What Do You Need for a Car Title Loan?

When you find yourself in a cash crunch, whether you need to make an urgent purchase or pay bills, you may be tempted to apply for a short-term loan. One type of short-term loan is a car title loan. Before you go forward, know what you need to apply and the conditions of this type of loan agreement.

Definition

A car title loan is an arrangement between a title lending company and a car owner. The lending company provides the borrower with cash in exchange for ownership of the car title until the loan is repaid. The title lending company checks the blue book value of the car to determine how much the company can lend. If the borrower fails to repay the loan, the title company takes ownership of the car per the agreement. A car title loan is similar in concept to a standard short-term payday loan, which the borrower must repay in a matter of weeks.

Free and Clear Title

One of the items a borrower needs to get a title loan is a free and clear vehicle title. If there is a lien holder on the title, such as a bank, a potential borrower cannot use the car as security for this type of loan. The applicant must own the car and have the actual title in his possession to present when applying. The lending company commonly holds onto the title until the borrower repays the loan.

Checking Account and Job

To qualify for a title loan, the lender needs assurance that the borrower can afford to repay the money. So the applicant needs a consistent job and must verify his income in order to apply for a car title loan. In some cases, the car title lending company also requires the applicant to submit a canceled check or a checking account routing and account number in order to secure a title loan. The lender can then withdraw the required payment from the borrower's checking account.

Warning

Car title loans come with a number of risks and warnings. For one, the interest rate on a car title loan is extremely high compared to a standard loan. Though the interest rate the lender quotes seems reasonable at first, when you calculate the annual percentage rate, the cost of the loan can climb well past a 100 percent interest rate. You also risk losing your car. So consider all possible alternatives before settling on this high interest, high-risk loan, such as a small loan from a loved one or a small loan from a credit union. You can also create a budget and make temporary sacrifices (such as canceling cable service for a month) so that you can save and avoid the need for this expensive type of loan.

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Can I Deduct the Interest Paid on Car Loan?

As is specifically stated in the IRS Tax Topic 505 discussion of "Interest Expense," interest paid on car loans for personal use, as opposed to business use, is not tax deductible. Car loan interest for personal autos is considered "personal interest," which is a category of nondeductible expense.

Basics

According to Cars Direct, tax deductible interest expenses include: "mortgage or home equity payments, student loan payments, business loan payments and payments for specific types of personal loans."

Considerations

While conventional car loans do not fit the criteria for tax deductions, you can finance your auto purchase in ways that allow for deductible interest. Home equity loans or lines of credit, secured with real property, do have tax deductible interest and can often be used for an auto purchase. Additionally, if you use your auto primarily for business purposes, it could be considered a business expense.

Tax Deductions

Exploring other options to make auto financing tax deductible is wise since it can save you money on tax obligations. You should keep your sales and financing records when buying a car as it has been rumored during the economic downturn (2007-2010) that the IRS is contemplating new tax rules to make auto loan interest and sales tax both deductible as part of stimulus programs.

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What Are the Questions to Ask When Leasing a Car?

Before leasing a car, there are several key questions to ask dealers, which should be answered to your complete satisfaction. You obviously want to secure the best available leasing terms. By understanding car-leasing fundamentals, along with the various options at your disposal, you can negotiate the right deal---one that simultaneously complements your current financial situation and saves you money over the lease's lifetime.

Negotiable Particulars

Generally speaking, car dealers have only one negotiating card in their decks: vehicle pricing. Dealers work as agents for the leasing institutions, which typically establish such essentials as down payment requirements, security deposits and acquisition fees. This is precisely why it is wise to inquire what items in the lease contract are negotiable, and what items are set in stone. With this knowledge in hand, you can further your quest for the most favorable leasing arrangement.

Financing Options

Query dealers, too, about their leasing company and whether you can use the services of an outside party. While most automobile shoppers are unaware of this financing alternative, it nonetheless exists. Ordinarily, car dealerships work with their manufacturers' financial arms, such as Ford Motor Credit and American Honda Finance Corporation.

However, if you are not wholly convinced that the available leasing terms at the dealerships are optimum, and you feel you can obtain more propitious terms elsewhere, then by all means explore prospects in banks, credit unions, and car-leasing concerns with no relationships with automobile manufacturers. The bottom line is that you want the best possible terms, and sometimes they are not through a car dealership. Check out PrimeLease at www.primelease.com for more information on these lease-financing alternatives.

Best Time to Lease

Are there better times of the year than others to lease a car? Yes. You can often land a preeminent leasing deal when the car manufacturer offers promotional discounts. Discounts from the automobile company, as well as the individual dealer, are one-two punches that work to your advantage. Inquire about forthcoming promotions. You can always bargain with dealers on price. But having the automobile manufacturer kicking in on the pricing discount is optimal.

