Smart Car Care

Car loans are certainly less costly than home mortgages, student loans, or other kinds of loans. So why do so many people end up defaulting and losing their cars? Find out these hidden dangers:
Biggest Hidden Car Loan Danger: The Inherent Money Pit

Unlike home mortgages, student loans or other big-ticket loans, car loans are inherently money pits. A house can build equity; higher education can increase earning potential; even jewelry can sometimes be re-sold for as much as was paid for it. If you borrow to buy one of those things, you may eventually get a return on investment. But every single car loses significant value and keeps losing it as time goes by.

Solution: spend as little on your car as possible.

Of course, in order to spend as little as possible over the life of the vehicle, you need to get a well-made, fuel-efficient car, rather than the one with the lowest price on the windshield.

But a pickup truck, SUV, sports car, or “luxury” model is a guaranteed money-loser. Dont worry about what other people will think. Think about it: when was the last time you saw an expensive automobile and thought, “I really like and respect whoever owns that!”

The best buy? Many economists actually recommend buying a used car that’s a year or two old. That way you can actually benefit from the fact that cars only drop in value. Even a car thats just six months old may offer you a substantial savings. Just have it inspected thoroughly so you don’t lose what you’ve saved on maintenance payments.
Hidden Car Loans Danger: Dangerously High Monthly Payments

Unfortunately, most people never figure out the total cost before signing on the dotted line. They end up staying up late at night trying to figure out how to make ends meet. They live in smaller houses. They skip going out at night. They dont go on vacation.

All that sacrifice to have a brand-new SUV in the driveway!

Take a hard look at your finances, and figure out how much you can pay total each month for your car. Be sure to take into account insurance, tax, maintenance, and fuel. Usually, when people actually do calculate the total monthly cost of the car theyre considering buying, theyre amazed by how high it is.
How Much Car Debt Can You Afford?

1) Make a list of your average monthly non-car expenses, and subtract them from your earnings.

your monthly after-income-tax income

any other taxes

housing (including any fees and property taxes, and utilities)

food

health insurance or HMO

life insurance

debt payments

401 (k), IRA, or other long-term savings

short-term savings

telephone, cellular phone, cable, internet, etc.

entertainment and fun stuff (be honest!)

cost of yearly vacation(s) divided by 12

other expenses

what you can spend on a car

2) Subtract your monthly car-related expenses from the amount you have left over from your other expenses.

What you can spend on a car (from above)

Amount youre spending per month on gas (raise or lower this figure depending on whether you are getting a car with higher or lower gas mileage).
Monthly maintenance (remember: your new car wont stay new long, so maintenance will be an issue).

Monthly insurance (remember that for a new car, your insurance premiums may go up).

Tax.

Maximum monthly loan payment.

Now plug the number above into a vehicle loan rate calculator to figure out big of a car loan, and how much interest you can afford.
Final Hidden Auto Loan Danger: Unnecessarily High Rates

If you simply take the first loan the dealer offers you, you are probably paying too much. Do some comparison shopping on the internet, and bring a list of the best loans with you when you negotiate loan terms with the dealer.

Dont let the dealer cheat you by shifting the cost from the car loan to the car price to the deal on your trade-in. Make sure you get a good deal overall.

Congratulations! You now are far better prepared to stay out of an auto loan money pit than the vast majority of car buyers.

Most car buyers spend hours researching the makes and models of car before deciding which to buy. Then four out of ten rush out to the showroom and sign up for the car within 30 minutes of stepping inside.

But will their painstaking research extend to sourcing the cheapest finance package? Probably not. Whilst around 50% of new cars bought privately are purchased on finance, nearly 20% sign up in the showroom for the finance deal offered by the manufacturer. Unfortunately that could turn out to be a costly decision. With typical manufacturers finance costing 13.7% per year over a 3 year and including a 10% deposit, they could be throwing some 1,800 down the drain.

Take someone buying a new Renault Megane Sport Saloon Privilege 1.6 and let’s assume that it costs 16,000 on the road. Including 3 years interest that means the full cost will be 17,384. However, there is a much cheaper option. With a good credit history you could get a personal loan at only 5.5% and end up paying just 15,631 that’s a full saving of 1,753. This goes to prove the old adage that it pays to shop around. Rushing to accept the dealers finance package can hit your pocket hard it’s effectively giving back the discount we hope you negotiated!

