10 Things You Need to Know before Buying a Car

Buying a new or used car can be an intimidating experience. Many car salespeople may pressure you to leave the lot with a purchased vehicle, so it’s crucial you’re armed with information about the cars you are interested in, the budget you can afford, and the value of your trade-in—if you have one. With these details, you have all the tools you need to negotiate properly.

Here are 10 tips and strategies for making sure you get the best-quality vehicle at the lowest price.

1. Think about Financing

Prior to visiting any dealership, have a sense of what kind of deposit you can put down and what monthly payment you can afford. It also helps to do some research on available auto loans to get a sense of what you qualify for. Or try a service like AutoGravity, which allows you to select rates and terms that fit your budget and then obtain offers from lenders.

2. Check Your Credit Score

Knowing your credit score can be helpful as well. Justin Lavelle, chief communications officer for BeenVerified, says, “Having a good idea of your credit report and credit score and the interest rates available can help you negotiate a good deal and save hundreds, if not thousands, of dollars.”

3. Shop Around

Research the cars you might be interested in before you head to a dealership, rather than going in unprepared. To determine what kind of car you want, use resources like US News Best Cars, where you can search anything from “best cars for families” to “best used cars under 10k.” Another resource is Autotrader, which can be used to search new and used cars in your area by make, model, price, body style, and more.

4. Compare Prices

Lavelle also stresses getting detailed pricing info in advance: “Price the car at different dealerships and use online services to get invoice and deal pricing.” A reliable tool is Kelley Blue Book. Use the site’s car value tool to find out the MSRP and the dealer invoice of a car as well as a range of prices you can expect to see at dealerships. TrueCar is also helpful to use. You can search for and request pricing on any make, model, or year of car. You may get a slew of phone calls, emails, and texts from dealers immediately after, but having information from different dealerships can help you negotiate prices. You should also visit dealer sites to look for rebate offers.

5. Research Your Trade-In’s Value

If you have a trade-in, don’t wait for the salesperson to tell you what it’s worth. On Kelley Blue Book, you can get a sense of the value ahead of time so you know if you’re receiving a good offer. Or try the Kelley Blue Book Instant Cash Offer feature, where dealers will give you a guaranteed price for a trade, eliminating complicated haggling at the dealership. 

6. Test Drive Potential Purchases

You may want to pass on the test drive if you’re familiar with a particular make and model, but Lavelle recommends taking the time to do it anyway. “It is a good idea to inspect the car and give it a good test drive just to make sure all is working and there are no noticeable squeaks, rattles, or shimmies that could cause you headaches after your purchase,” he says.

7. Look at Car Histories

Before selecting dealerships to visit, search for consumer reviews so you can avoid having a bad experience. However, Lavelle warns that just because a car sits on a reputable, well-reviewed lot does not necessarily mean that the car is issue-free. So he recommends digging deeper, especially for used cars. “Services like CARFAX represent that they can tell you about the car’s life from first purchase forward, so that might be a good place to start,” he says. He also recommends checking the title, which you can do online via the DMV.

8. Find Repair Records

In addition to checking the repair history on the specific car you are interested in, Autotrader suggests looking up the repair record of the make and model. “Check J.D. Power and Consumer Reports reliability ratings to see if the vehicle you’re considering is known to be a reliable one,” the site states. It also recommend Internet forums and word of mouth.

9. Spring for an Inspection

Autotrader also suggests telling the seller you require an inspection from a mechanic before purchase to ensure there aren’t any problems. “While a mechanic may charge $100 or more for such an inspection, it can be worth it if it saves you from thousands of dollars in potential repairs,” it recommends. Some sellers may try to dismiss a mechanic’s inspection. Don’t give in—the seller could be covering up a serious issue with the car. Insist an inspection is done, or rethink your purchase.

10. Know Your Rights

For any new or used car, take the time to get familiar with the warranty package and return policies. Do you need to supplement the warranty? Are you familiar with the lemon law in your state?

Shopping for a car can be frightening, but with the right research and preparation, you won’t have any regrets. Use the tips and resources above, and snag a free credit report from Credit.com so you know what kind of financing you can expect.

Image: istock

The post 10 Things You Need to Know before Buying a Car appeared first on Credit.com.

Source: credit.com

Can I Get a Car Loan If I Have No Credit?

buy a car with no credit

Yes, lenders have auto loans for people with no credit, but getting one is not guaranteed. It will depend on the lender’s flexibility, the down payment you can afford, and the kind of car you want to buy. It may even depend on how you ask.

