It is also in danger of not only being a victim of driving mistakes of other drivers on the road, but also driving mistakes of the person behind the wheel. These mistakes can result in a total loss of the vehicle, which means a total loss of the revenue involved in the vehicle if it was uninsured. Finally, the vehicle is also susceptible to vandalism. If something happened to the vehicle and it had no insurance, the owner could quite possibly walk away, leaving the lender taking the total loss. In order to protect themselves from this liability, they require insurance.

Lenders are not interested in liability insurance because they are only interested in their investment. What they will require you to carry is comprehensive insurance. This insurance protects the vehicle from any number of things, including everything mentioned above. With this requirement, the lender is protected anything that could happen to the vehicle and therefore have protected their investment.

The first is your credit rating and the second is your down payment amount. The more down payment money you have available and the higher credit rating you have, the more desirable you will be as a customer. This doesn’t mean if you have no down payment or you have a bad credit rating that you won’t be able to get one.

If you want to make it easy on yourself, get a pre-approval for a loan. In getting a pre-approval, you will have taken a majority of the stress associated with purchasing a vehicle and eliminated it. When you go in for your pre-approval you will best serve yourself by knowing exactly what your credit score is and exactly how much money you are able to put down as a down payment. If your credit score is bad, be prepared to have more of a down payment available.

Shop for your loan; don’t just accept the first one. The more shopping you do, the better off you will be. Don’t be afraid to tell the bank representative that the loan is not acceptable and further the negotiations. The worse any bank can say to you is no. So you aren’t taking any risks in negotiating.

The second thing you need to do (or not do) is to not know anything about the vehicle you wish to purchase. Don’t go online and find out how much its worth, definitely don’t do any bargain shopping and price comparisons. If you did this, you would again, give yourself bargaining power.

In order to guarantee that you get a bad loan, the next thing you need to not do is get pre-approved. Getting pre approved gives you even more bargaining power as you become more desirable to a dealership.

So really, if you want to avoid a lemon of a loan, all you really need to do is prepare and know what you’re dealing with. Know what you can afford, know what it should cost and very importantly, know what your credit score is. Getting pre-approved is one of the best things you can do. As far as spotting a lemon of a loan, just go into your local dealership, point at a car and say I want that one. Sign the loan papers he or she brings out and you will most surely be the proud new owner of a lemon loan.

photo credit: Team Dalog

Lets Face It – There are Too Many Options!

With all of these options many people have trouble deciding which car type is right for them. Does this sound familiar? Well you aren’t alone. It is important to give some thought to what type of car suites you best before you start you search at your local dealership.

Different cars work well for different people. Essentially most people fall within 1 of 4 categories when buying a car, often times a mix of two of them. These categories are performance, safety and security, economy, or convenience. If you have a firm understanding of what type of car suits your needs the best you will have more control over the buying process.

What is important is that prior to shopping for a car, you understand these four categories and rate them in order of importance to you. By doing so, you will greater control over the car buying process and will also reduce the chances of buyer’s remorse from setting in post purchase. No one wants to go through the car buying process only to regret their decision in the near future.

The Car Buying Matrix – Deciding What Type of Car is Best for You

To the right you will find the car buying matrix. Within the matrix are the 4 key categories to keep in mind. When using the matrix we suggest you rate each quadrant by importance, it may help to print this matrix out.

Start by rating the most important category with a 1 and the least important category with a 4. When shopping for a new car think about where the car you are looking at fits these categories. As you look at more cars, place them on the matrix where you think they fit.

By finding a car which matches the needs you have defined. This process will help you make an informed decision! Below we have broken down the categories to help you rank them.

Performance:

Imagine for a second that you are driving on the interstate in some city traffic. Cars are slowing in front of you but to your right you have a slight opening. As you push the gas your RPM’s rev up and you shoot past traffic like one of those drivers that we watch on T.V. on Sunday afternoons. Does that make your heart race and bring a smile to your face? If so, then a car’s performance is important to you.

As you shop for a new car, it is important that you understand where you rate performance. If you enjoy the thought of the scenario above, then you may not want to spend needless time researching a Dodge Neon or Ford Focus. Conversely, if you have no desire to live the life of a road warrior and how quickly you can pass traffic rates low in your mind and heart, your reasons to purchase a car are different.

Now, many individuals automatically default to 6 or 8 cylinder engines. That is a trend that usually leads to a higher cost of the vehicle for marginal benefit. It is true that a V6 engine has a higher horsepower rating but how much more are you getting for you money?

