Use this calculator to help you determine your monthly payment & purchase price. After you have entered your current information, use the graph options to see how different loan terms or down payments can impact your monthly payment. You can also examine your complete amortization schedule by clicking on the 'View Report' button.

What You Need to Know Before Buying

Automobiles are a significant investment. In most cases, you're securing a loan you will spend years paying back. You're investing in a vehicle that will be your primary mode of transportation for years to come. You have to do everything you can to make your choice the best choice. That means you need to be as informed as possible before you start looking. This article will take you through each of the major purchasing steps, including some considerations you may not think of on your own.

Determining your Price Range

The first thing you need to know is what your potential budget is. The primary factor here is how much you can afford to pay each month towards a vehicle. Determine this amount based on your own personal finances -- everyone will have a different figure based on their income and expenses. Once you have this number, multiply it by 36, 48 or 60, which is the number of months for three, four and five year long loans.

To this total, you need to add what you will be able to put forward as a down payment. If you have an older vehicle you are trading in, you will add this number as well. The trade-in value may not be much, depending on the age, make and model. It will factor towards your down payment.

This number still needs some tweaking to finish. You will still need to pay financing charges and, depending on your state, sales tax. From your number, subtract twelve to twenty percent, with twenty being the most expensive scenario. Once you have done so, the number you come up with will be the general price range you can afford. Keep in mind that you will be able to negotiate somewhat with the auto seller, which increases your price range slightly.

As an example:

We offer a variety of tools that will calculate your price range with a few extra variables, if you choose that route. It is useful to know what information is relevant, however. Make sure you don't over-estimate your price range simply to buy a more expensive automobile! You have to be able to afford fuel, insurance and other life expenses as well.

As a special note, make sure you look up what the trade-in value of your current vehicle is. One of the main ways that a dealership profits off you is by offering you less than your vehicle is worth. By knowing the value coming in to negotiations, you know when they try to low-ball you. Check both the Kelley Blue Book and the NADA price guide for an idea of vehicle values. Links to both sites are in a later section.

Knowing your Credit History

Before you search for a vehicle, you should first know what you look like to auto dealerships and lending institutions. These groups are going to want to check your credit history, so you should pull your own history so you know what to expect. If there are any issues or questions that may arise, you should know how to answer them.

Your credit history is primarily stored with three reporting agencies: Experian, Equifax and TransUnion. Any other credit report service will charge you an exorbitant fee in order to pull the information from these companies. Fortunately, you can get your credit history directly from each company for a minimal fee. It does not hurt your score when you pull your report, and it will leave you more informed than before. You are also entitled to get a free credit report from each service at

Why does your credit score matter? Auto dealerships and financial agencies are looking for anything that will indicate you may have issues paying for your purchase. If you have a poor credit score, you are likely to face higher interest rates and less negotiating with dealerships. Most of the best deals you see advertised on television and the Internet only apply to people with excellent credit scores.

Picking your Vehicle

If you go to a dealership with nothing in mind, you are more than likely going to walk away with nothing. If not, chances are you will be convinced to buy something that doesn't quite suit you. You never know what a salesman is going to push to you. What might seem like a good idea at the time often turns out to be ill suited to your needs. To prevent this, it is best to do your research before you even visit a dealership. Here are some general indicators of the type of vehicle you might need.

The broad category of vehicle is just one concern. You also have to consider the size within that category and many of the extras that a salesman may try to sell you.

What size vehicle should you go for? Chances are good that you'll be pleased with a smaller vehicle, as they are typically just as safe as larger ones, if not safer. They are more agile and lighter, which means they stop faster and can avoid accidents. They also get better fuel economy than their larger cousins do, though of course the make and model affect that as well. Many small vehicles also have just as much space inside as larger vehicles. While that may not translate into carrying capacity, it does wonders for the comfort of larger people.

When it comes to drive train and power, you probably don't need the top of the line. All wheel drive, for example, has little effect beyond better acceleration in slippery conditions. Likewise, getting a vehicle that can go 0-to-60 in record time isn't much use if you never put the pedal to the metal. It's better to go with a less powerful engine that suits your driving habits. Hybrids have their own section later on in this article, but in general, they are excellent for driving around town -- if you plan to drive long enough to make the upfront costs worth it.

Once you know what vehicle you're looking for, you should do some research. Check the various auto websites and magazines to see what the average price is for the vehicle. That way you will know what is a good deal and what is simply a salesman sounding persuasive.

Securing Financing

Always try to secure financing before you set foot in a dealership. Having financing of your own gives you bargaining leverage against the typical tactics a salesman will use. More on those in the negotiation section later. You also have the advantage of knowing how much you have to spend, as well as being able to shop around for the best lending rates. Having your own financing also avoids many of the most common financial scams dealerships pull.

Securing a pre-approved loan has a number of advantages. These include:

In order to get pre-approved you will need to gather some data first. You will need proof of your income as well as any assets and savings you may have. This helps the financial institution know you can repay. This includes pay stubs and, in some cases, tax returns. It will help you to have a copy of your credit report, in order to spot any credit mistakes or scams a lending institution may try to pull. This is increasingly rare, but it never hurts to protect yourself.

You have the advantage of being able to shop around, including online. Websites like CarsDirect and TrueCar allow you to get quotes from the comfort of your couch without needing to deal with a bank representative. Feel free to get quotes from as many agencies as you can. Compare the amount, the length of repayment and the interest rate to know how much you're really getting.

At this point, you should know whether you have bad credit. If you do, you are not completely out of luck. Many financial advisers will suggest that you focus your money and attention on improving your credit, but the decision is ultimately yours. Thankfully, bad credit auto loans are becoming more and more common. They are also much safer than they used to be. In the past, poor credit was little more than an excuse to prey upon people using a ridiculously high interest rate. Today, rates are much more reasonable.

You should also be aware that many of the dealership deals they offer for low APR financing do not apply if you have poor credit. It can't hurt to ask, but do not rely on getting a low APR from a dealership.

