Auto Shopping – Young Money http://finance.youngmoney.com Money: Earn it, Invest it, Spend it Thu, 10 Aug 2017 23:17:14 +0000 en-US hourly 1 https://wordpress.org/?v=4.7.5 Driving Down the Cost of Driving http://finance.youngmoney.com/wheels/driving-down-the-cost-of-driving/ http://finance.youngmoney.com/wheels/driving-down-the-cost-of-driving/#comments Tue, 19 Apr 2011 14:00:55 +0000 http://finance.youngmoney.com/?p=10212 GM College DiscountWhether you’re dreaming about cruising around in your first new ride or are already a proud vehicle owner, it’s no secret that mobility can be expensive. But never fear — the GM College Discount Program* is here to help, with insights and tips that can help save you money throughout your ownership experience. Three areas of opportunity include the way you buy, maintain and drive your vehicle.

WHEN IT COMES TO THE PURCHASE PROCESS, YOU’RE IN THE DRIVER’S SEAT.

Do your homework. Take the time to research what’s available in your price range and determine the type of vehicle and features that are right for you. Go for a test-drive. Then compare prices among dealers and let their competition for your business get you the best deal.

Line up your funds. Financing your vehicle through the dealership is certainly one way to go. But you have options: check out online financing companies and your local bank or credit union. You could end up saving a great deal of money.

Make a down payment. Even a modest down payment can save you big dollars over the life of a loan. It will help lower the amount of principal you owe, thereby reducing your monthly payments.

Score a discount. If you’re in college, a graduate program or a recent grad, the GM College Discount Program can save you hundreds ¬— even thousands — on an eligible, new Chevrolet**, Buick or GMC vehicle. Plus, you can combine it with most current GM offers to save even more. It’s the best college discount from any car company. See for yourself at gmcollegediscount.com.

TAKE CARE OF YOUR VEHICLE AND IT WILL TAKE CARE OF YOU.

A properly maintained vehicle will be more fuel-efficient, safer, more dependable, produce fewer emissions, help you avoid costly repairs and retain its value better. If you’re not a do-it-yourselfer, it’s important to find someone you can trust for service. With all the advanced technology found in today’s vehicles, the factory-trained technicians at your dealer are always a good place to start.

Pump it up. Underinflated tires reduce fuel efficiency by up to 5% due to increased rolling resistance. They also wear out faster, which could create a safety hazard for you and others on the road.

Let it breathe. Your engine relies on a constant flow of clean air to operate. Simply replacing a dirty air filter can improve fuel economy by up to 10%.

Keep the spark alive. Whether your engine has four, six, eight or sixteen spark plugs, they can fire as many as three million times every 100 miles or so. Checking and replacing them when worn is a key part of ensuring efficient engine performance.

Go with the flow. Fuel filters keep debris from entering and damaging the high-tech engines in today’s vehicles. These systems often operate at high pressure, so filter replacement is best left to the pros.

DRIVE IT LIKE YOU OWN IT.

Another effective way to save is by paying attention to the way you drive. Here are a few tips to make every trip greener, while leaving a little green in your pocket.

Slow down and save. A small decrease in driving speed can have a big effect on your fuel budget. For example: every 10 mph faster you drive reduces fuel economy by about
4 MPG, regardless of vehicle size.

Lighten your load. Avoid driving around with unnecessary cargo in your vehicle. An extra 100 lbs. can reduce your fuel efficiency by as much as 2%.

Make a list. Your vehicle’s engine runs more efficiently once it has warmed up. By combining errands, you’ll reduce the number of individual trips you have to make, saving time, fuel and money.

Don’t sit idly by. An idling engine burns about a gallon of gasoline every hour. It also produces twice as much exhaust emissions as a car in motion and is much harder on your engine.

The vehicle care and driving tips provided here are intended to help you get the most out of your vehicle ownership experience. Figures quoted are averages based on the findings of a number of independent research agencies. Actual fuel consumption rates will vary according to vehicle type and driving conditions.

*Eligible participants for the GM College Discount include college students (from any two- or four-year school), recent graduates who have graduated no more than two years ago, and current nursing school and graduate students.

** Excludes Chevrolet Volt.

www.gmcollegediscount.com

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Thinking About Buying a Car? Here’s Some Help For Determining Your Insurance Rate http://finance.youngmoney.com/wheels/thinking-about-buying-a-car-heres-some-help-for-determining-your-insurance-rate/ Wed, 30 Mar 2011 11:20:40 +0000 http://finance.youngmoney.com/careers/thinking-about-buying-a-car-heres-some-help-for-determining-your-insurance-rate/ Need help determining what your car insurance rate will be? This should help. During the depths of the recession, the automobile industry suffered mightily as consumers pulled back their spending and cut back on big-ticket purchases. However, as the economic recovery has taken hold, auto sales have surged. In fact, in January of this year Chevrolet, Ford, GM and Honda all posted sales gains in the double digits compared to January 2010.

As consumers return to their old buying ways, auto lending has risen concurrently. Banks that all but discontinued their auto lending programs during the recession are now extending credit to subprime borrowers, illustrating the great strides the industry has made over the past 18 months.

With auto sales and auto lending up, many consumers are either looking to buy or thinking about purchasing a car. However, like any big purchase there are lots of hidden fees that can arise. One question many potential car buyers often have is how much they will have to pay in insurance costs on a car once they decide to buy it.

