Can I Trade in a Car That I Still Have Monthly Payments On?

It is possible to trade in a vehicle that still has an open loan. To determine whether or not doing so benefits you financially, check your vehicle's value and compare it to the car's remaining pay-off amount. If you owe more than the vehicle's loan amount, you may have to carry over money from your old car loan into your new one.

Vehicle's Value

Get an idea of how much your car is worth before bringing it to a dealer for a trade-in appraisal. While Internet appraisal websites differ in value estimates, you can determine an average trade-in value for your car. Use the Kelley Blue Book, Edmunds and NADA Guides websites to obtain a median of values. Most dealers subtract maintenance and repair fees from the trade price, so be sure to expect somewhat of a lower value if your car needs work or has body damage.

Remaining Amount

Your dealership salesperson will call your lender to find out your remaining loan amount, but you should do so beforehand to prepare your budget. If you owe more than the vehicle is worth, it is advisable to put down sufficient money to cover the negative equity so you don't carry over the debt to a new loan. If you lack the funds for a down payment, consider your interest rate. If your current loan has an interest rate of 6 percent and a new loan offers a 0 percent rate, you'd be saving money by transferring a small amount of the balance rather than keeping your car to pay down the loan.

Dealer Process

As stated earlier, the dealership will call your lender to obtain your remaining loan amount and appraise your vehicle. The loan amount and the vehicle's trade value should be close to your calculations. If not, ask your salesperson why the values are off and negotiate a fair price if you do not receive sufficient explanation. Once you make a deal, the dealership pays off the loan; equity goes into your new loan as money down, or if you owe more than the vehicle's value, the excess amount is added to your amount due.

Warning

Be careful of transferring negative equity. In the event you carry over extra money and take out a longer term loan, you may see an attractive monthly payment, but consider the length of the loan and your total payback amount. If your new vehicle has a sticker price of $25,000 and you end up borrowing $29,000, you can expect to stay in that car for a long time. It will take years or extra payments to level your equity and loan amount. To see the full effect a loan term and interest rate has on your loan payback amount, use the Edmunds' website to access the auto loan calculator feature.

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How to Skip Trace for a Repo

When a person skips town and moves to an unknown location to avoid having his vehicle repossessed, it can be difficult to locate the car. Repo men have to be creative, organized and investigative to locate the new address of the person. When running a "skip trace" for a repo, it's important to keep track of all types of information, whether it may seem relevant or not. Knowing whether the person is married or not, where his family lives, and even where he may go to church can give you that final address or car location you need to repossess the vehicle.

Instructions

1

Review the credit bureaus every few days. Any change to his credit history will register here, like a new credit card or a bank card application. A change of address to a credit account will register here. However, this does not mean the skipper is going to register a new address. Still, you should continually check at all three credit bureaus--Experian, Equifax and TransUnion--as information differs.

2

Make a note of when his license is up for renewal and when the tag expires. Search the DMV records to find this information. However, this may not help either, as many skippers will drive on an expired license or use someone else's tags. But keep track of the information and check periodically for changes.

3

Visit the local courthouse. Review court records and check for scheduled court appearance dates. This way you can appear on the date and follow him to the car. Look through the civil list of "process served". A person who is running from the repo man has lots of other people trying to get funds and who are resorting to the legal system. A process serve will have the current address. All you have to do is write it down and go get the car. Look through civil records that will give you information on the subject like attorney names and addresses, and other useful information. These records may not give you the subject's address, but they will give you useful information that can lead to other sources.

4

Research and keep track of important information like Social Security number, marital status, employment records, old friends, girlfriends, hangouts and hobbies. A person usually works within the same industry, or finds similar hobbies and hangouts in new towns. If he has a family, he may go back to see them. Look for the person at family homes during the holidays. Many cars are repossessed on Thanksgiving and Christmas when the skipper visits family homes.

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Is There an Advantage to Paying Off a Car Loan Early?

Car loans act much like mortgages, with several primary differences. Car loans tend to have lower interest rates, except for risky borrowers. The interest paid on a car loan does not fall under any tax exemption status, unlike mortgage interest. But because car loans are for such lower amounts than home loans, borrowers can pay them off more quickly and can often make extra payments to retire the loan early. There are several advantages to paying off an auto loan early.

