How to Shop for Car Dealers with Programs for Recent Graduates

Graduating students can expect to get discounts, lower interest rates and special rebates from car dealers with programs for recent graduates. Many car dealers expect graduates to be financially responsible and mature. If you are employed and have good credit, you can expect to save some money on the purchase of a new auto. To shop for car dealers with programs for recent graduates, follow the steps below.

Instructions

1

Check with the student resource center of your university for car dealers with programs for recent grads. Colleges usually have information about all kinds of student discounts.

2

Make sure you qualify for discounts from car dealers with programs for recent graduates. Typically you need to have recently graduated from college within the past two years to qualify. Requirements vary from company to company; however, most auto dealerships will give discounts to students who have graduated within two years or who will graduate within a few months.

3

If you qualify for a discount, start researching the type of automobile you want to purchase. You can start on the Internet. For example if you're interested in Audi dealers, Mitsubishi dealers or Toyota dealers, check out their websites and look for car dealers in your area. There are links to some of the more popular car dealers listed in the resource section below.

4

After you have narrowed down a few car models, call the car dealerships in your area and ask if they have incentives for recent graduates.

5

Search auto dealerships by incentives by going to Edmunds.com. Most car dealers have programs for recent graduates.

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6 Reasons to Pay Cash for a Car

Financing a car purchase can allow you to pay a relatively small monthly payment that fits into your budget, while helping to build your credit. Nevertheless, if you have the financial resources, there are several good reasons why you should pay cash for your next car. Before you head out car shopping, understand your financial options and use the one that is best for your situation.

No Payments

The most immediate, and obvious, advantage to paying for a car in cash is that you will not have to carry hundreds of dollars a month in a regular payment. You will save money on your personal budget, and you will free up money that you can save for future needs.

Interest

When you finance a vehicle, the lender charges interest on the loan. Consequently, at the end of the loan the total amount you paid is more than the actual sticker price you agreed to with the dealership. When you pay in cash, you don't pay interest on a financed amount, which translates to a savings of hundreds, or possibly thousands, of dollars.

Upside Down

According to John Rosevear, writing on the Motley Fool website, a car loan becomes "upside down" when the value of the loan exceeds the value of the vehicle. You are still making monthly payments, but it can be almost impossible to refinance an upside down car loan to try and lower your monthly burden. When you pay in cash, you do not have to worry about the value of the vehicle versus the amount left on financing.

Reselling

If you finance your vehicle purchase with a five-year loan, then you are tied to that loan until it is paid off. If you would like to sell your vehicle three years after purchase, you must first satisfy the lien holder, which is the institution that financed the vehicle. When you pay in cash, you get the title to the vehicle with no lien holder on it and you are free to sell the vehicle whenever you want for as much as you want.

Repossession

Defaulting on a car loan is something that can happen to anyone. When you first obtained the loan, your financial situation may have been stable. But, if you lose your job or get hit with unexpected medical bills, then your financial situation could change. When you pay in cash, you own your vehicle outright and you do not have to fear defaulting on the loan or losing your vehicle to repossession.

Fees

Leasing or financing a vehicle involves a schedule of fees. In some cases, those fees are attributed to the lease or the loan and have little to do with the value of the vehicle. For example, if the finance company insists that you have insurance placed on your auto loan because of your bad credit, then that insurance cost increases the amount of the loan without adding to the value of the vehicle. When you pay in cash, you do not pay lease or finance fees and only pay for the price of the vehicle plus administrative costs such as registration and title.

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Basic Budget Ideas

Budgeting for current and future financial needs is a basic principle in money management. Knowing how much money can be allocated to expenses, investments, savings and entertainment can minimize financial stress and offer a blueprint for personal financial success. Establishing a successful budget requires some up-front time and attention, then occasional adjustments as your financial situation changes. Budgets can be created and managed through multiple methods, so select one that meets your personal financial needs and lifestyle.

Yearly Budget

Scope out your financial requirements and anticipated income for the coming year and establish monthly spending brackets. Preparing a basic budget for the year minimizes your planning time and accounts for the once-a-year expenses that may be overlooked when only budgeting on a monthly basis. Include some flexibility in your budget to allow adjustments during the year.

Envelope Method

Designed for people who struggle with overspending, the envelope budget system is a simple way to minimize the reliance on credit while controlling spending. Each paycheck is divided precisely into different budget categories. These category names are placed on physical envelopes and the funds from paychecks are placed into the envelopes according to the budget. In order to maintain strict controls, spending is done in cash from the envelopes. Once the money runs out in each envelope, no further spending is allowed in that budget category.

