How to Transfer an Auto Loan

Whether you're selling your car to a stranger or turning it over to a friend, it is possible to transfer your existing car loan to that person along with the vehicle. If the person taking the car decides to arrange for his own financing to pay off your existing loan, the matter is easily solved. On the other hand, you can also request to modify your existing loan with your lender to transfer responsibility for future payments to someone else.

Instructions

1

Discuss transferring the auto loan over to the person who will be taking the vehicle. Review the details of the loan with her. Make sure she understands she will become solely responsible for all future payments. Realize that your name and information will be removed from the loan as if you never existed as the borrower.

2

Obtain a credit score from the person receiving the vehicle. Verify that his creditworthiness is as good as or better than your own. If his credit score is lower than yours, determine if he can put any cash down to add value to the proposal you will make to your lender.

3

Make certain the person also meets the insurance requirements of your loan agreement. Call and ask your lender what the requirements are if you are not certain. Discuss this with the prospective owner and have her correct any insurance coverage shortcomings.

4

Contact your auto loan lender and inform it of your desire to sell your vehicle. Let it know you have a prospective buyer. Supply the lender with the person's information and request that it consider transferring the loan.

5

Make certain the person taking over the loan signs all necessary paperwork completing the transfer once it's approved by the lender. Request a written statement from your lender confirming that your responsibility for the loan has been met and that your name and information have been removed from the financing documents. File these documents somewhere safe.

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Should You Buy a New or Used Car?

The debate over whether it's smarter to buy a new or used car is common. There are both pros and cons of purchasing a used car instead of a new car. In the end, it depends on your personal financial situation and what you truly want out of your next vehicle purchase.

Cost

Used cars are always less expensive than comparable new cars. If you're on a tight budget, then buying a used car might be the best option for you. Some people purchase used cars even if they're not on a tight budget because it brings luxury brand vehicles like Audi, BMW and Mercedes within their desired price range. Without purchasing a used car, they might not have been able to purchase a luxury vehicle.

Depreciation

After you purchase a new car, it will lose about 40 percent of its value after three years, according to MsMoney.com. After three years, its rate of depreciation will begin to slow down. Many people purchase used cars that are older than three years because they don't have to worry about depreciation as much as they would if they purchased a new car.

Maintenance

One advantage of buying a new car is that new cars require less maintenance than used cars. New cars usually don't require maintenance aside from an oil change within the first two years of ownership. Used cars are more likely to break down and can require major repair jobs depending on how many miles they have and how well they were maintained by the previous owner.

Warranty

Companies usually provide at least a three-year warranty on new cars. This means if anything goes wrong with the car within the warranty period, it will be fixed for free. Some higher-priced vehicles even have four-year, 60,000-mile warranties. In addition, manufacturers include warranty coverage for the powertrain of new cars, which is a major plus. Older used cars commonly have powertrain problems, which can be expensive to repair.

Insurance

Used cars are less expensive to insure than new cars, according to "Consumer Reports." Newer cars are the most expensive to insure because their parts are more expensive to replace.

Safety Features

Newer cars tend to have newer safety features that older models might not have, according to "Consumer Reports." If safety is your main concern, consider purchasing a new model.

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Should I Pay Cash for a Car or Finance It?

With the price of a new car running well into the five digits, most buyers will need to take out a loan to buy a car. But if you are in a position to pay cash, you can find a number of advantages by avoiding the financing headaches and high interest rates. Even so, you should consider both the pros and cons of paying cash for your next car.

Deal Negotiation

You may be able to negotiate a better deal with the car salesman if you can buy with cash. This is not always the case; but if you have the cash on hand to buy the car, mention it to the salesperson. A cash sale can be attractive to the dealer. It's a good idea to negotiate the price of the car first, letting the dealer assume that you will be financing. After the price is set, ask the dealer if an additional discount is available for cash purchases.

Interest Rate

If you can get a low-interest rate on a new car loan, it probably makes more sense to finance it than to buy the car for cash. This is particularly true if you can earn a higher interest rate on your savings than what you are paying for the car loan. On the other hand, if the interest rates you find are significantly higher than what you are earning on your savings, you will get a better return on your money by purchasing the car for cash and avoiding those high interest charges.

