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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Can I Give My Car Back to the Creditor?

Giving your car back to the creditor is known as repossession. Repossession significantly damages your credit and should be avoided. Other options exist that may prevent you from having to return your car. Learn about the process, effects and other options before you decide if you should give your car back.

Types

The two types or repossession are voluntary and involuntary. An involuntary repossession occurs when the bank hires a towing company to come and collect your car for return when payments are late or behind. A voluntary repossession occurs when you decide you will no longer pay for the car as stated in your contract and you make arrangements to return the car to the creditor.

Significance

A voluntary and involuntary repossession have the same impact on your credit report. Your credit score will drop significantly and you can expect the repossession to remain on your credit for at least seven years. While you can still secure a loan after enough time has passed with your repossession, expect a higher interest rate while the mark remains on your credit. Rebuilding your credit after a repossession is difficult and can cost you thousands of dollars in interest payments if you do secure a future line of credit.

Warning

A repossession does not mean you can return your vehicle to the bank and go on payment-free. You are responsible for paying the loan amount specified in your contract. Once the vehicle has been resold by the bank, any money lost is due by you at some point. If your bank offers to settle the loan and allows you to pay less than the total amount owed, the canceled part of the debt is reported to the IRS (Internal Revenue Service). The IRS considers the canceled debt a gift of sorts; you will have to pay taxes on the amount. If you ignore attempts by the bank to collect payment or arrange for a payment plan, the bank is within its legal rights to sue you, enforce a judgment against you and garnish your wages.

Other Options

Avoid repossession if you can. Call your lender; it might have programs to help you, such as payment deferment, loan extension or a temporary reduction in payment. You might be able to sell your car on your own. Once your bank knows of payment problems, ask for the vehicle's payoff amount if you want to try to sell it privately. If you make a profit beyond the payoff amount, you can keep it. If you sell for less, you must come up with the remaining money due to satisfy the loan. Explore your options before returning your car to the creditor.

Process

Once your vehicle is returned to the creditor, you'll get a letter within a few weeks that states the amount due to get your car back before it is sold by the bank. The amount includes any past due payments, bank fees and tow fees if your vehicle was repossessed by a tow company. You don't have to answer the letter. Once the vehicle is sold at auction, you'll receive another letter that states the selling price and whether or not a profit was made. The profit will be returned to you, but you are responsible for any money due. The bank will contact you soon after the auction to discuss payment arrangements. The bank may take you to court at any time after bank efforts for payment have been ignored.

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Do You Have to Buy the Car After You Paid the Deposit?

You can back out of a car deal after you've paid a deposit. Depending on the agreement you made with the dealer, it may not want to refund your money. Do not leave a deposit on a vehicle unless you intend to buy it. Otherwise, if you want to hold the car, make sure the dealer notes that the deposit is refundable.

Your Receipt

Prevent any hassle at the dealership by signing a receipt that truly reflects your purchase decision. For example, if you aren't sure you want to buy the vehicle but are offered a chance to hold it by leaving a small deposit, make sure the dealer notes this on the receipt. The dealer should note that your deposit is refundable based on your ultimate decision. If you intend to purchase the car and leave a deposit to prove your interest, read your receipt. Most states don't allow a dealer to keep a deposit unless you actually buy the car, which involves signing additional paperwork beyond the receipt.

Additional Paperwork

If you left a deposit and only signed a receipt, you did not buy the car. If you signed additional paperwork, you may have bought the car, although unless you're driving it, you can probably back out of the deal. Go over your paperwork to review the documents you've signed. If you agreed to an end-of-month deal and signed loan contracts and motor vehicle paperwork but didn't take the car, your dealer probably did not process your paperwork and you can still cancel the purchase.

If You Took the Vehicle

Most dealerships require a deposit if you want to purchase a vehicle but can't do so that day. For example, some customers may have a loan approval but need to pick up the check, or they may be waiting for an insurance settlement to provide a down payment. If you leave a deposit, take the vehicle and change your mind before completing the paperwork, you do not have to buy the car. In this situation, you'll likely lose a portion of your deposit. The dealer can charge you for putting mileage on the vehicle's odometer and for its cleaning fees.

Pursuing the Return of Your Deposit

If your dealer refuses to return your deposit, call the proper authorities to initiate a complaint. Before initiating the complaint, let the dealer know you plan to do so. Many dealers would prefer to avoid this. Call your state attorney general's office or the motor vehicles department to begin the process. In most cases, the dealer will receive a phone call. The proper state authorities can help you back out of a car deal or get your deposit back, if you are eligible.

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Can I Buy Back a Totaled Car From the Lien Holder?

Depending on the extent of the damage and your vehicle's value, a car accident could result in your insurance company "totaling" the car. Insurance companies typically total out vehicles that would cost more to repair than to replace. In the case of older cars or cheaper vehicle models, your insurance company could total your car when the vehicle itself sustained minor damage and is still functional. Should this occur, you can negotiate with your insurance provider and attempt to buy back your car.