If you are looking to purchase a Chevrolet Malibu, for example, a 4 cylinder version of the car starts around $22,000 and puts out 169 horsepower. If you look at the 6 cylinder model, you will get an increase of 83 more horsepower for an additional $2,000 in cost. For many people, paying over $24 per additional horsepower unit just isn’t worth it. This is especially true when you feel essentially no difference in your acceleration speed by having the additional 83 horsepower units. Depending upon how you rate performance, you can find quite a bit of value in a small engine vehicle that saves you money.

Economy:

According to the Department of Energy’s website, national gas prices are around $2.63 per gallon and fluctuating every day. With these kinds of prices, fuel economy has become a forefront in every car buyer’s mind. If you buy a car that is not gas efficient, you will find that the cost of owning that car can, in some cases, triple. That is why car shoppers should try to balance the performance and fuel efficiency quadrants of the car buying matrix.

photo credit: dave_7

Many feel that in order to get outstanding fuel efficiency, you must purchase a 4 cylinder engine. In some instances that can be the case, however according to www.fueleconomy.com the Ford Taurus only loses 4 mpg in its fuel rating between a 4 cylinder and a 6 cylinder engine. Additionally, the Toyota Camry only loses 2 mpg in the city and 3 mpg on the highway. This shows that you do not necessarily need to sacrifice performance in order to save dollars at the pump.

What About a Warranty?

When shopping for an economy car, many buyers forget to calculate the annual cost of owning a car. This includes maintenance, repairing wear and tear items, gas, and so forth. For example, if you own a car with no warranty that you pay $200 per month on and pay for an oil change, tires, repairs, etc throughout the year your total cost for driving that car could be in the area of $4,500. Now, by purchasing a car with a warranty your payment may go up $75 per month but your repairs are covered by the warranty. Your annual cost of driving the car is now reduced by $900. Many individuals forget these points by trying to save money on a monthly payment but overall they could save even more by doing they homework.

Safety and Security:

photo credit: wrhowell

If you are a parent, you can never take the safety and security of your car for granted. Accidents happen all the time and if your family is in the car, you want to know that they will be able to walk away from a crash site unharmed.

If your mind and heart are dominated with these thoughts then you need to make sure you are purchasing the right car for your families needs. In addition to the many features that are available for the safety minded individual, the government also rates car safety from one to five stars, but what does the safety ratings really mean?

Understanding Car Safety Ratings

The New Car Assessment Program (NCAP) rates vehicles to determine crash worthiness and rollover safety. The safety ratings are gathered during controlled crash and rollover tests conducted at NHTSA’s research facilities. Based upon the findings, they will rate the safety of the car from one (lowest) to five (highest) stars.

If you are looking for a car that will protect those most important to you, then you need to look at some common cars like the Honda Civic, Hyundai Genesis, Chevrolet Aveo, and Kia Borrego just to name a few. By receiving a 5 star crash test rating, these cars have proven to be the safest on the road.

Additional Safety Features

Safety isn’t only rated in stars. Manufacturers offer many features that will make your drive a safer one. Traction control has become a much more popular addition to the safety line up. Traction control is applied when acceleration takes place and the additional torque applied is more than what road conditions can handle. In many cases the system will reduce the power from the engine so that control of the vehicle is not lost. This has become a very beneficial feature in snow covered states.

Anti-lock brakes have become a topic of discussion for so many nowadays. Some people absolutely hate the updated technology while others could not go without them. ABS in a nutshell will prevent, through computer intervention, from allowing the brakes to lock. With ABS you no longer need to pump the brakes but rather hold pressure on the brakes to a stop. This is quite beneficial on wet or snow covered roads since it will help stabilize the car as you come to a stop.

Car Security

photo credit: davidsonscott15

Security features are quite common on most of the newer cars and they can save you some money on car insurance. For example, many newer cars theft deterrent is two-fold. First, if you lock your doors using a remote keyless entry feature and someone breaks the glass, unlocks the door, and enters you vehicle the horn will honk and the lights will flash. One way to test if your car has this feature is to roll the windows down, lock the car using the remote and then unlock the car manually and enter. If the horn honks and lights flash, your car has this theft deterrent.