Buy or Lease

Querying car dealers about the benefits of purchasing a vehicle outright, versus leasing one, can also prove extremely enlightening. When you enter into any sort of leasing agreement, you are financing the use of a vehicle---period. There is no ownership involved. This reality bite is exactly why the answer to this question is so significant.

Ask yourself whether the lower monthly payments of a leasing contract---versus a purchase---is both necessary and in your short-term and long-term interests. Purchasing a mode of transportation, as opposed to leasing one, typically amounts to genuine savings over time. Nevertheless, with a lease, you are only paying for a fraction of the vehicle's overall value, and, in many instances, do not even need a down payment.

In addition, to purchase a vehicle, you will be required to pay an interest rate commensurate with your creditworthiness. If your credit is less than stellar, this would entail a high interest rate and considerable monthly payment. Based on your credit score, you might be ineligible for a loan.

Your current monetary situation and personal circumstances assume the definitive role in whether leasing or buying a car is right for you. It also clues you on what monthly leasing payment you can afford both immediately and in the coming months and years.

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Can You Trade in a Vehicle Without a Signature From the Primary?

A loan's primary borrower, also known as a co-signer, is just as much of a vehicle's owner as the loan's secondary borrower, or the other person named on the auto loan. Both co-owners must sign the vehicle's title to release ownership to a dealership when trading in a vehicle.

The Vehicle's Title

Both your name and your co-owner's name are listed on your vehicle's title. A dealership requires that you provide a signed title at the time you trade in your car. Most dealers also require that your co-owner is present for signing. Some states require notarized signatures; many dealers employ a public notary, so you don't have to find one on your own. If notarized signatures are not required in your state, the dealer must verify the co-owner's identity before accepting his signature on the vehicle's title.

Title-Holding States

If your state sends the vehicle's title to the lien holder and not to the actual owner, you won't have a title to offer your dealership. Your dealership will obtain the vehicle's title once it satisfies your car loan. Dealers in title-holding states may have different signature requirements. You and your co-owner might be asked to return to the dealer to sign your names once it receives the vehicle's lien-free title. Your dealer may also request that you and your co-owner sign a "Power of Attorney" form. This form allows the dealer to sign the vehicle's title on your behalf, eliminating the need for you to return to the dealership at a later date.

Co-Owners Who Are Out of Area

Speak with your dealership to find out its requirements for a co-owner's signature when she is not local. If the co-owner is unable to come to the dealership, your dealer may offer an alternative, such as offering to mail any relevant paperwork. Your co-owner can expect to answer personal information before the dealer mails out the vehicle's title and other paperwork, in order to prove identity. The co-owner may have to sign a "Power of Attorney" form, which is also sent out by mail. Since the form must be notarized, it allows the dealer to easily prove identity and to sign the vehicle's title on the co-owner's behalf.

Other Issues

States and lenders have different signature and title requirements for co-owners who have passed away or are unable to sign. Usually, a "Power of Attorney" form is necessary if the co-owner is not able to sign, such as for military reasons. If the co-owner is deceased, the owner of the estate may sign the title as long as proper paperwork is provided to the dealer. Necessary paperwork depends on state rules. To find out which papers and forms you need in order to transfer ownership, call your state's Motor Vehicle Department.

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How to Calculate a Lease on a New Car

Leasing a car is a confusing process for many buyers. It is, however, possible to calculate the lease payment so that you can understand how much you are actually paying for the car and make an educated decision about whether leasing a car makes good financial sense. To calculate lease payments on a new car, you will need to get some basic information from the car dealer.

Information Needed to Calculate a Lease

You will need to find out from the dealer what the manufacturer's suggested retail price, MSRP, is of the vehicle. This figure is also commonly referred to as the sticker price of the vehicle. In addition, you need to ask the dealer or bank financing the lease for the money factor. The money factor is the interest rate used for the lease payment calculation. The lease term is the duration of the lease expressed in months. Finally, you will need to ask for the residual value of the car expressed as a percent. The residual value is the value of the car at the end of the lease. This value is a predetermined percent that is written into the lease contract at the time of purchase.

Calculate Residual Value in Dollars

Calculate the value of the vehicle at the end of the lease by multiplying the MSRP by the residual value. For example, if the MSRP of the vehicle is $25,000 and the residual value is 55 percent the residual value expressed in dollars is $25,000 x .55 = $13,750.

Calculate Depreciation

Take the actual purchase price of the vehicle, assuming it is less than the MSRP, and subtract the residual value in dollars from this amount. Continuing the same example, and assuming an actual purchase price of $23,000, subtract $23,000 from $13,750 = $9,250. This figure represents the depreciation of the vehicle during the term of the lease.