Legal Owner

When an insurance company totals your car, the company sends you a check for the car's estimated value minus any wear and tear or previous damage. If you still owe money to your auto lender, it's your responsibility to use the insurance money to pay off the damaged vehicle. Unfortunately, paying off the car doesn't mean that you'll automatically get your damaged vehicle back. The lien holder has the title to your car, but the insurance company has the actual vehicle.

Insurance Company Negotiations

If you want to keep your car after an accident rather than taking the money the insurance company provides to pay off your loan or put a down payment on a new car, contact your insurance provider as soon as possible and explain your desire to keep your car. The insurance company may sell you your vehicle for the price it would have otherwise charged a salvage yard. Although many consumers have successfully bought back their totaled vehicles from the insurance company, your insurance provider has the right to refuse to sell you your car back after an accident.

Keeping the Car

In order to avoid the possibility that your insurance company will refuse your request to buy back your car, consider working with your insurance provider to avoid having your vehicle classified as a total loss. Insurance company policies vary, but if you find a repair shop that can fix your car for less than the replacement value, your insurance company may rethink classifying the vehicle as a loss. If you insure all of your vehicles and your home with the same insurance company, threatening to switch providers could give your insurance company the incentive it needs to work with you and repair your car, rather than totaling it.

Buying at Auction

If your insurance company has already totaled your car and refuses to sell it to you, it will often run the car through an auction. Consumers and car dealers can then bid on the car in an attempt to purchase it. Ask your insurance provider where and when it plans to auction the car. Keep in mind, however, that while no law prevents you from buying back your previously totaled car at auction, not all car auctions are open to the public. Some auctions are for dealers only. Should you succeed in purchasing your car at auction, your insurance company is not responsible for the vehicle's repair costs. You must bear the burden of repairs on your own.

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Do I Need to Pay Back a Car If It Was Repossessed?

Having your car repossessed is a result of not paying loan or lease. You may have lost your job or had some other financial hardship that prevented you from keeping your account current. However, when you default on your auto loan, you risk repossession by the lender. Because the car was used as collateral, it is taken as payment, but you still may be responsible for a portion of the loan.

Seizure

Your car can be repossessed if you miss just one car payment. However, most lenders will contact you first to try to bring your account up-to-date. If you are unsuccessful at paying the amount you owe plus any fees or penalties, then your car can be taken from the street, a parking lot or your property. However, most states don't allow repossession from your garage if the door is shut. Also, you cannot be threatened in any way while the car is being taken.

Auction

Your lender may keep the car as full payment of your debt and then you will not have to pay back your loan. However, if your car is sold at auction and doesn't sell for the amount of your loan, you can be held responsible to pay the difference. You will be notified of the date of the auction so that you have an opportunity to buy the car back at that time. Whether before or during the auction, if you want to purchase your vehicle, you may be required to pay your default amount, the balance of the loan and any other charges the lender has accumulated because of the repossession.

Possessions

If you have personal possessions in your car when it is repossessed, you are entitled to collect them. Your lender must keep your property and care for it for a reasonable amount of time to give you an opportunity to pick it up or have the items mailed to you. If you placed improvements in your car, such as a new stereo, it generally is not considered your personal property if it is attached to the vehicle.

Options

Since a car repossession can stay on your credit report and lower your score for seven years, contact your lender as soon as you know that you can't make a payment. If you carry a high interest rate, refinance the loan if you qualify. Alternatively, ask your current lender for a loan modification to change the terms so they are affordable. You can try to sell the vehicle, if you think it will net you close to the loan amount you owe. Otherwise, ask the creditor what happens if you give the car back voluntarily. Whether you offer the car to the creditor or it is sold at auction after a repossession, ask the lender to waive the deficiency you continue to owe if the sale price did not satisfy the loan amount.

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How to Cancel a Lease on a New Car

Canceling a lease agreement on a new vehicle can impact your finances and credit rating. However, unexpected events do occur; some people endure financial hardships shortly after signing a lease agreement. Fortunately, there are techniques to help you get rid of a newly leased vehicle.

Instructions

1

Give the car back. Return a newly leased automobile to the dealership within three business days to cancel the agreement without damaging your credit rating. Lease contracts vary. Read the conditions of your agreement to see if you're eligible for this option.

2

Find a buyer. Speak with your finance company and ask for the pay-off balance. Place ads in your local newspaper and find a buyer for the leased car.

3

Do a lease trade. Read your lease contract to see if the finance company allows lease trades or assumptions. Place a detailed ad on websites such as Leasetrader.com to find someone to take over the lease.

4

Return the car and accept the consequences. If unable to sell or transfer the lease, bring the car back to the dealership and deal with the financial or credit consequences. Expect the finance company to sue for breach of contract, wherein you're expected to pay off the lease balance.

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Alabama Laws for Car Title Loans

Car title loans are short-term loans, generally at a relatively high rate of interest. Each state has the authority to enact consumer protection laws governing the lending practices of car title lenders. In Alabama, since the general assembly does not view car title lenders as official financial lending institutions, the state imposes few restrictions on them. Instead, car title lenders are pawnbrokers, according to Alabama law.

