Tips for Purchasing Used Vehicles

If you buy a used vehicle that has been well cared for, has low mileage and is less than three years old, you will pay thousands of dollars less than if you bought new, and get a vehicle that is nearly as good. Keep your wits about you when buying a used vehicle; be willing to walk away if the price isn't right, and you will eventually find what you want.

Inspect the Title

Take a good long look at the title for the vehicle before you buy it. If there is anything strange about it, have it verified by the Department of Motor Vehicles. The likelihood that the title has been tampered with is small, but it's better to be overly cautious than to get burned with an illegal vehicle. If the seller says he doesn't have a title, or says he will send it to you later, walk away quickly.

Test Drive

You are buying a vehicle to use, so use it before you buy it. Any reputable seller will let you take the vehicle out for at least a couple of hours. Drive it at high speed on the highway, in traffic through town, on rough roads and on smooth roads. Park it in tight spots and take it around sharp corners. Try to fit everything that you might do with the vehicle into the test drive, so you can determine how it behaves in different conditions. The test drive is the most important step in the process of buying a used vehicle.

Buy What You Need

Be honest with yourself about how much car you really need and you can save a lot of money. Every city has a large number of people driving around in full-size 4x4 pickup trucks that have never seen a log or a bale of hay. A sensible car buyer buys a truck when he needs a truck, and a car when he needs a car. By buying a car that fulfills your needs without being larger than it has to be, you will not only save money on the selling price, but also on fuel and maintenance costs.

Haggle

Don't be shy about offering less if you feel that the price of the car you want is too high. Most sellers expect buyers to haggle about the price and set their price accordingly. If the seller refuses to come down on the price, it's very easy to walk away. There are many cars in the world and you can certainly find one that isn't overpriced. On the other hand, if you feel the car is underpriced, buy it and be happy.

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What Is the Legal Way to Repo a Car in Montana?

When you take out a loan for a vehicle, you agree to pay the loan back in exchange for the use of the car during the loan period. If you fall behind on your payments, your lender may repossess the vehicle. In Montana, lenders may repossess vehicles either with or without a court order as long as they follow proper procedures.

Peaceful Repossession

If a debtor defaults on the obligation to pay back a vehicle loan, the lender may repossess the vehicle without a court order if he can do so peacefully. Peaceful repossession requires the cooperation of the debtor. The repossessor may not take the vehicle without the debtor's consent or while the debtor is not present. The repossessor also may not break into a locked garage or other area to repossess the vehicle.

Court Order

If the debtor refuses to consent to repossession, the repossessor must get a court order. In this case, the repossessor sues the debtor for the amount of the debt. If the judge agrees that the debt is valid, the repossessor can ask the court to order repossession. The debtor must turn the vehicle over to the lender or allow the lender to repossess it after a court orders the repossession.

Right to Redeem

If the vehicle is repossessed, the debtor has the right to redeem it prior to sale. The debtor may redeem the vehicle by paying the loan in full plus the cost of towing and storing the vehicle. In Montana, the debtor has 10 days to redeem the vehicle after it is repossessed. After the tenth day, the lender has the right to re-sell the vehicle to cover its losses.

Resale

The lender must provide the debtor with written notice of the intention to resell the vehicle. Once the vehicle has been sold, the lender must apply proceeds from the sale to the debtor's outstanding loan. If the sale does not cover the entire balance owed, the debtor must pay the difference. However, if the debtor has paid more than one third of the purchase price and voluntarily gave up the vehicle (e.g. without the repossessor going to court), she cannot be held liable for this amount.

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Why Are Older Cars Hard to Finance?

When you apply for any type of secured loan, your lender has the right to take ownership of the collateral if you default on the loan. The more valuable the collateral, the less risk the lender assumes. The lender has a better chance of recouping its money if it seizes valuable collateral rather than collateral with minimal worth. Because cars lose value over time, older cars are generally harder to finance.

Depreciating Value

Most vehicles have some kind of warranty that protects both the car owner and the lender against financial loss stemming from mechanical problems that may emerge with the car. Warranties often expire after three or four years; thereafter car owners must pay for repairs out of their own pocket. High maintenance costs sometimes leave car owners with insufficient funds to cover their loan payments. Therefore, this exposes the lender to greater level of risk. Additionally, if the lender stretches out a loan term over a long period of time, the borrower's payments may not pay down the car fast enough to ensure the loan balance does not exceed the vehicle's falling value. This means the lender may not recoup its losses if it has to repossess an old car with a long loan term.

