What You’ll Need for an Auto Loan

Make sure you have these things before you go into an office for a car loan

Car keys, calculator, and loan paperwork on a deskWhen buying a new car, getting a loan to cover the cost is an increasingly popular option chosen by new drivers. In fact, data from the Federal Reserve Bank of New York and reported by CNN Money shows that a record 107 million Americans currently have auto loan debt, a number which has been growing rapidly over the past 5 years.

If you plan to take out your own loan for your next vehicle, you are definitely in good company. However, first-time buyers may be surprised that getting an auto loan requires bringing along a certain number of items.

Proof of income
According to CarsDirect, proof of income is the first document that the lender will want to see, and the reasoning for it is fairly self-explanatory: whether the lender is a bank or an automaker, it wants to know that you are employed and therefore capable of paying back the loan. CarsDirect adds that proof of income generally would take the form of your last two pay stubs, or your direct deposit receipts if your employer prefers that payment method.

These pay stubs offer a good deal of information about your employment history, including how much money you have made to date, how much you pay in taxes, how long you have been with this employer and whether you have any wage garnishments.

If you are self-employed, you will need to provide at least a year’s tax returns, although it’s a good idea to bring more just in case.

Credit and banking history
According to LendingTree, the next thing a lender will want to see is your credit history. This may include mortgage or lease agreements, statements from credit cards or banks and records from any alimony or child support payments.

This also means that a lender will be looking at your credit score. This three-digit number encompasses the above information, plus other factors, to show how much risk would be involved in giving you a loan. As such, a good credit score would show a potential lender that you are trustworthy, and you’ll have a better chance of securing a loan and setting better terms for that loan.

Since holding a good credit score is so important to this process, the U.S. Consumer Financial Protection Bureau (CFPB) offers a few rules for doing so.

First, pay your bills and loans on time and take care of any missed payments as quickly as possible to stay current. Then make sure you’re not too close to your credit limits, since credit scoring models check to see if you are close to maxing out. On a related note, you should only apply for credit that you need. Many credit applications in a short amount of time signal that you are in dire economic straits and may not be able to pay back a loan.

In general, the CFPB adds, a long, consistent credit history is the end goal to achieving a strong credit score. The longer you continue paying on time (and catching any mistakes), the better the effect will be.

Proof of residence
According to CarsDirect, proof of residence confirms to the lender that you live where you say you do. This information is needed so you can be contacted by mail or, in a worst case scenario, so your vehicle can be located for repossession. This document can be a bill or driver’s license, showing both your name and the address given on the loan application.

Vehicle information
This refers to the vehicle you want to buy, not any trade-in that may be involved. For a new car, LendingTree says that you will need the dealer’s sheet or buyer’s order for the vehicle, including purchase price and vehicle identification number, as well as its year, make and model. If buying a used car, you will need the same information from the seller, along with the mileage, original title and disclosures of any loans currently on the car, called liens.

Proof of insurance
According to CarsDirect, you need to prove that the vehicle has current, valid insurance. This should take the form of a document showing the specific vehicle is insured, and not simply proof that you have insurance with a particular company.

With these documents (and a good credit score) in hand, securing an auto loan can be turned into a streamlined and easy process. However, LendingTree explains that all lenders are different, so it pays to call ahead to see what specific information they want you to bring to help speed up the process.

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

Advertisements

How to Find the Best Loan for Your Next Car

Here are the best tips on how to get the best loan for your new carYoung man and young woman  applying for an auto loan
Purchasing a vehicle is one of the largest and most important financial investments that any individual will ever make during their lifetime, excluding the purchase of a home. But the process of acquiring loans for a vehicle can often be confusing. There are many questions to ask leading up to the purchase of a new vehicle and customers need to determine whether they want to buy new or used, whether they want to buy outright or lease and which type of vehicle that they wish to purchase.

However, before any of these decisions can be made, customers need to determine how they will pay for the vehicle. While paying in cash is an option for a select group of new car buyers, most people will have to rely on an auto loan. Determining from where this money will come from can be the trickiest part of the process. Fortunately, there are ways to make the search for the best loan a little bit easier.

Loan pros and cons
While automotive loans can carry several benefits, they are not without their drawbacks. The most obvious benefit is that by using a loan, customers don’t have to pay for their new vehicle in its entirety, all at once. Another benefit is that automotive loans can help build credit. While you need good credit to qualify for most loans, paying for those loans will only improve your credit score. Auto loans, of course, do add another monthly payment to your pile of bills. Keeping up with those payments will be a necessity for many months ahead.

