Your rates of bank

So the economy is tanking and you find yourself in the unenviable position of needing to get a new car anyway.

Take heart. There are lots of options that can still fit within your recession-minded budget.

According to the Edmunds.com, there are 34 sedans for the 2007 and 2008 model years that are priced under $15,000. I’m including 2007 models because slow new car sales for the past 12 months means many dealers still have significant backlog of last year’s models on their lots.

The 2007 Chevrolet Aveo is the least expensive of the new sedans. The Aveo, which has a look that only a penny-pincher can love, carries a base sticker price of $9,995. According to Edmunds, buyers are paying about $9,500.

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Dear Terry,
Is there a general rule-of-thumb percentage of depreciation value for a new car as soon as you drive it off the lot?
I have located a 2008 Mercedes ML 350 that a husband bought for his wife for Christmas. She doesn’t like it and now they want to sell it. The car has 1,250 miles (bought new Dec. 12). They paid $58,000 after taxes and title. They are asking $48,000.

Could a car have depreciated $10,000 in just a month?
— Jim

Dear Jim,
Yes, it could have depreciated that much. New vehicles usually fall as much as 20 percent to 25 percent after they are sold. In the case of SUVs in this era of high gas prices, depreciation can be even more. If this is a vehicle you want, $48,000 is not a bad price. (more…)

Dear Terry,
I financed a used 2001 Mazda Tribute for my husband in November 2007. Now, the transmission has blown. The cost of the repair is around $2,000. We do not have the money to fix the car and the outstanding loan is around $7,000.
I have good credit but I am considering turning in the car to the financing bank. What do I do? I am very concerned — I don’t want to destroy my credit.
— Tanya

Dear Tanya,
Whatever you do, don’t turn the truck back into the bank. It will damage your credit just the same as if the bank repossessed it. Look into a short-term loan to fix the transmission, if possible. (more…)

Dear Terry,
About a year ago, I purchased a used pickup. It turns out the previous owner was a smoker. I couldn’t smell the smoke when I test drove it because the dealer had it cleaned and smelling fine. The clean smell eventually left and the smoke smell became stronger.
I really can’t stand the smell and would like to trade. I have spent a fortune trying to get the smell out professionally, but it is still there. My wife thinks I should drive it for a couple more years, but I’m afraid the value will be much less by then and I can get more trade allowance now. (more…)

Is your odometer costing you money?

As bizarre as that question may seem, a recent lawsuit settlement has revealed that all odometers are not created equal. Some may cause you to lose your factory or extended warranty sooner than necessary.

The lawsuit involves a lawyer from Arkansas. In 2004, he noticed that the miles seemed to be clicking by faster than normal on his Honda Odyssey minivan.

The lawyer checked the odometer against some measured mileposts along the highway and found that the odometer was off by at least 5 percent.

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Like a lot of people, you may be watching the price at the pump soar and wondering whether it’s time to dump your current, less-than-efficient SUV, truck or car.

It’s tempting to simply haul your 15 miles-per-gallon vehicle down to the dealership and drive out in something that gets 30 mpg or more. But that may not be smart, at least from a financial point of view.

People thinking of going this route need to take several factors into account.

For starters, your gas guzzler is worth considerably less as a trade-in than it was even six months ago. By some estimates, the value of used sport utility vehicles has dropped more than 20 percent since January.

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Dear Terry,
I am sure you receive this question a million times and I have read about similar situations. However, I would like your advice on my situation.
I currently have an auto loan that began in March 2007. It is a five-year, 5.29 percent loan that currently has a balance of about $14,000 (monthly payments of about $380).

I am very good about putting money away, and currently max out my Roth every year. I am also forced to contribute 10 percent of my salary to my pension. (I am a firefighter). I have about $21,000 in savings, with about $13,000 in a money market earning 1.9 percent, and the rest in mutual funds.

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If you’re trying to unload an SUV or a large pickup in favor of a fuel-efficient sedan, the market has put you between the proverbial rock and a hard place.

Not only are trade-in values and sales prices for used, fuel-thirsty machines falling, but the demand for economical sedans has pushed up prices for smaller cars.

Here are the numbers:

J.D. Power and Associates reports that prices for used Ford F-150 pickups have fallen 5.6 percent from a year ago.

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Dear Terry,
My fiance has bad credit, but I have excellent credit. He wants to buy a truck, but it will take months to fix his credit report and receive a low interest rate. Should I take an auto loan in my name, and assign him the title of the truck? Is this even possible to do?
— Heather

Dear Heather,
Do not, under any circumstances, take out a loan to buy your fiance a vehicle. Until you’re married and have some legal ties that bind you together, he could back out of the marriage, disappear with the truck and leave you holding a large loan. (more…)

Dear Terry,
If you have the money in the bank, is it useful to buy a car with a cash-back credit card to save money on the total purchase price?
— Stephen

Dear Stephen,
If I understand you correctly, you want to put the car on your credit card, reap the card’s cash-back benefits, then pay off the card with cash. It’s a nice idea, but I doubt many dealers would let you do this.

The dealer pays the credit card company as much as 2 percent of the transaction, so that’s another 2 percent out of the dealer’s pocket. Most dealers will let you put part of the car’s price — usually capped at $5,000 or less — on a credit card and then pay the remainder in cash or by financing.

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Dear Terry,
I want to purchase another car because the one I have now has given me more trouble than I care to continue supporting. However, I’m still making payments on it. What steps do I need to take to get it paid off in order to purchase a dependable vehicle?
– Jeanette Kindle

Dear Jeanette,
You should call your lender to get a payoff and then check a site like KBB.com or Edmunds.com to see what the car might be worth. You can check the trade-in value and the potential value of selling to a private party. If the value is greater than the loan amount, you’re in good shape. If you owe more than it’s worth, calculate when you’ll have paid enough to make it worthwhile trading. You can generate an amortization schedule for your loan using Bankrate’s “Monthly auto loan payment calculator.” (more…)