Phil Reed, senior consumer advice editor for the consumer auto site Edmunds has some good advice on how to get a car loan with no credit. He says a surprising number of people simply walk into a dealership and say, “Hi, I have no credit, and I want to buy a car.” He doesn’t recommend this approach. Instead, he offers these five tips for people who need a no-credit car loan.

1. Get Pre-Approved

If you have no credit or a thin credit profile, you should try to get preapproved for a loan before heading to the dealership. This will let you compare rates with any loan the dealer may offer. It may also give you a bargaining chip when negotiating the final deal.

If you have a relationship with a bank or credit union, you should start looking for financing there. Reed recommends making an appointment to meet with your bank’s loan officer in person.

“Make a case for yourself,” he says. That means bringing your pay stubs and bank account records with you. You should also check your credit reports, if they exist, and credit scores. You want to know as much about your credit profile as a lender would. If you don’t know your credit score, don’t worry—you can check your credit score for free every month on Credit.com.

If you can’t get a loan from your financial institution, you may be able to find a no-credit auto loan online. Just make sure it’s from a reputable lender. Credit.com can also help you find auto loan offers from trustworthy lending institutions.

// <![CDATA[
googletag.cmd.push(function() { googletag.display('div-gpt-ad-1523377147000-0'); });
// ]]>

 

2. Negotiate a Good Price

A dealership could beat the offer you get from your bank or credit union. However, if you know you’re already approved for a loan, you can focus on comparing rates and prices instead of worrying about financing.

Reed says that it’s important to be wary. You don’t want to feel so indebted to the dealer for “giving” you a loan that you fail to negotiate the price of the car. And if the dealer’s financing isn’t better than the bank’s, at least you still have an approval in your pocket.

Having a good down payment or trade-in can also help your case. A trade-in would reduce the amount you’ll need to borrow, and a larger down payment would show the lender some commitment on your part. Edmunds recommends putting at least 10% down on a used car, so start saving now.

3. Choose the Right Car

Be sure the car you’re buying is affordable for you, even if it’s not the car you’d choose if you had more money and better credit. “If you have no credit, it’s not the time to get your dream car,” Reed says. “You have to choose the right car and the right amount [to borrow].”

You want reliable transportation you can afford. Making regular, on-time payments won’t just pay down your load, it will also build your credit, so don’t get a loan that requires higher payments than you can comfortably make.

Sites like Kelley Blue Book, Cars.com, and Edmunds can help you find information on the cars that match your budget. When you’re at the car dealership, remember your budget and don’t spring for optional add-ons you don’t really need.

4. Don’t Let Interest Rates Scare You Off

Reed cautions that when you get a loan with no credit, the interest rates you’re offered may seem appallingly high, but that’s part of the cost of having no credit history.

When you don’t have a credit score, lenders can’t assess how big of a risk they’re taking by giving you a loan. To protect the money they’re lending, they will likely treat you as a high-risk borrower, which means the loan will have a higher interest rate.

As you make payments, you’ll establish a pattern of reliably paying back money. Over time, you can improve your interest rate by refinancing. Reed says that, according to a dealership employee, a customer once lowered his interest rate from 13% to 2% in two years’ time by improving his credit and refinancing.

5. Give Yourself Some Credit, Not a Cosigner

Reed advises against cosigning—a process that involves checking someone else’s credit and using that score to qualify for a loan. It might get you a lower rate and help you get approved, but Reed says that if you bite the bullet and pay a higher interest rate rather than get a cosigner, you’ll have the opportunity to build credit.

In addition, having a cosigner will tie that person’s credit to yours, and the way you repay your car loan will influence their credit. Reed says if you’re going to do it, do it only as a last resort, and make sure the cosigner is a relative.

Bottom line, though, as Reed explains, “It’s asking a lot.” It’s better to finance the car yourself, pay on time, and build your credit. That way, the next time you need a loan, you won’t have to worry about whether you’ll qualify.

Good credit doesn’t just help you get reliable transportation: good credit can make a huge difference in improving your financial security and the peace of mind that comes with it. Start tracking your credit for free today at Credit.com. Your new car will get you moving around town, but your new credit score will get you moving up in the world.

Image: iStock

The post Can I Get a Car Loan If I Have No Credit? appeared first on Credit.com.

Source: credit.com

Help, I Need to Get the Cosigner Off My Car Loan!

how to get a cosigner off a car loan

We’ve had many readers write in after a divorce and ask how to split their assets with an ex-spouse. One of the most common questions is how to remove an ex or another cosigner from a car loan and title. Here’s how to go about it.

What’s the Role of a Cosigner?

