Recently getting a private party auto loan has become much more common. The current economic situation may have been devastating for some, but it has created new opportunities for others. Since the automobile industry has been affected so extensively, and since so much of the success of the U.S. economy is tied to the automobile industry, it was only a matter of time before creative thinkers came up ways to keep wheels rolling and found ways to make private seller car loans.
In the past, lenders were only willing to make car loans for the purchase of new cars. Private seller car loans were not even considered. A new car, purchased from a new-car dealer, provided a layer of security for a lender that could not be obtained otherwise. Lenders could rely on the dealer invoice, the manufacturer’s suggested retail price, the manufacturer’s warranty and most importantly, the commercial context in which the transaction took place, to be assured that the collateral was worth the amount being financed. Eventually, even certified used cars, sold from a new-car dealer’s lot, or vehicles coming off an auto manufacturer’s leasing program, gained that same level of confidence. While loans for previously owned vehicles were made a higher interest rates, at the least the financing was offered.
Keep in mind that the two major elements that go into the financing of an automobile are the credit-worthiness of the borrower and the value of the collateral. Unlike a home loan, where the collateral (the home) traditionally appreciates in value, a car is a depreciating asset. Lenders are not in the used car business, nor do they care to be. The theory of lending for the purchase of a new car, covered by a manufacturer’s warranty and collision insurance, was that if anything happened to the collateral, it could be repaired or replaced, with the borrower being responsible for only deductibles. As a car grew older and its book value decreased, the possibility that a borrower would simply walk away from an expensive repair or a non-compensated accident increased dramatically. A borrower in that situation was more apt to default on the car loan and leave the lender with the worthless collateral and a personal obligation that would be difficult to collect.
By adding private seller car loans to a lender’s portfolio, more loans, on otherwise trustworthy vehicles, will be created. With unemployment rates high, and many of the unemployed responsible for large car payments, a private seller used car loan would appear to be a win-win situation. In this transaction, a potential purchaser could easily provide a lender with all of the original documentation for a vehicle, a printout of the vehicle’s accident and repair report, and have the vehicle brought to an independent appraiser to substantiate its value. Add to that a certification from the original manufacturer that the warranty is in full force, and the lender is assured that the private seller car loan is fully collateralized. With a creditworthy purchaser, the lender will be in the same position it would have been with a new car loan. In fact, considering the financial condition of the automobile manufacturers, lenders might even be in a better position.
So think about a private party auto loan if you are looking at getting a car.
Thursday, June 18, 2009
Sunday, June 14, 2009
Military Auto Loans: Advice For Soldiers Looking To Buy A Car
Many car dealerships, especially those located near a military base, will give a substantial discount to military personnel. This may not be standard policy, but should always inquire if such a reduction in the purchase price of a vehicle is available. If you already have financing for your car loan in place from a lender, or secure one through the dealership, you may be able to save $500-$1,000 by taking this step. Also, the dealership might want to see proof of your military service, so be prepared to provide the agency with a copy of your military ID card when you set out to buy a car.
If you want to feel more confident when buying a new care, note that a family financial counselor may be available, free of charge, at your military installation’s Family Support Center. After reviewing your financial situation, a counselor can help you determine if buying a new car (and the monthly military auto loan payment that will go with it) fits your budget. You may also discuss the establishment of a car maintenance fund, the related car insurance, and some ways of reducing your other current expenses to ensure that you stay on course financially. It is crucial that you know exactly how much you can afford before you sign any paperwork.
Since those in the military are often transferred and move frequently, most installations have a reserved space (jokingly referred to as a “lemon lot”) where military personnel display the cars they want to sell, often because of impending deployment. If you are interested in buying a used car and are unable to find anything suitable, check out the BX/PX/NEX, where you may find advertisements for used car on the community bulletin board, and refer to your base’s official newspaper as well. When you find a used car that you like, remember to have a mechanic check it out before you seal the deal.