Finally, here are some financial terms you will encounter in your hunt for financing and your dealings with the dealership. It will help you immensely if you know what all of these terms mean before you dive neck-deep into negotiations.

Buy New or Used?

New Vehicles

Buying a brand new car is unquestionably more expensive than buying a used model up front. The true costs, however, come later down the road. New vehicles have a number of benefits such as the peace of mind you gain from knowing there is nothing broken and hidden from you. You also gain the benefit of any manufacturer warranties. Because it is more expensive up front, however, you may look into some deals. Here are some of the most common ways to cope with the expense.

Bonus Cash, Cash Rebates, Customer Cash

Sometimes a manufacturer will offer bonus cash on a new vehicle. Essentially, one vehicle may cost $30,000 and one costs $30,000 with a $3,000 cash rebate. When you cash in the rebate, your purchase price becomes $27,000. That makes the one with the rebate a better deal. It is the most straightforward type of deal you can find.

Most of the time, the cash rebate will be given to you when you sign the contract to purchase. You are free to apply the rebate to the purchase price of the vehicle immediately, or you can save it for some other use. It is completely up to you, the money is cash in your hand. Since cars depreciate quickly, it is usually best to put the rebate on the loan, unless you have higher interest obligations like credit cards to pay off.

Qualifying for a cash rebate is the difficult part. You may have to finance through the manufacturer, you may have to be leaving a competitor's brand of vehicle or you may have to be purchasing during a spring or summer event. Always be on the lookout for cash rebate deals on the one you want. If you can plan a year or more in advance you can see when these seasonal opportunities are likely to come around the next year.

Low APR or Low Interest Financing

Low APR financing is one of the most common deals you find today. Nearly every automotive commercial will mention some kind of low interest financing. Occasionally they will advertise a complete zero percent APR. A low interest rate will result, of course, in a cheaper car over time. If interest is not building up, you will cut months off your payment schedule. That's not to say that a low APR is free of drawbacks.

As with any financing deal, you will need to qualify. This is where your credit history comes into play most often. You will need an excellent credit score in order to be approved for low APR. Chances are, if your credit score is not good enough, you will end up with a higher interest rate. Always know your credit history so you have an idea whether or not you will qualify.

Low APR financing deals often cancel out other deals as well. This means that if you find your ideal car with both a cash rebate and a low APR deal, you will have to pick which one you want to apply. Most dealerships won't allow you to use both. Generally, the cash back rebate will be better than a low APR deal. This is because the amount of cash you get back is more than the amount you would save by paying lower interest. In extreme cases, where you have a long long for an expensive vehicle, the percentage of interest you would pay over the years is high enough to make a lower APR a better deal. Remember that most low APR deals will stipulate a specific amount of time to pay back -- if you cannot afford the loan in the given period, don't take the deal.

Leases and Special Deals

The standard buying method, the one assumed in the rest of this article, is that you will negotiate financing up front. You will then pay it back over time. If this isn't ideal for you, a lease may be the better alternative.

Leases are calculated such that the overall price is cheaper than it would be to purchase it outright. The catch is the strings attached to the lease. You may have to stick with a strict payment plan and face stiff penalties if you miss a payment. Other deals will offer you an incredibly low monthly payment, but lock you in for years of payments that result in a higher price overall.

Leases have four major factors to consider:

Once you know each of these, you will have an idea of whether or not the lease is a better alternative. Miles driven is rarely an issue unless you spend a significant amount of time on the road. Lease term and monthly payments are the primary two you need to calculate.

Tax Breaks and Incentives

The government offers tax incentives for some vehicles. Most of the time, this means looking into a hybrid or an electric car. The government is trying to help the issue of pollution, and is encouraging people to purchase green vehicles. If you are already planning to look for a hybrid, you should certainly look for tax credits. Which credits are available depend on the time of year, the state you reside in and the model of vehicle you plan to purchase.

It is unlikely that a tax credit alone is enough to justify purchasing a hybrid over a comparable gasoline vehicle. Hybrids have a higher purchase price. However, a tax credit is something you can factor in to your calculations when you decide on your budget, if a hybrid is part of your considerations to begin with.

Used Vehicles

A used car isn't as glamorous as a new one. It probably has some dings and scratches. It might need a little work to keep running. It is probably an older style, an older make and model that might not lend you the image you want. On the other hand, an older used vehicle is bound to be significantly cheaper than a new vehicle. You have to deal with the way it was treated before you own it, but if you pick a good previous owner and treat the vehicle properly, it can last you just as long as a new one would.

Finding a Used Automobile

There are several ways you can locate a used car. Dealerships have the largest selection, but they are businesses. Many of the horror stories you hear about being sold a lemon come from used car dealerships. That is not to say that every dealership is out to scam you, nor does it mean that every individual seller is trustworthy. Just remember to inspect every bit of paperwork. Many new car dealerships will also deal in used cars, though they may have a limited selection.

You can also check guides online and in print. Searching online is a tricky proposition, but with caution, you can make it work. Used car classifieds, as you might find in a newspaper or a specialty car magazine, can be published by both individuals and businesses. If you're looking to avoid dealerships, you won't be guaranteed if you just browse classifieds.

The Best Used Vehicles Available Today

This list is far from comprehensive, but here are ten of the most reliable, best-rated options you can buy used. There are certainly other good choices available, and these models may change in the coming years. For the next few years, however, these are good choices to look into.

Inspecting Used Vehicles

Millions of accidents occur every year. Many of the vehicles involved end up totaled and parted out. Many more have minor cosmetic damage or some internal damage that can be repaired. It is probable that in your search for a used car, you will encounter a vehicle that has been in an accident, so you must do research and exercising caution.

Before you even think about buying a particular automobile, here are some things you should know about it.

Never sign paperwork that forfeits liability for a vehicle as is. The "AS IS" paperwork means that as soon as you drive it off the lot, any problems it has are yours to deal with. This is one common way that dealerships avoid state lemon laws. If you suspect something is wrong, make sure you get it looked at.