The 60 Percent Budget

The 60 percent budget limits spending on essential items to 60 percent of income. Essential items consist of food, clothing, shelter, charity, taxes, insurance and household expenses. Ten percent of income goes directly into retirement savings, 10 percent into long-term savings, 10 percent into short-term savings for unpredictable or irregular expenses and 10 percent goes toward entertainment. Since everything is placed into basic categories, this type of budget does not require much planning or oversight to manage.

Budget Planners

Use a planning spreadsheet or software to help establish a budget. These programs can help minimize the task of classifying expenses and allocating funds. Enter all your financial information including income, expenses, investments and savings into the program. After entry, you should be given an overview of your current spending categories and how much you are saving or losing every month. Generally, these programs help you to modify your spending and create a budget based on your entries. This type of budgeting requires recording all spending and income on an ongoing basis for accuracy.

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What Do I Need to Not Have a Cosigner on Car Loan?

Lenders require borrowers to have cosigners if they are not creditworthy on their own. The cosigner offers the lender some security by agreeing to be held responsible for repaying the debt if the primary borrower defaults. To avoid having a cosigner, you will need to meet the lender's standards for creditworthiness.

Credit History

The main factor that lenders consider when evaluating your car loan application is your credit history. If you have consistently made on-time payments over a period of years, the lender can assume that you will handle your car loan responsibly as well. Because you represent a low credit risk, the lender will not require a cosigner. Some of the most important factors in your credit history include your payment history, the amounts you owe, especially on credit cards, and how long you have managed credit.

Large Down Payment

One of the ways you can make up for a mediocre credit history is to have a large down payment saved up. If you can pay for much of the purchase upfront, you will not have to apply for as big of a loan. The lender will be more likely to approve it because you are borrowing less and will have lower, more manageable monthly payments. The fact that you have the discipline to save a down payment will also work in your favor.

Steady Employment

Lenders for auto loans typically ask about your employment history and income on the application. If you have held a job with a good salary for a while, this is an indicator of financial stability and the ability to make payments on a car loan. If you are unemployed, have changed jobs frequently or make very little income, the lender might require a cosigner because you don't appear to be able to make payments on your own.

Tips

If you start preparing at least a year before buying a loan, you should be able to work on all three of the major factors that help you avoid having a cosigner. If you have never managed credit before, get a secured credit card, a retail card or a small personal loan and start making regular monthly payments. Also keep your credit card balance to a small percentage of your limit to improve your credit. Get a good job and save money out of every paycheck for a down payment. Also consider buying a used car instead of a new one so you do not need to borrow as much money. Plus, used cars depreciate more slowly than new ones, making them less of a risk for lenders.

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Laws on Repossession of a Car and Buying Another Outright

When you no longer want to or are unable to make your car payments, your car will eventually be repossessed. However, some people actually stop making payments to save money and use it to buy a vehicle outright after their other vehicle is repossessed. While technically this could work, it could also cause some financial problems for you.

Right to Repossess

After you stop making your car payment, by law the lender has the right to repossess your vehicle. When you sign your car loan, you agree to a clause that allows the lender to repossess the vehicle when you do not meet the terms of the agreement. Once this happens, the lender can take the car and sell it to repay the amount of money that you borrowed to purchase the car on the front end.

Deficiency Balance

While you may try to save up your money and pay for another car outright, this does not necessarily eliminate the money that you owe for the first vehicle. If the lender sells the car for less than what you owed on the loan, this creates a deficiency balance. When this happens, you still owe money to the lender. The lender then has the legal right to come after you for this deficiency balance. If you do not pay the balance, the lender may take legal action against you.

Legal Action

When you have a deficiency balance, it is essentially the same as owing money to a credit card provider or to another lender. Because of this, the lender has the right to sue you in civil court to get a judgment against you. Once a lawsuit has been filed and a judgment given, the lender can then use that judgment to collect the balance from you. One way to collect the balance is to place a lien on your property or to seize it through a levy.

Considerations

Even if you use cash to pay for another vehicle after getting your first one repossessed, this does not necessarily mean that your new vehicle is secure from a levy against you. If the lender of the repossessed car gets a judgment against you and has the right to levy your property, it could levy your new vehicle to pay for the old one. As such, your new car could be seized and sold by the local sheriff to generate enough cash to pay for the deficiency balance that you owe.

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What Does Leasing a Vehicle Mean?

Leasing is a form of financing for assets that decrease in value. If you lease a car, you are arranging to pay for the amount that the car depreciates over the term of the lease. With a lease, you do not own the vehicle. At the end of the lease, you can turn the car in to the bank or leasing company that financed the deal.

