Browsing Category: Cars

Overcome Your Bad Credit and Purchase a Vehicle

When you apply to rent an apartment in California, one of the first things you’ll need to provide is your credit report. If your rating is low, you may lose that apartment to an applicant with a better credit rating. Why? If you were going to be collecting money regularly from someone, you’d want to know they’d pay you on time and in full. Right? That’s what landlords want to know and your credit report tells them how trustworthy you are.

Of course, a credit report doesn’t tell your life story. Maybe your score is low because of past financial problems that are now resolved. But there’s no note on the report that says, “ignore the score, they’re okay.” A good credit score is important whether you’re renting an apartment or buying a car. A good score will help you gain access to the things you need (like housing and transportation). Furthermore, a good score will contribute to getting lower interest rates and save you money in the long run.

How to Buy a Car with Bad CreditNew or Used License Plate Buy Car Truck

If your credit rating has suffered a few dings in the past, there are still valid options available for consumers who need to purchase a vehicle. For example, those in the market for a car can certainly check out two-in-one used car dealerships and financiers who often feature great vehicles with reasonable terms. According to Bankrate.com, the upswing in the economy coupled with the loosening grip on lending funds makes this a really good time for potential borrowers to negotiate a car loan. The following are a few tips to make the process easier.

Get a Credit Report

First, check your credit report. While the credit-reporting industry has “tightened up” over the past few years, there’s room still for mistakes on credit reports. The problem is, when your credit has already suffered damage, a few challenges (even very slight ones), can push you under the threshold for some financing companies. You can pull your credit report from all three credit-reporting agencies — for free — by visiting AnnualCreditReport.com. You can also get your most recent FICO score (the numerical score lenders review) for a small fee at MyFICO.com.

Preparations

Become as prepared as possible before purchasing a vehicle. Subprime lenders take a look at your overall picture, so have the proper documentation ready. This alone suggests that you’re responsible and a serious buyer. While different companies will have different requirements, some of the standard documentation includes presenting a valid driver’s license, recent pay stub, current utility bill, proof of insurance (or the ability to acquire insurance) and, in some cases, a recent tax return.

In addition to preparing the necessary documentation, experts suggest saving up for a down payment. According to Fox Business, having a 20 percent down for a new car or an 11 percent down payment for a used vehicle is considered a good rule of thumb. High down payments are always a good idea and communicate to finance officers much differently than having an auto trade-in with equity, especially for individuals with a damaged history of credit.

Buying a Used Car

As much as you may desire a new vehicle, consider a used vehicle instead. Folks with bad credit can peruse used cars at buy here pay here lots or check out other financiers to find the right price. Used vehicles are generally less expensive, which can help with both the monthly payments and with the down payment option, as well. It’s best to consider a reliable used car with a good history — which can be checked for free at the National Motor Vehicle Title Information System. Also, Consumer Affairs advises borrowers with damaged credit to skip on all the extras, like GAP insurance, extended warranties or credit life policies. While they may seem to come with a low monthly fee, over the life of the loan you may be adding an additional $1,000 or more to the purchase price. And don’t be fooled … dealers will often tell you it’s required, but legally, it isn’t.

Refinancing

It’s a good idea to research the average annual percentage rate for a person with your credit history. At least you will approach the application process with an understanding of the range you should be offered. However, if you aren’t perfectly satisfied with the rates, or if after a year, your payment history is good and your credit has improved, consider refinancing the loan. According to the DMV, the process is painless, and a loan with merely one percent lower interest rate can save you quite a bit of money.

Sticker Price: Just Another Puzzle Piece in Truck Ownership Costs

NWhen it comes to buying a new truck, many people head straight for the bottom line. Negotiating the best keys-in-the-hand-drive-it-off-the-lot price is usually the focus. While getting a big discount off the sticker price is great, the purchase price is really just one piece of the puzzle.

Paying more for your new truck could save you almost 10 percent— thousands of dollars in the long run, according to Edmunds.com. But why?

One Piece of the Whole

Think of the purchase price as the outside frame of that puzzle. It’s a place to start, but without all the little individual pieces inside, you can’t see the whole picture. The true cost of ownership (TCO) of any vehicle includes the extras. Not the leather seats and fog lights or the tow package and the heavy-duty suspension— the extras in the form of insurance coverage, taxes, fuel consumption and maintenance. When you start adding the little pieces, the real price of ownership starts to take on a different whole.

AAA Public Relations Manager Ginnie Pritchett reports annual maintenance and repair costs, for instance, jumped almost five cents per mile driven in 2013 over 2012 prices. That jump brings the average cost per mile to operate a vehicle up to more than 60 cents per mile— a figure that is higher in most trucks.

Model by Model

Is doesn’t matter whether you are considering a 2012 Cadillac Escalade EXT or a 2013 Chevy Silverado, discovering that TCO is essential if you really want to get the best deal. Naturally, the Escalade has a higher price tag than an extended crew cab Silverado, but it might surprise you to learn that maintenance and repair over a five-year period is higher for the Silverado.

Thinking about adding aftermarket off-road tires? Add another 10 percent into the operating mix for lower fuel consumption, according to a 2010 Car and Driver 2010 road test. Comparing the sticker price of a 2013 Escalade ($63,000) to a 2013 Silverado 3500HD ($31,500) aren’t even close, but if you go to DriveTime used cars and compare the price on a Ford F-150, a Dodge Ram and a Chevy Silverado you’ll find a similar market.

When it comes down to it, digging deeper into the TCO may be the deciding factor in your truck purchase.

The Big Picture

The picture is starting to take shape as you add the puzzle pieces for fuel consumption, maintenance, insurance and taxes. So if you find a Ford F-150 for under $22,000, take the time to ask about taxes, check into the cost of insurance coverage and use an online calculator to estimate the annual fuel consumption and repair costs.