With the hurricanes and large storms flooding large parts of the country, one thing you should learn to watch for is signs of flood damage. Flooded vehicles have fewer obvious signs of damage than those in accidents, but you never know when a small patch of rust is going to ruin an engine. Check the radiator, engine and interior for water lines. Does it have new upholstery? No one re-carpets without a good reason. Smell for must and mold. Lift up the carpeting to look for damage beneath. Check the metal bits under the seats for rust. Check the air intake for debris that was never cleaned out.

Step by Step Purchasing Process

For a detailed rundown of the process, here is a six step guide to buying a used automobile from start to finish.

  1. Search newspaper classifieds, used car magazines, Internet resources and dealerships to give yourself a wide range of options.
  2. Run a report on the history of the vehicle. A vehicle history report will tell you if anything has gone wrong or, possibly, is wrong and hidden right now. CarFax and Autocheck are both good options. Never buy without running a history report.
  3. Secure a loan for the purchase price. Banks have stipulations for loans involving used vehicles. There are two primary types. One is for buying from a private seller, and the other is for buying from a dealership. Make sure you get the right type of loan. Also, be aware that banks charge higher interest rates on used vehicles due to the perception of greater risk. They also will generally not offer financing for cars over five years old.
  4. Negotiate with the seller. There is a lot of information involved in negotiating, so there will be more on that in a later section.
  5. Complete the sale itself. You will probably want to get a bank draft, which will record the transaction in case there are any problems in the future. You do not want to pay entirely in cash, because cash is untraceable and there will be no record of the transaction. You can also download a bill of sale form from the Internet to have something you can record all pertinent information on.
  6. Protect yourself. You will probably want to get an extended warranty, since chances are the original warranty is not available. If you are purchasing as-is, you definitely need the warranty. You will also need to make sure to take it to a mechanic to spot any problems before they become expensive issues.

Avoid the common scam with cars parked on the side of the road. It works like this. It's priced incredibly low and looks in perfect working order. The seller parks it somewhere out of the way so you don't know where they live. You withdraw the cash to pay the seller, who doesn't have the title. You go to register it, only to find out that it is recorded stolen. You lose the vehicle, and you have no way to get the money back. Avoid these extra-cheap cars on the side of the road.

You can buy from a rental agency if you want. They have a few benefits, mostly in maintenance. The rental agency wants their inventory to be in perfect working order, so they keep them in good repair and retire them after only a couple of years. This means you're getting a well-maintained vehicle. On the other hand, it is likely to have a number of cosmetic dings and scratches. Further, it has been driven by many drivers who may have treated it poorly. Rental agencies also typically refuse to haggle, so the price may not be as low as you would like.


Negotiating is where most of your information comes in handy. It is also where the dealership will do their best to try to wring more money from you. If you go into negotiations well informed, you will be able to beat their sales tactics and walk away with a better deal than you otherwise would. Here are some tips and strategies for negotiation.

New Car Negotiations

Find your Fair Price

The first step for negotiating with a dealer is learning what they paid. There are services online like TrueCar that allow you to look up the dealer invoice. You can even ask to see the invoice while negotiating. You'll be able to see a list of the various fees and payments they have to make while the vehicle is taking up space on their lot. Some of these are legitimate expenses, such as rent for the building. Others are financing fees and special deals that they add on top to make their potential profits higher.

Your goal is to calculate a price that is five percent higher than the dealer's cost. Take the invoice price, subtract the factory to dealer incentives, subtract the factory holdback and add five percent.

Why five percent? Most businesses survive and thrive on a one to three percent profit. Salesmen often sell to uninformed shoppers for a profit of ten or more percent. Five percent is a fair offer that gives the dealership a profit without costing you more money than you have to spend.

Negotiate Correctly

Try to complete the deal quickly. You're offering the dealer a lower amount of profit than they would usually get, so they have an incentive to not waste time with you. If you spend two hours negotiating, their profit per hour shrinks. Try to get the deal complete within half an hour. It saves both of you time. In order to encourage this, make sure you have your financing secure before you set foot in the dealership.

You've made your offer, so don't budge. They will give you a sob story about stealing food from their kids, needing more profit to survive or how little they get after the dealership takes their cut. You don't need to listen -- they're trying to charge you more, after all. They would be stealing food from your kids.

Make sure you know why your offer is what it is. You need to be confident in your offer. If the salesman doesn't take you seriously, be prepared to walk away. Other dealerships will accept your offer. You do not need to accept a worse counteroffer just because of a perceived limited choice. Stick to your offer! They might try to explain other costs they have to pay, but you have done your research. You know what offer is fair.

Never negotiate when you're hungry, tired or sick. Eat a good meal before you visit the dealership. Make sure you got plenty of sleep the previous night. Shower so you feel comfortable. Dress casually, but not too casually. A nice pair of slacks and a dress shirt is all you need. You don't need a suit to negotiate, but you shouldn't look like you can't afford what you're buying. Any inappropriate state of mind may make you make poor decisions.

Dealership Tactics

"We don't need to lower our price. These are selling like hotcakes. Other people will pay more than you will, and you'll lose out." No, you won't! You will go to another dealership and give them your fair five percent profits. Always be prepared to walk away.

"The deal is only good today. There are other buyers looking at this, and my price today is lower than it will be tomorrow." Wrong! Other people looked at it, showed interest, saw the dealership price and walked away. They may be back tomorrow, or they may not be back at all. You have an offer on the table. They might tell you their good price will be gone tomorrow. You can tell them so is your offer. You're under no obligation to purchase from them, and you can get your better deal elsewhere.

"Look at these records. Here are now many we've sold, and the prices we've closed on. This offer is fair, anything less is stealing food from our children." Nope! They clearly present you with a list of previous sales they made an excellent profit on. In reality, they're trying to increase your offer, stealing food from your children. Don't be afraid to use their information against them.

