in cash you can avoid the need for a loan altogether.

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How to Buy a Car With Poor Credit

Most people need reliable transportation for work, school and personal affairs. Some people are able to save money and pay cash for an inexpensive car. But if you don't have cash, financing an automobile is the next best thing. A good credit score can help you finance a car at a low rate. Although lenders prefer applicants with a good credit history, it's possible to get a car loan with poor credit. Knowing where to look is the key.

Instructions

1

Give the lender a down payment to help you qualify for the loan. Depending on the auto loan lender, you may need a down payment to secure a loan with poor credit. Aim for a 20 percent down payment.

2

Use a co-signer as backup. Having someone with good credit agree to co-sign your auto loan application puts the lender's mind at ease.

3

Go to a small dealership. Big dealerships may not consider your application with poor credit. On the other hand, smaller dealerships are usually prepared to help borrowers with credit problems. They offer fresh start programs and sub-prime loan programs.

4

Compare auto loan rates. One lender may take a look at your credit history and issue an 11 percent interest rate on your auto loan, whereas another lender may offer a nine percent interest rate. Shop around and speak with multiple lenders to get the best rate on a sub-prime car loan.

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What to Bring to Get Car Loans

Most auto loan providers require proof of a borrower's income, address and employment to ultimately approve a car loan. Even if you plan to finance at a dealership, expect to provide the same information, as the dealer is required to follow any lender requirements. Having your information and documents ready can speed up the application and approval process.

License and Insurance

Expect to provide your driver's license or other valid proof of identity to your lender, such as a passport or military identification. Collision coverage is also necessary to complete your auto loan, so find a provider before you apply. It can take time to shop for a competitive price or you may find that you need a down payment to initiate your policy if you aren't currently insured. Once your auto loan obtains its final approval, you'll provide your lender with proof of insurance coverage that lists your lien holder as the policy's loss-payee.

Income and Employment Information

To complete your credit application, you'll have to provide your gross annual income and employer's information. Bring your most recent pay stub with you so your lender can determine your actual year-to-date income. Talk to your auto loan provider if you've recently changed jobs or received a raise in pay as most lenders only use your year-to-date income; some lenders don't recognize future income changes when a raise applies. Obtain your employer's name, address and contact information so the lender can verify employment.

Proof of Address or Identity

You may have to provide your Social Security card or birth certificate to your lender to finalize your loan. This usually occurs when a discrepancy is reported to the credit bureaus, such as the misspelling of your name or an alternative Social Security number is reported. If your address is relatively new or is shown incorrectly on your credit report, you may also have to prove your address. Bring your social security card with you and a recent utility bill, just in case. Provide a recent utility bill from your electric, water, cable or phone company, which should document your name and current address.

Other Information

If you're pursuing a loan outside of a dealership, bring your vehicle information with you. Expect to provide the vehicle's identification number (VIN), year, make, model, exact mileage and the car's features, which affect loan approval amount. Note features such as a sunroof, advanced audio system, navigation, DVD player, leather, alloy wheels or other vehicle accessories that add value. Many auto loan providers also require the name and addresses of three to five references, so obtain reference information before you apply for your loan. Otherwise, you may find that friends or relatives aren't available to offer the information when you need it, which can increase your loan approval time.

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How Long for a Cosigner to Be Removed From a Car Lien?

Most lenders do not allow borrowers to remove a co-owner. If you have applied for a new loan without a co-owner, you are refinancing your current loan, in which case, your cosigner is removed instantly. You must have your cosigner's permission and signature to remove him from your loan.

Removing the Cosigner

If your lender allows you to remove your cosigner, the process should take only as long as it takes your lender to process your paperwork. If your lender isn't local, the process may take several weeks. If your lender is local, the process might be immediate. Your cosigner's signature is needed to remove him from your loan. Your cosigner may go to your lender's establishment to sign, but if your lender is not local, he will have to wait for the lender to mail his portion of the ownership transfer paperwork. The cosigner will have to mail the paperwork back, as original signatures are required.

Refinancing

If you had to refinance your loan to remove your cosigner, expect the process to take up to two weeks. You'll have to provide a credit application for loan approval, which can take up to a week. Also, your cosigner has to release ownership of the vehicle. Once you're approved for your loan without your cosigner, you must sign your loan contracts. If your lender is local, you can sign your contracts immediately. If the lender is not local, you may wait up to one week during the mailing and paperwork processing.