It can be challenging to remove a cosigner from a loan. To gain a better understanding of why, let’s look at why a cosigner is used at all. Essentially, a cosigner is needed when the borrowers own credit and/or income isn’t enough to qualify for the loan by himself or herself. The cosigner, presumably, has stronger credit and income, and is required by the lender or creditor to help guarantee that the loan will be repaid.

Loans involving a cosigner include a cosigners notice. The notice asks that the cosigner guarantee the debt. This means that if the original borrower fails to make payments on the debt, then the cosigner becomes responsible for the balance. The cosigner then is obligated to make payments until the debt is paid when the borrower can’t.

Co-signing a loan is risky for the cosigner, because it can affect the cosigner’s credit if the borrower doesn’t satisfy the debt and the cosigner has to take over. The debt can ultimately affect the cosigner’s credit scores and access to revolving credit, such as credit cards.

Before co-signing a loan, a cosigner should be sure that he/she is able to comfortably take on the monthly payments if it comes to that. The cosigner should also make sure he/she doesn’t need to get a loan of his/her own over the course of the cosigned loans terms.  Cosigning on the borrower’s debt will affect the cosigner’s overall credit utilization and ability to secure other credit opportunities in the meantime.

Now that you know the role of a co-signer let’s look at what you can do to remove them from a car loan if needed.

Refinance the Car Loan to Get the Cosigner Off

You may be able to refinance a car loan in your own name to get your cosigner off the loan. In essence, you’ll buy the car from your ex-spouse and go through the car buying process again.

The spouse who is responsible for the car loan payments, the primary signer, should ideally assume credit liability for the loan. It’s a also good idea to go through this process right away, regardless of what your divorce decree states.

Divorce decrees (or court orders) don’t release either person from his/her obligations under the original contract of the loan. That means that if you and your ex-spouse have a joint account, like a car loan, and if the spouse who is supposed to pay doesn’t, the negative credit history will end up on both of your credit reports, and those late payments will damage both of your credit ratings. In fact, the other person may not know about the unpaid account until a collection agency calls.

Removing your ex from the car’s title, if the car already paid for, is similar and requires working with the Department of Motor Vehicles (DMV). You’ll both need to sign a change of title/vehicle ownership form and return it for processing. You can check online or call your state’s DMV for details and forms.

In some states you can file a transfer of title between family members, if the divorce has not been finalized yet. A transfer of title lets you avoid getting any needed inspections or certifications and paying taxes on the vehicle based on the purchase price. (If you live in the state of California, for example, research changing vehicle ownership versus transferring a car title.)

See if You Have a Cosigner Release Option

Some car loans include conditions that remove the cosigner’s obligation after a specified number of on-time payments are made by the primary borrower.

If you’re unsure if this is an option, talk to the lender and check any loan documents you have. The cosigner release option is probably one of the easiest methods of taking a co-signers name off a car loan.

Pay Off the Loan

Another option to get a cosigner off a car loan is to pay off the loan either directly or by selling the car. If you sell the car, you can use the money to pay off the loan. With luck, the sale value of the car will be sufficient to cover the remainder of the loan.

Be aware that if you are the cosigner, and the primary borrower fails to make payments, you can likely seize the asset and sell it.

This article was originally published February 20, 2013, and has since been updated by another author.

Image: iStockphoto

The post Help, I Need to Get the Cosigner Off My Car Loan! appeared first on Credit.com.

Source: credit.com

What Is the Average Used Car Loan Rate?

average-used-car-loan-rate

Article originally published July 13th, 2016. Updated October 30th, 2018.

More people are opting to lease their new set of wheels instead of purchasing them, according to Q2 2018 data from Experian.

The number of auto loans grew to an all-time high, with leasing surpassed 30% of all new consumer vehicle sales. But the interest rates consumers are getting on these loans has stayed low, especially for used cars. In fact, Experian reported that average loan rates saw some increases, but still remain historically low.

Loan rates for a new car in Q2 of 2018 were 5.76%, up from 5.20% a year prior. Franchise used rates are 8.28% (down from 7.88% in Q2 2017), while independently used rates are 11.87% (down only 0.17% from Q2 2018).

The Experian Automotive scoring deems prime consumers as those with scores of 661 to 850, nonprime users with scores of 601 to 660, and subprime users as those with scores of 300 to 600. Consumers on all risk tiers are increasingly choosing to lease over purchasing cars, according to the report.

The number of prime consumers choosing used vehicles increased from 55.61% in Q2 2016 to 55.79% in Q2 2018. The number of nonprime and subprime consumers also saw increases, from 21.75% to 22.05% and decreases of 25.71% to 25.05%, respectively.

Experian reported that the increased number of prime consumers choosing used vehicles resulted in “score increases, greater percentages of used financing in the prime risk tier and lower average used rates.”

