Hidden Costs to Consider When Buying a New Car

The sticker price doesn’t tell the whole story

Congratulations! You’veAutoCosts_Featured found your perfect car, and the asking price is within your budget. Don’t celebrate too early, however, as there are many fees and hidden costs associated with purchasing a new car that you may not have considered—and you may even have to pay them up front. Don’t get caught off guard. Check out some of these common costs that buyers often fail to consider beforehand, so you know what to expect at the dealership.

Fees
While these will vary based on state and type of car (new or used), these costs can be quite costly. For example, a destination and delivery fee can run you anywhere from $500 to $1,000, depending on the manufacturer, and that is a bill that must be paid before the car is removed from the lot. Other fees include:

  • Vehicle registration
  • Title
  • License
  • Documentation
  • Compliance
  • Emissions testing
  • Floor plan
  • Advertising
  • Dealer preparation

These fees can easily nickel-and-dime you into a stupor. According to Kelley Blue Book, the federal government requires that many of these fees be itemized on the sticker price. If a fee is listed, there is no getting around it. However, take a good look at the paperwork before you sign anything. If you see something that looks negotiable, try insisting on the fee’s removal. It never hurts to attempt the fine art of haggling.

Another non-negotiable cost—technically not a fee but a huge expense that must also be paid up front—is sales tax. Even worse, incentives are taxed in 30 of the 50 states, meaning that if you are offered a customer cash rebate (through the manufacturer, for instance), you are still charged tax on the purchase price before the rebate is applied. So be prepared for that number to be higher than you may have expected.

Add-ons
Although add-on features such as leather seats and a sunroof are already included in the price of the vehicle, beware of the upsell. Keep in mind that the finance manager is still an employee of the dealership, so his or her goal is always to increase the sale.

Michael Caudill, an auto expert who owns Driven Public Relations out of California, stresses to U.S. News and World Report that consumers should not take the bait.

“I always like to tell consumers that the finance manager is simply another salesperson at the dealership. They just happen to have a different title,” Caudill says, cautioning against extras like credit insurance, extended warranties or prepaid oil changes that will add to the cost of financing your car.

Finance charges
You’re already taking out a loan for tens of thousands of dollars for a new or new-to-you vehicle, but it’s easy to forget that you will actually be paying thousands more in loan interest over the duration of your loan. That said, it is best to do your homework on financing rates before you head to the dealership, or even secure your loan first.

Buying the wrong car
Getting a vehicle history report from a reputable source like Carfax is always a good idea, so you know ahead of time if the vehicle’s had multiple owners or if the odometer reading seems legitimate.

“We estimate more than 1 million cars are on the road right now with an odometer rollback,” Chris Basso of Carfax says in U.S. News and World Report. “The cost of buying one of these cars is, on average, $4,000. That figure represents a combination of lost value and, perhaps more important, repair costs that the buyer will likely incur sooner than expected.”

Furthermore, the Bureau of Labor Statistics reports that households in America spend an average of $2,132 a year on car repair and maintenance, but with an unreliable car you are likely to spend more.

Buyers could drive themselves crazy thinking about all the hidden costs of purchasing a car, wondering if there are even more than just the ones discussed here or fretting about being able to cover the interest charges or repairs. But now that you are a more-informed buyer, you are already one step ahead of the game.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

What Does Zero Percent Financing Mean to You?

It’s more than simply a great deal

We’ve all seenZeroPercent_Featured the advertisements on TV, whether for your local automotive dealer or a national auto brand: no money down, zero percent financing or some similarly unbelievable deal. Typically, as with all things that seem too good to be true, there is a catch. In the case of zero percent financing, it’s the ambiguities explained thoroughly in the fine print.

To avoid all that over-defined jargon, find out here what zero percent financing really means:

You’ll probably have higher payments – According to Kelley Blue Book, these zero percent deals usually require a shorter-term loan, so monthly payments end up being much higher than they would be with a conventional auto loan. Many people opt to keep their monthly expenditure lower and go with a longer-term loan, even if they end up paying more in interest in the long run. KBB.com also notes that there are exceptions in which zero percent financing is offered for longer terms, so make sure you do your research before signing on any dotted lines.