Insurance rates are affected by myriad variables, including driving history and where a person lives. Though it can often seem like a daunting and complex process to determine the actual price you’ll pay in insurance on your car, Automotive.com has assembled a graphic that can illustrates the different factors that come into play with insurance and the likely costs a person will pay based on the region someone lives, the type of car purchased and other criteria.

For example, the site has broken down all of the potential deciding factors in your insurance rate. According to their insurance experts’ graphical representation, driving record and claim history account for 35 percent of a person’s projected insurance rate; age and marital status make up 25 percent; the type of car is 13 percent; a person’s sex is 5 percent; the location and state of the driver represents 8 percent; the insurer and the policy make up 5 percent; and credit rating is 3 percent of the total.

Also lightly weighted but still indicative of a total insurance rate are insurance deductibles, which make up 4 percent; a person’s occupation figures 2 percent into the equation; and theft protection devices – including parking indoors at night – weighs 1 percent in that decision.

That may seem like a lot of variables because, well it is. Nonetheless, these factors are important deciders in the rate that you’ll pay when you’re cruising around town in your stylish and sporty 1997 Ford Windstar. If you’re thinking about buying a car or looking to switch your insurance, take a look at the graphic and see what your rate could be. Know this, though: The average American pays $1,560 per year on car insurance.

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Porsche Unveils 918 – $845,000 Luxury Hybrid Sports Car http://finance.youngmoney.com/wheels/porsche-unveils-918-845000-luxury-hybrid-sports-car/ http://finance.youngmoney.com/wheels/porsche-unveils-918-845000-luxury-hybrid-sports-car/#comments Tue, 22 Mar 2011 15:43:34 +0000 http://finance.youngmoney.com/careers/porsche-unveils-918-845000-luxury-hybrid-sports-car/ Luxury automaker Porsche is taking advanced orders for its new hybrid offering, the 918. If you’re deciding if and when to replace your car, consider this: Luxury carmaker Porsche has begun taking orders for its 918 hybrid supercar. The beautiful sports car can be yours – if you’re willing to fork over $845,000.

Following the car’s unveiling at the 2010 Geneva Motor Show, Porsche has sought to cash in on the notoriety the car has gotten in the press and from fanboys. According to The Wall Street Journal, the decision by Porsche to begin taking orders brings the luxury automaker one step closer to introducing the car into its production lineup.

The car appeals to fans of sports cars and the eco-conscious, thanks to its sleek design and hybrid engine. Many sports cars models available for purchase are gas guzzlers, but the 918 is the rare exception in the market. Porsche said it will manufacture the car at its Stuttgart Zuffenhausen factory starting September 18, 2013.

If you’re interested in buying the car, you’d best move quickly. Porsche says it will limit the number of models to only 918 – a clever marketing ploy. The car features a 500-horsepower V8 engine, two electric motors with an additional 218 horsepower and hybrid technology that boosts the car’s performance. It is projected to get 78 miles per gallon in the U.S.

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Financing Your New Wheels http://finance.youngmoney.com/wheels/auto_shopping/Financing-new-wheels/ http://finance.youngmoney.com/wheels/auto_shopping/Financing-new-wheels/#comments Mon, 29 Jun 2009 21:00:00 +0000 http://75.145.89.9/?page_id=1671 Car loans and buying and leasing cars

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This article is part of our 52 week journey through Bill’s latest book, The Graduate’s Guide to Life and Money. Each week, a full excerpt from his book will be presented from beginning to end. To get your copy of his book, visit www.TheGraduatesGuide.com.

Now, let’s discuss some of your financing options. Clearly, paying cash is the way to go. If you have enough money sitting around to buy your car without taking out a loan, this is the best method. Not only can you be free and clear of any ongoing monthly payments, but also you may be able to negotiate a better deal. After all, the sale will be much easier to the dealer or the individual selling the car if you can walk up to them with a certain amount of money in a certified banker’s check. They don’t have to wait for financing approval and there is less paper work. You’ll also notice that some car companies advertise the choice between low financing rates and cash back (for instance, 0% financing for 60 months or $3,000 cash back). Essentially, you are saving $3,000 in this example just for already having the cash available.

Assuming you are like most people, you don’t have enough money lying around to buy a car. That means you are going to have to borrow money or lease. Have you decided which to do? The answer depends on how long you will keep your car. Basically, if you are the type to trade in your car for a newer model every three years, perhaps leasing is the way to go. Of course, if you plan to lease, maybe you should go back through this book and read a little closer. Otherwise, it makes more sense to buy your next car. By leasing a new car every three years, you essentially never really own anything. You are simply renting the car for three years, and then renting a new one for three years, etc. You will constantly be paying for a car. You will never get to enjoy that brief period of time after you own the car outright, just before it dies.

Your best option, in this case, would be to buy the car. Car loans usually exist as simple loans. You borrow a certain amount and pay a fixed payment every month, based on the interest rate and the length of the loan (three years, four years, five years, etc.). After the length of the loan (i.e. five years) your loan balance will be paid off and you are finally the proud owner of a car. Of course the warranty is usually over at this point, so be prepared to spend money for repairs.

There are three factors to your car loan that affect your payment; the amount borrowed, the interest rate and the length of the loan. The higher the interest rate, the higher your payment. The more you borrow, the higher your payment. The longer your loan, the lower your payment. Wow, it almost sounds like a low interest, low cost loan for as long as possible is the best deal, but it’s not. You definitely want to get the best price you can for the car and get a loan for the least amount of interest, but you do not want to stretch your car payment for longer than you have to.

