What Should I Consider About Buying My First Car?

Your first car is probably not going to be new, and it will probably come with a personality. However, that car will serve you well if you choose it wisely. Your budget will be first priority, especially settling on a realistic budget and sticking to it. After that, several factors should be considered.

Budget and Reliability

Your primary consideration, unless someone else is buying the car for you, is the cost of your vehicle. Your budget must include not just what you'll be giving the dealership, but also elements such as insurance, gas mileage, maintenance and reliability. Instead of buying the first cheap car you find, research the make, model and year. If you know any mechanics, ask their opinion of the car. Gauge how much you'd be paying in gas each month. Make certain the car has good maintenance records; if the owner can't supply them, ask for the VIN and run your own check on Carfax or Autocheck. Don't let the owner or salesperson rush you into a decision; if you miss out on a good car, another will be along soon. It's better to not buy a good car than to spend all your money on a bad car.

Style vs. Practicality and Insurance

While it's normal to desire a sporty car, be even more careful to gauge the real cost when considering one. Sporty little vehicles tend to be higher on insurance, and much higher if you're young. You should also consider what will work best for you and your situation. Two-door cars are nice, but if you're planning to have a baby before selling it, you'll be much better off with a four-door sedan or even a minivan. If you must have the sporty car, consider buying a more sedate vehicle and modifying it. You'll have a significantly cheaper insurance rate.

Safety

Your new car must keep you and your passengers safe. Later-model cars, starting around 2005, have side-impact air bags installed standard, but they are a bit more expensive. Very reliable vehicles are also safer, as they won't stop suddenly and leave you stranded in a bad neighborhood. Larger, heavier vehicles that are not top-heavy are safer, as their frames can take more punishment in an impact, but of course they are not sporty and often not fuel-efficient. You'll need to decide how much safety you are willing or able to give up for the sake of budget and looks.

Financing

First-time car buyers are usually teens and young adults with little or no credit history. As a result, you aren't likely to get a good interest rate, if you can even get approved for a loan. Minimize this problem by coming in with a sizable down payment in addition to the license, tax and registration fees you'll need to pay. If you belong to a credit union, you can get a pre-approved loan at an acceptable interest rate before going to the lot; this has the added advantage of enforcing your budget, and it frees you to look at private-seller cars as well. If all else fails, you may need a co-signer. If you're prepared for all these eventualities before car shopping, you'll be able to purchase your car quickly and with minimal pain.

Sales Technique and Bad Bargains

Car salesmen have studied their customers for years, and invariably know much more about how to convince you to buy the car than they know about the car itself. First-time car buyers are ideal marks, as they have no idea what tricks the sales team may use. For this reason, try to go to a car salesperson you know personally. If you don't know any, take an experienced car buyer with you to prevent you from doing anything foolish. Remember, once the contract is signed, you're obligated to live up to it. Make sure it's the right contract and the right car.

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Can I Take a Car I Co-Signed for Even if the Primary Owner Is Still Paying for It?

When you co-sign for a car loan, you put your own credit on the line by agreeing to guarantee the primary owner's payments. If the primary owner does not make the payments as promised, the lender will require the co-signer to pay off the balance of the car loan plus interest. While several pitfalls come with co-signing a car loan, one key disadvantage is that you have no rights of ownership concerning the car, only an obligation to pay if the primary owner doesn't.

Registration

The car would be registered in the name of the primary owner. The co-signer has no legal right to drive the car or take possession of the car for any reason. Even if the primary owner quit making payments on the car and the bank was threatening repossession, the co-signer is powerless to take the car. Although banks rely on co-signers to make car payments in a worst-case scenario, civil law does not give co-signers any right to take a car from the primary owner under any circumstances.

Credit

Co-signing for a car loan can affect your finances in other ways. The balance of the car loan will appear on the credit reports of both the primary owner and the co-signer. If the primary owner makes late payments on the loan, those late payments are reflected on the co-signer's credit report as well, causing the co-signer's credit score to suffer. Even if the primary borrower makes all payments on time, the co-signer's ability to obtain credit could still be affected. The loan balance for the car will appear on the co-signer's credit report and if the co-signer needs another loan, he may be turned down because he has already borrowed too much money. For this reason, co-signers who are approved for new credit often must pay a higher interest rate.

Parent-Child

There are good reasons why friends and family members agree to co-sign car loans, but co-signing for a person who cannot obtain bank approval based on his own credit history can end up being a big mistake. It could make sense, though, for a parent to co-sign a car loan for a teenage child who lives under the same roof and is covered by the family insurance policy. Parents could turn the car purchase into a learning experience by supervising the car payments and car maintenance. Parents and legal guardians who co-sign for a car under those circumstances are in a better position to take a car even if the primary owner is still paying for it.