Emergency Fund

If it takes every last penny of your savings to buy the car for cash, it is probably better to take out a loan and keep that money in the bank. Experts recommend that all workers have an emergency fund containing at least three to six months' worth of living expenses, and raiding your emergency fund to finance the purchase of a new car could leave you without the money you need if you lose your job or face another financial setback.

Less Risk

If you pay cash for your car, you do not have to worry about becoming "upside down" on the loan. That can happen when you owe more on the car than its current value, and it is a significant risk. Since cars depreciate rapidly, the risk of becoming upside down on a car loan is high. That can pose a problem when you go to trade the car in or if the car is totaled in an accident. If you own the car outright, you do not face this financial risk.

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Can I Default on My Auto Loan If the Car Is a Lemon?

No one wants to make car payments on a non-functioning vehicle. If it seems like your new car is always in the shop or a particular problem keeps popping up again and again, you may own a lemon. Although state laws vary, all 50 states provide car buyers some form of recourse if they inadvertently purchase a lemon. Should you find yourself stuck paying for expensive repairs on a car you recently purchased, you may have grounds to get rid of the lemon and get out of your auto loan.

Lemon Laws

Just because a car suffers from frequent repair issues, that doesn't make it a lemon. Each state has different criteria a vehicle must meet before being classified as a lemon. As a general rule, lemon laws apply only to new vehicles.

A true lemon suffers from a considerable defect. Each state classifies these defects differently, but major issues, such as transmission problems or engine trouble, usually constitute a defect significant enough to make the car a lemon. In order for you to have legal recourse, the defect must occur before the car reaches a certain mileage, and you must have attempted to repair the problem.

Your Rights

If your car meets your state's definition of a lemon, you have the right to demand that the manufacturer either replace the vehicle or refund you the purchase price. You must provide thorough documentation that your car suffers from repeated problems that you tried to fix without success.

You must solve the problem through the manufacturer--not the lender that financed your vehicle. Your lender did not sell you the vehicle and is not responsible for its poor condition. Thus, you cannot default on an auto loan simply because your car is a lemon.

Payments

If the manufacturer offers to refund you the price you paid for the vehicle, you can use the refund to pay off your auto loan--eliminating the burden of making monthly payments on a car that doesn't work properly. With your loan paid off, you can then secure another loan to purchase a more reliable vehicle.

Warning

Defaulting on your auto loan carries severe consequences. Not only will your lender repossess your vehicle, it will report the repossession and your missed payments to the credit bureau. This hurts your credit score and makes obtaining a new auto loan difficult, if not impossible. If your lender cannot sell the car for a high enough price to cover your auto loan, it will sue you for the balance. You are responsible for paying your auto loan on time, regardless of whether or not your car is a lemon.

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How to Purchase a Car From an Individual

Purchasing a car from an individual can prove less stressful than buying from a dealership. Dealerships might inflate the price of cars, and some salespeople employ pressure tactics. But before buying a car from a private party or individual, know what to expect.

Instructions

1

Apply for financing; go to your bank or credit union and get pre-approved for an auto loan.

2

Research Kelley Blue Book (kbb.com) once you have a car in mind. Check the retail or market value price of the car. This provides a price point to begin negotiating a price for the vehicle.

3

Ask if you can have a mechanic look at the vehicle. Bring a mechanic with you to test-drive the car. Have the mechanic inspect the car to assess the condition of the vehicle. Exercise caution and think twice about buying the car if the seller doesn't permit an inspection by a mechanic. The car might require serious repairs, which you're required to pay for after making the purchase. Follow your instinct and walk away from suspicious situations.

4

Get the car's vehicle identification number and get a Carfax report to check the vehicle's history.

5

Make an offer and begin negotiating with the buyer.

6

Schedule the loan closing if you are using a bank to finance the purchase. At closing, sign your loan documents and transfer ownership of the car.

7

Take the title to the Department of Motor Vehicles to pay your sales tax and register the vehicle under your name.