Interest

Interest payments are much easier to handle if a borrower pays off an auto loan early. The interest rate that is applied to the loan applies only to the principal. If the borrower starts paying off more of that principal, the rate will apply to a smaller and smaller amount, leading to lower interest payments in addition to less principal. All early payment will reduce the total amount of interest the borrower is paying--as long as the borrower is paying interest at all.

Credit

Credit scores are affected by how borrowers deal with their debt. Paying a debt off early is a sign that a borrower is financially responsible and pays loans off easily. This may raise credit scores, and even if it doesn't, a lender can look at a credit report as see the account was paid off early. This makes lenders more willing to loan the borrower money for other things like a mortgage and is an ideal process for building credit or recovering from a bad credit decision.

Financial Planning

The sooner a borrower pays off an auto loan, the sooner they will have extra money to spend on other purchases or paying down other debt. This can be useful if borrowers have an eye on another loan or on saving or investing money in a specific way and need extra income to do it. Paying the car loan off early can be part of a long-term financial plan that includes using the extra money for another project.

Methods

Many lenders are willing to work out different ways to pay off car loans early. Some may be willing to accept large lump sums that pay off the rest of the car loan completely, or at least a good part of it. Others may be willing to have borrowers pay off a greater amount of the principal each month, or simply make extra payments each month. Some lenders, however, will charge fees to have the loan paid off early, since they are losing interest on the deal.

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How to Estimate Car Taxes

Considering that some counties in the United States charge more than 8 percent sales tax on vehicle sales, it is a good idea to figure out your sales tax before making such a large purchase. If buying a car privately, you can expect to pay your state taxes when registering your vehicle, but if buying from a dealership, you'll pay your taxes during the transaction. Learn how to find your state and county's sales tax rate and how to apply it.

Instructions

1

Call your state's motor vehicle office to find out your exact sales tax amount. Have your ZIP code handy to give to the motor vehicle representative in case your state charges different tax amounts by county.

2

Ask the representative if you can deduct a trade-in amount from the sales price of the vehicle before applying tax. If you have a trade-in, you have already paid taxes on it and most states allow you to deduct its trade value for a tax savings. If buying a new car, ask the representative if you can deduct discounts and manufacturer rebates before applying tax---some states require you to pay tax on the full MSRP (manufacturer's suggested retail price) while others consider a price discount, but not manufacturer cash allowances (which look like money down, not a discount).

3

Take the selling price of your vehicle and deduct applicable discounts allowed in your state. This includes subtracting a trade-in amount, if applicable, and new car discounts or rebates, if allowed in your state.

4

Multiply the adjusted selling price by your tax rate. If your calculator does not offer a percentage symbol, use a decimal instead. For example, a $15,000 vehicle with a 8.25 percent tax rate would be multiplied as "15,000 X .0825."

5

Use an auto loan calculator, if you prefer. The Edmunds' website's auto loan calculator offers one free to use that puts in your tax rate by default depending on the ZIP code you enter.

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What Happens If I Don't Pay My Car Loan?

Before you decide to stop paying your car loan, due perhaps to your inability to afford your vehicle or lack of desire to hang on to it, understand the consequences.

Late Notices and Calls

If you stop making payments on your car loan, your finance company will begin to send you late notices and phone calls. If ignored, the frequency of phone calls made by your financier will increase, with you receiving calls at your home, job and at some point to your listed references until communication is established.

Payment Plan Option

Your finance company will attempt to work with you by establishing a payment plan to help you catch up on missed payments.

Final Notice

Once attempts to contact you and work out a repayment plan have been exhausted or become unfulfilled on your behalf, your finance company will send you a final notice regarding their intended action to recoup payment and late fees for your car loan.

Repossession

If you ignore attempts to work out a solution, your finance company will initiate the process to retrieve your vehicle. After vehicle repossession, you will have the opportunity to pay off the balance of your car loan before the vehicle is sold. If your car is sold, you'll be responsible for the remaining balance plus any fees associated with storing your vehicle after it was repossessed.