Considerations

If you're waiting for your vehicle's title, the time you can expect to wait depends on your state's motor vehicle department. You might be able to provide your lien paperwork and receive your title instantly. Some states do not offer instant titles, so you can expect to wait several weeks to receive it. Other states, known as title holding states, do not send a vehicle's title to the vehicle's registered owner. These states send the title to the lien holder instead. If you plan to sell your vehicle, you have to pay off your loan to receive the title for transferring and obtain your cosigner's signature.

Trade-ins

If you're trading in your car, your cosigner does not transfer to your new loan account. You can still trade in your vehicle while it has an open loan. You have to work with your cosigner to trade the vehicle toward another purchase. The dealership requires that the cosigner arrive at the dealership to sign her portion of the vehicle's title, or she may sign another form -- known as a power of attorney form -- that allows the dealer to sign on her behalf. This form often is used in title holding states.

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What Is the Grace Period for Car Loans in Nevada?

Nevada state laws do not regulate grace periods for car loans. Typically, a grace period entitles the borrower to be 10 to 15 days late making a payment without having to pay a late fee. The availability of a grace period on a car loan in Nevada is totally dependent on the lender's willingness to offer it to the borrower.

Contract

Your contract with the lender identifies your grace period if one is available. The federal Truth in Lending Act ensures that your lender provides the complete details of the loan in a disclosure statement. Required information includes any applicable grace period, the interest rate of the loan and the lender's method of calculating it, late fees and loan processing charges. The lender must explain its repossession policy in the disclosure.

No Grace Period Clause

If your contract with the lender does not specify that you have one, you do not have a grace period and the lender can repossess your car if your loan enters default. Nevada law provides an exception to this if your lender has habitually accepted late payments from you. The lender cannot stop processing late payments on your account without sending you a notice stating that it will no longer accept late payments.

Consequences of Late Payments

A grace period allows you to pay your car loan late. However, it does not extend the time that you have to make a payment. If your lender provides a grace period, it is a courtesy to assist the borrower when he experiences a temporary setback. However, if you do not make your payment within the grace period, your lender can consider you to be in default on your loan. Your lender will report payments made more than 30 days after the due date to the credit bureaus. Negative reports will lower your credit score making it more difficult to receive future loans with a low interest rate.

Title Loans

Just as with other loans, Nevada law does not prohibit a lender from offering a grace period on a title loan. The state defines title loans as any loan that requires the borrower to submit the title of the vehicle as security for a loan with an annual percentage rate that is higher than 35 percent. While Nevada has no cap on the interest rates charged by title lenders, the lender must provide you with written notice at least 30 days before repossessing your car.

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Should You Use Home Equity to Purchase a Used Car?

Some people purchase cars with funds from home equity products. Homeowners can extract equity from their homes in a variety of ways and generally lenders enable people to use funds for any legal purpose, including buying a car. There are some advantages to using home equity to finance a car but there are also disadvantages and people should carefully consider the pros and cons before making a decision.

Accessing Home Equity

There are three products that people can use to extract equity from their homes: a mortgage cash-out refinance, a home equity loan or a home equity line of credit. People who refinance can request to receive a cash disbursement at closing and use the funds when they please. Homeowners can take out home equity loans or lines of credit if they have available equity in their homes and these loans can occupy either first or second lien position.

Interest Rates

Mortgage rates are based on bond rates. Car loans usually have rates based on the U.S. prime rate. Bond rates and prime rate often move in opposite directions, meaning a cash out mortgage refinance might have a very low rate at a time when car loan rates are high. Home equity loans and car loans normally have fixed rates based on long-term projections for prime rate whereas home equity lines are variable and move in conjunction with prime.

Benefits of Using Home Equity

Generally, lenders view homes as better collateral than cars because automobiles have shorter lifespans and therefore car values depreciate while home prices may rise, stay steady or depreciate at a slower rate than cars. Loan rates are priced to mitigate risk so stronger collateral usually means lower interest rates. Therefore home loans usually cost less than car loans. Additionally, some people are able to write off interest payments for home loans whereas interest payments for cars are non-deductible.

Problems with Home Loans

People who finance cars with home equity lines could see their payments increase dramatically if the prime rate rises. Cash out refinances and home equity loans have fixed rates but closing costs are often very costly compared with auto loans, which have minimal processing fees. Even in instances where closing costs are low, people often end up paying more on a home loan because interest amortizes over 10 or 20 years whereas car loan terms are normally capped at six or seven years. Additionally, defaulting on a car loan leads to a car repossession but defaulting on a home loan leads to foreclosure.

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How to Negotiate a Residual Lease

When banks determine the residual value of new cars, they anticipate consumer negotiations. Residual values are not fixed. Set values sometimes reflect market value, but hardly ever match a best estimate of the going price established by manufacturers. As a matter of fact, manufacturers exploit marketing schemes to boost the residual value of particular models by lowering monthly payments. Leasing instead of buying is rewarded.