Sure, a six-year loan has a much smaller monthly payment than a three-year loan, but you will be paying much more for your car. Here is an example. Assume you bought a $10,000 car with nothing down, so your total loan is $10,000. If the bank offers you two loans, both at 8%, but one loan is for three years and the other is for six years. The 6-year loan will have payments of $175 per month, but you will pay $2,623 in interest. The 3-year loan will have payments of $313 per month, but you will only pay $1,281 in interest. The 6-year loan may have had smaller payments, but the car cost you $1,342 more (you paid double the interest to borrow the money).

Another problem to consider with a long-term car loan is being upside-down on your loan. Upside down means you owe more on your car than it is worth. How does this happen? In Chapter 9, on debt and credit, we will discuss that with most loans, you are paying much more money towards interest in the beginning and very little towards the principal. In the example above, if you would have chosen the 6-year loan, after three full years you would have still owed $5,600. The problem is that your car is probably only worth about 80% of that, or $4,800 since your car depreciates so quickly.

What’s wrong with being upside-down? To begin, it is never a good thing to own something that takes away from your net worth. On top of that, what happens if you want to get rid of your car for some reason (too small, new child, new job, etc.)? If you sell your car, you will have to come up with the difference in order to pay off the loan, otherwise the bank, which holds a lien on your car, will not allow you to transfer the title. If you trade the car in, you will have to apply the remaining loan balance towards your new car. In other words, if you still owe $7,000 and you trade the car in for $5,000, the remaining $2,000 will be added on to the loan of your new car. You purchase a new $18,000 car, but your loan will be for $20,000. Now you will start out by being upside down on your next car!

You can see that this leads to a vicious cycle that never gets any better. Another problem with being upside down on a car is if you total it. If you are in an accident that badly damages your car, and your insurance company figures it is cheaper to pay you what the car is worth than to fix it (see insurance, Chapter 11), you may receive less than what you owe. Now you are stuck paying off a car you no longer even own. That’s about as bad as it gets.

I know it is difficult to maintain the balance between getting a reliable car, making your monthly payment, and paying off your car as soon as possible. Nobody said it was going to be easy. Try to get a loan that will allow you to pay off the car within three years, while still having a little left over to pay for the maintenance costs.  If you are able to do this with your first car, great, but I don’t expect this out of most people until their next one. The longer your loan, the more you will pay. Is that $15,000 car really worth $18,000? You have to be the one to decide. If you find yourself wavering between two cars of different prices, or thinking about extending your loan, please read Chapter 9; maybe that will help sway you in the right direction.

Next week you will learn how to maintain your car to extend its life and save money.

Bill Pratt is a former credit card executive turned student-advocate. He is the author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h and The Graduate’s Guide to Life and Money. Bill speaks at colleges to educate and entertain students about real-life issues in money, leadership, and success. His goal is to help students succeed personally and financially so they can improve the lives of those around them. You can learn more at www.ExtraCreditBook.comor www.TheGraduatesGuide.com.

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I Work, Therefore I Drive http://finance.youngmoney.com/wheels/auto_shopping/I-work-I-drive/ Mon, 22 Jun 2009 21:00:00 +0000 http://75.145.89.9/?page_id=1662  Prepare for your next car purchase before you even walk onto the lot.

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This article is part of our 52 week journey through Bill’s latest book, The Graduate’s Guide to Life and Money. Each week, a full excerpt from his book will be presented from beginning to end. To get your copy of his book, visit www.TheGraduatesGuide.com.

There are several ways to get from one place to another. In college you probably walked, took a bus, or bummed a ride from someone who had a car. Perhaps you even used a bike or roller blades. While you can use those same methods to get to work, you will probably go with something more sophisticated such as a motorized scooter or a Segway. You might just choose the more traditional route and use public transportation or drive a car. No matter what method you choose to get to work, you will probably own a car at some point in your life. For instance, I used public transportation to get to work, but I used my car to get to the train station. I still use the car to go to the grocery store and the movies. For now, we’ll assume you are going to be purchasing a car sometime.

Here we go again. Another one of life’s little ironies. In order to get to your job, you need a car. In order to buy a car, you need a job. Who came up with this system anyway? Sometimes it feels like the whole world has something against those of us who are just starting out. But wait… Just when it seems to get grim, you see that sign at the dealership, “No Credit? No Problem.” Perhaps you’ve received one of those “checks” in the mail. If you haven’t yet, you will. It looks like a check, from a car dealership or a major automaker in the amount of, say, $20,000.

So what is the deal with all of those auto dealerships that say credit is not an issue? Be very careful. What they will do is charge you an extra high interest rate on your loan and sometime additional fees, since you have no credit history. If you are worried about not having enough money for a down payment, you may still be able to go through a bank. Perhaps your parents will cosign. (Warning: I am not endorsing cosigning because way too often a person bites off more than they can chew, or they lose their job, or some other life event takes place and their parents get stuck with the bill). I know you want to be independent, but we all could use a little help. You could always refinance later, and take their name off of the loan. Of course, if you follow our debt elimination plan, you’ll have it paid off in just a couple of years anyway. Talk about making your parents proud.

Okay, so what about that check in the mail? Actually, it is nothing more than a loan you may be qualified for in order to purchase a new car. It is somewhat deceptive. If you assume nothing in life is free, you should be able to avoid any of these “tricksters.”