Judgements

You're not off the hook simply because your car was sold. If you avoid paying off the remaining balance of your car loan, finance companies will resort to seeking legal action by filing a judgement against you through the courts to recoup the remaining balance.

Wage Garnishment

If you fail to respond to the judgement or appear in court, you run the risk of having your wages garnished to pay off the loan balance. By law, your wages can be garnished up to 25 percent of your disposable earnings.

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How to Sell a Financed Car

If you're looking to buy a new automobile or get rid of your car payment, you might be interested in how to sell a financed car. Selling a financed automobile is different than selling a paid-off car, and some car sellers don't make any money off of the deal. Yet, if you're hoping to purchase a new car, selling the vehicle yourself is often better than trading in the car.

Instructions

1

Contact your creditor. Call your auto lender and ask for your pay-off balance. In order to sell a financed car, you'll need to acquire enough cash to pay off your current loan balance. Knowing the pay-off balance can help you determine the asking price.

2

Determine your vehicle's worth. After learning your pay-off balance, check Kelley's Blue Book to find out how much your vehicle is worth. If your car is worth more than your loan balance, you can sell the car for more than you owe and make a profit.

3

Prepare the automobile. To receive your asking price, prepare to sell the automobile by cleaning the interior and exterior and making minor repairs. Order a vehicle history report from Carfax (see Resources) and show this information to potential buyers.

4

Place classified ads. Attract potential buyers by placing ads in local newspapers or circulars. Include detailed information about the vehicle such as the make, model, year and asking price. If you have an assumable auto loan, mention this in the ad.

5

Obtain a Bill of Sale. Download a Bill of Sale form from the DMV's official website (see Resources). This form is necessary to complete and legalize the sale. Without this form, it's impossible to transfer ownership of the car. After the buyer presents a check, both the seller and the buyer sign the Bill of Sale. Make a copy for your records and give the buyer the original copy.

6

Pay off the vehicle loan. Cash the buyer's check and use this money to pay off your auto lender. The lender will send you the vehicle title and a letter stating that the debt has been paid.

7

Sign over the title to the new owner. After receiving the title from your auto lender in the mail, sign over the title to the new car owner.

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How to Make a Payment on an Existing Car Loan

If you just bought a car and don't know who to make your payment to or which form of payment to send, you should contact your loan provider to ensure you follow your lender's guidelines. Doing so can decrease confusion and ensure your timely payment is correctly applied to your loan. Most banks do not accept a credit card for payment; cash, balance transfers, check or money orders are commonly accepted. If your lender is local, you can go in to the bank to make your payment.

Instructions

1

Call the dealership you bought your car from if you are unsure who your loan provider is. Ask a dealer representative for the name and phone number of your bank. Also ask when your first payment is due; most are due within 30 to 45 days of purchase, and if it is too soon, your bank may not have processed your paperwork yet.

2

Call your bank and follow the prompts to reach its customer service department. Have your loan account number ready; if you do not have it, have your Social Security number ready. Also have your vehicle identification number (VIN) ready in case it's needed; you can find the VIN on any of your vehicle paperwork or insurance card.

3

Ask the bank representative where to make your payment, how much is due (to verify if necessary), which forms of payment are accepted and if the bank offers an online payment method. If so, you may need to set up an online account, which the representative can help you with.

4

Follow the bank's payment requirements by obtaining the form of payment it needs, whether you need to write a check or obtain cash or a money order. If sending in the payment, make sure your check or money order lists your account number on it so the payment is correctly applied to your loan.

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Things to Consider When Leasing Car

Leasing a car gives you an alternative to buying the vehicle. A lease is similar to renting a vehicle long-term in that you don't actually own the car. At the end of the lease, you have the option to turn in the vehicle or purchase it. Lease payments are generally lower than the car payments would be for the same vehicle, but you should analyze all of the terms to ensure you understand the agreement.