Monthly Depreciation Payment

Divide the depreciation by the lease terms in months. Continuing the same example and assuming a 36 month lease, divide $9,250 by 36 = $256.94. This figure represents your monthly depreciation payment.

Monthly Payment Calculation

Take the actual purchase price of the vehicle, $23,000, and add the residual value in dollars, $13,750. This yields a total figure of $36,750 in our example. Multiply this figure by the money factor. Let's assume a money factor of .0033. This yields the money factor payment of $121.28. Add this figure to the monthly depreciation payment of $256.94 in this example, this results in a total lease payment of $378.22.

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How to Sell a Car in North Carolina

If you live in North Carolina and you want to sell your car, there are several ways that you can go about it. You can sell the car to a dealer or a used car lot, you can trade it in while buying another car, or you can try selling it yourself. Selling the car to a dealer or trading it in is the quickest way to go, and the easiest, but that may result in your getting less for the car than it is worth. Selling the car on your own could be time-consuming. If you are in a hurry, selling the car yourself is probably not the way to go, but if you have the time, that kind of sale probably will yield a higher price for your car.

Instructions

1

Take your car to a dealer, such as CarMax or a small used car dealer that buys cars outright. The dealer will inspect your car to make sure it meets certain standards and doesn't have any mechanical problems. If the car passes inspection, the dealer will make you an offer. If you take the deal, the dealer will handle all of the paperwork. If you owe money on the car, that amount will be deducted from your payout and sent directly to the lender.

2

Trade in your car while buying a new car. The dealership where you buy the car will be happy to take the old one off your hands. Research the value of your car in Kelly Blue Book to ensure that you are getting a fair price. When negotiating with car dealers, look at the trade-in value--not the retail value. The retail value is the price for which the dealer will sell the car bought from you.

3

Sell the car on your own. Advertise online, in local trade papers or in classified ads. Give a short accurate description of the vehicle along with the price and condition. Keep your car clean on the off-chance that someone wants to see it. Selling the car on your own may be the easiest course if you do not owe anything on the vehicle and have the title in hand. For print advertising in North Carolina, try your local newspaper or a regional paper such as the Charlotte Observer or a want ads-only paper like the IWANA. For online advertising, try Sellmycar.com or Oldcaronline.com, which used to be Old Car Trader.

4

If you sell the car on your own, go to the bank with the buyer to make sure that the payment will clear.

5

Go with the buyer to the tax office to transfer the title and ensure that all future property tax on the vehicle is in the new owner's name. If you don't own the car yet, you will need to call the lender while the buyer is with you. Give instructions that the title on the vehicle is to be changed to the new owner's name and mailed to the new owner. Inform the lender that payment is on its way.

6

Fill out the section on the title transfer papers that pertains to liens if the sale of the car won't cover the loan payoff. This will help transfer loan obligations to the new owner. Contact the lien holder first to ensure this is all right and give the lien holder any information required.

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How to Buy a Car From a Deceased Person's Estate

Buying a car from a deceased person's estate is not much different for the purchaser than buying any used car. Most of the work falls to the estate's executor to ensure that the transfer is legal. In states such as North Dakota, you can be liable for sales taxes on vehicles you purchase from an estate. Your local tax assessor's office can tell you if you must pay sales tax on the purchase in your state.

Inspect the Car

A car can develop mechanical issues if it does not run for a period of time. Not only should you inspect the car but also request permission to have a mechanic inspect the car. While you can see surface damages, unless you have experience repairing and maintaining vehicles, you may not recognize internal problems that the car may have. If you or the mechanic find problems, negotiate with the executor on the price you agree to pay.

Confirm the Legality of the Sale

If the probate court is allowing the sale of the car before it clears an estate, the executor will have papers proving his right to sell the vehicle. Ask to see proof of the seller's authority to sell the car. Only the executor or named administrator has the authorization to sell items from an estate. The seller should have an order from the probate court, a death certificate and personal identification. Confirm with the probate court that the executor has court approval to sell the estate's assets and keep a copy of the death certificate for titling the car.

Compare the Title with the Other Paperwork

You must confirm that the vehicle belongs to the decedent. Match the vehicle identification number on the car to the number listed on the title and compare the name and address on the title to the information on the death certificate and other papers. If nothing matches, consult an attorney or the police before proceeding with the purchase.

Transfer the Title

To make the car legally yours, give the executor the money for the car and take the title to your local Department of Motor Vehicles or local tax assessor's office. The fee to transfer a title varies from location to location. For example, in Texas the fee ranges from $28 to $33 depending on the county, at the time of publication. You may also have to pay a service fee for the transfer. Remember to insure the car in your name according to the laws in your state.

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