Function

A vehicle lease allows a driver to have a lower payment than he would have if he bought the vehicle. If you buy a $30,000 vehicle, you have to finance and pay for the entire $30,000. Over the time period of a lease, you would only pay for the depreciation of the vehicle, which could be as low as $15,000. The lower overall amount translates into a lower payment over an equal length of time. Since the payment is lower, a person can lease a more expensive vehicle than he could afford to buy. A lease is also an attractive option for drivers who like the idea of having a new vehicle every three or four years.

Residual Value

The residual value is the amount that the leasing company or bank estimates that the vehicle will be worth at the end of the lease period. This is an important factor in your monthly payment. If two vehicles both sell for $25,000, and one has a residual value of $15,000 and the other $11,000, you will pay less per month to lease the first one, because you are paying off a lower amount. This is true if all other terms of the lease are the same. You can find the residual value in your leasing documents, and the residual value usually reflects the amount you would pay to buy the vehicle at the end of the lease.

Types

There are two types of leases: closed-end and open-end. At the termination of a closed-end lease, you turn the car in, settle up for any mileage overage, damage and excessive wear and tear, and walk away. If the vehicle's value is lower than the expected residual value stated in the lease documents, you are not responsible for the difference. With an open-end lease, however, you would be responsible for this difference at the end of the term. Most consumer auto leases are closed-end, but check your lease documents carefully.

Time Frame

Automotive lease terms, or the length of time of a car lease, are commonly 24, 36, 48 or 60 months. Sometimes, leases have odd terms, like 30, 39 and 42 months. This can result when dealerships try to get people in during slow sales times to buy new vehicles.

Misconceptions

Some may think that since a lease never mentions an interest rate, it does not have one. Leases do have a form of interest rate called a "money factor." This is a finance charge on the money that the bank or leasing company had to pay to buy the vehicle to lease it to you. Leasing companies show money factors in small decimal numbers. If you multiply the small decimal number by 2,400, however, you will get the equivalent of an annual interest rate for comparison purposes. The money you pay will be close to the interest rate you would pay if you bought the car.

Warning

Leases have mileage allowances, commonly between 12,000 and 15,000 miles per year. If you go over these allowances, there will be a charge at the end of the lease that could be as high as 25 cents per mile. If you need more than the mileage being offered, it is usually less expensive to purchase the mileage at the time that you sign the lease. Also, do preventive maintenance according to the manufacturer's requirements and keep records of the maintenance. You could be charged extra if you do not do this.

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What Value of Vehicle Do Banks Use When Using a Vehicle as Collateral?

In a purchase of a vehicle, the vehicle itself is usually the collateral for the loan to buy it, but using a car as loan collateral is a risky move if you're desperate for fast cash. A bank may charge a high interest rate for the quick infusion of capital and will move to seize your car if you default on the loan. A bank or other financial institution uses a number of methods when determining the value of your vehicle for any loan, including fair market value and minimum appraised value.

Fair Market Value

A bank usually calculates the value of a vehicle used as collateral for a loan at the vehicle's fair market value. This is the price that the majority of other comparable vehicles are selling for on the open market. The bank considers a variety of factors when determining fair market value, including mileage, number of sustained accidents, remaining original parts and special vehicles features. A vehicle with a low fair market value won't be as useful for collateral in a loan situation as a vehicle selling for a high price. The bank generally wants collateral that can cover the cost of a loan if the bank must seize the vehicle due to non-payment of a loan.

Auto Loans

When you purchase a car, the bank or lending institution buys the car for you and agrees to allow you use of the vehicle while you make payments on an auto loan. Failing to make those payments will cause the lender to repossess the vehicle. A bank can, and usually will, repossess a vehicle, regardless of value, at any point during the repayment process if you miss even a couple payments. This move protects the bank's interest and allows the financial institution to recoup as least a portion of the original price of the vehicle.

Auto Liens

A lien is a judgment by a court allowing a creditor to place a security interest in a piece of property you own to guarantee the payment of a debt. The court may grant a creditor a security interest in an automobile you own if the court deems the value of the vehicle sufficient to pay all or a significant portion of the debt. The lien entitles the creditor to a portion of the profits from the sale of your vehicle up to the amount of the debt you owe. This means your creditor could receive all of the proceeds from the sale of your vehicle.

Minimum Liquidation Value

Appraisers employed by banks usually establish a minimum liquidation value when determining the total value of your vehicle used as collateral. The appraisers then issue a certificate of guarantee to the bank, which locks in this minimum amount in the event the bank must sell the vehicle due to your default on your collateral auto loan. The bank may also base the amount of money you receive through your loan on this minimum value as a means of mitigating losses in the event of a default.

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