Time Frame

The length of a lease varies depending on the terms. The minimum is typically around 2 years, but a 3-year lease is most common. A 3-year time frame works well for a lease because you will likely turn in the car at the end of the agreement. A longer lease term increases the chances of mechanical issues with the vehicle. Because most warranties on lease vehicles only last 3 years, you save yourself the worry and money for car problems that could occur if you keep the vehicle longer.

Fees

Like a car loan, a lease requires you to submit a monthly payment. This amount stays the same for the length of the lease. You pay for the taxes and registration for the vehicle when you lease it. The dealership may also require a down payment or the first month's payment upon leasing the vehicle. Total up all of the fees and monthly payments to determine how much you will end up paying over the entire term.

Mileage

A lease comes with a certain number of covered miles per year. If you go over the total number of miles allotted for the length of the lease, you pay more when you turn in the vehicle. Estimate the number of miles you will drive the vehicle in the time you will have it. Compare that number with the mileage allowed under the lease. If you estimate you will drive more, negotiate a higher amount of miles. Check on the charge for going over so you have an idea of what you might end up paying should you exceed the limit. You may also have to pay fees for excessive wear such as major dents in the body or tears in the upholstery.

Insurance Requirements

Check on the insurance requirements to fulfill your part of the lease. Since you aren't the owner of the vehicle, you must abide by the limits and type of insurance mandated by the leasing company. Gap insurance is often required. This type of insurance will cover what you still owe on the lease if that amount exceeds the value of the vehicle.

Cancellation and End-of-Lease Options

Once you sign the lease agreement, you are usually under obligation until the end of the lease. If the agreement has a cancellation option, it will likely cost you a high penalty. Read the terms carefully so you understand the consequences of ending the lease early.

Your agreement should also spell out the end-of-lease options. Most people choose to turn in the leased vehicle. The process involves an inspection of the vehicle and paying any outstanding fees. The other option is to purchase the vehicle. Your lease agreement may state a pay-off amount if you decide to purchase it.

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How Can a Person Having Bad Credit Get a Car Loan?

No matter how you look at it, bad credit means most lenders want nothing to do with you. Some creditors, however, specialize in auto loans for people with bad credit---called subprime borrowers. Going to a subprime lender typically results in a tough decision, because he might offer a loan, but at a highly undesirable rate.

Subprime Lender

The most likely source of a car loan for a borrower with bad credit is a dealership that has a loan officer who deals with subprime consumers. Any subprime lender must charge a higher rate to a bad credit customer than a regular buyer to make up for the higher risk. The subprime lender may even demand a large upfront down payment.

Cosigner

A bad credit car loan provider probably hopes that any customer with terrible credit comes in with significant collateral or a cosigner. A cosigner agrees to take over payments if the primary account holder cannot meet them. The lender might not offer a loan if the cosigner has poor credit or a heavy debt burden. If the cosigner has good credit, the lender will likely tender an offer.

Considerations

You might not have terrible credit. Usually, anything in the range of 580 to 640 is an acceptable credit score. This probably won't garner the lowest rate the lender can offer, but you likely do not need a cosigner or large down payment. The best way to find out your score is to shop around. The credit scoring formula counts all auto loan inquiries in a 45-day period a single inquiry, so it harms your score far less than if you were shopping for a credit card.

Tip

The car dealership usually just helps you acquire a car loan through a traditional bank, but add on extra charges as a commission. Edmunds suggests going to banks or the lending institution, which probably saves you money. Also, securing financing on your own gives you more leverage, because you do not depend on the dealership for the loan.

Benefits of Rebuilding Your Credit

High-interest bad-credit car loans increase the chance of your loan going "under water"---you owe more money on the loan than the car's fair market value. Cleaning up your credit report months before going to the auto dealer increases your chance at approval and saves you money over the life of the loan. Start by eliminating debt and paying bills when they are due, this will eventually outweigh most of the negative items. You might need to open a new account to build history. Look for a department store card or a credit card backed by a security deposit, because these generally have the lowest standards.

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What If I Don't Get the Title When I Purchase the Vehicle & the Lien Holder Must Send for It?

