Your rates of bank

Dear Terry,
I recently purchased a new car. I am only 20 years old and had never purchased a car before. I asked my parents to help, but they refused. So, my fiance’s mom and dad co-signed for the loan.
I didn’t make the best deal on the car because I didn’t know much about it. Now, I have a car that is too much for me and I can barely afford the payments.

I would like to get rid of this car and find a car that is cheaper so that I can have lower payments. I work at the bank where I got my loan. They said they’ve already stretched out my loan for as long as they can and that the payments are as low as they can go. What are my options in this situation?

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Dear Terry,
I drive a 2003 Dodge Durango. I owe about $14,500 on the vehicle. My loan is at 10.25 percent. Unfortunately, I am behind two months on payments of $400 each due to joblessness.

I thought about selling the sport utility vehicle for $7,000 and paying that amount on the bank loan. I will be stuck with another $7,000 to $7,500 to pay it off. I would look for another cheap, affordable car. I need your feedback so I can see what I can do.
— Teri

Dear Teri,
You can’t sell the vehicle for less than you owe without an agreement from the lender, which you’re not likely to get. Since you’re out of work, getting a loan to cover the negative equity on the Durango seems unlikely. Contact the lender to see if it will work with you before it comes time for repossession. (more…)

Dear Terry,
I purchased a 2004 Lincoln LS in November 2004. I have not had a chance to enjoy the car because it has stayed in the shop more than on the road. I believe the car is a lemon. It has been in the shop a total of 35 days.
Now it is back in the shop for a new transmission. The car is under warranty. I told the dealership I want another car because it has been in the shop for two weeks. The dealership told me that I have to keep the car until March before I can get rid of it.

Is this true? And what can I do? I do not want to keep paying for a lemon.

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Dear Terry,
I surrendered my truck to a bank. I called the bank told them why and they told me where to take it. I followed their instructions, then called the 800 number and told them I had dropped it off.
I am a single mother of two with no help. I had no choice. Will I go to jail?
— Jen

Dear Jen,
No need to fear any criminal charges. People get into loan trouble all the time, unfortunately, and the worst that usually happens is their credit rating is dragged down. (more…)

Dear Terry,
I was thinking about buying a new car next year. I have a job and some money saved up, but I have no credit. As a result of having no credit, will I get a low interest rate or high interest rate?
— First car buyer

Dear First,
It’s an unfortunate Catch-22 of the credit business that the two types of people who suffer low credit scores are those who have abused their credit and those who have never had credit. (more…)

The best way to approach buying a new vehicle in any market is to be armed with the most knowledge about the car you want, your credit situation and the types of “offers” the dealership is likely to run past you.

As an automotive columnist for more than 25 years, it’s not immodest to say that I’m probably better versed in the buying and selling of cars than the average consumer.

Yet when I went to buy a new car last month, I was nonetheless amazed at how dealers continue to try to bamboozle and confuse a buyer in an effort to pad the deal with extra charges.

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It has been nearly two months since the Wall Street meltdown and the credit crunch shook up an already unstable automobile industry.

The bad news for consumers is that despite federal bailouts to banks and automakers, the buying landscape has changed and may never return to what shoppers have come to expect in the last five years.

But if you need to buy a new vehicle in this environment, here’s what you can expect:

1. End of 100 percent financing. Those 100 percent finance deals are virtually gone. This is particularly true of those “we’ll pay off your trade no matter what you owe” negative financing deals. They were to the auto industry what subprime mortgages were to the housing industry. Lenders still in the automotive market are demanding down payments of 10 percent to 15 percent from most buyers, including those with better-than-average credit.