Getting a Car Loan

If you’re thinking about buying a used car and taking out an auto loan to do it, it’s a good idea to review your credit first. Having a good credit score can help you qualify for better terms and conditions on your financing. (To find out where your credit stands, you can see two of your credit scores for free, updated every 14 days, on Credit.com.)

And when you’re figuring out how much you can afford, remember to consider not only how much your monthly car payment will be but also how much the loan will cost you in the end, by considering the interest rate and length of the loan term. (The longer the loan term, the more interest you will pay.)

If you aren’t happy with what you see, don’t worry — you may be able to improve your credit scores by paying down any big credit card balances, disputing errors and limiting credit inquiries until your score has had time to rebound.

Gather All Documentation

When attempting to get a used car loan, you will want to gather all the necessary documentation including the following:

  • Your Driver’s License
  • Proof of all of your income- this can be a paycheck stub or even a tax return
  • A utility or phone bill to prove your residency
  • Your social security number so they can run your credit check

These days, you can often apply for the used car loan right online or even by phone which makes it the process that much easier and accessible.

Start With Your Own Banking Institution

It is always a good idea to start with your own bank or credit union for financing because you have already established history and relationship with them. Typically, you will be able to find the absolute best rates and more favorable terms if you go through your own bank.

They will also be able to advise you on all the options that are available to you as you begin the journey toward car ownership.

Shop for the Best Rates

You never want to settle on the first rate you are given; don’t be afraid to shop around to see if you can find something better than the typical auto loan rates. You will find the best auto loan rates if you have good credit. Additionally, if you apply for multiple loans within a 14 day period, it will only count as one hard inquiry so that you can find the best rate possible.

What is the Average Used Car Loan Rate?

Typically, you will find that the car loan rate on a used car is going to be a bit higher than the rates you would find with a newer car. For example, good credit car loans can see an interest rate as low as 3.9% for a newer model and a little more than 5% for its older version.

Average Auto Loan Rates by Credit Score

The following are the average rates you may find for a used car loan that carries a 60-month repayment term based on a range of different FICO Scores.

With a credit score between 500 and 589, you may be looking at interest rates on the loan as high as 16%. A bad credit score also makes it a lot harder to get approved for the car loan initially as well.

A credit score in between 590 and 619 will typically see the 15% mark, and the percentages get lower from here with the lowest coming in at 4.39% with a credit score between a 720 and 850.

A longer loan term will usually mean you will have a lower monthly payment, but you will also accrue more in interest with a longer loan term.

Bottom Line

When determining the average used car loan rate and the amount of interest you may have to pay on a loan, you will want to check all three of your credit reports, examine your credit score and credit history and determine what steps you can take to improve your credit, so you can qualify for a lower interest rate.

Again, if you bank with a credit union, always start there first because the lender will already be able to see if you are high risk or not. Car buyers should always take their time, do their research, and tackle the work of fixing their credit prior to obtaining a loan for a car. It is always best to shop smarter and save money in the long run.

The post What Is the Average Used Car Loan Rate? appeared first on Credit.com.

Source: credit.com

5 Steps for Getting a Car Loan

This Article was Updated July 5, 2018

When you are looking to buy a vehicle, the first thing you should do is apply for a preapproved loan. The loan process can seem daunting, but it’s easier than you think and getting preapproval prior to going to the car dealer may help alleviate a lot of frustration along the way.

Here are five steps for getting a car loan.

  1. Check Your Credit
  2. Know Your Budget
  3. Determine How Much You Can Afford
  4. Get Preapproved
  5. Go Shopping

1. Check Your Credit

Before you shop for a loan, check your credit report. The better your credit, the cheaper it is to borrow money and secure auto financing. With a higher credit score and a better credit history, you may be entitled to lower loan interest rates, and you may also qualify for lower auto insurance premiums.

Review your credit report to look for unusual activity. Dispute errors such as incorrect balances or late payments on your credit report. If you have a lower credit score and would like to give it a bit of a boost before car shopping, pay off credit card balances or smaller loans.

If your credit score is low, don’t fret. A lower score won’t prevent you from getting a loan. But depending on your score, you may end up paying a higher interest rate. If you have a low credit score and want to shoot for lower interest rates, take some time to improve your credit score before you apply for loans or attempt to secure any other auto financing.

2. Know Your Budget

Having a budget and knowing how much of a car payment you can afford is essential. You want to be sure your car payment fits in line with your other financial goals. Yes, you may be able to cover $400 a month, but that amount may take away from your monthly savings goal.