Anyone should be very wary of purchasing a vehicle when the seller does not have the title. The title to a car represents proof that a person legally owns the vehicle and has the right to sell it. If someone is selling you a vehicle without a title, you have no way of knowing if it is clear of outstanding liens. Lien holders send for the title if you live in a title-holding state. In non-title holding states, you have to apply for a lost title at the Department of Motor Vehicles or Secretary of State's Office.

Vehicle Financing Titles

If you buy a car using a loan, the lien holder is the bank or financing company that services your loan. In a non-title holding state, you will receive the title to your vehicle with the name, address and phone number of the lien holder printed on the front of the title. If you live in a title holding state, the DMV sends the vehicle title to the lien holder where it will remain until you pay off the loan.

Title Holding States

If the seller does not have the title to his car when you purchased it, it could be that he paid off the loan and the lien holder has not yet provided the new title showing the release of lien. If this is the case, the lien holder will receive the new title and mail it to the seller. The seller will then have to transfer the title to you. You must then take the title to your local DMV or SOS and complete a title transfer.

Power of Attorney

If the seller has not yet received the title when she sold you the car because she has not received a new title showing the release of lien, she can complete a Power of Attorney with Odometer Disclosure form. This form allows you, the buyer, to sign off the seller's interest on the car. The seller must complete the odometer information on the form and contact her lien holder to request that the new title be sent to you and not to her.

Considerations

If the seller is using proceeds from the sale of the car to pay off the remainder of her loan, ask her for a pay off balance and write a check directly to her financing company to pay off the loan. Then, write a check to her for the difference between the payoff balance and the purchase price of the car. The lien holder will still have to send for a new title, but doing it this way ensures that the seller can legally sell the vehicle and the lien holder will mail the new title to you and not to the seller.

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Is an Early Car Lease Termination Bad for Your Credit?

An early car lease termination is not bad for your credit, as the early lease termination requires you to pay an agreed-upon amount to end the lease ahead of its scheduled maturation date. However, if you simply stop paying your lease payment instead of formally terminating the lease with the lender, your credit score will fall, and the vehicle could even be repossessed.

Remaining Lease Payments

The largest component of a lease early termination that must be satisfied is the remaining lease payments. Per the lease agreement, if you choose to end the lease early, you will be held responsible for all remaining lease payments. This makes it difficult to get out of a lease in the early months, as very few payments have been applied to the account. For example, on a 36 month lease with payments of $400, the remaining balance after a year is $9,600, and this amount must be paid to terminate the lease early.

Excess Mileage

Additional charges will be levied if you have driven the vehicle more than the total allowable contracted mileage. The cost per mile varies between leasing companies but is normally between 15 and 25 cents per mile. In the case of high overage charges, it is sometimes cheaper to do an early lease termination and get out of the vehicle before the mileage gets out of hand, especially if you drive a lot. If you make long trips and have to pay 25 cents for each mile driven in addition to your monthly payment, the cost of not doing an early termination could be higher than ending the lease.

Disposition Fee

The disposition fee, also known as a disposal fee, is charged by most leasing companies. Although some consumers consider the fee a needless charge, it is included in the lease agreement, and the monies are used to offset the expenses encountered by a leasing company when handling leased vehicles that must be taken to the auction and sold to other dealerships.

Early Lease Termination Considerations

If you choose to end your lease early and get a new vehicle from a dealership, have the salesperson contact your leasing company to verify the early termination amount. If the remaining early termination charges are to be rolled into a new loan or lease and the dealership is handling the payoff, be sure to get a written guarantee that the dealership will handle the payoff. Dealerships often have payoff confirmation worksheets or similar forms that can be given to a client in order to put promises in writing.

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Statute of Limitations in North Carolina on Auto Loan Default

A statute of limitations is a rule of law that prescribes a certain period of time within which a plaintiff must file his civil lawsuit in court. Each state establishes its own limitation period for various causes of action, e.g., negligence, fraud and breach of contract. North Carolina has established a statute of limitations period for actions by creditors to recover the default balance due on an automobile loan.