"We'll beat any other dealer's price, or we'll give you X amount of money!" Of course, they will. You just need written paperwork from that other dealership. So why not just buy it for the better deal at that other dealership? Even if you do bring in the paperwork, they might find a tiny detail to claim the vehicles are different enough to void the deal.

"Our ad says no payments for six months, but it was a clerical error. It's really just two months." This is an outright lie. Take your offer and leave.

"We have the model you're looking for, just come in." Then, when you come in, it turns out they just sold it and you missed out. However, if you just look over here, we have another one for a few thousand more. All you need to do is pay more than your offer because you missed the one that didn't exist in the first place.

"You'll never find it cheaper anywhere else." Usually they will say this as you walk out the door, jilted that they didn't get the sale. Well, who are they to tell you what deal you won't find? Even if you can't find a better deal, there's no shame in coming back and saying so. At least you tried.

Save Money

Always have your facts on hand. You calculated a fair five percent profit for the dealership. You have all of the numbers, you know where they came from and you trust the source. Don't let them sway you with the invoice price.

No haggle signs are a great time to haggle. Many dealerships use no haggle to sell at an inflated price. They think it will lower your guard, and that you won't have to go through this whole process. If the no haggle price is higher than your fair profit offer, haggle! Remember, you have the ultimate trump card. You can, at any time, walk out of the dealership.

If they ask you how much you're willing to pay each month, don't give them a number. The monthly payment is irrelevant and has nothing to do with the value of the automobile. You're negotiating based on the value, not on how much you can pay ever month.

Don't let them to convince you to finance through them. They may claim it gets you a better deal, but the loan might have a longer term, pre-payment penalties, or you might have a higher interest rate. They want to maximize their profits and will do whatever they can to crank those numbers up.

If they claim it is hot and flying off the shelves, back away. You don't care about popularity. Don't impulse buy just because of the perceived demand. At best, you'll pay far more than you should have paid. Don't ignore supply and demand. Once the buying frenzy drops off, you'll be able to get a much better deal. All you need to do is back off and wait.

Always verify the dates on any paperwork they provide you, both handwritten and computer printed. Many deals require you to pay by a specific date. It serves the dealership to misprint the date, so they can later revoke the deal with claims of nonpayment. They even have proof! Always verify dates.

You are not required to purchase credit life insurance or an extended warranty. Credit life insurance is a scam that increases dealer profits, and it is aimed at people with bad credit. It is also an illegal practice in some states. Report the dealership immediately and definitely do not buy from them.

Read the fine print. Often newspaper ads will mention a much lower price, but the price includes rebates. This has the dealership retaining the rebates for themselves, meaning you don't get any of the cash back.

Never give them a deposit check before you're one hundred percent certain you're purchasing. They'll file it away in a folder so that if you decide to back out of negotiations, you have to get it back. They'll do anything they can to hold on to that check. Don't even take it out of your checkbook until you're ready to buy.

Used Car Negotiations

Buying used is a bit of a different experience. Here, you are in the position of the salesman, trying to whittle away the patience and confidence of the seller. You want the best deal possible, so it is best to treat the seller as if they are trying to overcharge you. Treat them respectfully, of course. They have no obligation to sell to you if you are obnoxious.

Dealing with Dealers

Ignore "certified used car" labels. This is dealership slang to make you feel better. In order to sell it certified, they need to perform certain maintenance tasks and ensure the vehicle is in proper working order. It also means it has never been in a major accident. Always compare your CarFax report with what the dealer is telling you. Some slimy dealers will make cosmetic improvements to the car and leave mechanical problems for you to deal with down the road.

Don't rely on a 90-day warranty covering everything. Most of them cover the power train and not much else. If the dealer says they will cover everything, no matter what happens, get it in writing. Verbal contracts are not legally binding, and some salesmen will do anything to close the sale and get inventory off their lot.

Federal law requires that used vehicles have a buyers guide attached, containing all of the pertinent information about it, including whether or not it is sold as is. Don't listen to a salesman if they try to contradict the buyers guide. The guide overwrites what they say.

Remember that it's only worth what you're willing to pay for it. If it has been sitting on the lot for one month or for one year, the price doesn't change. Always be willing to walk away, and remember the dealer probably paid several thousand under book value when they bought it. They will also try to cite you prices from the NADA price list. This list is higher than the Kelley Blue Book pricing, which is what you probably used. Stick with your offer.

Dealing with Private Sellers

Some of the time you will be dealing with another individual who is simply trying to offload their old vehicle. Chances are they will set a high price hoping to negotiate down to something closer to the true value, with as much profit as they can save. You should do your research first, looking up the used value and subtracting any damages you see. When you come prepared, the seller has less ground to stand on.

Always show up a little late to your appointment, to drive down their confidence. Always show up during the day, because at night you can't perform a proper inspection of the vehicle. Always take a second person with you, because they will be used in a few of the other negotiation tactics discussed here.

Have your partner be extremely negative, trying to convince you not to buy. Have them point out every scratch, every dent and every slight flaw with the vehicle. When they point something out for you, run a finger along it and look disapproving. You're using psychological tactics here to discourage the seller. They will expect a low-ball offer when you're done, and you will be happy to oblige.

Always take a test drive. Bring the seller with you and ask them questions about every little rattle, grind or shake. Never buy without a test drive. If the seller won't let you drive it, look for a deal elsewhere. There is no reason they should ever deny you the ability to drive what you will be buying.

Check the fluids. Is there windshield fluid? If not, the driver couldn't be bothered to refill it for a buyer, which is a sign something else may be poorly maintained. What color is the radiator fluid? It should be green, and brown fluid signifies old unchanged fluid. The transmission fluid should be purple, or slightly brown if it is getting older. If it is black, back away.

If you are confident in your research, make an offer. If not, go home and analyze the data you collected to come up with a solid offer. Don't try to work away at their selling point. In fact, ignore their selling point altogether. You know book value and you know how much you are willing to pay. Make your own offer. When you make your offer, bring printouts of other sellers who have similar or lower prices.

