Money Under 30 » Cars

How to Trade In Your Car With Cash for Clunkers

David Weliver — Wed, 29 Jul 2009 14:56:37 +0000

Believe it or not, the long-awaited (and debated) Cash for Clunkers program (a.k.a. CAR Allowance Rebate System [CARS]) is here—while the money lasts. Under the cash for clunkers program, the government will give you a voucher for up to $4,500 for qualifying used vehicles that can be used to purchase a new car. It’s a great deal if you can get it. First, your car must qualify. Second, you’ll have to get your act together before November 1, 2009 or the $1 billion allotted for the program runs out, which some analysts forecast could be by the end of August!

Are You Eligible for Cash for Clunkers?

Just because you drive a beater doesn’t mean that your car will qualify for this program. To qualify:

Your trade-in car must be no more than 25 years old
Most trade-in cars must get 18 MPG or less (with some exceptions)
Your trade-in car must have been registered and insured for a full year preceding the trade
You must agree to scrap your old car (i.e., you cannot sell it for its full value and collect the rebate

In addition to these requirements, to qualify for the cash for clunkers rebate, you must

Purchase a new vehicle (not used) from a participating dealer
Purchase a vehicle that meets fuel economy requirements

How to Get a Cash for Clunkers Rebate

To participate in the Cash for Clunkers program, simply take your qualifying trade-in auto to a dealer. Once you select your new car, the dealer will apply the applicable credit at the time of purchase. You do not need to register for a voucher; the rebate is given at the dealership. When you visit the dealership, be sure to ask about the scrap value of your vehicle. Although it won’t be much, dealers are required to pay you the scrap value of your car in addition to the rebate.

Should You Buy a New Car With a Cash for Clunkers Rebate?

That all depends. Getting up to $4,500 in trade value for a car that is otherwise worthless is a great deal, but only if you can afford to buy a new car. Even the most basic new cars cost about $10,000 plus taxes and registration fees, so you’ll be looking at fronting more than $5,000 in cash. Ask yourself: How long will your current vehicle last you? If you’re pretty sure you’ll need to pony up for a new ride in a year or two anyway, it might be wise to check out cash for clunkers. Will you make it more than a couple years? It might be best to keep on clunking.

You can learn more about the CAR Allowance Rebate System (CARS) at CARS.gov.

Cash-for-Clunkers Bill Could Offer $4,500 for Your Old Car

David Weliver — Thu, 11 Jun 2009 11:30:54 +0000

My father drives an old Lincoln town car that has over 300,000 miles on it. That’s right, 300,000. Not only does he drive it, but he commutes over 90 miles each way in it, every day. Everybody who knows him thinks he should have gotten a new car oh, about 100,000 miles ago. But my dad is fanatically frugal and, perhaps more importantly, he simply likes his car. He’s determined to drive that old Lincoln until it simply doesn’t want to drive anymore. Unless the so-called “cash-for-clunkers” bill becomes law. The bill (which the House passed it today) could offer drivers like my dad up to $4,500 towards a new, more fuel-efficient ride. What’s the cash-for-clunkers bill all about? And could you benefit?

The cash-for-clunkers bill would give a $4,500 credit to anybody who trades in an old car for a new(er) vehicle that gets at least ten miles per gallon more, or a $3,500 credit for new cars that get between four and up to 10 MPG better fuel economy. According to the current version of the bill, to qualify, the trade-in vehicle must be model year 1985 or newer, be drivable, and must be destroyed upon trade-in (it cannot be resold). Additionally, the new car purchased must get at least 22 MPG or, if it is a light-duty truck, at least 18 MPG.

Obviously, the cash-for-clunkers bill is intended to eliminate less fuel efficient cars and create an incentive to buy a car (and presumably give a boost to the flagging auto industry). Critics of the bill say that we’re over-incentive people to spend money in certain struggling industries (this program would be akin to the $8,000 first-time home buyer tax credit designed to stimulate the housing market).

Personally, I think the cash-for-clunkers bill is a great idea. (And not just because I want to see my dad get some new wheels!) Even if the economy (and auto industry, in particular) weren’t in such dire straights, I believe it’s partially our government’s responsibility to begin to find ways to reduce our dependence on oil. Although moving towards more fuel-efficient vehicles isn’t a big a step as, say, developing alternatives to fossil fuels; it’s a start. Plus, this bill pushes for greater fuel efficiency in a model that is true to our free-market economy: Drive a more fuel-efficient car, get a financial incentive. Makes sense to me.

What do you think about the cash-for-clunkers bill? A good idea or too much government involvement? Would you take advantage of the incentive? Let us know!