In additional to the security feature above, many newer cars, such as Chevrolet models from 1999 on, have a fuel pump shut-off feature. What this means to you is that if someone attempts to bypass the ignition in order to start the car, in other words use something other than the key, the fuel pump will shut off and the car will not start. If security is a buying reason for you then you need to keep these two features in mind as you look for a new car.

Convenience:

The convenience category is taking a huge foothold on the car industry. Many buyers have families that they need to take into consideration when looking at a new car. For some, having an abundant amount of trunk space is a key buying reason; however, for others, they need to be able to take 6-7 individuals to baseball practice.

Minivans

photo credit: mr.alsultan

Many convenience shoppers have turned to the minivan in order to supply their needs for convenience. For starters, a minivan usually will hold 7-8 passengers safely, give the buyer ample amount of storage space and give additional features like remote door openers, built in car seats, and seats that neatly store in the floor of the van.

Sport Utility Vehicles

But for the other buyers, where a minivan will never set one tire in their garage, options are available for you too. The SUV was invented to give the anti-minivan buyer a choice and if economy is not a high buying reason for you will fit the bill for space, passenger room, and fitting the family nicely.

Summing it Up – What’s Your Matrix Look Like?

Each person has different needs but if you have successfully filled out the car buying matrix then you will have a better understanding of what type of car you are looking for, this will help you narrow your choices down to something that you will be very happy with.

Make an Informed Decision

Most of all you will have made an informed decision. By doing so, you will have empowered yourself with knowledge of the “sales process.” Now as you begin shopping for a car, don’t let a crafty sales professional direct you to the car they want to sell. Direct them to the car that you want to buy.

Remember that education is the key!

Many car buyers see the price on the sticker and assume that is what they will have to pay for a car. While this figure is near what you will have to “pay” for the car its is definitely not the total cost of owning the car. To keep yourself in the clear we suggest you take a look at all the costs.

photo credit: tomsaint11

Fixed Costs

To own a car you have to buy it, this part is obvious but what about other fixed expenses that you may not know about such as Car Insurance, Taxes and Registration fees, and depreciation. You need to know about them so they don’t come back to bite you so we have broken it down for you.

Car Insurance

Nearly all of the States in the USA require car insurance, only New Hampshire and Wisconsin don’t. Each state has different limits as to what type of coverage you will be required to carry but in most cases you will have to carry atleast Bodily Injury Liability. Many states also require that you show financial responsibility in the form of insurance or a bond to ensure that you will be able to repay any damage you may cause in an accident.

We recommend that before jumping in over your head you check out one of the major insurance providers and check out quotes on the car you are looking at. Typically they will require you to have a VIN number on hand so don’t forget to write that down before requesting a quote.

Depreciation

You have probably heard that the moment you drive your new car of the lot it will have lost value, but that can be a hard idea to wrap your head around so here is how it works. Essentially depreciation is an accounting term, which is more than you need to know, but what it tries to do is put a value on the usage, passage of time, and wear and tear on a vehicle. That said each day when you wake up and start your car to drive to work you are indirectly paying for this “usage, passage of time, and wear and tear on the vehicle.”

This may leave you asking but why? I own the car.

It really comes down to that there is more value in owning a car today, than there is tomorrow. Depreciation is a way of quantifying that value. The idea may be pretty abstract but I assure you it is very real. Federal Tax Guidelines assume within the first two years of ownership the value of a car will depreciate over 50%. This calculation is used for tax purposes only and is based on a 5 year lifespan, but it gives you a good idea of how much this unseen expense is really costing you.

So what can you do about it?

You have a few options. The first is to reduce the wear and tear on your vehicle by taking good care of it. Which you should anyways! The next is to buy a used car. Savvy and educated car buyers know about depreciation and realize that used cars often offer more value with less depreciation. Though this is merely a rule of thumb there is a lot of truth to it. Lets take a 2 year lease for example.

Leases have different limitations than owning a car, one of which is a mileage cap. Now we aren’t going to get into the technical details of leases in this post but if you understand that mileage is the easiest way to understand how much a car has been used. It is easy to see that a car that is coming off a lease probably has lower miles and may have been better taken care of than a car coming from a trade-in. Many leases also require that scheduled maintenance be completed on time, which is also another plus. All in all cars that have come off a lease are typically a great choice for someone trying to minimize lost due to depreciation.

Finally depreciation isn’t felt until you sell your call. Often times, buyers find themselves “upside down” which means they owe more on their car than it is worth. For a full run down on what to do when this happens. The Simple Dollar has a great article on what to do if you find yourself in this situation.