Residual leasing is leasing that binds the payee to paying for the part of the car's residual value that was used. The more residual value the car retains, the less the payee will pay for the car lease. Residual leasing for luxury cars is a popular option for consumers who lease frequently.

Instructions

1

Select the make and model of the car. Consider that certain models retain more residual value over a leasing term when negotiating. The residual value of the model you select will affect your down payment and monthly payments.

2

Negotiate trade-ins and down payments. You may be able to forgo a down payment if you have an adequate trade-in. Use the Consumer Guide Report website to look up the residual value for your trade-in.

3

Negotiate monthly payments. If a manufacturer is currently marketing a particular model, you may be able to negotiate a smaller monthly payment. Check with the bank's Auto Loan department to see if any current deals are available.

4

Discuss your credit history. Be prepared to show your credit report to get a lower APR on your loan. Mention your credit history when you are negotiating your monthly payments.

5

Negotiate depreciation rates to get the lowest for your lease term. Rates can vary, so try to lock in.

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What Is the Depreciation Percent in the First Year for Cars?

Buying a new car can be expensive. After you pay the hefty price to drive the car off the dealership lot, you also may experience increased costs for insurance, registration, gas and repairs. However, one of the biggest expenses of new car ownership is the depreciation to the vehicle in the first year that you own it.

Definition

When you buy an item of value, it becomes an asset to you. Some assets decline in value and others increase. Some will do both over the span of their useful lives. If you buy an item with increasing value, then it will appreciate in time and you may be able to sell it for more than what you paid for it. This sometimes occurs with real estate or bonds, for example. If you purchase a product that decreases in value over time, such as an automobile, that is depreciation. Some assets depreciate slowly and others do so at a much faster rate.

Average Depreciation Rates

An automobile is a highly depreciating asset because it loses value as soon as you leave the car dealership. A vehicle also depreciates by sitting in your driveway. Some less expensive cars lose value faster than the ones that cost more, which makes the pricier vehicle a lower expense in the end. Financial people calculate depreciation on a vehicle over five years, even though cars continue to lose value throughout their lifespan, but at a lower rate. When determining the rate of loss on a new vehicle, it is standard to estimate that your car will be worth 15 to 20 percent less during the first year. With an average depreciation rate of 10 percent in subsequent years, the five-year loss averages 65 percent. According to Consumer Reports in 2008, this represents 46 percent of the cost of owning a car during the first five years of its life.

Model Differences

Not all cars depreciate at the same rate. Vehicles considered collector's items or limited editions might hold their value longer. Cars such as the Chevy Corvette, Mini Cooper and Lexus models have higher than average resale values by losing a lower percentage every year. Meanwhile, vehicles manufactured by Hyundai and Kia have lower resale values. When estimating the cost of different cars prior to buying one, check what each will be worth after five years and factor in the loss of value with other expenses.

Value

If you want to sell your car or if you just want to know its value, log on to a website that makes the depreciation calculations for you, such as Kelley Blue Book. Here you can request the trade-in value at a car dealership or the amount you can ask for when selling directly to a private party. Trade-in values will be lower than if you sell to a private party because it's fast and convenient to hand over your old car to the salesman and drive away with a new one. Also, the dealer will resell your car to another person or at an auction and wants to ensure he can make a profit.

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Will a Cash Downpayment on a Car Help with Financing?

You can more easily obtain financing for a car if you make a cash down payment. Cash down payment or not, you still have to qualify for the loan, and your income and credit score have a major impact on your qualification. If you can qualify for a loan, making a down payment saves you money in the long term.

Credit And Income

Lenders usually require you to have a credit score of 620 or higher in order to take out any kind of loan, and people with scores lower than that have so-called "subprime" credit scores. Very few lenders finance car purchases for subprime borrowers, and those that do charge high fees and interest rates. Additionally, you must have enough income to manage the car payment and your other debts. Your lender calculates your debt-to-income (DTI) ratio by looking at your gross income and your existing monthly debts. If you have a DTI ratio above 50 percent, you cannot usually qualify for a loan.

Depreciating Collateral

Cars are a type of depreciating collateral, which means that the value of a car drops over the course of time. Lenders attempt to structure your loan so that you pay down the balance faster than your car can lose value. Nevertheless, once you add interest into the equation, lenders find it very hard to prevent your car value from dropping below your loan balance. Consequently, some lenders only allow you finance 80 percent of the value of a car, and when this happens, you have no choice but to make a cash down payment of 20 percent.