Perks of Using a Lending Club Loan to Buy a Car

David Weliver — Mon, 09 Feb 2009 16:24:23 +0000

It’s best to buy a car with cash—but not everybody has saved up thousands of dollars when the need for new transportation strikes. Although car shoppers have several options for financing a new or used car, including many online lenders, buyers with good credit may want to consider another option available to them—a peer-to-peer personal loan of up to $25,000 like those available from Lending Club.

Why Use Lending Club for Your Auto Loan?

Pre-payment Advantage. Some car loans may not allow prepayments, or will penalize you for paying down the loan early which, of course, you should do if you can afford it. With a Lending Club loan, any additional you pay each month is automatically applied to the principal, making it easy for your to pay down your loan as early as you are able—saving you a load on interest.

Loan is Unsecured. Hopefully you’ll never run behind on any of your loan payments. But if you fall behind on an auto loan, the lender can repossess your vehicle—you know, send two scary looking armed repo guys to your house at 4 a.m. to tow your car. Lending Club loans are unsecured, meaning they can’t take your car if you pay late. (Paying late will still hurt your credit, of course, you just won’t risk losing your wheels).

Ability to Shop Like a Cash Customer. Perhaps the biggest advantage of using a Lending Club loan to buy your next car is that you can walk into the dealership as a cash customer. This gives you considerably more room when negotiating for your car because the salesperson can’t use one of the auto industry’s favorite tricks–quoting prices as monthly payments instead of total price. You’ll be able to draw a hard and fast line with the dealer as to what you’ll pay.

How to Use A Lending Club Loan to Purchase a Car

Think using a Lending Club loan for your next car is a good idea? To start, you’ll need a credit score of at least 660 (check your credit score for free now). Next, you’ll need to apply for the loan amount you want on Lending Club and wait for the loan to be funded. If it is, you’ll get the loan distribution directly into your bank account. Then, you can shop for your next car with “cash”.

Auto Insurance Coverage Types: Which Do You Need?

David Weliver — Mon, 19 Jan 2009 15:43:14 +0000

Earlier this week I wrote about the importance of bodily injury liability coverage, arguably the most important part of your auto insurance coverage. But what about all the other auto insurance coverage types? What do you need to load up on? And which can you skip?

Auto Insurance Coverage Type #1: Bodily Injury Liability

As mentioned in my earlier article, bodily injury liability coverage is required by law in every single state. It protects your assets in the event you cause an accident and injure or kill another person.

Although this type of insurance coverage is required by law everywhere, the legal minimum coverage may not be enough if you serious hurt or kill somebody else in an accident. For example, some states only require your bodily injury liability insurance to cover you for $10,000 in damages per person and $20,000 per accident. Even minor medical expenses that another injured driver may sue you for could easily exceed this small limit.

If you own your home, have money in the bank or investments, own a business, or have any other assets, you want to get enough bodily injury liability insurance to protect them so an injured drive can’t sue you and take your assets.

Auto Insurance Coverage Type #2: Property Damage Liability

This is the insurance coverage that covers you if you cause an accident and damage another vehicle or physical property. If you hit somebody and they need body work, their insurance company will recover the damages from your insurance coverage (if you caused the accident).

Many states require drivers carry this coverage, but the minimum limits may not be enough. Some states require just $5,000 in property damage liability coverage. If you only carry $5,000 of this coverage and cause an accident that totals another driver’s $70,000 Mercedes, however, you could be on the hook for $65,000!

Auto Insurance Coverage Type #3: Medical Payments

This insurance covers the cost of any medical treatments required by you or passengers in your vehicle if you cause an accident. It does not cover other financial damages that result from an accident that you cause, such as lost wages.

Auto Insurance Coverage Type #4: Uninsured and Underinsured Driver Coverage

This coverage protects you when you are hit by a driver without insurance or without sufficient insurance. In most states, uninsured/underinsured driver coverage only covers bodily injury losses, but in a few states it will cover property damage losses as well.

Auto Insurance Coverage Type #5: Physical Damage Coverage

Physical damage auto insurance is divided into two categories: Collision and comprehensive insurance. Collision insurance covers any damage to your vehicle only when you are involved in an accident (including, for example, if you back into a tree). Comprehensive insurance, on the other hand, covers all kinds of damage to your vehicle (including weather damage, windshield damage, theft, fire, or vandalism).

Physical damage coverage is optional unless you lease or finance your vehicle, in which case your auto lender (lien holder) will require you carry this coverage to protect their asset until it is paid off. Carrying comprehensive coverage is smart during the first few years of a vehicle’s life when it is still a valuable asset (holds substantial resale value).