OK, I can hear talking about the special finance offers that manufacturers are forever advertising. Yes, there are some really good deals – but always look closely. Some deals only relate to specific models with a set specification, often the cars that the manufacturers are having trouble shifting. A beware some deals have a sting in their tail. Take Volkswagens’ current offer on the Polo E2. Their deal is advertised at 5.8% with a monthly repayment of 99 over 35 months sounds a great deal but look more closely and you’ll find there’s a final balloon payment of 3,750 or alternatively you can trade in your E2 for another Volkswagen.

The car manufacturers use these deals to promote brand loyalty and encourage another purchase in 3 years time. They know that most cars will be traded in after 3 years rather than pay the large balloon payment.

Of course, personal loans and manufacturer’s finance are not the only way you could finance your car.

The traditional way to pay for your car is through hire purchase. With HP you pay a deposit, usually of at least 10%, or trade in your existing car for at least the same value, and then use HP for the balance of the price. The loan is then effectively secured on your car. So in practice, your car still belongs to the HP company until you have made your last monthly payment.

Then if you want to sell your car before you’ve completed the HP agreement, there will almost always be an early redemption penalty often up to three months interest. The HP company will also register its financial interest in your car with HPI the finance tracking agency. This effectively means that you will be unable to sell your car until you have paid off the HP loan.

Another alternative is Personal Contract Purchase, PCP for short, and in recent years PCP has become very popular. Here you also agree the mileage you expect your car to clock up each year. You then pay a deposit and part of the purchase price is deferred until the end of the agreed payback period. Your monthly repayments then repay the balance and the interest. These schemes are highly flexible as you can select the length of the loan and the size of the deposit but you’ll find that interest rates vary considerably between lenders. The current average is about 12.8% – still well above the 5.5% rate for a cheap personal loan.

At the end of the PCP contract you’ll have three options: –

Pay off the deferred balance and keep the car

Trade in the car using the trade in value to help pay off the deferred sum and hopefully leaving a balance towards a new car

Hand in the car and walk away with nothing more to pay.

This last option is always subject to your cars’ condition reflecting normal wear and tear and its mileage is in line with the annual mileage you agreed when you purchased it. If the recorded mileage exceeds the forecast mileage, then you’ll have an excess mileage charge to pay. The cost per excess mile will always be specified in the PCP agreement.

One of the big advantages of PCP is that the guaranteed buy back option effectively protects customers against excessive depreciation of their car.

As you would expect, car dealers take a commission for selling PCP contracts and to encourage you, you may find they’ll agree a bigger discount on your car if you take their PCP deal. If your lucky, they may even throw in a low cost servicing package or low cost insurance. But take care. You’ll need to do some homework to ensure that these extra goodies are truly worth the extra interest charged on the PCP contract.

You feel tempted when you see your dream car displaying in the showroom, but your frail economical position becomes an obstacle for you. You unwontedly give up your wish and compromise with your financial circumstances. However, you dream can become a reality with the help of car loans.

People who cannot afford cars directly from their pocket are procuring for car loans. You can go either for a new car or for the used one. Car has become a basic need in life and you can use for any personal as well as commercial purpose, but it is equally true buying car is a white elephant for the common people as it involves big investment. Thus, taking out car loans may be an intelligent decision to enjoy the pleasure of a car with your family.

You can opt for car loans in two different ways they are, secured and unsecured car loans. Secured car loan is secured against collateral and thus it is ideal for those who possess a valuable property such as homeowners. Presence of collateral makes terms and conditions flexible for you. You enjoy low interest rate and long period of repayment. The unpleasant side of this loan is losing the property if you become a defaulter.

On the other hand, unsecured car loan is designed for those who do not have a property. It is difficult to obtain, as lender does not have any security thus he is particular about your credit record and monthly income. He charges high interest rate with heavy monthly instalments. You can research the financial market on the Internet and apply online for direct responses from the lenders.

Cars loans do not require any preface; they are widely popular in the financial market and especially among those who cannot afford cars directly from their own. Cars are the easiest way to commute from one destination to another but not every one is capable enough to purchase a car. Hence, car loans may be a good alternative for you when you urgently require car for your various household usages.

Car loans may be secured or unsecured; you can opt for any one of these depending upon your financial capabilities and circumstances. Secured car loan suits those people who possess a property and wish to offer it as collateral. Presence of property minimizes the risk of lender and he is comfortable to offer low interest rate. You get all the benefits in secured car loan such as long period of repayment, small and affordable monthly instalments and flexible terms and conditions. However, the only thing you have to take care of is to make regular monthly instalments to avoid repossession of property in case you fail to repay the amount.