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How Does a Voluntary Repo Affect my Credit?

A repossession firm usually comes calling if you stop paying on your car loan. MSN Money writer Liz Pulliam Weston explains that banks and finance companies usually call in repossessors after 60 days, although your contract terms may allow your vehicle to be taken as soon as you default by missing just one payment. You can voluntarily turn in the car rather than waiting for the repossession firm to find you, although your credit is still damaged.

Definition

A repo refers to vehicle repossession, whether it happens involuntarily or voluntarily. The Federal Trade Commission (FTC) website explains that a creditor can repossess the car at any time without prior notice in many states if the car loan payments are delinquent. The repossessor may come on your property, if necessary, although you cannot be threatened or subjected to physical force. A voluntary repossession happens when you make arrangements with the creditor to turn over the car at a mutually agreed upon time.

Credit Effects

Both involuntary and voluntary repossessions have the same effect on your credit, according to the Edmunds automotive website. Other lenders see loss of a vehicle as a sign that you cannot manage bills, especially if you have other late or charged-off accounts. The MyFICO website warns that repossessions fall into the "payment history" part of your FICO credit score. Payment history makes up 35 percent of the total number, so a defaulted auto loan can drop your credit score significantly. Your bank or finance company can sue you for the difference between the loan balance and the amount of money it gets by selling your car, according to the FTC website, and that adds more negative credit report data.

Positive Effects

A voluntary repossession has some positive effects. You have time to get your personal possessions out of the vehicle rather than having it potentially disappear unexpectedly. The FTC notes that you also eliminate repossession costs that the lender would otherwise pass along to you.

Considerations

Sometimes you can legally escape paying the amount you still owe on your loan when your car was repossessed if the lender had it taken involuntary. For example, the FTC explains that you may have grounds to fight if the repossession firm did something illegal or the creditor did not sell the car in a commercially reasonable way or there was an unreasonable delay in suing you. Consider consulting an attorney about whether you may have a case.

Alternative

You can sometimes avoid a car repossession by talking to your lender as soon as you run into financial problems. The Edmunds website explains that creditors sometimes offer solutions, such refinancing or temporary payment deferment, depending on your previous payment history and delinquency reason. You may be able to sell the car and pay off the loan if its value is more than you owe.

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Tips on Leasing a New Car

All but the cheapest new cars cost upwards of $20,000. For this reason, many buyers, choose to lease rather than buy. Leases generally last for a period of two to three years, often with an option to renew. Using a few basic tips, buyers can successfully navigate their lease.

Watch Your Mileage

Most leased vehicles have strict limits on the amount of mileage that a driver is allowed to put on the vehicle. Usually, these limits are set on an annual basis. Any additional miles the driver puts on the car, past the limit, will incur a fee. For example, a driver may be allowed to put 12,000 miles on the car for each year of the lease, but will be charged one dollar for every 20 miles he puts on past that.

Know Your Fees

The price that a dealer advertises for a lease is only part of the story. In addition to monthly payments on the lease, the lessee may be required to additional fees, such as an initial signing fee and a fee that attends the return of the car. In addition, lessees should prepare to put a significant deposit on the car.

Mind The Wear and Tear

While the warranty for a leased vehicle will likely cover major repairs, it won't, in most cases, cover routine wear and tear to the vehicle, nor basic maintenance, such as oil changes and fluid refills. If the car is returned with nicks, dents and scratches, the lessee may be assessed heavy fees to cover the cost of repairs.

Know Your Insurance Costs

Before purchasing or leasing a car, prospective buyers should always have an idea of how much they'll be paying in insurance premiums. This is especially important for leased cars. Car buyers usually are allowed to hold the minimum amount of insurance coverage set by the state, but many car dealerships require people leasing a car to have far more extensive coverage.

Shop Around

Before selecting a lease, make sure you've examined all your provider options. Many prospective lessees are under the misconception that only the dealer can offer a lease on a car. In fact, many financial institutions will offer to extend a lease on a car as well. Once you've selected a make and model, shop around at various dealerships for the best price.

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