If your car is older, however, consider canceling comprehensive coverage. The less valuable your car on the resale market, the less you can expect to recover from insurance should the car be damaged in an accident. If you drive a really old car, for example, and it sustains even minor damage in an accident, the insurance company may decide the cost of repairing the car is higher than its resale value and decide to give you it’s resale value (maybe $1,500) instead. If your carry a $500 deductible (the amount you agree to pay out-of-pocket in any insurance claim), comprehensive coverage would only pay you $1,000.

Curious how your insurance coverage stacks up to the minimum coverage requirements in your state? Need to get an auto insurance quote to compare annual premium costs? Check out our resource comparing auto insurance minimum coverage laws state-by-state, or get a free online insurance quote from Allstate® in about five minutes

Auto Insurance Liability Limits: How Much Do You Need?

David Weliver — Wed, 07 Jan 2009 22:05:17 +0000

Here’s an interesting tidbit about auto insurance many people don’t know: bodily injury liability coverage is the most important type of car insurance to have and, often, the least expensive. How much liability coverage is enough, and how can you tell?

Bodily injury liability insurance protects you and your assets in the event you cause a car accident and injure or kill somebody else. If the other party sues you for their injuries and wins, your liability insurance will pay the damages up to your coverage limits. If you don’t have liability insurance, or enough, the courts can—and will—seize any assets you own.

Bodily injury liability auto insurance is required by law in virtually every state. The coverage limits required by law, however, may not cover your needs. For example, in Maine, the minimum required bodily injury liability coverage is $50,000/$100,000. What that means is that the policy must cover at least $50,000 in liability for each person injured and at least $100,000 per accident.

But what happens if you own a home worth $200,000 and you are found responsible for injuring somebody in a crash and ordered to pay them $100,000 in damages?

This minimum bodily injury liability insurance only covers you for $50,000 for any one person. You will be responsible for another $50,000 in damages, even if it means the court has to put a lien on your house. Furthermore, you could be responsible for these damages if you lend the car to a friend or family member and he or she causes the accident.

Therefore, it’s important to buy bodily injury liability car insurance that will cover at least the value of your assets. In this case, you should have limits of at least $200,000/$400,000 ($200,000 per person, $400,000 total).

Often, bringing your auto insurance liability coverage limits in line with what you need will only cost you a hundred or so dollars per year—well worth it if the unthinkable happens and you have assets to lose.

Need to revisit your auto insurance? Curious if you’re paying too much? Get a no-obligation quote in just minutes online from Allstate® Insurance Company.

It’s Time to Buy a House (or a Car), If You Can

David Weliver — Mon, 15 Dec 2008 22:44:24 +0000

There is a bright side to all of this economic doom and gloom going around. If you’re poised to buy a home—or even a car—in the next few months, you’re going to get quite a deal.

Save a bundle on a house

The rate on a 30-year fixed rate mortgage fell to 5.47% last week—a new four year low (sub. required), and lobbyists are pushing Congress to subsidize a 4.5% 30-year fixed rate for new homebuyers.

Not only are mortgage rates low; so are home prices, which fell 9% nationally in the third quarter of 2008 compared to a year ago.

Despite low rates, great prices, and glut of homes for sale, buyers will still need to qualify for a mortgage, which could be the kicker. You’ll need excellent credit and perhaps as much as 20% down.

If you’ve got the credit (and cash) it’ll take to buy a home, then start shopping! To see if you’ll qualify for a mortgage—and what kind of rates you can get—learn how to get mortgage quotes online.

Buy a car, save a truckload

It’s not just the housing market that is ripe for buyers; car dealers are desperate to make deals. As you can see from the recent news, American automakers are hurting the most, but the entire industry is struggling. Read up on my tips for negotiating with car salesmen, take steps to secure financing if you need it, and then head to the dealerships!

(A final note on credit and auto lending. Yes, stricter lending has impacted auto loans. Even buyers with shaky credit should still be able to find approval, however; it just may not be at the dealership. If your credit is average or poor, try applying for an auto loan online as well as with your local bank or credit union before going to the dealership. But always, always get quotes from two or three lenders!

Would You Buy a New Car to Get Better Gas Mileage?

David Weliver — Tue, 28 Oct 2008 12:00:19 +0000

Even as the price of gas keeps dropping, fuel economy is still on a lot of people’s minds, and it’s certainly a selling point for auto manufacturers. Is it something you’re thinking about?

I’ve actually noticed over many years of driving cars that are a least a couple of years old, that you don’t need the latest brand new compact car to get good gas mileage.