Variable Costs

First lets define Variable Costs. These are costs that don’t have a specific price tag associated with them. They could range from Gas, to Oil Changes, to an unexpected repair. All of these need to be planned for, without examining these carefully you may find yourself in a pinch.

Gas

Lets start with the essential one, Gas. Most cars run on fossil fuels, few run on other sources of energy but either way the car won’t run without an energy source. So when you are reviewing your car options be sure to check out what type of gas mileage your prospective gets along with what grade fuel it uses. Moving from a car that uses regular to premium, be ready for the extra expense. Don’t let it creep up on you.

To check the gas mileage of just about any car visit FuelEconomy.gov. This is an authoritative source with tons of tips and statistics on fuel economy.

Oil Changes

Most people get these done by a “quick lube” company or by the dealership. This is something many people recommend you get done every 3,000 miles or more depending on the type of oil you use. The oils which last longer also have a higher price tag associated with them. Keep on top of this so you don’t run into an expected problems.

Maintenance &Unexpected Maintenance

By driving a car you run the risk of it breaking down. For many this is the last thing that they want to think about, but I suggest you be prepared for when/if it does happen. To friends and family I suggest that you save 15% of your car payment to go towards unexpected maintenance. This means for every $100 you pay monthly, you should set aside $15. This may seem like a lot, but would you rather be in a pinch or have some extra money saved up?

Parking & Tolls

Depending on where you live you may find yourself having to pay for parking or toll roads. These expenses can add up especially in a big city!

In the end education is key to being a good car owner! Knowing all of the expenses associated with owning will help you better understand how much you can really afford to spend on a car.

Car Buying can Be Fun!

So you need a new car, huh? Did you realize that buying a car, even though it is rewarding and exciting, is one of the greatest fears of the American consumer? It is fun shopping for a car but most of the process can be so painful. First, you need to find the right car that fits your many needs. Once you have decided on which car is right for you then you need to visit dealership after dealership or spend countless hours shopping online. Finally you need to make sure you’re not being taken advantage of along the way.

This can be overwhelming at times but rest assured you can make the process much more enjoyable. You, like so many others, need a “car buying coach” and these articles are designed to be just that.

Education is the Key:

Education Makes Car Buying Easier

As a former car salesman, I can tell you that nothing scares a car salesman quite like the educated buyer. If a buyer walks into the dealership educated, it can make for a frustrating sale. Now, don’t get me wrong, the salesperson deserves to make an honest fee from helping you throughout the process, but the day of car salespeople raking in $2,000 – $4,000 in profit is dead and gone, given you use the Car Buying University as your guide.

Before venturing out to a car dealership you must know the following:

The type of car you’re looking for.

• You need to understand the 4 basic features of a car like performance, safety and security, economy, and convenience. By understanding how you rate these 4 basic features, you will greatly reduce buyer’s remorse from setting in at a later point.

Rebates and special dealer offerings.

• Each manufacturer has rebates, especially in this economy, which will give you incentive to buy their product. Furthermore, used car departments and independent used car lots offer additional reductions in order to bring buyers to their businesses.

The wholesale and retail value of your trade.

• It is important to know the value of your trade before hearing what the dealer is “offering” you. A quick cash increase for a dealer is to undervalue your trade. It happens much more than you realize. To keep this from happening, be sure to check the value of your car at Edmunds or Kelley Blue Book.

If you are looking for a used car, understand the wholesale and retail value of the new car.

• You must have a general understanding of the true value of a dealer’s car. By doing so, you greatly reduce your risk of being taken advantage of and you can now negotiate with the dealer on a wholesale to wholesale basis or a retail to retail basis.

Your credit rating

• A classic car selling trick is to make a buyer self-conscious about their credit, which in turn, causes the power and control of the sale to shift to the car salesperson. To check your credit report you can visit AnnualCreditReport.

The various finance options that are available to you.

• Understanding where you can get the money to buy the car is a GREAT negotiating tool and once again gives you control.

Ultimately what you are looking to achieve from the day.

• If you can go out shopping for a car with clear goals in mind, you will maximize your day of shopping.

By keeping these principles in mind you can recapture the excitement and fun that is associated with buying a new car. You don’t have to arrive to the dealership with fear, dreading the approach of the infamous car salesman. You can step back, seize and keep control throughout the entire process, and find your new car with ease rather than dread. Remember that education is the key!