Auto Loans

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Car Loan - Motorcycle Loan

Car Loans Explained | Cash Back or 0% | Which Type for You? | Credit Score Impact | Lease Vs. Purchase | Auto Refinance | Motorcycle Loans | Yacht & Boat Loans | RV Loans

Car Loans Explained

Obtaining a car / auto loan is the usually the second largest obligation an individual makes. Make sure you know what you are getting into with your new car loan.

Almost every bank and credit union offers some type of auto / car loan program. These programs have grown in length over the years and it is not uncommon to see a six year term on an auto loan for more expensive automobiles. Even a term of seven years or more for classic cars and "high line" autos.

If you take out a six year auto loan you could find yourself "upside down" in a couple years when you plan to sell. If you opt for this length of loan - make sure you research depreciation rates on cars and choose wisely.

It has also become easier of the years to obtain high priced automobiles with interest rates being so low. People often think they can buy a nicer car for the same monthly payment and cost as when the rates were higher. This is simply not the case. Consumers need to remember that "high line" vehicles are higher maintenance and more expensive to maintain. Tires can cost double or triple more than economy cars and even the smallest parts can cost more just for the name.

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Cash Back or 0%

Most car dealers offer some type of cash back incentive for paying cash or they offer a 0% loan. Better run the numbers!

Many people fall into the 0% interest rate trap every year. At today's low interest rates for people with good credit it will almost always save you money to go with the cash back offer instead of 0% financing. Arrange for financing through your bank or credit union before car shopping and have that bank pay for the auto in full so you get the cash back. If you pay 4-6% it will almost always pencil for savings if you take the cash back.

If you would like to work this out to see which you should choose follow these steps:

• Find out the amount of cash back offered.
• Figure out the interest paid over the life of a loan.
• Subtract the interest from the cash back and that's your savings.

There are a lot of places to look for the best rate for a car loan. Start on the internet and apply to a few programs and let the lenders compete for your business. These lenders have less overhead than a conventional bank and can typically offer lower rates to it's customers.

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Which Type for You?

Some things to consider when shopping for your next car / auto loan.

There are many "configurations" of loans with various length, fees, interest rates, etc. We are here to help! Here are some various scenarios and types of loans to consider including some tips regarding the type of car you may be purchasing.

Some factors in choosing financing:

• How long do you plan to own the car?

  • Do you usually get a new car every year or every 5 years?

• Do you purchase through a dealer?

  • Or do you plan to purchase from private party?

• Are you a member of a credit union of some kind?

  • Usually a credit union can offer better rates to members.

• Do you have a good credit score?

  • Those with better ratings get better interest rates.

How should any of this affect your decision?

• If you plan to own your car for only a short time you should avoid dealer incentives such as no payments for a specified amount of time. Then when you go to trade in the car you won't be upside down.

• If you buy from a dealer you can decide if you want a rebate or special financing if offered by the dealer.

• If you are a member of a credit union you can enjoy low fees to obtain the loan and possibly lower interest rates. Although, don't forget to check around online! Online lenders can have the lowest rates due to low overhead.

• If you don't have good credit you may find yourself shopping around at higher interest rates. You may want to consider a private loan or even paying cash for the car if possible.

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Credit Score Impact

The scary truth about how your credit score affects your car loan. Make sure you keep your credit clean.

Your credit score probably has more of an affect on your life than you think. A bad credit score can cause you to pay much higher auto loan interest rates and cause you to pay higher auto insurance premiums. Many people are unaware that insurance companies check your credit before selling you insurance.

There are still loans for those with bad credit

The internet is a wonderful thing! It's now much easier for people with poor credit ratings or credit scores to obtain a loan. Shop around - you'll be surprised.

Usually, a credit union will have more strict guidelines if you have bad credit. It's also worth shopping around locally to see if local banks have loan programs for those with poor credit. More loan programs may be available if you have a more reasonable loan to value ratio.

It's always wise to compare at least three loans before deciding.

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Lease Vs. Purchase

Leasing an automobile: Some items to consider before you make the decision.

Advantages to leasing

You can often get into a lease with a low down payment. And, since you're only paying off the depreciation on the car's value, your monthly payments may also be less than buying the car. Usually, the end of the deal is generally easy - rather than having to hassle to sell a car or trade it in on a new one, you simply take it back to the dealership.