While unsecured car loan does not have any risk of losing your property because it requires no collateral from the borrower. However, you are burdened with heavy monthly charges with short repayment time and heavy interest rate.

However, buying a car is a big time investment hence, before you shop around for your dream vehicle it is for your benefit if you take into consideration your budget and other financial issues. A fierce competition among lenders may help you get the best car loan deal. You can explore the market on the Internet and approach lenders directly online.

Its too bad many people dont know about how to get the best auto loans. Businesses make a lot of money on what consumers dont know. These days no one has enough money that they can afford to get locked into a bad loan. In this article I hope to be able to help you pick the right loan for you.

Just going to a car lot and asking them to put together your loan for you is not the best way to do this. Lets start with that right away. Their job is to sell you a car and whatever loan they can get you that will achieve their purpose is the one they will try to get you to take. They want you to drive out with the car today.

You should negotiate your car loan before you make the actual deal to buy the car. Many people think these two things must occur simultaneously. Wrong. There are a lot of things you must decide before buying a car. One of those is how you are going to finance it, but lets explore all of things you will need to decide first.

Are you sure you know how much you can afford to pay for your new or used car? When you arrive at that figure, remember, you cannot spend all of what you can afford on the car payment. What I mean is this; say you can pay only $400 per month for your new or used car. That is your budget. How much of that goes to auto insurance? Subtract the cost of insuring your car. How much do you have left?

Now think about the interest on your car loan. How much of that will you be paying. You can estimate that based on the amount of car payment you are aiming at. Now how much is left of the original $400 per month you allotted for your new car?

If your budget for a new or used car was $400 per month, you really cant agree to payments of more than about $250 per month. The other charges and incidentals will bring you back up near the $400 mark you started with.

Now, if you are looking at new cars, is buying or leasing a better option for you? You will need to read up on both options before deciding what is right for you. Dont let the car salesman decide for you and pressure you into something that isnt what you need or want.

Loan calculators can be a big help. There are many on the internet, so be sure to find a reputable one. You can experiment with several options, and using a calculator will help you understand the whole process a little better.

They will even help you figure out how much you can afford to pay for a car. You may think you can pay more than you really can. This little tool will give you a reality check of sorts so that you do not get into a deal that is over your head.

So many people think they can afford more car than their budget allows and let it get them into credit and debt trouble. Doing your homework ahead of time and having a little discipline to stay within your means will keep you from having these problems.

You can use that tool over and over again, until you are comfortable making the decisions you will need to make when it comes time to negotiate with someone for the purchase of your car.

Remember, when you are the buyer, you are in charge, not the seller. If you have done your homework, you know how much you can afford, what type of loan you want, what terms you need, and all of the other details. Its their job to sell you a car that fits within the parameters you set.

The bottom line is do not buy more car than you can afford. Do not accept a car loan that is going to put you in a financial bind. Dont agree to a car loan just because the salesman tells you its the only one he can get you. Do your homework before you choose the car. Too many people choose the car they want, then go out and try to find a way to afford it. Thats putting the cart before the horse and a sure way to get you into debt trouble.

I hope this helps you open your eyes and prepare for a positive car buying experience. Buying a new car should be fun, just dont let the fun turn into worry down the road. I hope you find this article useful!

I get a lot of questions from people about car financing. And it makes me wish that more people were educated on how owning new cars can be the biggest destroyer to their personal net worth. I dont mind automotive manufacturers earning a lot of profit, and I know of one that earns the majority of their money by financing and leasing cars. It just doesnt have to be your money, all the time.

There is a spectrum of two extremes that you can follow for car ownership. You can hold brand new cars for only a couple years (buying or leasing) or you can hold each vehicle for well over 5 years (and maybe buy them used in the first place). You can already guess which one is financially healthier, but it will help if you know why.

It is my observation that owning a brand new car for less than 4 years is the biggest destroyer of anyones net worth. I have a lesson plan for you if this is your preference of car ownership. Each year, you should be forced to withdraw the cash equivalent of the amount that your car depreciated over the last year. Then you take that wad of cash, and in front of your parents, spouse, kids, and financial planner you feed it all into an industrial paper shredder that turns it to dust. It is just a little helpful tip from me to illustrate what you are doing to yourself.