Alabama Pawn Shop Act

To legally conduct business in Alabama as a title pawn lender, the Alabama Pawn Shop Act requires businesses apply for a license to do so. Since car title lenders are nonrecourse lenders, they fall under the Alabama Pawn Shop Act. As compared to a recourse lender, the pawn broker does not have a legal right to demand repayment of the original vehicle loan. Instead, its only recourse is to take possession of the vehicle when the borrower does not repay his car title loan.

Legality

Under Alabama law, as long as car title lenders obtain a pawn broker's license pursuant to the Alabama Pawn Shop Act, they may conduct business providing car title loans to consumers. However, they must comply with the banking department's rules and state's financing laws. The Pawn Shop Act does not apply to vehicle loan lenders or banks that provide financing to vehicles. Instead, these entities are subject to the Alabama Consumer Credit Act ("Mini Code"), the Alabama Mortgage Brokers Licensing Act or the Alabama Small Loan Act.

Lending Terms

Pawn transactions in Alabama must be for one month, and the maximum interest that pawnshop brokers can charge is 25 percent monthly. According to Section 5 of the Alabama Code, the Pawnshop Act requires pawnshops to comply with the state's interest and finance charge limits. Furthermore, the banking department has the legal authority to conduct on-site inspections of a pawnshop's records to ensure it is complying with the state's consumer protection laws.

Considerations

Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

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What Are the Rights of a Co-Signer on an Auto Loan?

The co-signer on a car loan shares an obligation with the primary borrower to repay the loan. In most instances a co-signer has no ownership rights to the vehicle. Therefore, if you are thinking of co-signing on a car loan you should first add your name to the title of the vehicle being financed.

Onwer Versus Signer

When you take out a secured loan such as a vehicle loan or a home loan, you must sign the contract both as an owner and as a borrower. As an owner you sign your consent for the lender to place a lien on your property. In your capacity as the borrower you agree to repay the loan. Not all of the property owners have to sign the loan as borrowers, and not all of the borrowers have to have an ownership stake in the collateral that secures the loan.

Title

If you feel uncomfortable about agreeing to sign for a loan against a car that you do not own, you must go with the owner of the car to the Department of Motor Vehicles and ask to add you as an owner of the vehicle. The DMV transfers ownership of the car from the current owner to the current owner and you. You now have an equal ownership stake in the car, and depending on your state's laws, this may mean that you can assume full control of the car if the other owner refuses to make loan payments.

Credit

People with poor credit are often unable to obtain car loans but they can get around this issue by asking someone with good credit to co-sign on their loan applications. However, once you sign on a loan, that loan account will appear on your credit report. This means that when you apply for future credit, lenders will assume that you are already making this loan payment and may not agree to provide you with any more credit unless you have a very high income level. Taking on the extra debt also increases your overall debt level and causes a drop in your credit score.

Repossession

If you co-sign on a loan for a car that you do not own, the bank can repossess that car if you and the car's owner fail to make the monthly loan payments. However, although the lender cannot repossess your own car, the lender can report the missed loan payments to the credit bureaus, and a record of these missed payments and the repossession will remain on your credit report for seven years. A low credit score can make it hard for your to obtain future credit and may even prevent you from landing a job in some industries.

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Can I Use My Car to Borrow Money?

Tough economic times call for creative solutions to financial problems. Many families pay down debt or save money by selling unneeded personal property. Others borrow money against assets to make ends meet. If you own your car outright, you can use your car title to borrow money against your car. However, it is prudent to remain aware of the risks inherent in the transaction.

Ownership

Car title loans require that you use your car title as collateral to secure borrowed money. If you are paying off an existing car loan, you don't have title to your car; your lender does. Without a car title, you can't borrow money against your car. Therefore, you cannot apply for a second-hand car title loan, or a loan against a car that does not belong to you, despite whether you've received the owners permission.

How it Works

If you use your car to borrow money, the lender will hold the title to your car until you repay the loan in full. Most car title lenders advertise car title loans as an emergency measure, because they don't check your credit or verify your employment before they lend you money. Most car title loans are short-term loans that must be repaid or extended within 30 days. Accordingly, a car title loan may be a viable short-term solution if you know you will receive the money to repay the loan before repayment is due.

Dangers of Car Title Loans

Financial experts consider car title loans to be predatory loans -- high interest loans that borrowers have limited ability to repay. For example, many car title loans accrue interest at extremely high rates. However, some states restrict the amount of interest a lender can charge on a car title loan, whereas lenders may charge up to triple-digit interest rates elsewhere. According to the Center for Responsible Lending, borrowers most frequently extend car title loan repayments eight times before repaying them, and lenders usually repossesses vehicles otherwise.

Alternatives

Before borrowing money against your car, ensure that there are no alternatives that do not harbor the same degree of financial risk. Alternatives to consider include applying for a loan from a bank or credit union, borrowing from a family member, selling your property at a garage sale or online auction and selling jewelry for cash at a pawn shop. Moreover, you can perform a short-term or temporary service for immediate payment, such as babysitting, cleaning houses or repairing automobiles. For debts to old creditors, consider refinancing the terms of your debt rather than introducing a new one.

