Choose the wrong auto loan and you might drastically increase the chances of defaulting and losing your car. Find out step-by-step how to avoid a money pit.
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.
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. Don't 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 that's 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 don't 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 they're considering buying, they're 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
Amount you're 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 won't stay new long, so maintenance will be an issue).
Monthly insurance (remember that for a new car, your insurance premiums may go up).
Tax.
WHICH LEADS TO MAXIMUM MONTHLY LOAN PAYMENT.
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.
Don't 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.
Many economists have suggested and recent economic data indicates that the economy is steadily moving in the right direction. A combination of several factors has no doubt had a negative impact on the economy over the last several years.
The recent state of the economy, combined with the increasing cost of healthcare, has made it difficult for all size employers to continue to offer the same level of employee benefits. In the case of health insurance, future plan modifications may be necessary over the next few years.
After much consideration, these modifications may take the form of increasing deductibles, out of pocket maximums, office visit copays, and prescription copays. Employees may also be required to increase their contribution amount. A vast majority of employees understand the current strain facing employers. Employees are particularly aware of the difficulties faced by medium and small business owners.
If you find that plan changes are inevitable, several aspects are very important to pay attention to when modifying your group health insurance coverage. Modify the parts of your plan that provide a savings while having the least impact on your employees. Make sure the changes are fair to both the employer and employee. Develop and execute a strategy that clearly communicates the plan changes as well as the reasons for the changes.
When the outlook for your business does improve, your organization's ability to capitalize will greatly be dependent on your ability to attract and retain productive employees during difficult economic times.
Finding an auto loan with bad credit.
Firstly you need know how much you can afford to spend on monthly car payments. Use one of the many online loan calculators to help you with this. Then it's just a matter of shopping around to get the best interest rate. The internet has made it easy to shop around and compare rates because you can compare rates with hundreds of lenders from one site. You can compare traditional lender such as banks, credit unions, etc. The lower the interest rate the more you will have available to spend on your car. You will also have to decide the term of the loan.
If you have fair to good credit you should have no problem getting approved. If you have bad credit you can find lender who will work with people with poor credit. The downside is the loan will cost you more as poor credit means greater risk for the lender and therefore a higher interest rate to you.
Top 10 Auto Insurance Myths
1. I Don’t Need Automobile Insurance Because I’ve Never Had an Accident
Every state legally requires every driver to have some variation of car insurance. If you are fortunate enough to never have had an accident, then you may be eligible for a safe driver discount. However, you still need to protect yourself and others with the proper automobile insurance.
2. My Bad Credit Doesn’t Affect My Insurance Rate
Now more than ever, insurance providers perform credit checks on applicants before underwriting a policy. If you have poor credit, there is a very good chance that you will be paying higher premiums than someone with good credit.
3. Owning a Red Car Will Increase My Policy Premiums
The color of your vehicle makes no impact on your policy rates. The vehicle’s make, model, year and engine size do affect premiums. Your credit score and driving history play into your rate as well.
4. I Have No-Fault Insurance, So I’m Not at Fault for an Accident
If you cause an accident, you are still at fault. No-fault insurance just means that your insurance company will pay for your damages regardless if it’s a result of your actions or another driver’s.
5. I Don’t Need Additional Insurance to Use My Personal Vehicle for Business Purposes
This is a tricky one. Many insurance companies will only cover your vehicle for personal use on a personal policy. If you are transporting clients or using the vehicle for business purposes, you should contact your insurance company to see if you need any business-use extensions added to your policy.
6. Comprehensive and Collision Coverage Are One and the Same
These are two different types of coverage. Collision coverage will only protect you against collision. If you want additional protection against theft, vandalism, weather-related damage or damage from a collision with a deer, then you should opt to include comprehensive coverage in addition to collision coverage on your automobile insurance policy.
7. My Driving Record Doesn’t Matter
Even though you’ll need auto insurance whether you’ve had an accident or not, the fact is you can save considerable money on premiums if you keep your driving record clean. Auto insurance companies fight to sell policies to people who are unlikely to make claims, so keep that record clean and check in with your company periodically about discounts and rate adjustments.
8. If Someone Not Named in the Policy is in an Accident Driving My Car, I Am not Liable
This is absolutely not true. If the accident is in your car, it is your responsibility, and you shouldn’t be surprised if your premiums go up as a result.
9. The Government Decides My Premiums
While each state sets rate regulations, your individual premiums will vary with your specific situation and which company you choose to insure with, so consider your options carefully.
10. If I Buy a New Car it is Automatically Covered Under My Existing Policy
Not true. You may receive temporary coverage if you drive the car off the lot and into a pole, but for long term coverage, you must inform the insurance company of the new vehicle and provide all necessary information.
Myths Summarized:
- I have a perfect driving record and therefore do not need car insurance.
- My credit score does not affect my insurance premiums.
- If I own a red car, I have to pay more for car insurance.
- I have no-fault insurance, so I’m not at fault for an accident.
- My insurance will protect me for business purposes.
- Comprehensive and collision coverage are the same thing.
- My driving record does not matter.
- If someone not named in the policy is in an accident driving my car, I am not liable
- The government decides my premiums
- If I buy a new car it is automatically covered under my existing policy
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