Some auto insurance companies cater only to those in the military, and you may get a very good rate from one of them because of your active-duty status, and others may also give you a discount. Start looking for insurance coverage before you buy a car, and as you investigate the rates being offered, mention that you are an active duty and would like to know what discounts are available to you. When you feel that you have found a good deal, go to the dealership, complete the sale and have your insurer fax a copy of your “proof of insurance’ to them. Then both your loan and your auto insurance will be in place
As a member of the military you are in a unique position when it comes to paying off any type of loan. Shirking your responsibilities is frowned on in the military, and your creditors know that if you fail to meet any of your obligations, they can contact your supervisor and inform him or her that you are behind in your payments.
If you find that you are being transferred out of the country, you might one want to sell both of your family cars and buy a new one. Be sure to tell the lender that your new car will be going overseas because the regulations covering certain lenders do not allow a vehicle to be shipped out of the country if the auto loan is not paid off.
If a loan company offers you as extremely high interest rate, and “extras” like life insurance and disability insurance coverage are automatically required, this company deserves to be “black listed” at your military base and you should continue your hunt for a more reputable lender. After the fact, especially if you are inexperienced in shopping for a car, if you sincerely feel that you have been the victim of some deceptive business practice, discuss this with your legal office, First Sergeant, or supervisor to see if the contract can be voided. The dealer may comply when given the choice between rescinding the contract and being “blacklisted” at your military base.
Deciding what to car to buy and where to buy
If you want to feel more confident when buying a new care, note that a family financial counselor may be available, free of charge, at your military installation’s Family Support Center. After reviewing your financial situation, a counselor can help you determine if buying a new car (and the monthly military auto loan payment that will go with it) fits your budget. You may also discuss the establishment of a car maintenance fund, the related car insurance, and some ways of reducing your other current expenses to ensure that you stay on course financially. It is crucial that you know exactly how much you can afford before you sign any paperwork.
Since those in the military are often transferred and move frequently, most installations have a reserved space (jokingly referred to as a “lemon lot”) where military personnel display the cars they want to sell, often because of impending deployment. If you are interested in buying a used car and are unable to find anything suitable, check out the BX/PX/NEX, where you may find advertisements for used car on the community bulletin board, and refer to your base’s official newspaper as well. When you find a used car that you like, remember to have a mechanic check it out before you seal the deal.
Make the most of your military status with military auto loans
Some auto insurance companies cater only to those in the military, and you may get a very good rate from one of them because of your active-duty status, and others may also give you a discount. Start looking for insurance coverage before you buy a car, and as you investigate the rates being offered, mention that you are an active duty and would like to know what discounts are available to you. When you feel that you have found a good deal, go to the dealership, complete the sale and have your insurer fax a copy of your “proof of insurance’ to them. Then both your loan and your auto insurance will be in place
As a member of the military you are in a unique position when it comes to paying off any type of loan. Shirking your responsibilities is frowned on in the military, and your creditors know that if you fail to meet any of your obligations, they can contact your supervisor and inform him or her that you are behind in your payments.
Going overseas is a special case
If you find that you are being transferred out of the country, you might one want to sell both of your family cars and buy a new one. Be sure to tell the lender that your new car will be going overseas because the regulations covering certain lenders do not allow a vehicle to be shipped out of the country if the auto loan is not paid off.
A word about to the wise about auto loans
If a loan company offers you as extremely high interest rate, and “extras” like life insurance and disability insurance coverage are automatically required, this company deserves to be “black listed” at your military base and you should continue your hunt for a more reputable lender. After the fact, especially if you are inexperienced in shopping for a car, if you sincerely feel that you have been the victim of some deceptive business practice, discuss this with your legal office, First Sergeant, or supervisor to see if the contract can be voided. The dealer may comply when given the choice between rescinding the contract and being “blacklisted” at your military base.
Friday, May 15, 2009
Buying A Car With Private Party Financing
I've seen rates as low as 5% recently, but depending on your credit history and market fluctuation you may find something different. Shop around and get a reasonable estimate of what rate you will be able to get for your loan. Bank Rate is a good place to start. They also have an auto loan calculator which will help you determine what cars you can afford.