Prepare for the Sales Person Before You Walk onto the Lot

Once again, you are being called upon to do a little homework. This time you may have a little more fun. You only need to do this one if you are thinking of buying a car. You can begin your search by going on the web. Visit www.edmunds.com or www.kbb.com (Kelley Blue Book). From these web sites you can find out exactly how much the dealer paid for the car (if it is new), or an estimate of what the dealer paid for the car if it is used. You can also determine how much your old car is worth if you are trading it in for a newer one. From there you can figure a good starting point in your negotiation process.

Salespeople make their living by selling things. I have nothing against honest salespeople, but I always keep in mind that it is in their best interest for me to buy from them even when it is not in my best interest. Sometimes the dealer may try to guilt you into purchasing a car after spending time with you or talking about some promotion they are very close to getting. This is not a charity function here. You have come to buy a car; the one that is right for you. Don’t buy anything you do not want.

Another great tactic is where the dealer says they are giving you the best possible deal. Then they “talk to their manager.” After 15 or 20 minutes your salesperson returns and says the manager has allowed another few hundred dollars off, but that is as low as they can go, and that is already eating into your salesperson’s commission. In reality, they were probably talking about golf or something for a few minutes. Either way it doesn’t matter, because you should already have an idea of how much you are willing to spend.

One thing you will notice is the whole process takes a very long time. I don’t know the exact science here, but essentially you are being worn down ever so slowly. For one thing, you will have spent so much time there you might as well make the purchase because you cannot imagine going through this again. Besides, most of your day is gone and who has the time to keep looking for cars when there is so much more you could be doing with your life.

If you do decide to make your purchase, make sure there is a clear understanding of what car you are getting, what features and warranties come with it and at what price. Before you go to the final “signature” room, tell the dealer ahead of time you want to be made aware of any possible extras such as extended warranties and so on because you will not add anything else to the sale when you go to sign the paperwork. Dealers make so much extra profit from those last minute sales. It goes something like this, “By the way, I forgot to mention that we also offer a rust proofing package. We could go ahead and add that on for only $10 per month. You’ll hardly notice it in your payment. What’s $10 a month to protect a $20,000 investment?” First of all, it is not an investment, it’s a purchase, but that’s another issue. Second of all, actually there is only a first. Like I said, you are already worn down at this point and you are more likely to agree to anything.

That’s why you must ask before you sit down for the final signatures. Another way of trying to get you would be, “Okay, everything looks good. You would like to protect your vehicle with our three year extended warranty wouldn’t you?” Again, you want to know about all of this upfront.

Just for fun, here are a few other sales tactics to watch for. The salesperson will use the word authorize instead of signature. “If you would just authorize this right here.” Everyone knows that when you sign something you are making an agreement and you should read everything first. Also, everything is an investment instead of a purchase. “To protect your investment, you should…” Anything that is expected to decrease in value is essentially not an investment. This includes cars and refrigerators.

When you begin to do your paper work, not only do you have to wait for a while, the dealer will seem agitated if you start to take time and think before making a decision. If you are going to spend that much money, I say take all the time you need.

There are several ways to shop for a car. You can take the traditional route, which is to browse a few dealerships until you find something that is almost what you are looking for and is close to the price you are willing to spend. Not only will you spend a lot of time, but you may also find yourself negotiating for a car on the lot before you are really ready. The one real advantage to this method is your ability to test-drive several vehicles.

Another option is to write down specifically what you are looking for, send a fax or email to several different car lots within your driving range, and have them send you a quote. You should specify make, model and year, and what condition you want the car in (if it is used). Also, list any features the car must have such as air-conditioning and power door locks. You may also want to list anything you do not want such as any shade of brown or pink. Inform the dealerships you are interested in purchasing a car, based on the descriptions in your email or fax, and that you are sending your request to several dealerships to find out who has the best offer. Once you receive quotes, you can go to the dealership and test-drive the vehicles. If you find that the car is not really what you are looking for, then walk away. The salesperson will probably try to make you feel bad, but we are talking about your money here!

Thanks to our creative society there are several other options available for buying a car. Costco and Sam’s Club offer car-buying services they claim will save you money. You can go directly to some of the auto manufacturer websites such as GM and Ford and build the exact car you want. From there you can enter your zip code and the dealerships in your area will send a quote to you within a couple of days. Some dealerships are now offering no-haggle pricing where they mark the car with the lowest price they are willing to accept, and you can either pay it or leave it. You can even go to e-bay and bid online for a car!

The one key ingredient, no matter which way you choose to shop for a car, is to know what you want. You should create a list of all the features you absolutely must have, the ones you would really like to have, and the ones you absolutely do not want. You also want to figure out how much you can afford. Remember, you may be paying for this car for a long time. If you start to think, “I can sacrifice a little more to get a slightly more expensive car,” you may be slipping right into the dealer’s hands. It is one thing to give up a few nights out one month for a car, but to do that month after month for five years will make you miserable.

Don’t fall for the, “Well, you’re young and you’ll be getting raises so you’ll make more money soon and the payment won’t be that bad.” Remember; when you take out a loan for a car (or anything for that matter) you are already giving up future income in order to enjoy your purchase today. Don’t start thinking about giving up future pay raises also! If you cannot comfortably afford the payment today (take into account other things you want to do with your money and the maintenance costs on the car), you simply cannot afford the payment.