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Auto Loan Information: How to Buy a Car With Bad Credit

So you've got bad credit and want to buy a car? The outlook may not be as bleak as you think. Sure, people with the highest credit scores usually get the best deals on auto loans, but even bad-credit borrowers can find financing. That financing may even come from a bank or credit union offering somewhat respectable interest rates and terms. Sometimes banks and credit unions take chances on bad-credit car buyers by requiring a larger down payment. After all, the bank knows it has an ace up its sleeve--it can take back the car if you default, and keep the big down payment.

Instructions

1

Find out just how bad--or not so bad--your credit is. Get a copy of your credit report from the website Annual Credit Report (see Resources). The website was created to issue free credit reports as required under the federal Fair Credit Reporting Act. Order your credit score separately by following instructions that will be included on the credit report.

2

Compare your credit score with the scores of others being approved for car loans. Microsoft Money, citing statistics from CNW Marketing Research, reported that only 1 in 10 auto loan applicants with FICO credit scores of 620 or below was approved through a credit union or bank in April 2010. For those with credit scores between 620 and 749, 8 of 10 loans were approved.

3

Improve your credit score as much as possible by bringing all existing accounts current. Find all past-due accounts on the credit report along with other delinquent accounts such as charge-offs or collection items. Charge-offs are accounts that were closed by the creditor after you stopped paying. Collection items are delinquent accounts placed with debt collection agencies.

Contact the creditors or bill collectors for those accounts and offer to pay the balances in full in exchange for the negative information being removed from your credit report. That process is called pay-for-delete and is legal. Most creditors won't agree, but you should still try. Pay off as many of the delinquent debts as you can, with or without the pay-for-delete. Allow about 60 days for your credit reports and score to be updated following the payments.

4

Apply for a car loan where you bank. Sure, it may be a long shot, but your relationship with the bank could help. Chat with a loan officer as you turn in your application. Be upfront about your past credit problems and tell why things are better now. Wait for a decision that could come within minutes or the next day.

5

Apply for a loan at the dealership if you're turned down by your bank or credit union. The dealer will shop your application around to to a number of lenders if necessary, including those who are comfortable lending to bad-credit borrowers.

6

Find a neighborhood car lot if the dealership turns you down. You'll have to settle for a used car from this lot, and interest rates likely will be around a whopping 20-25 percent, according to Microsoft Money. The car lot may provide the financing or arrange for it through a finance company. Either way you may be required to make biweekly payments or agree to automatic debits from your checking account on your payday. Drive away with your newly purchased used car and keep working on your credit.

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Does a Car Get Paid Off if the Owner Dies?

When a person dies, all of his affairs must be settled through an orderly legal process. This includes paying off any debts that the person owed, and then distributing any remaining assets to the heirs of the estate. When the deceased person owed money on a car loan, the treatment of that loan will vary depending on the value of the estate, and other estate planning preparations that the owner made prior to his death.

Loan Life Insurance

If the owner of the car purchased a life insurance policy covering the unpaid balance of the car loan, this policy will pay the car off if the owner dies with an unpaid balance. These policies are commonly purchased at the dealership, but may also be purchased through banks and independent life insurance agents. You must provide the insurance company with a copy of the death certificate of the owner of the vehicle before they will pay the proceeds.

Estate Value

If the estate of the owner of the car has sufficient assets, the estate will be required to pay off the vehicle. This is done through the estate settlement, or probate process. The executor of the estate pays off the deceased person's debts with assets from the estate, selling them under court supervision if it is necessary to free up cash. After all of the debts of the estate are paid off, the executor distributes the remaining assets to the heirs.

Regular Life Insurance

If the owner of the vehicle had a life insurance policy that was not specifically intended to pay off the vehicle upon his death, the insurance company pays the proceeds of the policy to the beneficiary. This life insurance payout is not part of the estate of the car owner, and creditors have no claim against this money. The beneficiary may use it for any purpose, including paying off the vehicle, but he is not required to pay off debts. If the policy owner named no beneficiary, or named his estate as the beneficiary, the proceeds of the policy are available to the executor to pay off any debts of the estate.

Heirs

If sufficient assets are not available to pay off the car loan, the bank can repossess the vehicle if someone else does not pay for it. One of the heirs can choose to pay off the vehicle and take possession of it, after paying the other heirs their portion of any equity in the vehicle. The bank may require payment in full at this time, or may be willing to allow the heir to assume the monthly payment obligation.

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Should I Buy a Prepaid Maintenance Plan for My New Car?

A prepaid maintenance plan can potentially save you money, as it allows you to pay for years of vehicle maintenance upfront. However, maintenance is usually more expensive at a dealer than at a private shop, and the plan requires you to return to the dealer that you purchased from. Determine your long-term costs before purchasing a maintenance plan.

