Managing a Car Loan

Tuesday, July 30, 2013

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

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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.

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.

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.

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.

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.

How to Skip Trace for a Repo

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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

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.

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.

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.

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.

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

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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 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 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.

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.

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.

How to Estimate Car Taxes

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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

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.

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).

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.

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."

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.

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

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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.

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.

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

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.

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.

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.

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.

How to Sell a Financed Car

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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

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.

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.

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.

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.

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.

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.

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.

How to Make a Payment on an Existing Car Loan

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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

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.

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.

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.

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.