If you don’t already have a budget, start with your monthly income after taxes and subtract your usual monthly expenses and how much you plan to put in savings each month. For bills that don’t come every month, such as Amazon Prime or Xbox Live, take the yearly charge and divide it by 12. Then add the result to your monthly budget. If you’re worried, you spend too much each month, find simple ways to whittle your budget down.

You’ll also want to plan ahead for new car costs, such as vehicle registration and auto insurance, and regular car maintenance, such as oil changes and basic repairs. By knowing your budget and what to expect, you can easily see how much room you have for a car payment.

3. Determine How Much You Can Afford

Once you understand where you are financially, you can decide on a reasonable monthly car payment. For many, a good rule of thumb is to not spend more than 10% of your take-home income on a vehicle. In other words, if you make $60,000 after taxes a year, you shouldn’t spend more than $500 per month on car payments. But depending on your budget, you may be better off with a lower payment.

With a payment in mind, you can use an auto loan calculator to figure out the largest loan you can afford. Simply enter in the monthly payment you’d like, the interest rate, and the loan period. And remember that making a larger down payment can reduce your monthly payment. You can also use an auto loan calculator to break down a total loan amount into monthly payments.

You’ll also want to think about how long you’d like to pay off your loan. Car loan terms are normally three, four, five, or six years long. With a longer loan period, you’ll have lower monthly payments. But beware—a lengthy car loan term can have a negative effect on your finances. First, you’ll spend more on the total price of the vehicle by paying more interest. Second, you may be upside down on the loan for a larger chunk of time, meaning you owe more than the car is actually worth.

4. Get Preapproved

Before you ever set foot on a car lot, you’ll want to be preapproved for a car loan. Research potential loans and then compare the terms, lengths of time, and interest rates to find the best deal. A great place to shop for a car loan is at your local bank or credit union. But don’t stop there—look online too. The loan with the best terms, interest rate, and loan amount will be the one you want to get preapproved for. Just know that preapproved loans only last for a certain amount of time, so it’s best to get preapproved when you’re nearly ready to shop for a car.

However, when you apply, the lender will run a credit check—which will lower your credit score slightly—so you’ll want to keep all your loan applications within a 14-day period. That way, the many credit checks will only show as one inquiry instead of multiple ones.

When you’re preapproved, the lender decides if you’re eligible and how much you’re eligible for. They’ll also tell you what interest rate you qualify for, so you’ll know what you have to work with before you even walk into a dealership. But keep in mind that preapproved loans aren’t the same as final auto loans. Depending on the car you buy, your final loan could be less than what you were preapproved for.

In most cases, if you secure a pre-approved loan, you shouldn’t have any problems getting a final loan. But being preapproved doesn’t mean you’ll automatically receive a loan when the time comes. Factors such as the info you provided or whether or not the lender agrees on the value of the car can affect the final loan approval. It’s never a deal until it’s a done deal.

If you can’t get preapproved, don’t abandon all hope. You could also try making a larger down payment to reduce the amount you are borrowing, or you could ask someone to cosign on the loan. If you ask someone to cosign, take it seriously. By doing so, you are asking them to put their credit on the line for you and repay the loan if you can’t.

When co-signing a car loan, they do not acquire any rights to the vehicle. They are simply stating that they have agreed to become obligated to repay the total amount of the loan if you were to default or found that you were unable to pay.

Co-signing a car loan is more like an additional form of insurance (or reassurance) for the lender that the debt will be paid no matter what.

Usually, a person with bad credit or less-than-perfect credit may require the assistance of a co-signer for their auto financing and loan.

5. Go Shopping

Now you’re ready to look for a new ride. Put in a little time for research and find cars that are known to be reliable and fit into your budget. You’ll also want to consider size, color, gas mileage, and extra features. Use resources like Consumer Reports to read reviews and get an idea of which cars may be best for you.

Once you have narrowed down the car you are interested in, investigate how much it’s worth, so you aren’t accidentally duped. Sites such as Kelley Blue Book or Edmunds can help you figure out the going rate for your ideal car. After you’re armed with this information, compare prices at different car dealerships in your area. And don’t forget to check dealer incentives and rebates to get the best possible price.

By following these steps, you’ll be ready to make the best financial decision when getting a car loan. Even if you aren’t ready to buy a car right now, it doesn’t hurt to be prepared. Start by acquiring a free copy of your credit summary.

It is always a good idea to pull your credit reports each year, so you can make sure they are as accurate as they should be. If you find any mistakes, be sure to dispute them with the proper credit bureau. Remember, each credit report may differ, so it is best to acquire all three.
If you want to know what your credit is before purchasing a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Image: istock

The post 5 Steps for Getting a Car Loan appeared first on Credit.com.

Source: credit.com