Plan Details

Go over the details of the maintenance plan with the dealership representative who offers it to you. Make sure you have a clear understanding of which items are covered and which are not. Often, the contract covers only scheduled maintenance items, such as oil changes and tire rotations. Maintenance items such as brakes, windshield wipers or actual repair items are not covered. The prepaid maintenance plan is not an extended warranty. An extended warranty is more expensive than a service plan, but covers much more.

Price Comparisons

Go to the dealer's service department to gauge the true cost of the service schedule. Most cars need oil changes every 3,000 miles (some cars can go longer) and tire rotations every 6,000 miles. Ask the service department to provide you with the cost of the services for your vehicle and compare the maintenance plan value to the cost provided by the service department. Service plans are a source of profit for a dealership, and you may find that purchasing it doesn't save you money.

Cost

Once you've determined the cost of regular servicing against the prepaid option, ensure the plan is less money. Otherwise, purchasing it is not financially beneficial. You can negotiate the price of the plan, just as you can most aftermarket items offered at a dealership. If you can negotiate the price to one lower than you'd pay over the long term, then the maintenance plan is worthwhile. Do not finance the cost of the plan, as you'll likely pay interest on it.

Considerations

You can negotiate free oil changes with your dealer. Based on an average of 12,000 miles per year, you will likely need four oil changes, which is relatively inexpensive for a dealer to pay for. Tell the dealership you want a year's worth of oil changes before you agree to buy the vehicle, and you can save money by paying only to rotate your tires. If you use an independent shop for your servicing, compare costs. Dealerships often charge more for servicing, so you may also save money by servicing elsewhere.

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Laws About Defaulting on a Car Loan

Most people finance the purchase of a new or used car through a car loan. The terms of the loan will vary by lender, but many aspects of all car loans are similar. When a loan is used to purchase a vehicle, the vehicle itself acts as collateral to secure the loan. If the borrowers default on the loan, the lender has the right to reposes the vehicle in most cases. The majority of laws concerning car loan default can be found in Article 9 of the Uniform Commercial Code. Some states also have specific laws concerning this.

Features

After you have been approved for a car loan, the lender will require you to sign several documents. One of these is the loan agreement. This document explains the details and terms of the loan and defines important terms. The term default can have different meanings to different lenders. However, it basically means that the loan is past due by a certain period of time. Most lenders consider 30 to 60 days the time frame for default.

Notices

If the borrower has fallen behind on payments enough to constitute default, the lender will begin the repossession process. Generally, state laws determine if the auto loan lender must provide the borrower with a notice of default. Some states have this requirement, while others do not. If your state does not require the lender to send a notice to you, then your car may be repossessed without warning.

Repossession

Some states require the lender to provide advance notice to the borrowers of when they will be coming to seize the car. In some cases, the county sheriff may need to supervise the repossession. However, it is usually fairly simple for the lender, or a third party hired by the lender, to complete the task. A stipulation is that the lender cannot commit a breach of peace. This would include physical harm or threats and property damage.

Post-Repossession

Once the vehicle is back in the lender's possession, it can re-sell the car to account for the money lost on the loan. Typically the car will be sold at a public auction or private sale. Some states require that the borrower must be notified of the sale. In certain cases, the borrower may even be able to bid on the car at the auction. If the car sells for less than what is owed on it, the lender has the right to sue the borrower for a deficiency judgment in most states. For example, if the loan balance was $15,000 but the car only sold for $12,000, the lender could sue the borrower for $3,000.

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How to Calculate a Lease Rate Factor

The lease rate factor is used by equipment lessors as a means of determining interest payments, using a simple formula of interest rate divided by 24. The result is a quick way to calculate any changes in the leasing agreement. A few simple steps will help you calculate lease rate factor and apply it to leasing information to determine monthly payments.

Instructions

1

Determine the value of the equipment at the end of the leasing term. To calculate this, take the manufacturer's suggested retail price (MSRP) and multiply it by the residual value. For example, a car with an MSRP of $20,000 and a residual value of 60 percent at the end of a leasing term will have an end value of $12,000.

2

Calculate the value of the equipment that will be used during the leasing term. This is determined by subtracting the end value by the MSRP. Using the example above, the end value of the car ($12,000) subtracted from the MSRP ($20,000) yields a value of $8,000.

3

Divide the value of the equipment you're using by the number of months in the lease. For example, if a car is being used for 24 months, the monthly payment amount before additional charges will be $8,000 divided by 24, or $333.

4

Calculate the lease rate factor of the equipment by taking the interest rate and dividing it by 24. An interest rate of 9 percent would have a lease rate factor of .00375. Convert the percentage to a decimal before calculating the amount (9 percent would be .09).

5

Add the MSRP of the equipment to the end value, then multiply this amount by your lease rate factor to determine the monthly amount owed in interest. A car with a starting value of $20,000 and a residual value of $12,000 would have monthly interest of $32,000 multiplied by .00375, or $120.

6

Add the results of Steps 3 and 5 (monthly payment plus monthly interest) to determine the total monthly payment before taxes.