Gap Insurance

Some lenders do allow you to finance up to 100 percent of the value of a car, but to protect the lender against losses stemming from an accident, you are required to buy gap insurance. Normally, if you crash your car, the insurer only gives you a payout that equals the car's value, and this often amounts to less than the balance of the loan. Gap insurance covers the difference between the car's value and your loan balance. However, gap insurance causes your monthly payment to rise, which makes the loan harder to obtain due to the high payment amounts. Therefore, a cash down payment eliminates the need for gap insurance and makes it easier to obtain a loan because you have a lower payment amount.

Considerations

If you make a $2,000 cash down payment toward a $10,000 car purchase, then you save yourself from having to pay interest on that $2,000 for the duration of your car loan term. If you buy an expensive car with a high interest loan, you can save a significant amount of money by making a cash down payment rather than financing the entire amount of your loan. Therefore, cash down payments benefit both lenders and borrowers.

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What Does it Mean to Finance a Vehicle?

The majority of vehicles purchased are financed entirely or in part. The Federal Trade Commission (FTC) mentions that the average price of a new car in March 2007 was $28,000 and the average price of a used car was $15,000. Few consumers can pay this out-of-pocket and require financing. Financing a vehicle simply means acquiring a car loan to complete an auto purchase.

Direct Lending

One way to finance a vehicle purchase is through what is called direct lending. This is when you seek loan funds directly from a commercial source like a bank or credit union. The lender provides the car buyer funds to complete a purchase in exchange for repayment of the loan principal and an agreed upon interest rate. Buyers pay the dealer using the borrowed funds and they repay the lender over a stated term period.

Dealer Financing

Dealer financing is fairly common, according to the FTC. With dealership financing, the deal provides the loan to the buyer but often sells the loan or passes it on to a secondary lender. Convenience is the major benefit of dealer financing highlighted by the FTC. Dealers like to offer financing to consumers because it makes the buying process simpler. Dealers usually have access to a wide range of lenders and financing options to suit your needs, sometimes including special incentive programs.

Financing Process

With direct lender financing, you need to contact the lender ahead of making a purchase decision on a car. With dealer financing, you make your purchase selection and the finance manager at the dealership takes a credit application and searches for the best loan program for you. In November 2008, the National Automobile Dealers Association (NADA) distributed its "Automotive Financing FAQs." In response to a common question about whether poor economic conditions limited financing options for car buyers, NADA pointed out that if you have a steady job and good credit score, plenty of banks, credit unions and financial institutions want to lend to you.

Legal Considerations

The FTC discusses several important consumer protection laws that affect car buyers when financing a vehicle purchase. The Truth in Lending Act, for instance, relates to any loan and requires the lender to disclose in writing key terms of the loan, including "APR, total finance charges, monthly payment amount, payment due dates, total amount being financed, length of the credit agreement and any charges for late payment." The Consumer Leasing Act, Credit Practices Rule, Equal Credit Opportunity Act and Fair Credit Reporting Act are other consumer protection laws you should get to know before financing a vehicle.

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How Does Auction Car Buying Work?

Buying a car at an auction offers the opportunity of getting a really good deal, as long as you don't mind taking a bit of risk. Typically, cars sold at auction have no warranty or guarantee attached to them, meaning that if you make a mistake and buy a piece of junk, it's your piece of junk to deal with.

Auction Bidding

Different car auctions have rules that may vary to some extent, but they all work more or less the same. Cars are either brought up to the podium or pointed out individually, and the auctioneer takes bids from the floor. Whoever is willing to pay the most for the vehicle buys the vehicle. Buyers are sometimes required to pay for the vehicle on the spot, while other auction houses require a down payment followed by full payment within a specified amount of time. Owners of the cars are allowed to impose minimum bids to protect themselves from the risk of their cars selling for too little.

Titles

Ask about the title before you buy a car at auction. A car without a title can be bought for parts, but shouldn't be bought with the expectation of registering it and driving it. While it is possible to replace titles, the process is cumbersome and can be expensive; with the number of cars available on the market, it isn't worth the trouble. If you are dealing with an auction house that allows you to inspect the cars in the days leading up to the auction, go there during the inspection and ask about the titles of any vehicles in which you have an interest.

The Vehicle Identification Number

When you look at a car you are thinking about buying, note the Vehicle Identification Number. This can be seen on a plate behind the windshield attached to the dashboard on the driver's side. You can use the VIN to learn more about the car by inquiring with the Department of Motor Vehicles or by utilizing the services of one of a number of websites that offer this service for a fee. You should be able to learn about how many people have owned the car, and possibly something about its service record.