You need to create a list of the cars you are interested and how much each one will cost you. Then you can plug those numbers into the Bank Rates auto loan calculator to determine your monthly payment, decide what term is reasonable, and see how much more you might have to pay in interest those options will cost you.
Once you have a value in mind you need to apply for the loan. If you did your shopping around in step one then you should already have decided on a place and you can plug in the information you gathered in step two, loan amount, loan term, and whether you are buying from a dealer or a private party. It may take a few weeks to process your application so don't be impatient.
Once you are approved you will usually be given something along the lines of a blank check which will clear up to the amount you have been approved for. You can use this like cash, but be sure to abide by the loan originators guidelines. If it says you can only use it for a new car then don't try and buy a used car, etc.
As far as actually finding a good deal on the car, I recommend looking for a private seller rather than going through a dealership. If you want more information on how to find a good deal, definitely check out Sacramento used cars, which has lots of good information.
You can find the same used cars for thousands less because there is less overhead. It can be a little bit more work and there are definitely things you should watch out for but overall it can be the best deal out there. Which is one of the reasons I like private party auto loans so much more than dealer loans where you do not even have that option.
That's it for today on private party auto loans.
You need to create a list of the cars you are interested and how much each one will cost you. Then you can plug those numbers into the Bank Rates auto loan calculator to determine your monthly payment, decide what term is reasonable, and see how much more you might have to pay in interest those options will cost you.
Once you have a value in mind you need to apply for the loan. If you did your shopping around in step one then you should already have decided on a place and you can plug in the information you gathered in step two, loan amount, loan term, and whether you are buying from a dealer or a private party. It may take a few weeks to process your application so don't be impatient.
Once you are approved you will usually be given something along the lines of a blank check which will clear up to the amount you have been approved for. You can use this like cash, but be sure to abide by the loan originators guidelines. If it says you can only use it for a new car then don't try and buy a used car, etc.
As far as actually finding a good deal on the car, I recommend looking for a private seller rather than going through a dealership. If you want more information on how to find a good deal, definitely check out Sacramento used cars, which has lots of good information.
You can find the same used cars for thousands less because there is less overhead. It can be a little bit more work and there are definitely things you should watch out for but overall it can be the best deal out there. Which is one of the reasons I like private party auto loans so much more than dealer loans where you do not even have that option.
That's it for today on private party auto loans.
Use a Private Party Auto Loan To Refinance
Over the course of a normal loan circumstances sometimes change. It is not different for auto loans. Maybe your credit score has improved. Or Perhaps interest rates have just gone down and you can now get a better rate elsewhere. Perhaps you want you lost part of your income and need to extend your loan term to reduce your monthly payments. The point is that there are many situations where it would be smart to refinance your existing auto loan using a private party auto loan.
The first step is to find out exactly what the status of your existing loan is. You need track down any documents you might have pertaining to it. You also need to find out the current balance, how many months you have left till you pay the loan off, your current minimum monthly payment, and your interest rate.
Second you need to find out your credit score. I use CreditKarma to monitor my credit score for free. It is a great service but it does not offer an official report. If you are looking to refinance into a private party auto loan then you should get an official credit report from one of the three major credit bureaus. You are entitled to one free report per year. They will try and get you to sign up for additional services but that is not necessary.
Third you need to shop around for a good lender. I recommend starting with your own bank and seeing what they have to offer you. Or you can try some of the online micro-lending services like Lending Club which offers person-to-person loans with very competitive rates.
Once you have a loan officer they will walk you through the process of refinancing your original auto loan. But basically you will use the new private party auto loan to pay off the remaining balance of your loan and transfer the title of vehicle to the institution you chose to work with.
The first step is to find out exactly what the status of your existing loan is. You need track down any documents you might have pertaining to it. You also need to find out the current balance, how many months you have left till you pay the loan off, your current minimum monthly payment, and your interest rate.