Next week we will look at the ins and out of financing a car, and answer the age old question “does it make sense to lease a car?”

Bill Pratt is a former credit card executive turned student-advocate. He is the author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h and The Graduate’s Guide to Life and Money. Bill speaks at colleges to educate and entertain students about real-life issues in money, leadership, and success. His goal is to help students succeed personally and financially so they can improve the lives of those around them. You can learn more at www.ExtraCreditBook.com or www.TheGraduatesGuide.com.
 

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Smart tips for buying a used car http://finance.youngmoney.com/wheels/auto_shopping/Smart-tips-buying-used-car/ http://finance.youngmoney.com/wheels/auto_shopping/Smart-tips-buying-used-car/#comments Tue, 05 May 2009 21:00:00 +0000 http://75.145.89.9/?page_id=1598 A little research goes a long way in finding the right used car

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Buying a used car doesn’t have to mean you’ll end up in a 1989 Buick your friends will nickname “Rusty”.  It actually may mean you can get a cooler ride for less dough.  Used cars don’t lose their value as fast as new cars do (we’re talking up to thousands of dollars in depreciation when you drive a new car off the lot—yikes!)  And spending less money on your car can mean more money to spend on features and accessories you really want (can you say MP3 hookup or navigation system?) 

But there can be a downside to buying used—you could be buying someone else’s headache, so doing your research is essential. 


First stop—the Web 

Tear yourself away from the latest YouTube video and start clicking around car Web sites such as Edmunds.com, kbb.com, vehix.com to get a feel for which vehicles you like, and which are in your price range.  Web sites such as consumerreports.org that provide information on used cars and how they have stood the test of time.  The more you know, the better.  So unleash your inner Sherlock Holmes and start digging for information.

Cover your bases
Each state has different laws about buying and selling used cars.  Some require car dealers to perform safety inspections on used cars they sell, and some require dealers to disclose any problems in a car’s history.  Each state has also different legislation regarding lemon laws, so check out your rights before you get too far along in the process. To find out more information about each state’s lemon laws, visit the Better Business Bureau’s State Lemon Laws Web page.

Dealer or private party?
You also have to consider whether you’ll buy from a dealer or a private party.  Dealers can be a better option in case something goes wrong, but the price tag may also be higher.  However, buying from a private seller can be a huge risk—make sure to assess the seller carefully.  If you’re seriously considering buying a car from a private seller, it’s essential to have an independent mechanic inspect the vehicle. Yes, you have to pay for the inspection, but remember the mechanic can identify if anything is in need of repair and help you avoid buying someone else’s problem.  This could save you a lot of money in the long run.

The details—maintenance, warranties, and insurance
Mileage is important (low is better than high), but you should also look at maintenance records.  A record of timely, quality maintenance is as important as mileage on a used car.  Make sure to buy a used car from someone who knows the vehicle’s history.

Get a vehicle history report for any vehicle before you buy.  Some dealers may provide these free of charge, but you get them online for any vehicle for about 25 bucks—all you need is the Vehicle Identification Number (VIN). Visit CARFAX or AutoCheck to find vehicle history reports.

If you’re buying from a dealer, ask about the warranties that come with the car.  Make sure the car’s driveline, mechanical systems, and complex electronic systems are covered.  If your vehicle carries a remaining factory warranty (lucky you!), make sure to have the warranty transferred to your name.  (Heads up—you may have to pay about $100 for this transfer.)  You may decide the remaining warranty is enough, or you could decide to buy extended service coverage or mechanical breakdown insurance.  Keep in mind that buying additional insurance is hedging your bet that you’ll pay more for repairs than you will for premiums.

Get a fair price
To determine a fair price for a vehicle, visit sites such as kbb.com or Edmunds.com, or call your credit union and ask for the “loan value” for the make, model, year, and condition of the vehicle you’re looking at.  While you’ve got your credit union friend on the phone, ask about pre-approved financing for used cars—this can save you lots of money over dealer financing, and it’s nice to have one decision made before you step foot in the dealership.
 
Copyright 2009, National Credit Union Association, Inc.

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Car Shopping: Kicking Your Financial Knowledge into Gear http://finance.youngmoney.com/wheels/auto_shopping/Car-shopping/ http://finance.youngmoney.com/wheels/auto_shopping/Car-shopping/#comments Thu, 05 Mar 2009 21:00:00 +0000 http://75.145.89.9/?page_id=1520 Car sales are down and the U.S. government is doing it's best to entice consumers to purchase cars.

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January 2009 marked the worst month for auto sales in more than 25 years, and now, auto manufacturers and the U.S. government are doing their best to entice consumers to purchase cars in an effort to help the ailing industry. Many manufactures are offering zero percent interest rate loans, while the Senate recently passed a measure that would allow tax write-offs for auto-loan interest and sales taxes.
While times are tight, consumers should review their credit and financial standing, as they may be in a position to take advantage of good deals on car purchases. In fact, experts like automotive analysts at Edmunds.com say now may actually be the best time to buy a car.

Lucy Duni, vice president for consumer education at TrueCredit.com by TransUnion, is offering the following simple tips to guide consumers on the path to making a car purchase:

Rev-up your report knowledge. Review your three credit reports on an ongoing basis to ensure they accurately reflect your credit history.  Your history will dictate your credit score, and your score affects your loan rates. Always know where you stand by signing up for the TrueCredit Messenger, a free application that is downloaded to your desktop and lets you know when there’s been a critical change to your report.                            

