It’s expensive buying a car and it only gets more so as time goes on. Over time, the price of new cars has increased faster than the rate of inflation. This isn’t entirely due to greed on the part of automakers; cars are also more complicated and useful than they used to be. Sure, they were cheaper in the 1960’s, but they didn’t include air conditioning, air bags and video systems. Convenience and safety comes at a price.
With the increase in price comes an increase in the length of time people are taking to pay off their cars. Few people pay cash; most people take out loans and pay over time. The average car loan, which used to be repaid over a period of three years, now averages about six years in duration. That’s a long time to pay for a car, especially if you have no plans to own it for that long.
Taking six years to pay for a car has its advantages, as the payments are lower than they would be over a shorter loan term. Such a long loan does have a significant disadvantage, though – you can find yourself in a negative equity, or “upside down”, situation. This can be a serious problem – if you should total the car in an accident, your insurance company will only pay you the value of the car, and not the amount you still owe.
A buyer is described as being upside down when he or she owes more on a car loan than the car is worth. It’s easy to find yourself in an upside situation, and it can occur under any of the following circumstances:
Insufficient down payment – Cars depreciate as much as 25% the minute you drive them off of the lot. If you haven’t provided enough of a down payment to cover that depreciation, you may find yourself upside down immediately.
Trading in too often – Buyers like to trade cars in and roll their outstanding balance into a new loan. These unpaid debts can contribute to negative equity.
Too long a loan – Five and six year loans often lead to negative equity. You can often avoid it by keeping the length of loans to three years or less.
In order to avoid a potential problem in the event of an accident, you should contact your insurance provider to make sure that you have “gap insurance.” Gap insurance will make sure that you are protected should you have an accident while in an upside down situation. Without gap insurance, you may find yourself still making car payments even though you no longer have a car. That is the last thing any car owner wants.
Tags: Air Bags, Air Conditioning, Automakers, Car Loan, Circumstances, Convenience, Depreciation, Duration, Greed, Insurance Company, Length Of Time, Loan Term, Loans, Long Time, Negative Equity, New Cars, Rate Of Inflation, Six Years, Unpaid Debts, Video SystemsRelated posts
Buying a new car is one of the largest purchases most people make in their lives. Therefore, it is worth taking care and making sure the deal you get is the best possible.
Financing
If you need to obtain credit to fund the purchase of the car, you should be aware that the financing offered by the dealer is often not the best deal you can get. If you shop around for loans you may get financing at a much better rate. You should compare the annal percentage rate (APR) as well as the length of the loan and the amount of monthly repayments. Always look at the total amount repayable and compare this to the price of the car to see the cost of the finance.
Sometimes, dealers will offer you a very good financing rate on specific models that qualify. It may not be possible to negotiate on the price of these models and you should check to see if this is cheaper than buying another model that can be negotiated.
Make sure you have a copy of the contract and before you leave the lot, evaluate whether the repayment terms in it are affordable. If the dealer asks you to buy credit insurance, you should add this into the price and see if the car is still attractive. You should also check your existing insurance policies as you may be covered already under another policy.
If you are considering a trade in, bring it up only after you have already negotiated the best possible price for the car you want. You should also research the value of your old car so that you know what it is worth. This information will help you see what the dealer is effectively offering you for your old car and if it is a fair price.
If you are considering a service contract you should be clear on what it offers. They have many exemptions and you will already have some cover from the manufacturers warranty which is included in the cost of the car. You should certainly ask the following questions:
Tags: Best Possible Financing, Buying A New Car, Buying Car, Car Buying, Car New, Credit Insurance, Finance, Insurance, Insurance Policies, Loans, Manufacturers Warranty, Models, Percentage Rate, Purchase Car, Repayment Terms, Repayments, Routine Maintenance, Service Contract, Warranty
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If you really want or need a new car, but you dont have the capital up front you can consider taking out a loan especially for the purchase of your car. I’ve taked to many people who have always paid up front or have kept their car until it falls apart because they either didn’t want to have to pay for something that would depreciate so fast or they thought they didn’t qualify to get a loan. There’s a good chance that paying the monthly rate might be cheaper than continually fixing up the old heap.
There are so many different financial companies that specialize in issuing loans specifically for the purchase of automobiles. Even more conveniently, they’re all pretty well setup online for easy access. This is a blessing in disguise, fleeting are the days when you had to go to the nearest bank and get denied or take on a heavy payment due to the lack of options. With online loans you have the option to really shop around and be much more confident that you’re not getting “taken to the cleaners” on the first stop.
Often, this type of loan for the purchase of a car is known as an “unsecured car loan” and you can search for specialist companies online that provide them. A good car loan company should be able to give you an instant free quote, and many of these companies will provide between 90% to 100% of the purchase value of the car.
Typically the car loan is repaid over a period of three to eight years – five being the most popular. Whats particularly interesting is that even people with poor credit, bankruptcy or CCJ (County Court Judgment) are eligible to take out an unsecured car loan. Now going into debt is never a good thing but if you need a car and have to go the loan route then always work within your means.
Understanding what your credit situation before starting your quest for a new car loan, is very important. You should seriously get your credit check done to ensure you know going in what issues you have if any. As stated earlier an Equifax Credit Report will cost about $15 but is well worth it. You can also try FreeCreditReport.com, but either way it’s a small price to pay to ensure you know where you stand, especially if you’re planning on going car and loan shopping in person.
As always, its good to visit as many car loan online websites as you can – many online websites will offer you a free quote for your car loan, and its a good idea to get as many of these as you can prior to making a final choice. Try to get at least 3 and even 4 quotes to compare and ensure you’re getting the best deal out there. Getting quotes usually only takes a few minutes to fill out a form but doesn’t cost a dime, so take advantage of them. The worst thing when buying anything on impulse is seeing it cheaper right after you’ve paid.
Tags: Automobiles, Bankruptcy, Blessing In Disguise, Car Buyer, County Court Judgment, Credit Situation, Easy Access, Equifax, Good Car, Good Chance, Heap, Loan Company, Loan Tips, Loans, New Car Loan, People With Poor Credit, Specialist Companies, Unsecured Loan