If the seller won't budge, back away. Have your partner make a comment about how the other seller -- whether or not you have one -- was selling a similar one with lower mileage. If the seller overhears, they may panic and decide to accept your offer at the end. Otherwise, simply walk away. You can always come back with a higher offer later, once you've done more research to see if a cheaper option can be found.

Dealership Scams

Some dealerships are run by trustworthy individuals with salespeople who will cut you a fair deal, be up front with the vehicle information and will work with you to find a good deal. Others are staffed with people more concerned with their profits than with your savings. Some have unscrupulous salesmen who make the stereotype look pleasant. Here are some of the possible scams you may encounter. If you have bad credit, be particularly careful, as you are a probable target. Most of these scams take place in the finance office after the sale, so do not let your guard down just because the price was negotiated.

#1: Financing fell through. You make the deal for a low APR, you sign the papers and you drive home. A week later, they call you saying you didn't actually qualify for the rate. You check your paperwork, only to find a "subject to approval" clause in the contract. Now you're stuck with a higher APR. To avoid this scam, secure your own financing. The dealership cannot scam you through financing if you don't finance through them.

#2: Lying about your credit score. You pulled your credit history. You know your credit score is, say, 680. You qualify for the zero percent APR. Then the finance manager comes out of the office and hands you a paper with 500 circled, saying your credit score is too low to qualify. To avoid this scam, simply show them your credit score. Why is the official report different from their number? If they don't correct it immediately, walk away.

#3: Didn't pay off your trade-in. If you still owe money on your trade-in, the typical practice is that the dealer will pay it off and add that payment figure to the price of your purchase. The scam happens months later, when you receive notices that you haven't paid off your old loan and you now owe more money. You have no recourse, because the contract is in your name until the dealer pays it off. To avoid this scam, you have two options. The first is to wait unitl it is paid off. Then you can trade it in without worrying about the bills haunting you later. The second option is to force the dealer to add a clause, in writing, that they will pay off your trade-in within ten days or the contract is void. This way you have a legal fallback if they fail to pay.

#4: Straw loan signing. This is a type of bait and switch scheme. You're told your credit score is too low to qualify for a good loan, and so you need a co-signer. The co-signer is mixed up in the paperwork and, somehow, ends up as the listed primary recipient. Suddenly, the dealership makes a mistake and you aren't even on the contract any more. To avoid this scam, avoid co-signing altogether. If you don't have good enough credit to secure financing, you should probably not be looking for a new car.

#5: Your lender always bounces checks. This is most common with online lenders and credit unions. The dealership will say that this particular group always bounces checks, and that they don't accept them any more. Instead, you have to finance through the dealership. Of course, you'll get a high interest rate. To avoid this scam, walk away. Your lender is trustworthy -- if they weren't, they wouldn't still be in business. You're under no obligation to finance through the dealership.

#6: Warranty required. Some dealerships will try to sell you a warranty using any of a number of different tactics. You might need a warranty due to your low credit score, or so that the bank will approve your loan. They might claim the warranty factors in to the total cost and will decrease your APR or your monthly payments somehow. To avoid this scam, ask the dealer to put it in writing that the warranty is required to secure the loan. They won't! That's because it isn't, and they can be held liable if they claim it is. Instead, refuse to buy it or walk away. As always, securing your own financing is a better way to go.

#7: Excessive charges and fees. This isn't technically a scam, because there is nothing illegal about it. It is simply a high fee that you don't need to pay. Many dealerships will add a line on their contract about some kind of preparation or initiation charge. This is the fee the dealership charges for preparing it -- putting in fluids, removing plastic from the seats and vacuuming -- which doesn't take them very long. It is also a fee that is paid by the manufacturer, so why is the dealer charging you? To avoid this scam, simply demand that the dealer credit you for the amount. They may claim they can't remove the fee because it is permanently printed on their contract, but they can easily add a credit for the same amount to cancel it out.

#8: No matter the cost, we'll pay off your old loan. You trade in a vehicle you still own ten thousand on, and the dealer pays it off when you buy a new one. Of course, you still have to pay off the ten thousand. Why? They add the ten thousand to the cost of your current loan. The trick is, they stretch the price out. Maybe you were paying $300 a month, but with this trade-in, you're only paying $250 a month. Seems like a deal, right? The catch is now you're paying $250 a month for 36 more months than you would be before. To avoid this scam, pay off your trade-in before you trade it in. This is a similar scam to #3 and can be avoided the same way.

#9: Sold as is. It might have been in a wreck, and the dealer might be lying about it. They might not even know it was in a wreck. Federal law mandates that the buyers guide have the line "As in, no warranty" on it when this is the case. “As is” means that the dealership is not liable in any way for any repairs on the vehicle. You might be buying something that will fall apart the instant you drive it off the lot. To avoid this scam, never, ever buy as is. Just don't do it. You will never get a good deal. If they were confident in quality & reliability, they wouldn't push this sort of contract.

#10: The fake escrow scam. This isn't actually a scam you will find at a dealership, because it doesn't involve a legitimate dealership at all. If you are trying to buy on EBay or another online service, beware. This scam comes when the seller wants to contact you through e-mail about using a third party escrow service they trust. Never use it. Never, ever use it. It may be a fake site designed to steal your personal information and your money. Chances are the seller doesn't even have anything to sell. To avoid this scam, never use a financial site you don't trust. Always check the URL before you put in so much as a username, and do research searches for "brand name scams" and similar to verify it has a good reputation. Never wire money through Western Union or any other service. Protect yourself.

#11: We snagged you a lower monthly payment, just come back and sign a new contract. Your monthly payment will go down, of course, but the number of months will go up. Chances are they actually raised your interest rate and want to hook you into a longer loan. To avoid this scam, be satisfied with your original deal. If you want to trust the dealership, at the very least check the calculations. Multiply your payment by the number of months for both your old and new contract to see what they're pulling.