Make necessary tune-ups. Whether or not you’re in the market for a new car now, keep a close eye on your credit reports.  If you spot something that doesn’t look right, get in touch with the creditor involved or the appropriate credit reporting company. If you have significant issues with your reports, consider delaying your purchase until those issues are resolved to help you get the best rate available.

Make an age-defying purchase. Buying a used car can save you a heap of money if you do your research. On the other hand, many of the current factory incentives are for new cars, so it’s important to shop around to find the best deal for you.

Luxury versus economy: calculate how much you can afford. Before you decide that a car is right for you, it’s a good idea to evaluate your current debts and income to see how much you can really afford. Also determine if you have a trade-in or down payment to help you pay for the car. Such assets can help you negotiate a better rate with lenders and can be especially important if you have problem credit.

Navigate your options. When you’re ready to talk to lenders, it’s a good idea to shop around for the best available interest rate. Visit your local bank or credit union to discuss applying for an auto loan. Financing with the car dealer can sometimes be more expensive, so pricing out your options is a good idea.


To download TrueCredit Messenger and for tips about managing your credit, log onto
www.gotruecredit.com.  TrueCredit.com is the consumer arm of Chicago-based TransUnion Interactive, a subsidiary of TransUnion, a global leader in credit and information management. The site helps consumers understand personal credit management, empowering them to achieve greater financial well-being through the use of credit reports, credit and insurance scores, credit monitoring, debt management tools and identity theft insurance services.

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23 Words You MUST-KNOW When Buying Or Leasing a Car http://finance.youngmoney.com/wheels/auto_shopping/Car_language/ Tue, 28 Oct 2008 21:00:00 +0000 http://75.145.89.9/?page_id=1323 Buying or leasing a car? How to avoid getting ripped off!

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Pop Quiz: What’s the “Money Factor?”
(A) One of the three pillars of capitalism
(B) The reason why your diet for the past week has consisted of ramen noodles and hot sauce
(C) A personal, financial attribute; as in, “He has the wow factor, but not the money factor.”
If you answered any of the above, then you may need to brush up on your car-buying and -leasing terminology. But don’t fret. We’ve put together the ultimate crib notes to help you before you head to the dealership.

LEASING
Leasing: It’s the hottest option out there today, and it’s a great way to get behind the wheel of a brand-new car. The leasing world, however, has a language all its own. Here are some handy phrases and their translations.

Residual Value: The guaranteed value of the vehicle at lease end that is used to calculate the monthly payment of a lease. When buying or leasing a new vehicle, choose a make/model with a high residual value to help lower the lease payment.

Realized Value: The actual, fair-market value of a leased vehicle at the time of the scheduled termination of a lease. The realized value may be either the wholesale or retail value of the vehicle, as specified in the lease contract.

Money Factor: Also known as a lease factor, the money factor is the interest rate of a lease contract, expressed as a multiplier to calculate monthly payments. To convert a money factor to a percentage, multiply it by 2,400.

Security Deposit: Some leases may require a security deposit up front. This fee, usually in the amount of the monthly payment, is refunded at lease end, less any excess wear-and-tear or mileage charges or lease-end fees.

Amortized Amounts: Taxes, fees, charges for service contracts, payments for insurance, and any prior credit or lease balance that are included in the monthly base payment of a lease or purchase contract.

Acquisition Fee: A fee included in most lease contracts that is either paid up front or is included in the monthly base payment. Also called a bank fee, administrative fee, or assignment fee, it covers the administrative costs of processing lease documentation.

Disposition Fee: A fee due at lease end to compensate the lease company for selling or disposing of the vehicle. This fee can cost hundreds of dollars.

Purchase-Option Fee: An administrative fee added to the lease-end, purchase option price of a leased vehicle.

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Excessive Wear-and-Tear Charges: Charges due at lease end to cover damages to the interior and exterior of a vehicle that are beyond what is considered normal.
Excessive Mileage Charges: Charges assessed at lease end if the total vehicle mileage exceeds the limitations specified in the lease contract. Excessive mileage charges can vary anywhere from $.10 per mile to $.40 per mile.

Early Termination Charge: The amount owed if a lease is terminated, whether voluntarily or involuntarily, before its stated termination date. The earlier a lease is terminated, the greater this charge is likely to be.

Closed-End Lease: In some cases, the actual value (realized value) of a vehicle at the scheduled end of a lease is less than the residual value. With a closed-end lease or walk-away lease, the lessee is not responsible for the difference. With an open-end lease, the lessee is charged the difference. Open-end lease agreements are not common in consumer contracts.

Balloon Contract: With this type of contract, monthly payments are relatively low and comparable to a traditional lease, but the driver’s name is put on the title of the vehicle, becoming an asset for the driver. At the end of the contract, the driver has the option of buying the vehicle with one lump-sum (balloon) payment.

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BUYING
With all of the different models, options, and accessories available today, buying a new or certified used car can be tons of fun. Knowing the contract lingo will take the guesswork out of closing the deal.

FICO Score: A credit score used by lenders (including auto financing institutions) to determine the likelihood that a credit user, or borrower, will pay debts in a timely manner. A FICO score reflects a person’s credit history, including late payments, the length of established credit, the amount of used credit versus the amount of available credit, and bankruptcies. ï? 

Lien: A legal hold on the property of a person or entity as security for a debt or charge. For example, when a car is financed, the lender places a lien on the vehicle until the borrower pays off the entire loan in full.