When billionaire Warren Buffett was young, he refused to replace his old Volkswagen for many years even when he had the money to buy a new one. Why? Because over his lifetime, he knew that having $20,000 invested over decades would grow into millions of dollars in net worth to him.

Car owners also shouldnt hold on to them forever, because there is an inflection point where the longer you hold onto a car, the better it would have been to replace it. How can this be? It occurs when the annual repair costs of the car outpace the drop in value of a newer car. Let me explain: lets say that you are driving your 25-year-old-junker and are paying $4,000 a year in repairs to keep it loping along. Now, if instead you had replaced it with a newer car (maybe still under warranty), and it only dropped $3,000 in value youd be $1,000 ahead, happier with a newer car, and relieved at many fewer trips to the dealership over breakdowns.

It is too foolish for me to even begin addressing the financial damage of leasing a car, or getting an auto loan for more than three years and getting upside down (when you owe more on the car than what it is worth). Just avoid leasing and +4 year loan payment plans because these are the money-makers for the companies on the other side of the transaction.

Taking all this information into account, it is my opinion that the following is the financially optimum car ownership model: buy a car that is about two years old with less than 20,000 miles, and keep it for at least 5 years until the repair costs start exceeding $2,500 a year. As a general guide, this will help you avoid the sharp depreciation in the first two years and give you a car under warranty for a while, and then you bail out when the expenses start getting out of control.

Buying a new car is one of the single biggest purchases most people are likely to make in their life. Other than their home and maybe their education, there is not really much personal expenditure that can compare in size to the purchase of a new car. Therefore it is not surprising that most people cannot afford to pay for a car outright. This is so even if they have a very good income. It is a simple fact of life that to buy a new car, most people will need to use a car loan to do so.

If you are considering taking out a car loan to finance the purchase of a new car, then you should make sure you are completely aware of all the financing options that are available to you so that you get the best deal available. It is highly likely that to car dealer that is selling you the car will have some sort of financing options available to you. This may be in the form of a loan to purchase the car or leasing options that are also available. You should be clear of the vital difference between a loan and a leasing arrangement. With a loan, you are borrowing the money so that you can purchase the car. With a lease, you are only paying for the use of the car, and at the end of the leasing period, you simply return the car and that is the end of the arrangement.

There are some leases that will give you an option to buy the car at the end of the leasing period. If you borrow the entire amount for purchase of the car, it is likely that your monthly repayment amounts on the car loan will be higher than those for a lease, this is because you are paying for the full price of the car and at the end of this time, after you have made all the repayments on the term of the loan, you will be the owner of the car.

There are a number of factors that you should look at when deciding which car loan to opt for. First of all, you should know that you do not have to accept the financing options that the dealer offers you. You can also shop around with other lenders, such as banks, and make sure you get the best deal on offer. Car loans are expensive and you should be willing to look into the various options that are available before settling on any one option.

Car Loan Refinancing – When To Refinance Your Car Loan

Want to save money? Lower your monthly payment? Then refinance your old car loan. Trade in your high interest rate loan for a lower rate, especially if your credit score has improved. You can also lower your payments by extending your loan terms, helping your cash flow.

Trading In High Rates

When rates drop, refinancing makes sense for both mortgage and car loans. Factor in the length of the car loan though when deciding whether to refinance. If you only have a year left on loan payments, then it wont save you money to refinance since you have paid most of the interest up front.

You can also reduce your interest costs by refinancing for a shorter term. Reducing your loan by two years can easily shave over a thousands dollars off your interest charges, even with the same rate. Once again, you need to look at how long you have left on your original car loan to be sure you can save money.

Better Score, Better Rates

If you have improved your credit score since you first secured your car loan, you may find savings in better rates. So even if rates havent dropped for the general market, you may still qualify for better rates.

Besides making regular, on-time payments, you can improve your score by reducing your debt ratio. Your score also improves when none of your accounts are maxed out.

Lower Payment, Longer Term

Reduced rates arent the only reason to refinance. By rolling over to a longer term, you can reduce your monthly payment. Just remember that in the long run, you will be paying more for your car loan. However, when finances are tight, this option can keep you from defaulting on your loan or other bills.

Before jumping into a refinancing deal, be sure to investigate financing companies. Compare their APR, ask for free quotes, and read the fine print. Also check with your original lender to be sure there are no early payment fees. The best refinanced car loans are the ones where you save money. Taking the time to research financing offers will ensure that you find just such a deal.