You don’t need perfect credit to qualify – Jaded adults who think they know the “credit game” likely believe they could never qualify for zero percent financing with a less-than-stellar credit score, but that is not always the case. Some finance programs are trying to go after an expanded audience of buyers, so unblemished credit is not required in all cases.

It applies to only a limited number of models – To receive zero percent financing, you typically must buy a car right off the dealer lot—no special orders—and there is likely a predefined model and package that qualify. In other words, with zero percent financing, beggars can’t be choosers.

You can usually choose between zero percent financing and a cash rebate – The financing deal is usually offered in an either/or situation with a cash rebate, and you must choose between the two.

You can still negotiate a lower price – Some think that because you are already seemingly getting a steal on your financing, a dealer will not negotiate the price of the vehicle with you. However, that is not always the case.

“A reputable dealership will be open to negotiating the deal before applying the zero-percent financing to your sale,” KBB.com says. “As always, we recommend you do your homework before buying.”

There are other great interest rates available to you – If the car you have your heart set on does not qualify for zero percent financing, or you had a very rough year in the credit department, there are lenders that offer interest rates lower than most dealers can offer. For that reason, again, explore all your options before making any decisions.

With all these facts in mind, many people will be attracted to zero percent financing. Although the zero-percent trend has been around for a couple of years, most industry experts believe it can’t last forever. With the advent of lower interest rates and flexible terms, today’s car buyers are finding more creative financing options than ever. And with today’s economic challenges, these programs will continue to bring buyers into dealerships.

Your best bet is to stop in to your local financial institution and speak to them about the rates they have so you know what kind of deal you can handle before you head to the dealership.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Hidden Costs of Home Buying

The biggest expenses first-time buyers don’t expect

You’ve been savingHiddenHomeCosts_Featured up for years. You found the home of your dreams and negotiated a price that works for you—you even saved enough for a 20 percent down payment! A big weight likely feels lifted from your shoulders. But don’t get too comfortable. First-time home buyers are often vulnerable to surprise costs for which they did not budget. Don’t be caught off guard; familiarize yourself with these five common hidden expenses:

Home inspection: So you submitted an offer on a home and the seller accepted. Now you’re all set to move in, right? Wrong. Would you buy a used car without checking under the hood first? Similarly, hire a certified home inspector to pore over the entire property before you close on the house. If any structural or mechanical issues are uncovered, you can ensure the seller repairs them before closing or negotiate the price down for you to cover the costs of repair. Without a home inspection, you will be solely responsible for anything that should need fixing once you move in.

Even though a reputable inspector charges between $200 and $600 depending on your location, it is money well-spent up front in comparison to a potential home repair that costs you thousands down the road.

Appraisal fee: Your mortgage lender wants to make sure that the home you are about to buy, with his or her help, is worth every penny. That’s why the financial institution will charge you an appraisal fee. This money, charged directly to the borrower by the lender, goes toward an independent certified appraiser, who will assess and document the home and its property value. Be prepared to shell out an additional $250 to $600 for this necessity.

Closing costs: After you seal the deal and sign the papers, you’ll need to fork over an additional 2 to 5 percent of the home purchase price to cover closing costs, which can include everything from a loan origination fee and attorney fees to homeowners association dues and taxes. On average, you’re looking at $6,000 to $17,000 in closing costs, based on the average sale price of a new home in mid-2015, according to the U.S. Census Bureau.

Escrow account: Many first-time home buyers don’t fully know what an escrow account is, despite its being mandatory with some mortgage agreements.

“The money that goes into the account is used by the lender to pay certain ongoing property-related expenses on the homeowner’s behalf, such as homeowner’s insurance premiums, private mortgage insurance (PMI) premiums and property taxes,” explains Andrea Browne of Kiplinger’s Personal Finance magazine.

Escrow accounts are mandatory for buyers who make a down payment of less than 20 percent and for buyers who take out certain types of loans, such as FHA loans. You may be asked to make an initial deposit into escrow at closing, and then you will pay extra to the mortgage lender each month in addition to your house payment. Without escrow, you will be responsible for paying all insurance and taxes on the home and property on your own throughout the year. With it, you and the lender are both protected because these critical home ownership expenses are sure to be paid in full and on time. Escrow is a blessing; you just have to be prepared for its upfront costs.