All about Hybrids

Hybrid is the general term many people use for anything that runs on a fuel other than gasoline. As such, it is a large category with plenty of information. Combine that with the aggressive competition and anti-hybrid campaigns in the early days, plenty of misinformation is available as well. This section should help clear up some of the common misconceptions about hybrid vehicles. Firstly, there are two main types of hybrid vehicles: gas-electric hybrids and true electric vehicles.

Benefits of Electric

True electric cars are a relative rarity compared with hybrids. These vehicles are powered completely by electricity, the same kind you get when you plug a television or a computer into the wall. Electric vehicles plug into the wall to charge, or at public charging stations that are slowly being built around the world.

Some electric cars are gasoline cars that have been converted. Others are designed from the ground up to be electric. Thare are virtually silent when running & much quieter then older automobiles. When you consider that gasoline fuels a constant series of small explosions, this should come as no surprise.

Electric vehicles have a lower cost to run than gasoline ones. You don't need to purchase gas, so your fuel costs don't fluctuate with gas prices. You will have a higher power bill, but the cost of electricity is much lower than that of gasoline. They are also very reliable -- they have very few moving parts, so they won't wear out as quickly as gas engines. They also have a lower need for various fluids, which helps the wear and repair costs.

The largest reason to get an electric vehicle is the lack of emissions. They have no tailpipe emissions and are a very green alternative to gas. They are nearly silent, which lowers noise pollution as well. Even though the electricity has to come from somewhere, there are plenty of green energy sources.

Common Complaints about Electric Vehicles

One common complaint is the range of an electric vehicle. It can only run as long as it has power, and because the vehicle is entirely electric it doesn't have a gasoline-powered engine recharging the batteries. Once the power runs dry, the engine shuts down and you need to charge it if you want to move again. Technology is always improving in this regard, however, and the problem has been mitigated in recent years. The average person drives around forty miles in a day, and the typical electric vehicle can travel at least eighty on a single full charge. As long as the vehicle is charged each night, there should be no issues with distance and charge.

Another common complaint for both hybrids and true electrics is that the green benefits are minor. The thought is that while it is not producing emissions, the power required to charge it comes from coal burning or another dirty fuel source, which minimizes the benefit. While this is true, the emissions from a single tank of gas far outweigh the emissions caused by the power of a single charge.

The power grid and charging infrastructure are two more common complaints. Many people claim few charging stations present a major inconvenience. While this is true, most of the vehicle charging is done at home. Barring long trips, it virtually never needs to be charged at service stations. Some people also believe that if there were a mass adoption, it would overload the power grid and cause untold damage. This, fortunately, is simply not true.

Batteries cause other concerns. The batteries themselves are expensive, but most electric vehicles have battery warranties or leases. They are also highly recyclable. The impact on the environment is incredibly minimal.

Benefits of Hybrid Vehicles

Hybrids, those vehicles with both a gasoline engine and an electric motor, offer the best of both worlds when it comes to power production. They aren't as green as electric vehicles, of course. They still burn gasoline to power some part of the car. Hybrids mostly rely on the electric motor, and the gasoline engine is used simply to keep the battery charged and to aid when more power is necessary.

There are actually two different styles of hybrid vehicle. These are the Series and the Parallel hybrids. Series hybrids are powered entirely by the electric motor for short distances, and the gasoline engine kicks in for trips over fifty miles. Parallel hybrids are more common and use both the gas and electric motors at the same time. They work together to save as much energy as possible, resulting in incredibly high fuel efficiency. The Prius is a prime example of a parallel hybrid.

Hybrids bridge the gap between electric vehicles and traditional gasoline vehciles. They have some emissions, but far less than that of a gasoline one. They do not rely entirely on a charged battery, nor do they have the horsepower issues that some electric vehicles face. They are perfectly capable of traveling hundreds of miles at a time without suffering. They are also less expensive than pure electric vehicles, though they are still more expensive than gasoline-only cars.

Hybrids are still mostly used for coupe and sedan style vehicles, and to a lesser extent SUVs. They do not quite have the power and towing capacity necessary for heavy work, though great improvements are being made every year in that respect. Hybrids are excellent vehicles for families who travel in the city or over short distances very frequently, and occasionally take longer trips in the countryside. They are ideal for city driving, because they use very little fuel for short distance trips. This means a single tank of gas can last an incredibly long time.

A hybrid needs to be used constantly for a significant amount of time to balance out the increase in purchase price, however. Take this example. A gasoline vehicle costs $30,000 and a comparable Hybrid costs $45,000. The hybrid has a government rebate of $5,000, bringing the cost down to $40,000. This means the hybrid has a $10,000 higher introductory price than the gasoline one.

Assuming a moderate amount of driving, we can guess a driver will use a single tank of gas each week. If a single tank of gas costs $60, a conservative estimate for some parts of the country, it will take 167 weeks worth of gas to equal the $10,000 price different to break even. That is three years of constant usage, with a few months left over. This doesn't factor in the hybrid still needing to purchase gas occasionally. These numbers are high, in case you are concerned. In recent years, the price difference between a hybrid and a comparable car is closer to $4,000.

The exact calculations, of course, will differ. The selling price difference may be lower, the tax breaks may be higher, gas prices fluctuate and the amount of driving has a huge impact. Each individual or family looking to buy a hybrid will need to do these calculations themselves. That said, a hybrid is still an excellent investment if you plan to drive for at least four or five years, if not longer. If you habitually change vehicles every couple of years, the hybrid may not be the right choice.

Common Complaints about Hybrid Vehicles

The size of the vehicle is one primary concern. You won't find a Ford F-150 hybrid, nor will you find a nine-passenger SUV or van powered by a hybrid engine. That is, unless you perform the conversion yourself. Hybrid engines only put out so much power at a time, and they are currently unsuitable for hauling cargo or extremely heavy vehicles. That said, hybrid technology is improving with every year that passes, and eventually hybrid engines will be able to fill this role.