A few things that can help any use car reduce fuel consumption:

New tires (and proper inflation)
A clean air filter
New spark plugs
Smooth driving

Then again, if you’re driving an old Explorer, buying a new Corolla will help with the monthly gas tab. Have you bought a new car—or are you considering buying one—to get better MPGs?

Tire Shopping: Save Money on Your Car's New Kicks

David Weliver — Tue, 01 Jul 2008 11:55:48 +0000

Few parts of your car are as important to safety, comfort, and fuel economy as your tires, which should be replaced approximately every 50,000 miles, 5 years, or when they begin to show excessive wear. But with new tires running between $60-$200 each plus installation, replacing four tires can give your wallet a serious whack. To save yourself some dough on tires, follow these tips.

Replace All Four at Once – It can be tempting to buy tires in pairs (front or rear) to save money, but you’ll pay more in the long run due to uneven tire wear.

Rotate Your Tires – Rotating your tires (swapping front for rear and left for right) every 10,000 miles ensures your tires wear as evenly as possible, extending their life. Rotating should take a tire shop about 10 minutes. If you can handle a jack and a lug wrench, you can also rotate your tires yourself.

Keep Your Car Aligned – Ever notice your car pulling to one side on the highway? You car is out of alignment. Most auto shops can do an alignment for less than $100 in 45 minutes or less, which will dramatically improve your tire’s tread life.

Shop Around – Most people take their cars to the local tire specialty store and plunk down top dollar for whatever the salesman recommends. You can easily find your car’s tire size on the side of your current tires – it should read something like 215/70/15 (tire width/aspect ratio/wheel diameter). Use that number to get competitive prices on different shops, and online.

You can save money buy shopping at TireRack.com, which will ship tires directly to you or a local installer. Even with shipping, such a service can save you bundles. While their installation and service may not be as speedy as other tire stores, wholesale clubs like Costco and BJ’s may also offer tires at bargain rates.

Sell Your Old Kicks – If you haven’t completely exhausted the tread on your old tires, you may be able to sell them on Craigslist (or at least give them away); otherwise, expect to pay between $2 and $5 per tire for an installer to dispose of the old rubber.

Online Car Loans Compared: Get Approved Before You Shop

David Weliver — Sat, 28 Jun 2008 13:30:11 +0000

Buying a car with cash is stressful enough; finding the right auto loan is even harder. In my car shopping tips from an ex-car salesman, I recommend getting a pre-approved car loan online before heading to the dealership (even with bad credit). Here’s how, plus reviews of online car loan sites.

Why get a pre-approved car loan online?

Auto dealers profit on customer ignorance. Walk into a car dealership not knowing you can negotiate and buy a new car at sticker, the dealer makes several thousand dollars. Take a car loan without knowing your credit score and current loan rates, the dealer makes several thousand more dollars! And who paid him? You did!

These two simple steps will save you thousands on your next car loan:

Get your credit report and score (get it free now with Experian Credit Check Total)
Get a pre-approved car loan from an online site like MyAutoLoan Finder

How to get a pre-approved car loan online

Most sites offering online car loans allow you to apply for car loans for free and with no obligation. Lenders securely collect loan application information online, including the price range of the vehicle you want, and return a decision and loan terms within a few hours.

If you like the loan, the lender overnights you a check you use to purchase your car. Though your blank check is in hand, your loan is not originated until you use the check. You can use the loan to bargain with dealers, who may beat the online lender’s rate. Decided on dealer financing? Just toss the loan check and drive away.

Pre-approved online car loans compared

For borrowers with good, average, even bad credit, MyAutoLoan Finder provides an easy application, fast decisions, and great support for its loans. Apply Now »

RoadLoans is another option. RoadLoans approves most applicants and gets you your loan check in as little as 48 hours and provides top-notch customer service via email and phone along the way. Apply now »

Want to Know Why Gas Prices Are so High?

David Weliver — Thu, 26 Jun 2008 11:00:19 +0000

On Forbes.com Monday, Charles Biderman of Trim Tabs Investment Services says that if things don’t change, escalating oil prices will topple the U.S. economy.

Though geared towards an investor audience, Biderman’s article is one of the best explanations of the rising oil prices I have read. In addition, Biderman offers our government and corporate leaders some provocative ways to put an end the stifling gas prices.

Biderman suggests:

Regulars require investors in oil futures to disclose their oil positions so the public can see exactly who is profiting from a county crippled by high fuel costs
Government, airlines, and other organizations with an interest in low fuel prices short oil contracts on the commodities market
Regulars increase the margin rates for oil contracts from 7.5% to 25%, increasing the amount of cash speculators need to control oil contracts

Do you think our government should step in to reduce fuel prices? What steps do propose they take?