Loan Term

Due to falling values, most lenders only finance cars that are a certain number of years old. If you buy a brand new car, you can normally finance it over five or six years. Lenders typically reduce the maximum loan term on a year-for-year basis by taking into account the age of the car. Therefore, if your lender finances cars up to six-years-old, then if you buy a four-year-old car, your loan term cannot exceed two years. This means many people are unable to obtain financing from major lenders to purchase older used vehicles.

Payment

If you stretch out your car payments over a five- or six-year period, your monthly payments are much smaller than if you paid off the same loan amount within just two years. If you buy a four-year-old luxury car, you must contend with very high monthly payments. Your lender examines your income level and your current debt obligations to determine whether you can afford such a payment. Consequently, many people who are not high earners cannot qualify for short-term loans on used cars. It usually works out cheaper to buy a brand-new but more basic type of car.

Exceptions

While cars generally lose value over time, some cars actually grow in value. Vintage cars and special edition models often become collector's items. These cars have high maintenance costs and are expensive to run but some continue to grow in value over the decades. Lenders are more willing to finance vintage cars because, in the event the borrower defaults on the loan, the lender has a very good chance of recouping its losses by selling the vintage car to a collector.

Some lenders do offer loans on older non-vintage vehicles but charge very high interest rates which make these loans very expensive.

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True Market Value of a Used Car

Whether you're planning to buy or sell a used car in the near future, you should understand the concepts and methods of determining vehicle market values. Knowing the true value of a vehicle puts you in a position to get the best possible deal as a buyer and to set a realistic starting price as a seller.

What Is True Market Value?

Before you start exploring the value of a used car, it's important to fully understand market value. A market value of any asset is just an estimate. True market value is what a buyer would pay for the item under normal conditions. Unless you have one or more buyers before you with offers, you can't be entirely sure of the true market value of the property. However, you can estimate the market value in other ways.

Kelley Blue Book

One of the most trusted resources that car buyers, sellers and dealers use to estimate the market value of a used car is the Kelley Blue Book. The published values are based on the opinions of experts and car industry information. This resource use to publish as an actual book for dealers but now any interested party can look up blue book values online to estimate the true market value of a used car.

Car Condition

One of the most important details that goes into determining the true market value of a car is the condition of the vehicle. Kelley Blue Book rates used cars on a scale from poor to excellent. A poor condition car has severe problems while a car in excellent condition looks and works like new. In between the two extremes is "good" (minor defects) and "fair" (some problems) condition vehicles. The true market value of the car will vary depending on the car condition.

Private Value vs. Dealer Value

If you're trying to sell your car, keep in mind that the market value of a car varies depending on the type of buyer. If you try to sell the car to a dealership (or do a trade-in for another car) the amount the dealer quotes might be less than what a private party might be willing to pay. For this reason, as a seller you should try to sell the car on the private market first to see what offers you get before getting an estimate for a trade-in from your local dealer.

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What Is a Co-Sign Car Loan in California?

Banks in California may require a co-signer for potential car buyers who have credit history blights or a lack of credit history. A co-signed loan has two signatures on it, one for the buyer and one from another person who won't use the vehicle. Before you enter into a co-signed loan, learn a little more about how the contract will affect both parties.

Defining a Co-Signer

California law defines a co-signer as someone who signs the loan or lease for a motor vehicle but does not take possession of it. In other words, they take the responsibility for the loan, but do not benefit from using the vehicle in question. The co-signer will be held liable for the payments if the car's owner does not repay the loan.

When Co-Signers Are Needed

California drivers who need a vehicle but cannot get a car loan because of credit problems or little credit history can ask someone they know, usually a close friend or family member, to sign with them for the car loan. The bank or lender then looks at both individuals' credit ratings when making the determination about the loan approval. If the co-signer has a strong credit score, the likelihood of getting approval for the loan is higher. This scenario often occurs when a parent co-signs for a loan on behalf of their teenage driver.

Benefits of Co-Signed Loans

The main benefit of a co-signed loan in California is for the car's owner. By using a co-signer, the owner is able to purchase a car using a car loan even when his or her credit is too poor to warrant such action. There is not any benefit to the co-signer except the potential satisfaction of helping a friend or relative in need.