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Dear Terry,
I have a car loan that is financed at 20 percent. The payments are killing me! Because the interest rate is so high, I still owe $17,000 on an $18,000 loan after almost two years of payments. What is the best way to get out of this?
— Grace

Dear Grace,
If you have adequate credit and a spotless payment record on this loan, your best bet is to refinance and keep paying on the loan until you can get the balance down to where the car is worth more than what is owed. (more…)

Dear Terry,
Can we afford to buy a new car? If so, how much can we afford? We make $80,000 a year. Our take home income after taxes, benefits and 401(k) is $4,300 a month. Our mortgage, including taxes, is $1,060. We also have a student loan of $131 and a tractor loan of $306.
We don’t have any credit card debt, and our cost of living expenses are low, with utilities and all other bills totaling $750. — Hayley

Dear Hayley,
Determining exactly how much of a car loan someone can afford is tricky. It not only involves how much of your free cash you have to spend, but also depends on how comfortable a person is with debt. A car loan that keeps you awake at night — even though you can make the payments — isn’t a good deal. (more…)

Dear Terry,
I have just purchased a used automobile from a dealer here in Atlanta. I want to return it because I will not be able to cover the regular maintenance of the vehicle. When work needs to be done on the vehicle, it will be too expensive for me. The purchase is just three days old. Can I return the vehicle?
— Sallie

Dear Sallie,
There is no “cooling off” period when it comes to car sales. Once you’ve signed the papers and left the lot, the car is yours. (more…)

Dear Terry,
I am currently in Iraq serving with the Air Force, but will return in January with $10,000 in my savings account. I owe $13,000 at 5.6 percent interest on a car that is worth $9,000. I desperately would like to get into a home when I return.
Should I continue making payments on the auto loan and pay it off before saving a down payment for a home? Or should I sell the car and “eat” the upside-down amount, using the remainder to start my house fund and try to get into a car at a better ratio?
— Paul Bond

Dear Paul,
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Dear Terry,
I’m still about 21 months from finishing up my car lease for a Mercedes S550 and can no longer continue the high lease payments. Right now, I’m behind by two months and planning to return the car before they send a repossession guy to my house.
Do I still have to pay the deficiency, which is about $59,000, if I voluntary return the car? How long would my credit be ruined by this voluntary return? Do they have the right to go after my personal savings?
— Joy

Dear Joy,
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Dear Terry,
I was leasing an auto for 36 months when all of a sudden my job closed up and I was left unable to pay for this auto. They repossessed it. Now they want to charge $15,000 for the remainder of the payments. What are my options?
— DJ

Dear DJ,
You have very few options, and they are as follows: Pay the difference, to which the lender is entitled; try to negotiate a lesser amount with the lender; or seek bankruptcy protection. (more…)

Dear Terry,
OK, I knew that I possibly would have to suffer consequences out of desperation for a used car, but little did I know it would get this out of control.
I signed an agreement to keep this car for at least 18 months until eligible for trade. I am now in regret because I am suffering so much trauma being “out of pocket” with this car. I am paying literally $170 every two weeks for this car.

I signed an arbitration agreement that states that I can dispute the agreement and go into court. But how (with the least amount of hassle) can I get this reduced, or even be eligible for trade earlier than anticipated?

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Dear Terry,
I heard on the news about a program to “sell” cars 10 years and older to the government and get $3,000 toward a new car. Is this true or a myth? And if it’s true, how do we go about it? My niece is in need of this service.
— Renee

Dear Renee,
I have never heard of such a program. The closest I can recall is that some areas of California once were offering tax credits for people who junked old, smog-producing cars and bought cleaner, more fuel-efficient vehicles. If you live in California, I’d check with the state Air Resources Board to see if any such programs are still available. (more…)

Dear Terry,
We want to buy a car that my brother-in-law is still paying on. Is that possible? Can he just sign over the title to us while we continue the payments?
— Donna

Dear Donna,
Most car loans are not transferable. You can contact the lender and see if it will allow you to qualify for the loan, which usually means the lender simply issues a new loan on the vehicle.

Some people drive a vehicle and make the payments on behalf of the original owner, who then would sign over the vehicle once the loan is paid off. But that’s not legal, and the person paying off the loan has no rights to the vehicle.

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Despite the wide-ranging knowledge that’s available these days to help car buyers be more savvy and better able to strike the best deal — whether they’re shopping new or used — most shoppers still make some basic mistakes that cost them money.