Second you need to find out your credit score. I use CreditKarma to monitor my credit score for free. It is a great service but it does not offer an official report. If you are looking to refinance into a private party auto loan then you should get an official credit report from one of the three major credit bureaus. You are entitled to one free report per year. They will try and get you to sign up for additional services but that is not necessary.
Third you need to shop around for a good lender. I recommend starting with your own bank and seeing what they have to offer you. Or you can try some of the online micro-lending services like Lending Club which offers person-to-person loans with very competitive rates.
Once you have a loan officer they will walk you through the process of refinancing your original auto loan. But basically you will use the new private party auto loan to pay off the remaining balance of your loan and transfer the title of vehicle to the institution you chose to work with.
3 BIG Advantages of Private Party Auto Loans
There are definitely some advantages to choosing a private party auto loan to finance your next car purchase. There are a few disadvantages to consider also, but look for those in an upcoming post.
Private Party Financing gives you much more flexibility than traditional dealership loans for several reasons.
For one thing, unless you have 5000 to 25000 dollars in cash just lying around you can't just go and buy a car from a private seller. Buying from a private seller can save you thousands just look up the different values on edmunds.com or kbb.com.
Also, you get to pick your lender which means you can shop around till you find someone you like to deal with. Maybe you want to get your loan through the same company that handles your checking and savings accounts. Being able to deal with someone you trust and are familiar with rather than a mysterious dealership lender that works in the background is very comforting. Especially since you will typically have to deal with these people for several years.
Since private party loans are typically arranged prior to the buying process you are often at a significant advantage in negotiations.
You have a set budget which you can refer to when you are talking a seller down whether that be the slimy used car guy at the dealership or simply someone you found on craigslist. "I like this car, I really do... but I'm only approved for this much money- what can you do for me?" Since you have a concrete number that is out of your control (at least in that moment) its much more difficult for them to counter with something higher.
Furthermore since you are pre-approved for financing it is almost like cash in that you can close on a deal immediately. Rather than having to wait for financing approval which can often lead to salespeople sliding in additional charges etc. I've heard stories of salesmen quoting a rate that they new the customer would not get then letting them drive the car off the lot, only to call in a week to say that the actual rate they were approved for was higher and they would need to either pay more or return the car.
If you use a private party auto loan you can walk in with a blank check that will clear up to your approved loan amount. Pay on the spot as if you were paying cash. Simple and effective.
Often times dealership loans are only available to people with strong credit histories because they are for longer loan durations and their margins are lower due to the fact that they have to give the dealer commission for signing you up they cannot take on what they see as high risk borrowers.
Private Party loans are offered in much shorter terms and have nothing to do with dealerships so they can offer loans to a much wider group. If you have been turned down for a dealership loan you may still be able to afford to finance a car through a private party auto loan.
Of course having better credit will mean you can get a better rate than someone with poor credit. For those of us who have hit hard times or are young and haven't built up a credit history yet, being able to get a car loan is important.
1. Flexibility
Private Party Financing gives you much more flexibility than traditional dealership loans for several reasons.
For one thing, unless you have 5000 to 25000 dollars in cash just lying around you can't just go and buy a car from a private seller. Buying from a private seller can save you thousands just look up the different values on edmunds.com or kbb.com.
Also, you get to pick your lender which means you can shop around till you find someone you like to deal with. Maybe you want to get your loan through the same company that handles your checking and savings accounts. Being able to deal with someone you trust and are familiar with rather than a mysterious dealership lender that works in the background is very comforting. Especially since you will typically have to deal with these people for several years.
2. Negotiating Power
Since private party loans are typically arranged prior to the buying process you are often at a significant advantage in negotiations.
You have a set budget which you can refer to when you are talking a seller down whether that be the slimy used car guy at the dealership or simply someone you found on craigslist. "I like this car, I really do... but I'm only approved for this much money- what can you do for me?" Since you have a concrete number that is out of your control (at least in that moment) its much more difficult for them to counter with something higher.