Don’t settle for the first auto loan quote that crosses your path. There are various methods now-a-days in which individuals can acquire an auto loan. Be sure to compare all the pros and cons of each method to ensure you are getting the best bang for your buck. There are four main ways to acquire an auto loan quote: dealer loans, credit unions, home equity, or with online quotes.

Dealership Auto Loan

Dealership loans are fairly common. In the past, a dealership loan was the only way to finance a vehicle. Times have certainly changed! One thing is certain, dealership loans are convenient. While you sit and fill out papers for the vehicle you will purchase, you might as well fill out papers for a loan to finance that car. Yes, dealership loans are quite simple, however, sometimes they are not in your best interest. Convenience doesn’t come free. Many times, these loans have higher interest rates than if you were to find a loan by yourself.

Credit Unions

Credit unions are a great option for auto financing. They can quote much larger loan amounts for a lower interest rate that an auto dealership. Also, the extra time you will spend with a credit union is not overwhelming. Many times credit unions can approve you for a loan in mere minutes. Although one extra phone call needs to be made, there is not much effort on your end.

Home Equity

A home equity loan is another option for car financing. Using a home equity loan allows you to purchase your vehicle while using your home as collateral. On paper, home equity loans may appear to have a higher interest rate than standard car loans. However, the fact that the interest you will pay is tax deductible may present significant advantages.

Online quote

One of the quickest growing industries online is the financing industry. Now, you can simply go to a credit website and compare quotes and loan terms. There are even websites where banks and lenders will compete for your business. This is beneficial to you because it means lower interest rates and shorter auto loan terms.

The moral of the story is: be sure to check all options before signing an auto loan. There are many different methods to get auto financing quotes. Depending on your situation, each auto loan method can present certain advantages and disadvantages.

Before You Get A Used Car Loan – Read This

Let the Internet be your guide when buying a used car. The information you can find online is valuable and just a few clicks away from your fingertips. You can find out what a used car of any make or model might be worth if you were trading it in, selling it yourself, or buying it from another private owner or car lot.

Before you take out a car loan, go online to see what the used car you want to buy is really worth. Besides the fact that you dont want to pay too much for the automobile, you also dont want to take out a bigger car loan than is necessary.

“Trade-in value” is explained as, “What consumers can expect to receive from a dealer for a trade-in vehicle,” and “private party value” is explained as, “what a buyer can expect to pay when buying a used car from a private party.” But when it comes to “suggested retail value” KBB switches gears and defines it as, “representative of dealers’ asking prices and is the starting point for negotiation between a consumer and a dealer.” – advertisement -

Now, be careful. You have to check more than one source, because the web has many websites that have their own opinion about used cars and about car loans. Depending on the website, the values for some cars can vary by more than a thousand dollars for what seems like the same type of car in the same condition.

Most free websites that say they can help you find out the worth of a used car or that claim to help you get an auto loan, usually have a close relationship with auto dealers and car loan companies that support their website through advertising or other means. That relationship with their supporters can make the information less reliable.

Two popular websites for information about used car values are Kelley Blue Book and Edmunds. They are the most reliable sources Ive found for information about the value of a used car. For information about car loans, go to allaboutcarloans.com after you know how much you will need to borrow for that dream car you just researched.

First, lets determine what the car you want to buy is worth. There are a lot of things that go into a used car’s value, including regional differences, supply and demand and what’s happening in the new car market. Run through the calculator on Edmunds, and see what the result is for the car you want to buy. Then check the same car at Kelley Blue Book. Youll likely see two different values for the automobile you checked.

Why? Each of the two websites have a different means of calculating the value of automobiles. The prices that are calculated at the websites also use different sources for information about used cars. It seems that Edmunds.com uses a little forecasting to determine actual value of a used car, while kbb.com or Kelley Blue Book gives you a suggested retail price as a guide for car dealers.

Newer cars are easier for these websites to compare and youll find less differences in the price comparisons. The older the car is, the more likely they will be different estimates. None of these estimates should be taken as 100% accurate, but using both of these sources will help you define a range.

So what do I do? First remember, no two used cars are alike and no two auto loans are alike.
Also, it should be noted that using the higher estimated value when applying for your auto loan and using the lower estimated value to negotiate the purchase of your vehicle can be a plus. When you go to allaboutcarloans.com make sure you look for topics that will help you in determining the best places to apply for your auto loan and use the higher estimated value when applying.