Buyer Beware

If you go to an auction with realistic expectations, you will be bound to have a better experience. While you can get good deals at an auction, don't expect to buy a two-year old vehicle for $200. Auctions are full of car dealers who know the value of cars. They will be bidding at below-retail prices because they are trying to make a profit, but they won't be letting valuable cars get away for nothing. If you buy a car for almost no money when you're surrounded by car dealers, there's probably a reason for that.

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Can You Pick How Long Your Auto Loan Lasts?

Banks differ in the lending process; many offer a 24- to 72-month term for auto loans, while some offer more. Although you can apply for your preferred loan term, consider your budget and rate differences based on term length before you apply. Also consider the information the bank uses to determine your approved loan term.

Budgeting

To decide how long of a term to apply for, consider your overall vehicle price and budget. Include your taxes and fees; call your state's motor vehicle department for your tax rate and fee requirements. Edmunds.com offers a variety of auto loan calculators that allow you to price a vehicle based on an affordable monthly payment, term options and average interest rates. Using an auto loan calculator initially helps to determine affordability and price range before applying for a pre-approval or pursuing a vehicle.

Rate Considerations

Manufacturers often offer low-rate financing for new vehicles; however, the monthly payments for these offers are not always affordable without a significant down payment. For example, you may find 0 percent financing for a new car, but only for a 36-month term. The car payment for a $20,000 vehicle for 36 months at 0 percent (not including additional purchase fees and tax) is $555 per month. Rates from 24 to 60 months remain consistent for most banks, while longer terms warrant higher rates. Call a bank ahead of time to find out about rate differences.

Term Approval Factors

Banks may approve your loan term or decline it based on your debt-to-income ratio. You may feel you can afford a $555 car payment, but the bank ultimately determines if you can or not. Expect your lender to view your credit report; it uses your debts and monthly payments to determine your debt-to-income ratio. This may be inaccurate if you are the sole person on a mortgage or co-signed a car loan, as the debt appears to be your responsibility. The lender views your most recent pay-stub to determine your gross annual income. A lender can require that you take out a longer term to lower your payment, unless you use a co-signer.

Preapproval Benefits

Once you determine your budget, an affordable term and vehicle price, apply to a lender for a pre-approval. Applying for a pre-approval ensures your approved rate and term so you can shop accordingly. Additionally, the lender will let you know if you need a down payment or if restrictions, such as term, maximum payment or vehicle value, affect your loan approval. Obtaining a pre-approval allows you to adjust your price range so you can stick to your budget.

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How to Sell a Vehicle You Still Owe Money On

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Financial Concerns When Buying a Car

If you want to purchase a vehicle, but are unsure about your credit, financing options or budget, take the time to set your budget and method of payment before shopping for a car. This way, you can shop by your budget to purchase a car you can comfortably afford.

Setting a Budget

To avoid various financial issues that can result from an unorganized car purchase, set a budget for yourself and stick to it while shopping. Go over your monthly bills to determine how much money you have left over to comfortably spend on a vehicle payment and various costs of vehicle ownership, such as maintenance, insurance and gas costs. The money you have left over each month should not be used for a car payment alone, but the total cost of car ownership.

Extra Vehicle Costs

Finance or lease contracts require collision insurance on the car during the contract term. Collision coverage is expensive compared to state-required liability policies, so budget accordingly. Obtain insurance costs before you purchase a car. Depending on your driving and driver's license history, your monthly insurance payment can equal or exceed the cost of a monthly finance payment. Also check the cost of maintenance by contacting a service shop to obtain pricing of the vehicle's maintenance schedule. Check fuel economy at Fueleconomy.gov to figure out the price of fuel costs.

Monthly Loan or Lease Payment

If you have concerns about your interest rate or other loan issues, obtain a pre-approval before you choose your car. If your auto loan provider requires a down payment or restricts your term, you'll be well prepared to adjust your price range before shopping. Once you're pre-approved, you'll know your interest rate, which affects your monthly loan payment. A lending representative can help you to determine a price range based on the payment you can afford. If you're declined for a loan pre-approval, you can take the time you need to find a co-signer or fix your credit before you pursue a car purchase.

Warranty

Don't limit your car options because of a vehicle warranty. While purchasing a vehicle still under factory warranty may seem like a money-saving option, you can also buy an extended warranty for vehicles outside of the factory warranty period. Dealerships, insurance companies and aftermarket providers sell warranty coverage, which may open up your vehicle choices. For example, a vehicle still under factory warranty coverage may cost $15,000, while a higher-mileage option may cost you $12,000 when including extended warranty coverage.

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