APR: Annual Percentage Rate is the total cost the borrower will pay on a loan, expressed as an annual percentage of the amount financed. An APR includes the interest rate and other charges the borrower is required to pay. With Fixed-Rate Financing, the APR does not change over the course of the contract. Variable-Rate Financing, often used with special “introductory offers,” has an APR that changes (usually increases) after a certain period of time.

Down Payment: A cash payment made up front in an auto sales contract that reduces the total amount financed.

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Terms: A period of time and interest rate agreed upon between the lender and the borrower to repay a loan or credit obligation. Monthly Payment Amount: Principal Amount + Finance Charge

Principal Amount: The amount financed or the outstanding balance of a loan, excluding interest and other fees and charges.

Taxes and Licenses, Title, and Registration Fees: Standard expenses associated with purchasing or leasing a vehicle.

Documentation Fee: Most dealerships charge a documentation fee to cover the cost of preparing and filing documents.

Extended Service Contracts: An optional, extended warranty or service contract that can be purchased; this coverage usually extends past the expiration of the manufacturer’s warranty.

GAP:
Guaranteed Asset Protection is an optional coverage that can be purchased. In the event that a vehicle is stolen or deemed a total loss after an accident, GAP pays the difference between what is owed on the vehicle loan and what the insurance covers. ï? 

Finance Charge: The amount of interest charged for the loan or the amount charged for the use of credit services.

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The Three Ps of Car Buying http://finance.youngmoney.com/wheels/auto_shopping/311/ Tue, 29 Jul 2008 01:44:32 +0000 http://75.145.89.9/?page_id=93

At the writing of this article oil prices have been given to the unpleasant distinction of reaching what some are calling the "Not So Sweet 16." The phrase refers to the fact that the price per barrel of oil has risen for 16 consecutive days and is showing no signs of immediate slow down.

For the first time in United States history a gallon of unleaded gasoline reached $4 per gallon in two states and averaged $3.89 per gallon in other states. On average a car will hold between 12 to 15 gallons of gas which will cost around $46 to $58 each time you go to the gas station.

But if you’re talking about filling up the 18 to 22 gallons that an SUV or a truck holds the bill will be more like a whopping $70 to $85 per visit or possibly even more. Talk about pain at the pump!

Everyone is feeling the pinch of skyrocketing gas prices, so what are you supposed to do when you’ve got your eyes on a sweet new ride? If a new or even used car purchase is in your plans don’t be so quick to abandon your four-wheeled fantasy, you just need to make this very important buying decision based on the "3 Ps of Car Purchasing":

PRICE

Despite the fact that they were often $25,000 more expensive than a new car, SUVs and trucks have dominated the sales charts for the past 7 years, in some cases outpacing car sales three to one. Much of the demand was driven by desire, new long-term loan options and tax breaks.

But the tides have quickly turned and cars are making a comeback as the vehicle of choice. This has also caused the price of SUVs and trucks to hit what some would consider bargain prices. But is it smart to get a "good deal" on the truck of your dreams when the price of gas to drive it is the equivalent of a monthly loan payment?

When you are making your decision about how much you can afford to buy, you’ll also need to factor in the overall price of operation. What will it cost you per month in payments, how much will it cost to fill up the tank, how many times you will have to put gas in it, and what are the insurance rates.

These are important calculations to make before you step into a dealership because you need to know how to answer the infamous question, "What will it take to get you to drive away in one of these beauties today…?"

PERFORMANCE

The Internet has made car shopping easier than ever, you can research the best price, identify the make and model you want and even read posts from satisfied (and not so happy) drivers of your dream car.

Having owned several cars and coming from a big car-loving family, I would have to say that performance is the number one factor that you have to keep in mind when deciding which vehicle to purchase. Figure you’ll have your car for at least five years, that’s a pretty long time to be stuck with an underperforming piece of metal.

Believe me, I know from firsthand experience that it does you no good to have a car that you’re in love with but performs poorly. When I was in college I couldn’t wait to get the bright red beauty of my dreams – it quickly turned into a nightmare when I realized that it wasn’t the best car for the long distance drives I wanted to take. Even back when gas prices were just slightly more than $1, I had to fill up three times on a 200 mile trip!

Consider as many scenarios you’ll need the vehicle for before making your buying decision. If you’ll be doing mostly highway driving, be sure that the gas mileage is suitable for the highway.

PRACTICALITY

Popular TV shows like MTV’s "Pimp My Ride," and CMT’s "Trick My Truck," have given a whole new meaning to luxury cars. From flatbeds with fully functioning hot tubs to pedicure pamper stations – our imaginations have been given wheels.

The truth is you probably don’t need to have a mini-bowling alley in the back of the truck you drive to work. So determining the must-have features of your vehicle of choice should be realistic and practical.

Sanyika Calloway Boyce is the author of four books. She travels nationwide to educate, empower, entertain and enlighten students about money, credit and debt. This former debt-strapped college student shares real and relevant money messages that young adults can relate to and understand. Visit her online today at financialfitnesscoach.com.

© 2008, Young Money Media, LLC. All rights reserved.

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To Lease, or Not To Lease http://finance.youngmoney.com/wheels/auto_shopping/266/ Wed, 18 Jun 2008 02:47:31 +0000 http://75.145.89.9/?page_id=81 So you’re ready for new wheels-they could be brand spanking new or just new to you. In either case, you’ve got options, but first you need to decide whether to lease or to buy. Our guide will help you navigate this tricky terrain and figure out which route is right for you.