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How to Get Help to Buy a Car With Bad Credit

Having a bad credit score can make it difficult to get a loan. To qualify for a car loan when you have bad credit, you need to find a way to convince the lender that you are not going to default on your loan. One way to show the lender you are an acceptable credit risk is to get a co-signer to help you secure your loan.

Instructions

1

Sit down and analyze why you need help getting a car. If you have a bad credit score, it could mean a history of not paying bills, late payments, or balances that are too high. Ask yourself if you are ready to take on a car loan and pay a monthly bill for the next few years.

2

Make a list of everyone you think would be willing to help you by co-signing on a car loan. Family, friends, girlfriends and boyfriends, relatives, and acquaintances are all possible co-signers. Make sure to eliminate anyone on your list who does not have good credit.

3

Approach the people on your list one by one. You only need one co-signer, so talk to the person most likely to help you first. Invite your potential co-signer to lunch or offer to buy him a coffee so you can sit down together and talk. Be honest when you ask her to help you, and explain your reasons for needing a co-signer. Address the fact that your co-signer will be taking just as much responsibility for the loan as you will be.

4

Offer to provide your co-signer with a signed promissory note stating you will take responsibility for the car payments. If possible, offer to provide your co-signer with a cash deposit they can keep if you default on your payments.

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What Are the Credit Effects of a Car Repossession?

If you fail to abide by the payment terms in your auto loan contract, your car will be repossessed, whether the bank seizes it or you make the return yourself. The MyFico website warns that each individual's credit is impacted differently after non-payment of a loan, but expect your credit score to decrease significantly after repossession.

Repossession On Your Credit

Future creditors will see that you didn't pay your auto loan and your vehicle was repossessed. Creditors, employers or landlords viewing your credit report can also see the total amount you borrowed, the number of payments you've made, the number of times you were late, the date of the repossession and the balance due on the loan account after repossession. For the next seven years, the impact of the repossession on your credit score decreases, but the immediate affect on your credit score is significant. Expect your score to decrease at least 100 points.

The Balance Due

When you signed your loan contract, you agreed to pay for the total amount of the vehicle, including fees. Repossession doesn't excuse the promises you made when signing the contract. Your auto loan provider will resell your vehicle in an attempt to satisfy your loan balance. Most sales are completed at auction, where sales warrant wholesale pricing, which is similar to trade-in value. Expect a letter from your lender after the sale stating the amount due on your loan. The amount due is shown on your credit report as unpaid.

Settling or Paying the Account Balance

If you pay the total balance due on the loan, the loan account will read as "paid" on your credit report. The repossession notice, however, still remains on your report. Paying the deficiency in full may help you to obtain future lines of credit. If you settle the balance, your credit report will say so. If you don't pay the balance at all, the loan account balance remains open and unpaid. If the lender sells the debt to another company, the debt-collection company's information and the loan's balance may reappear on your credit report as a second derogatory mark.

Improving Credit

Over time, your credit can improve if you pay other lines of credit on time and avoid additional derogatory reports. To track your credit score immediately after repossession and over time, you'll have to purchase your credit score from the three credit bureaus: Experian, TransUnion and Equifax. Your auto loan provider might report to one or all three bureaus. After several years pass after the repossession and you've made efforts to improve your credit rating, you might obtain other lines of credit. Expect to pay a higher interest rate or provide a higher down payment toward a loan until your credit score improves and your lending risk decreases.

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If You Buy a Car Can You Return It in Three Days After Purchasing It?

After purchasing a car, circumstances may arise that cause the buyer to change his mind shortly thereafter. Each state has its own specific rules and regulations for whether a consumer can change his mind after signing a purchase contract. Many states have what is called three-day rule for canceling a contract.

Three-Day Rule

After signing certain contracts, an individual has three days to cancel, according to federal laws. This is called the "cooling off" rule or "three-day" rule. To cancel, the individual must inform the company or other individual in writing of his decision to cancel inside of three days after signing the contract. The rule applies to specific types of contractual agreements, like home equity loan contracts, Internet purchases and door-to-door sales. The rules for the cooling off period vary by state, so you should examine your state laws before entering or attempting to cancel any type of contract.

Does It Apply To a Car Purchase?

The cooling off rule does not normally apply to car deals. That is because when a consumer purchases and drives a car it immediately loses value. The consumer could very well put thousands of miles on a car in a matter of days and then return the car if this rule applied to car transactions. However, some states require car dealers to honor a request to return a car under certain circumstances, such as in the case of a car that turns out to be a "lemon" (mechanical issues).

Lemon Law

Under state lemon laws, a dealer or private seller must give the buyer a refund or comparable replacement if the dealer sells a defective car. A defective car is one that cannot be fixed within a certain amount of repair attempts. However, the final decision on whether a car is a lemon is up to a court of law. If the dealer refuses to give a refund, the buyer may have to keep complete records of what has occurred and file a claim in court to get his money back.