Average fuel consumption is just a starting point. Personal driving habits influence maintenance and vehicle mpg, quite substantially. Jack rabbit starts and stops, double clutching, off-roading or towing the horse trailer to the rodeo grounds every weekend, all drastically reduce your averages and increase repair expenses.

Whether you are looking for a loaded 2013 Cadillac Escalade EXT or a 2012 Ford F-150, start with the sticker price. But don’t stop until you have all of the pieces of the puzzle to give you a full picture of the true cost of ownership.

Steven Butler is a classic car collector and automobile enthusiast from L.A.

Using ISeeCars to Buy Your Next Car

reliable used car scion tc

I mentioned earlier this week that it’s possible to avoid a bad car loan when shopping for a car. Today I want to share how you can use ISeeCars to find a reliable used car within your budget.

What to Look For in Your Next Car

If you’re searching for your next car and want to get the most bang for you buck, there are a few things you need to consider with the make and models you’re looking at: reliable used car scion tc

  • Good Gas Mileage: Gasoline can become a huge monthly expense if you don’t shop wisely. Take a moment to shift through to see which cars give you great gas mileage.
  • Solid Reliability: Minimize the chances of having to take your car into the shop constantly by only shopping car models with history of reliability. I shared some of Consumer Reports’ top picks on reliable used cars here.
  • Cheap (in Price) Parts: I learned from experience that not all car parts are equal. When you take your car to the shop to get repaired, the cost of replacing bad or worn parts can vary significantly based on the car you drive. You’re on a fixed budget, check with local shops and online to get an idea of what a typical repairs would cost you.

Using Private Sellers vs Dealerships

Now that you have an idea of what you’re looking for, now it’s time to scour your area for a car. When we were hunting for our family sedan last year we looked at both private sellers and local dealerships.

Take your time and whittle down the list based on the previously mentioned criteria and your personal preference.

Once you have an idea of what price range cars are selling for, you can determine of the seller is being reasonable or not. If they are too high, you can use the data you gathered from your searches to negotiate with them on getting a competitive price.

Don’t forget to also check out the car on CarFax to make sure everything looked in order in the car’s history. You don’t want buy a lemon. This advice applies to both dealerships and private sellers. We had a car salesman lower his price by almost $2k (still was too expensive).

It takes a just a bit of legwork, but doing your research ahead of time will save you money in the short term and over the life of your next car.

Thoughts on Buying Your Next Car

I’d love to hear your thoughts. How many of you are thinking of a buying a car in the near future? What features are you looking for in your next vehicle?

Photo Credit: Brett Levin Photography 

Avoiding Bad Car Loans

car loans

Last week I received an email from a woman who was looking at getting rid her car loan. Julie* shared her story with me and gave me permission to publish it.

​I currently have a $15,000, 6 year car loan for a 2011 Kia at an interest rate of  18%. I pay about $340 a month on the car. I had considered refinancing it next year with the same company. I don’t know if I would be able to go through a credit union or bank since my credit is so low.

While I shared some tips on how to get out from an upside loan. We paid off our car loan early years ago and have since bought our cars with cash. However I know not everyone is in the same boat and some may car loan so they can have a vehicle to get around. I want to discuss how to you can avoid getting a car loan that will drain your budget.

Run the Numbers Yourselfcar loans

Before you head out to search for the car you should do a bit of legwork to give yourself the best chance at getting an affordable loan. don’t just go by what the dealership offers you. Lenders and car salespeople are looking at their numbers, not yours.

It doesn’t take much time to run the numbers. Just remember that besides having enough to pay the car loan, you want to make sure you have a budget that allows you to still save and invest for the future. One rule of thumb you may want to use to keep your budget sane is the 1/10th rule. don’t buy a car for more than one tenth of your annual income.

Once you have a budget that you know will not only pay the car loan, but handle other financial responsibilities, stick with it. Don’t let anyone else dissuade you from keeping your payments manageable and allowing you to have a buffer in your budget.

Besides the car payment auto related bills like insurance can eat at your budget if you don’t account for them. If you’re pressed for time, but still want to shop around for the best rates on car insurance you use Go Insurance Rates. It’s extremely handy as you can get several quotes in spot and it’s free!

Build a Down Payment

If you can give yourself some time to get a down payment ready, then by all means do so. The more you can save up the better. Aim for at least 10% down so you have more options on the car that you want.

For your down payment fund, you need to focus on 3 things:

  • Easy access to it in case of emergency – It does you no good to have a high interest rate if you can’t get to it quickly when it’s most needed.
  • Safe place to store you money – Whatever you choose, make sure it’s either covered by the FDIC (banks) or NCUA (credit unions).
  • A place where it can grow – If you can earn a decent interest rate for your savings while meeting the two previous criteria, then go for it.

One bank that we use for our savings is Ally Bank. they offer competitive rates and they don’t hit you with maintenance fees.

Look at Getting Pre-Approved

The final step before going to a dealership is sitting down and talking with your bank or credit union. You want to get pre-approved for a loan so you have negotiating power when you buy your car. The rates offered at the dealerships are often much higher than you would get at your local bank.

You will also have an out when the salesperson is trying to talk you into a car that you really can’t afford- you simply say that you want to stay within your pre-approved budget.

Getting an Affordable Car Loan

If you can buy your next car with, then by all means, please do so. If you are getting car loan, then I hope these tips help you with avoiding a bad one.

I’d love to get your thoughts on cars and loans. How do you plan on buying your next car?

* I changed the reader’s name adjusted some details to maintain privacy.

Photo Credit: Main