Identification

An automobile loan is a legally binding contract in which the creditor loans the borrower a lump sum for the purchase of a vehicle, and the borrower promises to pay back a specified sum each month by a certain date. The loan agreement is a written document (usually a promissory note), and it contains the essential terms and conditions of the contract, including the interest rate as well as the incidents and consequences of default. The appropriate limitations period for an automobile loan would be that period set by North Carolina for breach of contract actions.

North Carolina Limitations Period

Chapter 1 1-52.1 of the North Carolina Code of Civil Procedure has established a three-year limitations period for bringing civil actions based on breach of contract. The statute of limitations clock begins ticking on the date the debtor defaulted on the automobile loan, and it stops on the day the creditor files a civil action in court. A suit by a creditor that is filed outside the designated limitations period is considered time-barred and may be dismissed. A creditor whose complaint is dismissed for failure to comply with the applicable statute of limitations period has no further legal recourse against the debtor.

Considerations

The court does not monitor civil actions filed for compliance with the statute of limitations. A debtor who has defaulted on his automobile loan obligation is responsible for raising the issue of the statute of limitations as a defense to the civil action filed against him by the creditor when the debtor answers the complaint filed by the creditor. Once properly raised, the debtor can request the court to dismiss the action.

Misconceptions

The statute of limitations does not extinguish the debt; it merely prohibits the creditor from enforcing payment through the legal system. Even though a civil action for repayment has been dismissed for being filed outside the relevant statute of limitations period, a creditor in North Carolina may continue with collection activity; though, as a practical matter, such efforts may be futile.

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How to Cosign for a Car

A borrower who does not qualify for a car loan may be able to receive an approval by applying with a cosigner. A cosigner is often necessary when a borrower has no prior credit history, or when the borrower has a bad credit rating. The creditworthiness of the cosigner will determine whether or not a lender approves the car loan request. The monthly payment on the loan may affect the cosigner's decision to sign for the borrower, since the cosigner must be confident in the borrower's ability to make the payments on time.

Instructions

1

Talk with the borrower and ask why he needs you to cosign for the car loan. Find out if the reason is due to the borrower having bad credit, and ask what he is doing to repair his credit rating. If the borrower is not trying to repair any bad credit, you may want to consider denying his request to cosign until he shows that he is responsible for his debts. If the borrower is currently paying back his past-due debts, praise him for being responsible, but also let him know that he must not fall behind on the car loan that you cosign for.

2

Review the borrower's car purchase paperwork before you agree to cosign for a loan. Check the sales price to decide if the borrower is getting a fair deal on the car. Go online and search for a free car valuation website to help you determine the value of the car in relation to the purchase price.

3

Contact a lender and ask to speak with a car loan officer. Explain the reason for your call and set up a time to meet with the loan officer to fill out an application. Take a copy of your most recent pay stub with you to give to the loan officer. Make sure the borrower also takes a copy of a recent pay stub to the appointment.

4

Take the borrower with you when you meet with the loan officer. Ask the loan officer to explain what will happen if the loan payments are not made on time. Make sure the borrower understands that your credit rating is at risk when you are the cosigner on the loan. Have the borrower complete a loan application, then fill out your section of the application. Give the loan officer the pay stub copies and find out when you can expect to receive a decision on the application.

5

Review the loan terms once you receive an approval from the loan officer. Close on the loan and then go with the borrower to pick up the car. Take the loan check with you to give to the seller, unless the loan officer is handling the transaction. Reiterate to the borrower that you are also responsible for making the payments even though you will not be driving the car. Tell the borrower that you want to inspect the car each month to make sure it remains in good condition.

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Should I Sell My Upside-Down Car to Get Out of Debt?

If you have a car loan you can eliminate from your current debt, do so to decrease your monthly expenses. Unless you have a zero-percent loan, you are paying unnecessary money toward interest. Because your loan amount is more than your vehicle's sale value, you must come up with extra cash to satisfy your loan amount. Consider the process of selling your upside-car to determine if it can benefit you.