Financing Issues

Another issue to consider when examining this three day rule is what happens when an individual finances the car purchase and signs a loan agreement. When the loan commences, and the lender has finished processed the loan, the buyer would also have to cancel that contract. If the state law permits the buyer to return the car, the buyer and dealer must also arrange to either rescind that loan agreement or transfer the funds to purchase a new car.

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The Best Sources for Refinancing Auto Loans

Whether the economy is running on all four cylinders or struggling with high unemployment, consumers should explore all options to obtain the best auto refinancing terms. The first step is to obtain the most recent credit report from all three major bureaus (Experian, Equifax and TransUnion) in order to leverage a good report or otherwise accept the available options.

Banks

Local banks are often a convenient refinancing source for auto loans. As generally conservative lenders, they tend to prefer working with customers who have excellent credit and are looking to refinance a newer model car. These parameters usually limit choices to vehicles no older than four years with under 50,000 miles. However, like any retailer, banks are interested in keeping good customers happy, so a conversation with the branch manager can be quite useful.

Credit Unions

Credit unions typically offer competitive terms on auto refinancing, and in common with banks they look for applications with strong credit profiles. They are, however, much less strict in considering the car's age and miles. Also, given the affiliations with employers, unions and other organizations, credit unions are good sources to approach with less than ideal credit backgrounds.

Online Sources

Consumers should be equipped with the best information when looking to refinance their cars, and the most reputable online sources provide comprehensive information. The best sites are those that directly refinance and are not lending middlemen or loan brokers, who can end up sharing personal credit information with a dozen possible lenders. Online lenders know the auto market intimately and can work with all types of consumers and vehicles.

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Do You Need to Transfer the Title When Selling a Car?

The Certificate of Title, as it is called in most states, is the document that shows legal proof of ownership of a motor vehicle. The title is also used to register any liens against a vehicle. The finance company generally will not provide a copy of the title to the owner of a vehicle until any loans against it have been paid off. The title must be transferred to the new owner when you sell a vehicle.

When to Transfer a Title

The title to a vehicle must be transferred whenever the ownership of the vehicle is affected. The most obvious time is when you sell the vehicle. Depending on the state where you are located you may need to re-title the vehicle when a loan is paid off and a lien satisfied. If you inherit a vehicle from an estate you will need to make sure that ownership is correctly transferred, as well as if you receive a vehicle as a gift. In case of divorce or death of a co-owner a vehicle will need to be re-titled to remove the non-owner's name from ownership of the vehicle.

Information Needed for Title Transfer

The information you need to transfer a vehicle title varies depending on where you live. Commonly you will need a bill of sale showing the amount of the sale price of the car. You must also have a copy of the previous owner's title with the section that transfers ownership signed and with you named as the new owner. You will need the odometer mileage as well. Your state may have a form to certify the odometer reading that you and the seller have to sign. The vehicle identification number (VIN) is needed on each of these documents. Make sure that the VIN matches on each form as well as on the VIN plate that is physically located on the car.

Types of Titles

You will have to say what kind of vehicle title you are applying for when you complete the title application to transfer title. On a conventional vehicle transfer you will apply for a normal or clear title. If the vehicle has been totaled in an accident you may need a salvage title to sell the vehicle for parts. A repaired title is for a formerly totaled vehicle that has had parts replaced so that it is operable again. Specialty titles may also be available for antique or collectible autos.

Lien Release

When you make your last payment on your vehicle the procedure to receive clear title may vary by the state where you live. Some states have the bank send you a separate lien release form with the title. Both of these documents together then serve as your vehicle's title and proof of ownership. Other states may have the lender send the lien release form in to the state's department of motor vehicles along with the title, and they will issue a new title that does not have the lien listed. The new title is sent to the vehicle owner and serves as proof of ownership.

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How to Negotiate a New Car Lease

If you are interested in leasing a new car instead of buying or financing a new car, you can negotiate in the same manner as you would when buying a car. Leasing a car does involve some items that you do not encounter when financing or buying a vehicle. You must know the lease terms and the number of miles that you want included as part of the lease. Lease terms usually range from 24 months to 48 months. The miles allotted per year usually range from 10,000 to 15,000.

Instructions

1

Use the True Car website (see Resources) to view the car pricing report for the car you want to lease. This lets you know what the dealer paid for the vehicle, as well as recent prices paid by consumers in your local area, which gives you a price point to aim for.

2

Go to the local car dealer where you want to lease the car a few different times. By not closing the deal the first time you visit, you can make the salesperson anxious to close the sale with you. You will want to get a price from the dealer on leasing the car for the specific term you want, such as 36 months, and the number of miles you plan on driving a year, such as 12,000.

3

Visit other local dealers in the area to comparison shop. This way, if one dealer has a better price, you can use that against the other dealer to negotiate down to an even lower price. In fact, one dealer may be offering customer cash that another is not, which means you can try to get that same incentive at the original dealer. You can even check prices at other dealers in the state by using the Internet. For instance, you can go to Ford.com and look for dealers anywhere in your state.