Home maintenance and repair: Even though you had an inspection done, things do need to be repaired after normal wear and tear. As a homeowner, you are responsible for upkeep of the property, including everything from mowing the grass to fixing the garbage disposal. While these aren’t costs you can expect to pay before you close on the house, they will arise inevitably and can be quite high, so having a nest egg for such purposes is a good idea.

Now you know around how much more in “surprise” costs and fees you will need to foot before moving into your dream home. Even if you weren’t expecting to pay this extra money, hopefully at least being aware ahead of time helps soften the blow.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Getting the Best Car Loan

Why the right auto loan is so important—and how to get there

If you’re lookingBestCarLoan_Featured to buy a new car, you’re probably looking for the best price, too. And part of acquiring a good deal on your vehicle is getting the best car loan possible. But not all car shoppers shop smart—they want to get in, get out and get on the road with their new vehicle.

Don’t make that mistake. Sometimes if you’re in a rush and don’t do your homework, you’ll wind up paying more than you should for an auto loan. And nobody wants that.

“The big mistakes are made in the financing office,” explains Phil Reed, the senior consumer advice editor at Edmunds.com, the auto research website. “Making the right decisions can save thousands over the life of the loan.”

“When you buy a car, make sure it’s something you can afford, something that truly meets your budget,” adds Melinda Zabritski, senior director of auto finance at Experian Automotive. Otherwise you could risk running into financial problems in the future.

To make sure you’re making the right choice regarding an auto loan, here are five tips to keep in mind before you sign on the dotted line:

Evaluate your credit reports. It’s important to check your credit report at all three of the major credit reporting agencies, which are Experian, Equifax and TransUnion.

“You want to check all three because you don’t know which one the lender will use and you want to give yourself time to fix any mistakes,” explains Gerri Detweiler, director of consumer education for Credit.com. “I found a mistake when I went to buy a car a few years ago, and if I hadn’t straightened it out, it would have cost me a lot of money.”

In addition, checking your credit score beforehand will help you determine around where your interest rates will be. You are allotted one free report from each credit bureau once per year. The site www.annualcreditreport.com is the best place to obtain your annual free credit report from each of the credit bureaus.

Shop for second and third opinions. Most shoppers will finance at the car dealership where they’re buying their vehicle simply because it’s convenient—but it may not offer the best deal. In fact, local financial institutions typically offer the best rates on car loans.

“A lot of people just assume they’re getting the best rate and terms from the dealer, and that’s the last assumption you should make,” says Liz Weston, personal finance columnist and author of the book “Deal with Your Debt.” “You can apply for that loan, have it all set up, and then pull the plug at the last minute, if the dealer’s offer is better.”

…But shop for a maximum of two weeks. Anything longer than two weeks can hurt your wallet. How? Each time you apply for a loan (regardless of whether you’re approved or you take the loan), your credit score can be negatively impacted, which can make it harder to get a good loan. So in the interest of saving money—and time—keep your rate shopping to a two-week maximum, experts advise.

Go for the shorter-term loan. Most car buyers tend to lean toward longer loans because the monthly payment is smaller. However, in the long run, you’re actually paying more the longer the loan runs, due to interest.

“You definitely pay more in the long run because these long loans typically have high interest rates,” says Mike Quincy of Consumer Reports Autos. The perfect loan time for your vehicle?

“Try to limit your car loan to about 48 months,” advises Quincy. “That’s the optimal amount of time you should pay for your car.”

One of the first questions most salespeople will likely ask you is how much you can afford to pay each month for your vehicle. However, there’s no obligation for you to answer that—and you shouldn’t want to. If you focus on only the monthly payment, you won’t know the exact value of your trade-in, and you could wind up getting ripped off.

“If you just look at the monthly payment, you’ll have no idea what you’re being charged for the car, you won’t really know what you’re getting for your old vehicle and you won’t know what the interest rate really is,” says Jack Gillis, author of “The Car Book 2014.” “The artificially low monthly payment will disguise the fact that you’re paying more than you should for the car and financing and getting less than you could for your trade-in.”

Use these helpful tips to work out the best possible deal, and don’t forget to stop by to find out the best possible rates we have for you so your purchase can be as stress-free as possible.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.