Purchasing an automobile is a major financial obligation for most households. For this reason, strategic plans should be made to ensure every dollar is maximized. This article provides some very insightful strategies and information on the following:
The best time to buy a new car is during the last quarter of the year (September, October, November, and December). Most dealers receive an inventory of newer model vehicles for the upcoming year in September. For this reason, many dealerships offer their very best promotional offers during the months of September, October, November, and December. For example, if you want to purchase a 2012 modeled vehicle your will receive the best promotional offers during September, October, November or December of 2012.
Shop and compare rates of different lenders for financing. DO NOT solely rely on dealerships to provide financing options. Do your own research and try obtaining financing through outside sources. If you belong to a credit union, discuss and compare rates with your credit union. Remember although it may be convenient to use the dealers lenders, it is not necessarily the best option. Car financing agreements can be a 3-6 year obligation. In other words, it is worth the effort to shop and compare rates to find the best terms possible.
The maximum amount most standard auto insurance polices will cover if your vehicle is involved in a total loss is the market value or book value for your vehicle. This means most standard policies will not, necessarily, cover the amount of your loan. If you owe more than your car is worth, your loan is considered to be "upside down". There a couple of things you can do to be proactive and avoid being financially "upside down".
Many people become so focused on their monthly car payment. The bigger the down payment, the lower their monthly bills will be. So often people adjust their amount to put down based on what they feel will make a comfortable monthly premium. In actuality, you should also consider the rate of depreciation for their chosen vehicle. It is estimated the average rate of depreciation for a new car is 20% in value during the first year. For this reason, it is strongly suggested that 20% down is used to purchase a vehicle.
GAP Insurance. Guaranteed Auto Protection is definitely an option to consider if you are purchasing a new vehicle with a small down payment (less than 20%) or with NO money down. GAP Insurance is an insurance policy you can purchase separate from a standard auto insurance policy. Typically, GAP Insurance can be purchased at the finance department and/or insurance office of the car dealership. Be sure to review your standard auto insurance policy carefully before purchasing GAP Insurance. If your policy states, "will pay off the fully financed amount"- GAP Insurance is NOT needed. Remember GAP Insurance only supplements a standard auto insurance policy. It does not replace a
standard auto insurance policy. As previously discussed, most standard auto insurance policies will cover only the market value worth of a vehicle if it is a total loss. GAP Insurance will cover the difference between the amount owed on your financed vehicle and the amount your standard insurance policy pays out for a total loss that is covered.
The quicker you reconcile your loan- the less interest you will incur. Every day your loan is open it accrues interest. For this reason, paying it off early is usually a smart move. Before you make plans, be sure to contact your finance company and verify whether or not there are penalties associated with doing so. If there are penalties involved, proceed with caution. Read the fine print of the contract and obtain an objective opinion from your own personal bank. If you determine it is to your advantage to pay off early -- you have several options.
The following are several strategies you can use to complete your loan agreement early: make an extra car payment each year; add a little extra towards it each month; or make bi-weekly installments instead of monthly. Remember eliminating borrowed funds early will cut down on interest and allow you to complete the terms sooner. For example, assume a vehicle cost $20,000 and the term agreement is for 60 months or 5 years. If the interest rate being charged is 5%, the monthly charges would be $377.42. However, if a person commits to adding $50 more each month using the same terms, the total amount would be paid off 7 months sooner than the original terms. If a person opts to make only one extra car note each year using the same terms, the loan would be satisfied 4 months sooner than the original terms. Lastly, if a person opted to use the bi-weekly option (assuming the same terms), they would send out $188.71 biweekly and save $2,387.22 in interest over the entire term. (You can reference carpaymentcalculator.net/ to calculate your premiums using various options discussed).
Use your tax refunds, gift money you receive throughout the year and apply it all towards your loan. You may also consider reviewing your current car insurance policy to ensure you are getting the best rate possible and receiving all available discounts for your household. If you find savings in your budget, be sure to commit to applying that savings towards your loan.
By applying the information and strategies provided, purchasing and paying off a vehicle should be far less stressful. The repayment process does not have to be a 3-6 year obligation, if you plan ahead and commit to eliminate your debt early. Even if it does take 3-6 years to make good on your loan, you should have peace of mind knowing your interest is fully covered if your have planned appropriately.