4

Tell the salesperson at the dealership where you want to lease that you have some concerns regarding the vehicle you are looking at versus a similar vehicle from another brand. For instance, if you want to lease a Honda Accord, you could voice concerns about comfort, gas mileage or anything else compared to the Toyota Camry. This makes the dealer think you may move to another brand and dealer for the sale.

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Can a Person's Name Be on the Title of a Vehicle If Their Name Is Not on the Loan?

When an individual finances the purchase of a car, the title to the vehicle is sent to the finance company in most states and remains with the company until the vehicle is sold or the loan is paid in full. You may wonder, though, whose name is on the title and whether you can add or remove a name from the car title. Certain rules determine whether an individual's name can be on a car title, and one key factor involves the names listed on the loan.

Buyer's Role

The loan signer designates who will own the car upon full payment of the auto loan. The buyer determines ownership based on whose name he lists on the title. In most instances, the loan signer is buying the vehicle for his own use and lists only his own name. In some cases, though, a buyer intends to designate another individual as the owner or co-owner of the vehicle. The loan signer reserves the right to name anyone as the owner of the vehicle, but that individual must sign the title, too. The actual title, though, remains in the possession of the lienholder, or finance company, until the loan is paid in full. Only after full payment does the lienholder release the lien, and the title then goes to the person listed on the title.

Co-signers

A co-signer signs a loan when the primary signer lacks the credit history to obtain an auto loan on his own. The co-signer gains rights under this agreement, and that includes the right to refuse to sign a loan unless he reaches an agreement with the primary signer as to whose name appears on the title. The co-signer may request that his name appear on the title in addition to the buyer's name or a third party's name.

Title Changes

Once the title has been established and the lender takes possession of the auto title, the title cannot be changed until the loan is paid in full or the lender decides to sign over the title for another reason. A name cannot be removed from the title and a name cannot be added to the title. An individual can refinance the vehicle and purchase it from the other title holder. This process takes place in some divorce settlements. When this happens, the title can be changed to reflect the new owner of the vehicle.

Registration

The person listed on the registration for a vehicle typically is the same person listed on the title. In some cases, though, the vehicle is registered to the person who normally drives the vehicle and takes responsibility for it. This might not be the person listed on the title. If a person buys a vehicle and registers it, that person is liable in the event of a collision even if the person's name does not appear on the title. Therefore, it is best for the buyer to allow the titled owner to register the vehicle.

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Procedure to Buy a Used Car

You can purchase a used car from a dealership or private party, but each requires different actions on your part for registration, titling and tax payment, if your state charges taxes. Learn which procedures you should follow during your purchase to ensure you choose a reliable vehicle you can comfortably afford.

Budgeting

Before shopping, create a budget and stick to it. If you plan to finance, consider your monthly payment in addition to a full-coverage insurance policy (necessary for lending purposes) and maintenance items. Use an auto loan calculator to figure out how much you can borrow for an affordable monthly payment. Or consider your cash on hand in addition to taxes and motor vehicle fees, which are due at the time of purchase at a dealership or when you register your car if buying privately. Call a same-make dealership to inquire about the car's maintenance schedule and the price of upcoming services. Contact your insurance provider and discuss any policy charges and costs associated with the vehicles you are considering.

Inspection

Once you find a car you like, have it inspected by a mechanic. Doing so can save thousands of dollars in unexpected expenses. Test drive the car and ensure it drives and brakes smoothly before proceeding. If it does, run a vehicle history report to ensure the vehicle hasn't sustained major damage, such fire, flood or hail damage. Ask the owner or the dealership for the car's service history. If buying privately, the owner should let you know where the car was serviced -- you can call the shop to confirm if you have the vehicle identification number (VIN). If buying from a dealership, ask to see the vehicle's inspection report. Cars often go through the shop for repairs and fluid changes before being displayed for sale. The dealer should be able to provide you a free history report, as well. Make an appointment with a mechanic to take the car for a proper inspection before you decide on a purchase.

Payment

If you plan to finance, have a pre-approval in place before setting out to shop for a used car. This allows you to confirm your budget by knowing your interest rate and monthly payment. A pre-approval can take as long as a week, during which time you can lose out on the purchase if a better prepared buyer comes along. Once you have a pre-approval, you can provide the bank the vehicle information to receive payment for the buyer. If buying from a dealership, financing can be arranged for you. However, having a pre-approval in hand can prevent a dealer's profit from your interest rate, which is one way a dealership makes money. If you need to transfer money or request money from an account you plan to pay from, do so before you set out to shop.

Motor Vehicle Procedures

A dealership can handle all the motor vehicle paperwork for you. This includes transferring plates or supplying new plates. The dealership will collect all state-required fees, such as inspection, emissions inspection, plate and title fees. If you plan to purchase privately, call your state's motor vehicle department to find out which forms and paperwork are needed. While some states require only a title signed by the buyer, others require notarized signatures or additional forms, such as a bill of sale. Finding out which forms are needed ahead of time can better prepare you when you go to register your vehicle and prevent you from having to return to the seller to obtain more information or signatures.

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