Part of the problem is that unlike most other purchases, buying a car is often an emotional rather than a rational decision — someone gets what is sometimes called “new car fever,” and it can’t be quenched until the old set of wheels is replaced by something that’s shinier and sexier. (more…)

Dear Terry,
I have a specially equipped wheelchair-accessible vehicle. It is a 2008 Honda Element with a lowered floor, manual foldout ramp, and wheelchair tie-downs. It cost about $20,000 to customize the car, giving it a total price of $42,000.
I want to make sure I have the appropriate insurance coverage for it. I stated the value at $39,000 (the amount I financed) for the insurance company so that the loan would be paid off. I have a standard five-year loan at 6.7 percent through a credit union. (more…)

You have to hand it to some consumers: They know a good deal when they see one.

The numbers for vehicle sales in August show that U.S. consumers’ love affair with big vehicles, especially pickups, hasn’t entirely died.

Neither has the clamor for fuel-efficient cars.

Chalk up both trends to the fluid nature of the car business and continued dismay over the economy.

Huge discounts on new pickups from U.S. manufacturers and dealers — sometimes as much as $14,000, although the average incentive was closer to $5,300 — apparently outweighed concerns over gas costs and how few miles per gallon a driver may get from a V-8 truck.

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Perhaps the most dreaded time for people whose cars and trucks are leased comes when it’s time to turn the vehicle back to the leasing company.

Even if the miles on the odometer show the driver is under or at the allowable mileage, there’s that gray area referred to in most lease agreements as “normal wear and tear.”

The problem arises when it comes to who’s deciding what’s normal.

While a few paint nicks from parking lot door encounters may seem like normal wear on a 4-year-old car, the leasing company could decide that the door needs repainting and bill the customer after the car is turned in.

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Dear Terry,
I am upside down on my vehicle and I have no way out that makes logical sense to me. If I want to pay off the remaining balance quickly, what do I need to do to make sure the payments are being applied correctly so that I can see that it is going toward the interest?
What is the correct step to pay down a vehicle and what is the correct terminology that I need to use to communicate with the finance company?
— Trimika

Dear Trimika,
You have the right idea here, but what you should be paying down is the principal, not the interest. The principal is what you actually owe on the car, while the interest is what your lender is charging for the money. If you pay off the principal more quickly, you should also see a drop in your total interest payments. (more…)

Dear Terry,
I am in the process of purchasing a preowned car from a local dealer in San Diego. When I first found the car, I was on AutoTrader.com and the car I wanted showed up as being on the dealer’s lot. It said the price was $16,995.
I went in that afternoon and test drove the car and asked about any discounts on the price. They seemed thrilled that I had seen the car online for “such a low price” and said they had discounted it way down to get to the $16,995 price, so there was no more room to budge. (more…)

Dear Terry,
My girlfriend drives a 2005 Jeep Wrangler that eats gas like no other — she gets 14 miles per gallon in the city and 18 mpg on the highway. She currently owes $20,000 with a 16 percent annual percentage rate and now wants to sell her vehicle or trade it in for a Toyota Prius.
She has $2,000 for a down payment, but in the end she will still be in an upside-down situation. Do you have any creative ideas on acquiring a new Prius that is gas-efficient with this scenario?
— Tomas

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Dear Terry,
I purchased a vehicle in late October and decided the next day I didn’t want it! I talked to the dealer, but he said he can’t take it back. Well, he also put in the contract that I put $800 down when I didn’t. I also didn’t sign a promissory note. I just want out of the contract. Is it possible?
— Malcolm

Dear Malcolm,
Unfortunately, contracts for cars are binding once they are signed and the vehicle is delivered.

You say you didn’t sign a promissory note, so exactly how was the car to be paid for? And if you didn’t pay $800 down, did you give the dealer a trade or some other form of collateral?

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Dear Terry,
I am 19 years old with a credit score of 694. I have one credit card with a $1,000 limit. I have paid the balance in full every month during the seven months I’ve had the card. This is the only credit or debt I have.
I gross about $1,400 a month at my job, which I have been at for two years as of next month. I also just got a raise. I attend college full time and work 34 hours a week.

I am looking into purchasing a new car. I currently own a 2000 Honda Civic with about 135,000 miles and an estimated trade-in value of $4,000. My parents will not co-sign on a loan for me. The loan amount I will need will be $13,000.

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