Internal size is occasionally a concern as well, but most hybrid vehicles have roomy interiors and a well-designed layout. As always, test-drive any vehicle you want to buy before you decide. The interior can make or break a purchase no matter what type of engine is under the hood.

The price point is of concern for some drivers. As mentioned above, they do have a higher cost to purchase. They take years to work off the investment, but after a certain point, it is entirely profit. Each driver needs to perform their own cost-benefit analysis of the price point, available deals and driving habits.

Battery issues are a common concern. With a gasoline vehicle, a jump-start can get you running and even recharge the battery when it is drained. With a hybrid, the battery provides most of the power. If the battery drains, it will use gasoline to recharge it, but the battery itself may be damaged. Batteries need to be replaced occasionally, and they can be very expensive. If multiple batteries are installed, they may have different ages and charges, and the constant cycling between them will wear them both down much more quickly.

Part of the cost of hybrids is the manufacturing cost. There are no factories completely set up to manufacture hybrid vehicles at the same rate and cost as gasoline vehicles. They are simply more expensive to make, which means they are more expensive to buy. Government tax incentives can help mitigate this cost, but it is still substantial.

As with electric vehicles, many people worry of the origin of the power that is used to charge it. In a hybrid, you either plug it in like an electric and draw power from the grid, or you run the gasoline portion of the engine long enough to charge it. Some power is drawn from the brakes when slowing, but as anything with friction, it is not perfectly efficient. That said, much of the power that comes from the grid is cleaner than the energy gained from burning gas. The green savings is a net benefit.

Hybrid Buying Tips

All about Insurance

Insurance is mandatory for all drivers, and unless you are a first time buyer, you probably have insurance already. When you're buying a new vehicle, it is the perfect time to research and purchase new insurance.

Asking about Insurance

When you buy a new car, you should contact your insurance agency to ask about your current insurance. You will definitely need to contact them to change your automobile information, whether or not you chance insurance providers. The last thing you want to do is pay insurance for a vehicle you no longer own. Buying a new automobile will probably affect your insurance rates. They may go up or down, depending on what the options are on your new car. If you buy new, your premiums may increase due to the vehicle value especially if you shift from collision to full coverage, while a used car may have different liability costs due to a lower value & fewer safety features.

You may as well take this time to talk to your insurance agent about your insurance coverage. It may have changed since the last time you talked about it. On the other hand, your situation may have changed and your insurance no longer covers everything you want it to cover. Here are some good questions to ask.

1: Who all is covered under your current policy? If you are the only one covered, you may want to tweak your coverage if you have a family now. A spouse or children who are now of driving age should be covered as well, no matter what your vehicle.

2: What about when they are driving a different car? Most insurance will cover you no matter what vehicle you're driving, but you should make sure your dependents and family are covered. Too little coverage is never a good thing.

3: Do you have other insurance policies that can be lumped together for a discount? You may have more than one vehicle. If you have a boat, you might insure that as well. Depending on the company, you may be able to receive a nice discount by lumping in life or renters/homeowners insurance. Health insurance of all sorts might be qualified as well, depending on your policy. Ask for any discounts you can.

4: When your vehicle changes, what needs to happen? If you've sold something, you will want to remove it from the policy. If you are keeping it, it needs to be insured. On new purchases you may have different policy changes than if it is used. There is also the transition period to worry about; the time between when your current coverage ends and your new coverage begins. Ask about the temporary coverage in case an accident occurs in that short span of time.

5: If you were to cancel your insurance, for instance if you find a better deal elsewhere, are there any penalties? Some policies have cancellation fees and repercussions. Of course, if you don't have a vehicle you may be able to let your insurance lapse with no issues, but this article assumes you're buying a new car.

6: What does each line on your policy mean? It might be a good idea to sit down with your insurance agent in person to discuss all of the details. If you are unclear on your insurance coverage, what premiums and deductibles are and other insurance terms, you will benefit from learning the details. It always helps to know in advance if a fender bender is covered or if there is a circumstance where it isn't.

If you're shopping around for new insurance, you should ask a few questions of your new potential provider. This is especially true for small, independent insurance providers. You want to make sure you go with a reputable name you can trust and not a minor insurance dealer with a bad reputation.

1: How long as the company existed? A company that has lasted for years is going to have a reputation. This reputation might be good or bad, and it is up to you to find out. Insurance is a long-term investment and you want to make sure your provider is able to provide. Some companies, especially new companies, might not have a good reputation. It is rare, but occasionally an insurance company folds and leaves drivers unprotected.

2: Is the agent you deal with a full-time worker? Some insurance agents work part time from home, and that means they aren't always available to answer questions or file claims. On the other hand, it might show they are motivated to work for themselves and will do what they can to please you. It is a personal judgment whether you take it as good or bad, but you should ask and learn regardless.

3: If you're dealing with an independent insurance agent, be sure to ask them what company or companies they represent. Some agents will work exclusively with one company. Others will leverage their time amongst several companies. You want to know if they are working with a shady company you would rather not rely on.

4: How often do they review their policies? You might want to have an agent who looks over their policy ever six months or so. Circumstances change, vehicles change and lives change on a regular basis. It's no good to have insurance that won't change with the times.

Insurance Myths

While we're on the subject, we might as well cover some of the more prevalent insurance myths. Decades of information and misinformation have piled up, and it becomes difficult to sort through everything to find the truth buried beneath. Here are some of the more common insurance myths and the truth behind them.

1: The minimum mandatory coverage required by the state is plenty. In fact, the minimum mandatory coverage is just that -- a minimum. It is all you need in order to meet the legal requirements of the state. However, it is far from adequate coverage for the variety of situations you might encounter over the lifetime of your vehicle. You may be a safe driver and you may never get into an accident, and so your insurance coverage never comes up. On the other hand, you may have someone run into you when you're parked it at the grocery store and find the damage isn't covered. You never know when something you didn't expect is going to come up and put your insurance to the test. It is far better to get complete coverage now than to have to pay extra later.