Satisfying Your Loan

If you're upside-down in your car, you must pay to satisfy the loan balance after you receive your sales price to release the vehicle's lien. Most states do not allow transfer of vehicle ownership while a loan exists, so paying off the loan is necessary, not optional. In states that do allow title transfers while a lien exists, most buyers are knowledgeable enough to avoid a title with a lien holder. If someone takes ownership of your car and you don't pay the loan, the bank can repossess the vehicle from the new owner.

Determining Sales Value

Because of the wealth of information available online, many buyers use online sources to make sure prices are fair. Use Internet appraisal guides to determine a reasonable sale price. Go to NADAGuides.com, the Kelley Blue Book website and Edmunds.com to assess your vehicle's private-sale value. Keep your selling price relevant to the appraisal value to interest buyers. It is highly unlikely you'll receive phone calls from potential buyers if you are requesting a higher price than other sellers.

Loan Payoff

Call your bank to determine your loan's payoff amount. Deduct your value from the payoff amount to so you know how much money you must come up with on your own to satisfy the loan after the sale. Contact your bank to find out its lien-release process. If you sell your vehicle and the lender is local, you can arrange to go to the bank with the buyer and satisfy the loan, allowing you to receive the lien release to give to the new owner.

Another Option

If you're unable to come up with the extra money you need to satisfy your loan, consider leasing a car. You can roll money over to a vehicle lease, although you must follow the mileage and term requirements that a lease entails. At the end of your lease term, you can simply walk away from the car and payment without concern for vehicle value. If you currently have a high interest rate or a lot of time left on the loan, this option can prove beneficial. Talk to a dealer to find out if the option is worthwhile.

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Can You Terminate a Vehicle Lease?

You can terminate a car lease and break your contract. Terminating the contract may prove expensive, so you may want to explore other options before you decide to do so. Termination details are outlined in your lease contract. Expect to pay a termination fee and any payments remaining on the lease contract.

Determining Fees

To determine the cost of terminating your lease, review your contract or call your leasing bank. You can expect to pay a termination fee, which usually exceeds $1,000; the actual cost differs by bank. Expect to also pay any payments due for the remainder of your lease. Most leasing banks do not offer a payment plan to terminate the contract, which means you'll have to pay the termination costs before you turn in your vehicle.

Other Fees

Expect to pay any over-mileage or wear-and-tear fees that apply to your vehicle lease. If you went over your mileage allowance, you'll pay 10 to 20 cents per mile. Your contract lists your over-mileage charges. If your vehicle is damaged or has wear that exceeds your bank-specified allowance, expect to pay fees for repair or loss of value. Once you return your vehicle, the leasing bank inspects it to determine if additional fees apply. Terminating the contact does not wave these fees; expect to receive a bill shortly after your vehicle's return if owe additional money.

Returning the Vehicle

Once you arrange your vehicle's lease termination, you will bring it to a bank-specified location for drop off. Depending on your bank, this may include a dealership or auction. Upon return, expect to fill out paperwork that states your vehicle mileage, personal information and a list of items you returned with the vehicle, such as keys and owner's manual. Read all paperwork over before signing and obtain copies for your records. Your drop off location will not inspect the car. Any fees due are determined once the vehicle has been collected by the bank from the drop off location.

Other Options

A lease termination can prove expensive, especially if your contract is new. Explore your other options, such as a lease transfer. You can advertise your lease for assumption if your bank allows it. You may lose your original down payment amount, but your loss may prove cheaper than the cost of termination. Check with your leasing bank to determine if a lease transfer is possible. If you want to pursue another vehicle purchase, you can also sell your vehicle or trade it in for your lease purchase amount. You can contact your leasing bank at any time to obtain the car's purchase cost.

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Can You Still Purchase a Vehicle With a Suspended License?

If you have your license suspended temporarily, it could inhibit your ability to buy a car. Whether you will be able to buy a car while your license is suspended depends on how you will pay for the car and what the laws are in the state in which you reside.

State Laws

Some states require you to have a driver's license when you purchase a car and register it. Other states do not look at whether you have a valid driver's license when buying a vehicle. For example, in California, you do not have to have an active driver's license before you can purchase a car. Check your state law or call a local auto dealership to find out the requirements in your area.