Dangers of Co-Signed Loans

Co-signing for a loan is a financial risk. The Federal Trade Commission warns co-signers that they are taking a risk that lenders were unwilling to take. There are two strong dangers for the co-signer in a California co-signed loan. The first is that the car's actual owner will default on the loan payments. If this occurs, the co-signer is held responsible for the repayment. Yet, the co-signer may not be aware that the loan is not being paid, and eventually this could cause credit problems. A second danger is in the way the state interprets ownership and liability in crashes. In California, a co-signer is viewed as a liable party if someone is injured due to a collision involving that vehicle.

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Reasons to Trade in a Car

Unless you must immediately replace your vehicle following a devastating accident or a major mechanical breakdown, the time is going to come when you'll need to make the decision to bid your trusty -- or not-so-trusty -- car goodbye, trade it in and get a new ride. Determining when it's time to trade up can be difficult sometimes, although many vehicle owners have common reasons for trading in their car for something better.

Fuel Efficiency

Gas prices might have risen dramatically since you purchased your SUV, and paying $120 each time you fill your tank may no longer be an option. Before you trade in a gas guzzler for a fuel-efficient compact, look past the immediate savings in gas prices. Sure, you'll be saving 60 percent on fuel costs each month, but how long will it take for those savings to recoup potentially higher car payments, insurance and licensing fees? Calculate the cost of your new vehicle against the savings at the pump to determine if this is a sound decision to trade your car in.

Repair Costs

Owning a car you've paid for in full is great, but if frequent trips to the garage start chipping away at your savings, it may be time to consider trading up for something more reliable. Although it's almost always cheaper to repair an old car than buy a new one, frequent breakdowns and the hassles associated with car problems may quickly tip the balance in favor of trading a car in. If the cost of a repair exceeds the value of the vehicle or a year's worth of payments on a new one, you're best served trading the clunker in.

Managing Depreciation

All vehicles are a depreciating asset, so it's unlikely you'll sell yours for the same amount you purchased it for, particularly if you bought it new. Depending upon the type of vehicle you drive, its value may hold relatively stable for several years, then steeply begin to decline after it reaches the five- or six-year mark. Your trade in will be worth much more if you time your new car purchase just before your car's value starts plummeting quickly.

Lifestyle Changes

Sometimes the decision to trade in a car has nothing to do with financial matters, but changes in your lifestyle. The two-door coupe you purchased shortly after you got married was great for a while, but it's impractical now that you have a family. That rear-wheel drive sports car was fun when you lived in the Sun Belt, but after moving, you discovered it's a nightmare on Colorado's snowy roads. Holding onto a car because it makes good money sense is only an option if holding onto the car itself makes sense.

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Will My Car Be Repossessed After 2 Months?

Your purchase contract specifies when and why your vehicle can be repossessed. In most cases, the bank can repossess the car as soon as you miss a payment, although most banks typically do not act that quickly. If your account is past due, immediately call your bank to avoid repossession. Repossession is reported to the credit bureaus and damages your credit.

New Contracts

If you financed through a dealer, you usually have 30 to 45 days until your first payment is due. If for some reason you did not get your loan information or a payment booklet from your lender, call your dealer to obtain the lender information. Check your lending contract if you are unsure who financed your loan; the bank's phone number and address is listed on the front of the contract. Call your bank to pay the amount past due.

Non-Payment

If you have already missed two car payments, your bank will likely start the repossession process soon, if it hasn't already. Your contract specifically states your amount due and due dates, which you agreed to when you signed your loan contract. Call your bank right away to discuss your options and avoid repossession. If you are experiencing financial hardship, your bank may allow you to make a partial payment or offer other payment assistance.

Repossession Process

Your car can be repossessed from your home, work or even a parking lot or gas station. Once the vehicle is repossessed, your lender may offer you an opportunity to pay your past due amount, late charges and repossession fees to get it back. If you do not pay, the car is sold privately or at auction. If your loan balance exceeds the sales price, you must pay the outstanding amount or the bank can sue you and eventually garnish your wages. If you owe less than the vehicle's sales price, the bank will issue you check for the excess amount.

Other Options

Call your lender to discuss payment issues. Because you probably owe more than your vehicle's value, the bank would better benefit from working out a payment plan with you instead of repossessing the car. You may be able to defer your payments, meaning you can skip one or several payments. This can buy you time until your finances are back in order. Depending on your payment history, your bank can also extend your term to lower your payment.

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