2: New cars are more expensive than old cars to insure. This may seem like it is true on the surface, and that implies that the new car you are buying now will cause your insurance rates to rise. This is because a new car is more expensive to replace than an older one, in most cases. On the other hand, insurance covers a wide variety of situations, and yours may not result in an increase. For example, if you are trading away a rare or expensive vehicle, a new one may be cheaper to insure. New cars also have significantly more safety equipment than older ones, and safety is a huge factor in calculating insurance costs. An unsafe older vehicle may cost far more to insure than a safe new one.

3: Red cars are the most expensive color when it comes to insurance. The fact is, the color has very little to do with your insurance costs. Red cars have a stereotypical history of being speedsters and living dangerously. In the end, it is just another stereotype. The color may have a minor effect on your risk of crashing, but the vehicle safety features, weather conditions and other factors are far more influential. Insurance companies simply don't bother to consider exterior color when they calculate your premiums. The only reason they ask about the color is so the automobile can be identified more easily.

4: If a friend drives your new car and is in an accident, their insurance will cover it. The truth is, you are insuring your car, not yourself. Your insurance follows the car. If your friend crashes it, they aren't responsible as far as the insurance is concerned. Your coverage will cover the accident and any repairs, though your friend may still be on the hook legally for any damages.

5: Your credit score doesn't affect your insurance rates. In fact, as we know from previous sections of this article, your credit score has a large impact on your ability to get financing. The same can be said for your insurance rates. If you have poor credit, it indicates to the insurance company that you have a history of negative financial transactions. They see you as financially unreliable, and so increase your rates accordingly. On the other hand, if your credit score is good or excellent, you will see better rates on your insurance than you otherwise would. Of course, if you live in Massachusetts, Hawaii or California, you don't see this effect. These three states have banned the practice of using credit score to calculate insurance rates.

6: Children will cause your insurance rates to change. This is probably true! Children have a huge impact on every aspect of your life, including your insurance. On the other hand, this doesn't necessarily mean your rates will go up. Once again, safety is a primary factor here. If you have a child, chances are you're purchasing something with a high safety rating. Larger, roomier vehicles with more safety features tend to have lower insurance rates than the smaller, faster vehicles not designed for safety.

What Affects Insurance Calculations

Three primary categories affect insurance rates. These are vehicle, driver and company factors. Here is an idea of what each contains. Bear in mind that every individual insurance company is different, and their calculations may put different weight on different factors.




Disposing of your Old Automobile

When you're buying a new car, whether it's used or new off the lot, you have a decision to make about your current vehicle. What do you do with it? You have several options.

1: Keep it. If it still runs, an old vehicle can be useful in certain situations. If you have a family, having two cars may make it easier for both parents to hold jobs. It is also useful for when children reach a driving age. If they have a junker car to use, you as a parent don't have to worry as much about your nice new car being dinged up in a young driver's first fender bender.

2: Sell it. You are always able to sell it used on the secondary market. You don't have to involve a dealer at all. Just be sure to read the sections above about buying a used car. Many of the tactics that buyers should use when negotiating are tactics you should watch out for as a seller. Make sure it is well maintained, that you have all the relevant records, that you are honest and communicative with potential buyers about the price and that you don't try to hide anything wrong with the vehicle. You might be able to offload a junker on an unsuspecting buyer, but it is better to be honest about the value of the vehicle.

3: Trade it in. Many dealerships will accept trade-ins in virtually any state, though they may not give you much for it. Some dealerships will take anything, regardless of whether or not it runs, patch it up and sell it to someone else. Others will take your junker and tear it down for parts, selling the parts or using them in repairs. When you trade-in, you are generally putting the value of the vehicle toward the down payment on your new vehicle. Make sure you know the value of your trade-in before you agree to give it up.

4: Sell it for scrap, to a junk yard or as parts. There are many groups who will buy an old, inoperable vehicle. This is the ideal option if it is broken beyond repair. You can sell it for scrap and make a minor profit if no one will take it as a trade-in. You can also sell it to specialty buyers who specifically advertise cash for cars. Always be aware of the book value before you agree to sell it to a cash for cars buyer, because many of these buyers will attempt to low-ball you in order to maximize their value. On the other hand, the price might be worth it simply to get a broken vehicle out of your yard.

5: Repair it. If you have the money to invest, you might be able to make a bit of a profit if you perform some minor repairs. If it functions, or if it is nonfunctional but has minor work to get it fixed, you can potentially sell it or trade it in for more value than you would if it was broken. Be sure to do your research before you spend money on repairs! You don't want to dump $1500 into repairs only to find you can now sell it for $300 more than you could before.

6: For those who are mechanically inclined, you can always keep the junk car to do something with. It can be a father-son project, for example, tearing down and rebuilding it. It could be re-purposed in any number of ways. Your imagination is limitless if you don't worry about the value of the old vehicle. This is especially true of mostly-valueless old cars or, in the case of a rebuild, classic cars that can use some work.

About the Kelley Blue Book

When dealing with list price, you will often see the term "blue book value" thrown around. This is the listed value according to the Kelley Blue Book. What is the KBB and why is it the authority on auto prices?

In 1918 Les Kelley was one of the original use car salesmen. In order to keep track of inventory he would buy and sell, he started making a list of each one and the values he would buy and sell it for. He sent this information to various banks and dealerships, and it quickly became the go-to reference for used car prices. The first version of the book itself was published in 1926.

Today the Kelley Blue Book can still be found published each year, but the more useful reference is their website. They keep all of the information, constantly up to date, on the Kelley Blue Book website. At any time, you can visit the site to look up how much you should pay for any given make, model and year. You can also look up approximately how much your vehicle is worth. This is an invaluable resource both for dealers and for consumers.

Dealers may try to use a different price list. This list is the NADA price guide, which stands for National Automotive Dealer's Association. The NADA guide, found on their website here, often lists slightly different prices from the Kelley Blue Book. The KBB value tends to favor the consumer, while the NADA guide will offer the dealer better prices. Dealers will often use this guide to try to get a higher sell price in negotiations.

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