Paying For the Car

If you do not have an active driver's license you may not be eligible to finance the car. In this case, you would have to pay cash to purchase the vehicle. Many auto lenders require you to provide proof that you have a valid license before you can get a loan. If you were to drive without a license and get arrested, you may then be ineligible to drive for some time. This increases the chances of default on the loan.

Auto Insurance

If your license is suspended you may not be able to get auto insurance. Most insurance companies will only provide insurance on a vehicle when you show your driver's license. If you do not get auto insurance, you may not be able to register the vehicle in your state. In this case, you will not be able to buy the vehicle until your license is active again.

Considerations

If you are paying cash and purchasing the vehicle for someone else, you may not need to worry about whether you have a license. The dealership will not care who the car is being registered to as long as they get paid. For example, if your license is suspended and you are buying the car for your child, you could pay for it and then have the car registered in your child's name.

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How Big of a Car Loan Should I Take Out?

Car loan terms are commonly offered for as few as 24 months and as many as 84 months. While a longer term can warrant a lower payment, it may not prove to be your most beneficial financial option. Additionally, a borrower's term and finance amount is based on credit, so you may not have all terms or the lowest rate options available to you. Consider your present and future finances before you purchase a car.

Your Budget

Before determining how big of a car loan you should take out, figure your monthly budget and the amount you can comfortably put toward a vehicle payment. DMV.org suggests budgeting all of your monthly expenses below 45 percent of your gross monthly income. This amount includes your costs for living, such as food, gas and insurance payments. Once you figure your budget, enter in your vehicle pricing information into an auto loan calculator (Edmunds.com and the MSN Autos website offer one for free). This can help you determine your maximum loan amount to shop within your means.

Terms and Rates

Usually, lenders offer the same interest rate for loan periods up to 60 months. If you plan to borrow for a longer period, consider your future intentions and total payback amount. Seven years is a long time to own a car, and although it may lower your car payment for the vehicle you want, you will pay a higher interest rate. A shorter term lets you can create equity in your vehicle sooner, allowing you to trade or sell privately when the time is right. Again, use an auto loan calculator to gauge the differences in payment and overall payback amount.

Get a Preapproval

Get a pre-approval before you set out to shop. This way, you'll know your interest rate and the amount you can hope to borrow. You can pursue a pre-approval through any local bank by going in to fill out a loan application or calling to speak to the lending department. Dealerships can mark up interest rates for profit, as much as 3 percent in some circumstances. If you plan to shop at dealers, having a pre-approval with you ensures the rate you already obtained, although the dealer may attempt to beat it to save you money. Without a pre-approval, you might not know the real rate you qualify for.

Money Down

In most states, you can expect to pay taxes on your vehicle purchase. You can finance this amount, but it may not prove worth it. Other fees include title, registration, inspection and document fees or an extended warranty if shopping at a dealership. If you finance your extra costs, you will be paying interest on them, as well. Every $1,000 you finance costs you about an extra $20 per month (with a fair interest rate) in car payment. In states where taxes and document fees are high, you might be looking at a $60 increase in payment if you finance extra fees.

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How to Calculate an Automobile Payoff & Late Payment

Staying on top of your finances is critical when dealing with loans of any type, and one of the best ways to ensure proper and consistent management of your finances is to become familiar with loans. Car loans are often considered too difficult to understand, but with basic math, or the use of an online calculator, the average automotive borrower should have all the tools necessary to be informed and financially responsible. Calculating your automotive payoff and understanding the impact of late payments are two important ways to increase your familiarity with auto loans.

Instructions

1

Assemble the data pertaining to your loan from your loan information paperwork, including your remaining principal, interest rate, monthly payment, length of the loan, and how often interest is compounded (usually monthly). Write all this information down.

2

Divide your annual interest rate percentage by 12 and multiply it by your remaining principal. This is the amount of interest that will be applied to your loan this month. Add it to your principal and subtract your monthly payment. Write this new value down on paper next to the month and year. Repeat this process for each month of the loan, writing down the values as you go to ensure accuracy.

3

Total up all the monthly payments to find your total payoff amount. Subtract the original principal from the total payoff to find your overall interest paid.

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