Furthermore since you are pre-approved for financing it is almost like cash in that you can close on a deal immediately. Rather than having to wait for financing approval which can often lead to salespeople sliding in additional charges etc. I've heard stories of salesmen quoting a rate that they new the customer would not get then letting them drive the car off the lot, only to call in a week to say that the actual rate they were approved for was higher and they would need to either pay more or return the car.
If you use a private party auto loan you can walk in with a blank check that will clear up to your approved loan amount. Pay on the spot as if you were paying cash. Simple and effective.
3. Accessibility
Often times dealership loans are only available to people with strong credit histories because they are for longer loan durations and their margins are lower due to the fact that they have to give the dealer commission for signing you up they cannot take on what they see as high risk borrowers.
Private Party loans are offered in much shorter terms and have nothing to do with dealerships so they can offer loans to a much wider group. If you have been turned down for a dealership loan you may still be able to afford to finance a car through a private party auto loan.
Of course having better credit will mean you can get a better rate than someone with poor credit. For those of us who have hit hard times or are young and haven't built up a credit history yet, being able to get a car loan is important.
What Is A Private Party Auto Loan
A Private Party Auto Loan is any auto loan that is not provided by a dealership. Typically these loans are used to buy used cars from private sellers. But, There are some situations where it makes sense to use a private party loan to buy from a dealership instead of a dealership loan (I'll cover that in a future post).
This type of loan is fairly flexible and there are many institutions that offer them. These loans come in many different shapes and sizes depending on the institution providing the loan, the situation, and the buyers credit history. However, in general there are some differences between dealership loans and private party financing.
The typical loan term for a dealership loan is 72 months or 6 full years. On the other hand, a private party loan is typically only offered up to 48 months or 4 years. As a result you will often have to make higher monthly payments on a loan of the same amount. If you can make the payments though, you will end up paying a lot less in interest over the course of the loan which is certainly a plus.
The rate offered with this type of loan is often slightly higher than that of a dealership loan, though this is not always the case. Regardless, with a shorter duration you still usually end up paying less interest overall. In addition the added flexibility of this loan can often make up for the higher rate.
Private party auto loans are available to people who do not have perfect credit. If you have been rejected for a dealership loan you may want to consider a private party loan. Plus if you have bad credit, being accepted for a loan where you can make the payments can help repair your credit history.
Unlike dealership loans, private party loans often do not require a down-payment. This can be good if you are strapped for cash. Just be careful because down payments help keep the principal of the loan bellow the total value of the vehicle.
Like I mentioned earlier private party auto loans are available from a variety of institutions. However I've found the best deals are found through your existing bank because they know you and your history, or through micro-lending sites like LendingClub.
This type of loan is fairly flexible and there are many institutions that offer them. These loans come in many different shapes and sizes depending on the institution providing the loan, the situation, and the buyers credit history. However, in general there are some differences between dealership loans and private party financing.
The typical loan term for a dealership loan is 72 months or 6 full years. On the other hand, a private party loan is typically only offered up to 48 months or 4 years. As a result you will often have to make higher monthly payments on a loan of the same amount. If you can make the payments though, you will end up paying a lot less in interest over the course of the loan which is certainly a plus.
The rate offered with this type of loan is often slightly higher than that of a dealership loan, though this is not always the case. Regardless, with a shorter duration you still usually end up paying less interest overall. In addition the added flexibility of this loan can often make up for the higher rate.
Private party auto loans are available to people who do not have perfect credit. If you have been rejected for a dealership loan you may want to consider a private party loan. Plus if you have bad credit, being accepted for a loan where you can make the payments can help repair your credit history.
Unlike dealership loans, private party loans often do not require a down-payment. This can be good if you are strapped for cash. Just be careful because down payments help keep the principal of the loan bellow the total value of the vehicle.
Like I mentioned earlier private party auto loans are available from a variety of institutions. However I've found the best deals are found through your existing bank because they know you and your history, or through micro-lending sites like LendingClub.
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