Co-ownership

People who choose to help friends and family members purchase a car should consider co-owning rather than co-signing. Co-owners have equal legal rights to the car. While the person who is requesting the financial favor may object to the idea of sharing ownership of the car, that could be a sign he is insensitive to the vulnerable position he is willing to place the co-signer in.

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What Happens if a Car Gets Repossessed and Who Pays for It?

When a lender seizes your vehicle for nonpayment, you might be offered an opportunity to purchase it back. If you don't, the lender resells the car and bills you for the amount due on the loan. Even though you dont own the vehicle any longer, you must still pay any balance due on the loan, as you agreed to do when you signed your original contract.

Repossession Process

After you miss one or more payments, your lender may seize your vehicle by hiring a repossession company to collect the car. After the car is back in the lender's possession, it will send you a letter stating the amount you can pay to retrieve your car, which is usually the total amount past due or the entire cost of the car. You'll also receive notice of the date the lender intends to sell the vehicle. If you don't receive a letter from your lender, call to find out the balance due to retrieve the car and the date the lender plans to sell the car so you may plan accordingly.

Resale and Balance Difference

Borrowers facing repossession often find themselves in a negative equity situation, so selling the car privately for private-sale value isn't usually an option without an out-of-pocket payment. Many lenders resell repossessed vehicles at auction, which yields wholesale value, the lowest value for a car. After the sale, the lender will send you a letter asking for the amount due on your loan, which is the total of the loan payoff amount, repossession fees and reconditioning fees (charged for cleaning the car for resale) minus the vehicle's selling price.

Responsibility and Payment

The contract you signed at the beginning of your loan states that youll pay your loan balance even if you default on the loan. Read your contract if you're unsure of your responsibility. After the lender sells the vehicle, it reports the balance owed to the credit bureaus in addition to the repossession. The repossession notation remains for seven years from the month you originally defaulted on the loan. If you pay the balance due, the repossession remains on your credit, although your account will read "paid" to other lenders. As time goes by, the impact of the repossession on your credit rating and lending risk decreases.

Nonpayment

Your lender can sue you for nonpayment. If your lender sues you and wins its case, it can issue a judgment, which also appears on your credit and further damages your credit rating. After issuing a judgment, the lender may garnish your wages. Wage garnishment for loan nonpayment isn't allowed in several states, so check with a lawyer to find out whether the lender can take a portion of your wages. If you still don't pay your loan balance, the repossession remains on your credit as an unpaid and delinquent balance. Borrowing a loan while the repossession exists on your credit might prove difficult.

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How to Make a Payment to Honda Finance Online

Honda Finance is the program designed to help people buy and finance Honda vehicles. Managing your Honda Finance account is made easier through online accounts, where you can make payments online, view your transaction history and statements as well as update your account profile information from your own computer. Making a payment to Honda Finance online only requires the existence of a Honda Finance account.

Instructions

1

Go to "Honda Finance" (See References) and click on "Register for Owner Link" to register for an online account.

2

Input your basic information, such as your name, email address, desired user name and password, and your Honda finance account number, which you can find on your billing statement.

3

Activate your account by clicking on the confirmation link sent to your email address and logging into your new Honda Finance account using the username and password you created upon setup of your account.

4

Click on "Make Payment," and enter the amount you would like to pay; or select "Pay in Full" to pay the full balance of your statement.

5

Input your debit/credit card information to complete your payment.

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What If You Go Over Mileage in a Leased Car?

Car leases are written with a specific amount of miles that are to be driven each year. The lease contract limit is the total amount of miles per year, multiplied by the number of years in the lease. For example, on a 3-year lease at 12,000 miles per year, the mileage limit on the lease is 36,000 miles. If the car is driven more miles before the end of the lease, there will be an over mileage charge.

Excess Mileage Charge

An automobile lease contract will specify the amount of the charges if the car is driven more than the contract miles. The charge will be listed as an amount per mile. Typical excess mileage charges are 15 to 25 cents per mile. If the car is turned in to the leasing company at the end of the term, the lessee or car owner has to pay the amount of any excess miles multiplied by the mileage charge.

Serious Money

The excess mileage charge on a lease can add up to a significant amount of money if the lessee did not control the number of miles driven. If you turn in a car with 50,000 miles on it, but the car lease had a contract limit of 36,000 miles and a 20-cent-per-mile excess mileage charge, it will cost you an additional $2,800. It is possible for someone who leased a car, with a low mileage lease contract and high driven mileage, to pay $5,000 or more to turn in the leased car.