LEASING

Leasing is for those who are all about the here and now. Those who lease (lessees) want to roll in style today. For lessees, the future is wide open, so they want options when it comes to their ride.

Benefits of leasing
With a lease, you can drive a brand-new vehicle at a relatively lower monthly payment and, traditionally, have very few maintenance costs. For many drivers, lower payments mean that they can afford a more expensive car than if they were to purchase the same car. In some states, you’ll only pay sales tax on the lease price – which can save you up to 70% in taxes over buying. What’s more, you’re building personal credit, which lenders will look upon favorably when/if you apply for a home loan. A lease also offers great flexibility, allowing you to drive a new car as often as every two years if you choose – you have options as opposed to obligations.

How It Works
You pay a low monthly payment, which includes a money factor (similar to an interest rate). You may or may not need to make a down payment. Most dealerships offer leases that allow drivers to rack up to 12,000 to 15,000 miles on the vehicle per year. If you foresee a lot of road trips on the horizon, you can add extra mileage to your lease (for as little as $0.10 per mile, for some cars, or as much as $0.40). You can also customize your lease to run for two to four years. As the lessee, you are responsible for regularly scheduled maintenance and any repairs on the car not covered by the warranty. At the end of the lease, you can return the car and lease another, or you can purchase the car. Depending on your lease plan, you may be able to purchase the vehicle with one lump-sum payment, or you can finance what’s owed on the vehicle with monthly payments.

What to Keep in Mind
Watch out for additional-and costly-charges and fees. Administrative fees, sometimes called "acquisition fees," vary from company to company. Some lease contracts require a security deposit and include a disposition or purchase-option fee and/or wear-and-tear charges. (See the sidebar for more info.) Also, in some states, you only pay taxes on the lease price. But in other states, you pay taxes on the entire value of the vehicle, even if you do not purchase the vehicle at the end of the lease. These extra costs can vary from state to state, so make sure you read the fine print carefully before you sign the dotted line.

BUYING

Buying is for those who like ownership. They have an eye on the future, and see themselves in their cars for more than four years.

Benefits of buying
When you buy a new vehicle, you’re acquiring an asset and building equity. You’re also building credit. Like leasing, financing an automobile demonstrates a high level of personal credit responsibility. Buyers can also look forward to eventually owning a car without having a car payment, and they have the option of customizing their cars with any number of aftermarket accessories.

How It Works
When you buy a new vehicle, chances are you’ll opt for financing (as opposed to paying the entire purchase price up front). Financing is essentially a car loan from a lending institution. With traditional financing, you’ll have relatively higher monthly payments that include interest and tax. And, depending on the terms of your contract, you may make a down payment. This is ownership, so with every payment you make, you build a little more equity in your vehicle. At the end of the contract, when your car is paid off, you’ll receive a paid-in-full title. You can continue to drive the vehicle, sell it, or trade it in for a new car.

What to Keep in Mind
Before you sign, make sure you know the amount of the monthly payments for the entire contract, the amount of total interest on the contract, and the interest rate (also known as the annual percentage rate, or APR). If you’re able to, consider making a large down payment to save on the total interest you’ll owe for financing the vehicle. Also, don’t forget to consider the benefits and costs of an extended warranty, especially if you plan to keep the vehicle past the duration of the manufacturer’s warranty.

The Next Step
Once you’ve decided on leasing or buying, do your homework and shop around. Also, be sure to ask about any special offers or programs dealerships may have for students or recent graduates. You may be able to drive away with a great deal.

Printed with permission from Honda Financial Services (hondafinancialservices.com)

 

Before You Hit the Dealership, Know Your Lingo

* FICO Score: A credit score used by lenders (including auto financing institutions) to determine the likelihood that a credit user will pay debts in a timely manner. A person’s FICO score reflects his/her credit history, including late payments, the length of established credit, the amount of used credit versus the amount of available credit, and bankruptcies.

* Residual Value: The guaranteed minimum future value of the vehicle at lease end. When buying or leasing a new vehicle, choose a make/model with a high residual value for a greater resell value or to save on the lease price.

* Equity: The amount of debt-free ownership, or the market value of the paid-off portion of a loan.

* Security Deposit: Some leases may require a security deposit up front. This fee, usually in the amount of the monthly payment, is refunded at lease end, less any excess wear and tear or mileage charges or lease-end fees.

* Money Factor: Also known as a lease factor or lease fee, the money factor is the interest rate of a lease contract, expressed as a multiplier to calculate monthly payments. To convert a money factor to an interest percentage rate, multiply it by 2,400.

* Disposition Fee: A fee due at lease end to compensate the lease company for selling or disposing of the vehicle. This fee can cost hundreds of dollars.

* Purchase-Option Fee: An administrative fee added to the lease-end, purchase option price of a leased vehicle.

* Excessive Wear-and-Tear Charges: Charges due at lease end to cover damages to the interior and exterior of a vehicle that are beyond what is considered normal.

* Balloon Contract: A balloon contract combines the benefits of leasing with the advantages of ownership. With this type of contract, monthly payments are relatively low and comparable to a traditional lease, but the driver’s name is put on the title of the vehicle, becoming an asset for the driver. At the end of the contract, the driver has the option of buying the vehicle with one lump-sum (balloon) payment.

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