Leasing also has drawbacks

Since you're really renting a car with a lease, you're merely laying down cash to keep you behind the wheel for another 30 days. In other words, you're building no equity. You'll never be without a car payment, while someone who buys a car and takes care of it can enjoy many years of driving without having to lay out more cash. Getting out of a lease prior to its designated termination date can also be extremely expensive, as many lease contracts have steep penalties for early returns. Leases also charge you extra if you drive more than the number of miles specified in the lease.

Here's a checklist of additional elements to consider when choosing whether to lease or buy:

• If you tend to be rough on cars, you may do well with buying. Dealers expect their cars to be returned to them in excellent shape -- anything beyond an expected amount of wear may mean additional fees for you.

• Insurance can be a bit trickier with a leased vehicle. If you destroy the car or it's stolen, there's always the chance that your insurance coverage may not cover all that you still owe to the dealer. Be sure to obtain coverage to address any potential shortfalls in your coverage.

• Bad credit may also make it harder to get a lease with reasonable terms. Of course, bad credit affects you no matter if you're buying or leasing, but it's particularly problematic when you're shopping for and attempting to negotiate a good lease plan.

• At first glance, leasing may appear to be a rather simple proposition: Just set up the terms of the lease, length and a schedule of payments and that's it. In many ways it can be as confusing as the most complex purchase arrangement.

We recommend speaking with your tax advisor on tax benefits / drawbacks to leasing.

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Auto Refinance

Are you tired of paying a high interest rate on your auto loan? Consider refinancing your car.

People with good credit also get stuck with high interest rates. This occurs typically when a car buyer gets caught up in the moment and doesn't want to take the time to shop around for the best deal on interest rates, terms, and fees. So they usually regret it later, but that's ok. You can always refinance your car (provided you have acceptable credit and equity to the lender).

If you have had bad credit in the past and obtained a loan while the credit didn't look it's finest you may want to apply for a refinance to drop your rate.

Before you start shopping around for a new car loan make sure that your existing loan is a simple interest loan or there could be unexpected fees or interest due when you pay off your current loan. Most, but not all auto loans are simple interest loans.

You should also check to see if you existing loan charges a pre-payment penalty. If so, you'll have to figure out if the refinance is still worth it in the long run.

Another fee to be on the lookout for are state title fees. Some states require fees to change the lender on the title of an automobile. To determine if this will apply to you, simply call up your local DMV. Again, if this applies you'll have to factor this in and see if it still makes sense to refinance.

Refinancing can mean big savings : Over $500 savings on a loan interest rate difference from 6.9 dropped from 8.9. ($10,000 over 5 year term).

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Motorcycle Loans

Apply for a motorcycle loan

So you've found a new or used motorcycle and need to find financing. Here is some general info on motorcycle loans.

Motorcycle loans are much like car loans. The differences are usually in the term and cost of finance.

Motorcycle loans can range from 12-60 months and are usually about 1-2% higher interest rates than auto rates.

Always shop around when looking for financing. You may find better rates on the internet than on "brick and sticks" type lenders.

There are little things that can make some difference in the rate such as automatic payment (debit) from checking. Some lenders may drop the rate a fraction, but it all adds up.

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Yacht & Boat Loans

Not all banks will finance yachts and boats. Here is some general information on getting a boat loan.

A good idea, when looking for boat financing, is to look on the internet for lenders and best rates. Also, try your local credit union.

Conventional banks may not offer the best rates. When making such a large purchase the difference of even 1/4% can mean some huge savings. So make sure you do your homework and get at least three interest rate quotes.

When shopping for a boat loan you should also look for any financing fees. These could be as low as $25 or $50 and up to 1% of the purchase price or more. Beware of any excessive financing fees.

The interest rates for boat loans are typically higher than auto loans by approx. 1-2%. The terms for boat loans can sometimes go as high as 10 years. When considering the length of loans on boats, always consider the depreciation rates. You don't want to be "upside-down" when you go to sell.

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RV Loans

When shopping around for RV loans or motor home loans take these things into consideration.

A motor home or RV may be the second largest purchase next to your home one could make in their lifetime. So make sure you're clear on RV and motor home financing.

We've seen rates on RV loans at a level comparable to auto loans on the internet. With such a large purchase the right interest rate could mean hundreds in savings per year

When shopping for loans make sure you compare at least three loans. Look around at your local bank or credit union and then find some on the internet. Sometimes internet lenders can provide better rates than conventional banks.

RV / Motor home loans can range up to 240 months in extreme cases. As always, when determining the length of your loan, take into consideration the depreciation rates of the RV you are purchasing. Make sure that you aren't "upside-down" when you go to sell (even if you don't plan to sell anytime soon).

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