Controlling Excess Mileage Charges

A driver with a leased vehicle must be aware of the mileage limits. The first step is to select a lease with mileage that corresponds with the amount of miles you typically drive in a year. A low mileage lease should not be selected just to get a lower payment. If the driver knows she will drive more miles, it is possible to buy excess miles up front and have them included in the lease contract. Upfront miles cost less than the excess mileage charge and some leasing companies will return the money if the miles aren't used.

Minimizing the Damage

If a leased car has been driven high miles with a significant number of months left on the contract, consideration should be given to trading the car in early. For example, a lease car has reached the mileage limit with 6 months left to go on the lease. The car is being driven 2,500 miles per month; the monthly payment is $400; and the excess mileage charge is 20 cents. If the car is driven to the end of the term, the cost will be $2,400 in lease payments plus $3,000 in mileage charges. The car could be traded in now and the $2,400 in remaining payments due rolled into a new purchase or lease. Getting out of the lease early would save the $3,000 in excess mileage charges.

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Refinancing a Car & Gap Insurance

When a vehicle is totaled in an accident, a car insurance policy only covers its market value. If an owner has a loan on a totaled vehicle, he may end up owing money to the bank if the market value of the car is less than the loan balance. In this case, gap insurance can save him hundreds or thousands of dollars.

Gap Protection

Gap protection covers the difference between the loan balance and the insurance settlement when a vehicle is damaged in an accident and is beyond repair. Not every vehicle needs gap protection. Consumers often obtain financing without putting a large down payment on a vehicle. Vehicles depreciate by as much as 30 percent in the first two years. If a vehicle gets in an accident during that time, most likely its value will be considerably less than the loan balance. In this case, car owners may benefit from gap coverage.

Types of Gap Protection

A consumer may have a choice of gap or gap plus coverage. In the event of a total loss, gap covers the balance due on a loan or a lease after the insurance company makes a payment, less the insurance deductible. Gap plus protection offers the same as a regular gap but also cover the insurance deductible of up to $1,000. Restrictions may apply. A consumer should check the coverage information to ensure the plan covers all types of loss, including accidents, natural disasters and theft.

Refinancing a Loan

Gap coverage doesn't transfer from one loan to another and ends when a loan is paid off. When a consumer refinances, he obtains a new loan in place of an old one. When an old ends, so does gap coverage. When refinancing, he should purchase a new gap policy to replace the old one. He must pay a full charge for the new coverage. However, depending on the provider, he may receive a prorated refund for the old policy. He should check the contract for information on the refund policy.

Purchasing Gap Coverage

Lenders may offer to include the cost of gap protection in the loan when refinancing the vehicle. While this may seem like a good idea, a consumer should consider the long-term cost as he will pay interest on that amount. Lenders, car dealers, insurance agents and online vendors will offer gap policies at different prices. Cash or credit card payment is generally required at the time of purchase.

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How Can I Buy a Repossessed Car From the Bank?

Some people attempt to buy repossessed cars from banks because such vehicles often sell for less than the market value. Banks and credit unions do not like to keep repossessed vehicles on the books for very long because vehicles are depreciating assets. Additionally, financial institutions have to pay taxes and insurance for repossessed vehicles, so most banks and credit unions are eager to sell them quickly.

Instructions

1

Look in your local newspaper for the classified section. Financial institutions often place advertisements for repossessed cars in the auto classifieds section. Take down the details of any vehicles that interest you. Generally, newspaper advertisements for repossessed cars contain minimal information, but you should find at least the year, make and model listed to get you an idea of what's available.

2

Go online to the websites of banks and credit unions in your area. Perform searches for repossessed cars. Some banks do not list cars on the actual websites but provide contact information for people inquiring about inventory. Write down the details of cars listed or call the bank hotline and ask a representative about the repossessed vehicles they have on the books.

3

Contact local car dealerships. Many larger banks contract with car dealerships to sell repossessed cars on an individual basis or at auctions. Ask local car dealers about bank and credit union repossessions and take down the details of any cars that interest you.

4

Go to your local bank or credit union and apply for a vehicle loan. Provide the banker with your two most recent payslips or two years of tax returns if you are self-employed. Tell the banker about the vehicles that interest you. Most banks lend money on cars that are less than seven years old. Banks use the Kelley Blue Book to price vehicles. The banker pulls your credit score to pre-approve you and tell you how much you can borrow.

5

Contact the bank, credit union or dealer holding the repossessed vehicle that interests you. Ask to inspect the vehicle and request a carfax report. The report allows you to learn about the history of the car. If you like the condition of the car, make a bid. You should offer less than the Kelley Blue Book value and provide the seller with a copy of your car loan preapproval letter. Agree upon a price and ask the seller to give you a bill of sale. You take the bill of sale back to your lender and you receive a cashier's check payable to the seller. You exchange the check for the car keys and title.

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