Who provides loans?
Automotive loans are offered to customers through a number of financial institutions. According to Consumer Reports, banks and credit unions are often the most common sources. If you have a good credit standing, then you will be able to attain some of the best loan rates from these institutions. But if your credit score is less than desirable, you may not qualify. Another very common source for auto loans is the dealerships themselves.

Determining which loan is best
Once you determine where you want to apply for a loan, the next step is looking for the best rates across the board. It’s important to pay careful attention, as some loans may look good on the surface, but could spell financial trouble in the future. As vehicle prices increase with each passing year, longer loans become available. However, Herb Weisbaum at CNBC suggests that drivers choose the shortest loan that they can afford. Not only will longer loans cost drivers more in the long run, but paying off a loan sooner removes one more payment each month.

If you happen to find the loan that works best for you before you are ready to purchase your vehicle, then this can be used to your advantage. The DMV says that getting pre-approved for a loan can carry several benefits. If you are pre-approved, this removes a lot of uncertainty during the entire financing process when it comes time to pick up your next set of wheels.

There is no such thing as a perfect automotive loan, as each driver has specific wants and needs. Still, there are processes and guidelines set in place to help you find the right loan for you.

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

Vehicles That Offer the Best Retained Value

Blue Jeep Wrangler on scenic overlook with lake in backgroundThe following vehicles manage to best combat the effects of depreciation
One of the major drawbacks of purchasing a new vehicle is the steep depreciation that takes effect right after the purchase is completed. Once a vehicle is driven off the lot, its value usually begins to plummet significantly. Still, there are outliers in the automotive industry that retain quite a bit of their initial value. If drivers look to sell their vehicles down the line, these outliers will generate the best return on investment.

Spanning across several different segments and brands, here are just a handful of vehicles that offer the best retained value, according to experts at Kelley Blue Book.

Compact Car: 2017 Subaru Impreza
Subaru vehicles are some of the only in the industry to offer all-wheel drive standard, making them an increasingly popular choice, especially in areas with harsh winters. Because of this, many drivers hold on to their Subaru vehicles for far longer than usual, thus increasing their residual value. In the first three years, the 2017 Subaru Impreza manages to maintain 54.9% of its initial value. At five years, that amount only decreases to 36.1%, making it a standout in the sedan segment.

Compact SUV/Crossover: 2017 Jeep Wrangler
There really isn’t any other vehicle in the automotive world quite like the legendary Jeep Wrangler. Due to both its unique design and its cult following among automotive enthusiasts, the Jeep Wrangler has been able to maintain a high retained value for years. The latest iteration of the Jeep Wrangler manages to keep 60.6% of its initial value after three years have passed. Even after five years, the Wrangler manages to retain nearly half of its initial value at 47.4%.

Sports Car: 2017 Porsche 718 Cayman
Porsche is regarded as one of the world’s most recognizable and refined brands. Motorists who purchase vehicles from Porsche, like the 2017 Porsche 718 Cayman, don’t tend to turn around and sell those vehicles soon after, greatly increasing their resale value. In the first 36 months, the 718 Cayman’s value only decreases to 54.5% of its initial worth. At 60 months, the value is estimated at 39.5%.

Hybrid Car: 2017 Honda Accord Hybrid
Vehicles that utilize alternative energy and hybrid technology are quickly gaining popularity. Since such vehicles are still a minority in the industry, their rarity only makes their value grow. The basic version of the 2017 Honda Accord already retains a sizable amount of its initial value over time. Still, when the Accord is upgraded to its hybrid variant, the resale value in the first three years stays set at 42.7%.

Pickup Truck: 2017 Toyota Tacoma
Out of any segment in the automotive industry, pickup trucks managed to possess the highest retained value. The leader in this segment is the 2017 Toyota Tacoma. The Tacoma manages to achieve the highest-rated resale value of any truck, with 71.8% of its initial value retained after three years and 58.4% of its value retained after five years. According to Kelley Blue Book, those ratings make it the vehicle with the best retained value across all segments and brands of the automotive industry.

Originating from iconic brands and offering distinct collections of attributes, these vehicles manage to maintain a value that other automobiles tend to quickly lose.

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

Common Auto Financing Terms

Defining the essential vehicle finance jargon you should know
Calculator with car keys on top of keypadPurchasing a vehicle from a dealership, be it a brand new or moderately used model, is rarely as simple as you would hope. What should be a basic transaction can quickly become a complicated discussion rife with uncommon phrases you wouldn’t hear elsewhere.

In preparation for the next time you intend to shake hands and sign on the dotted line to purchase a car, familiarize yourself with the following information.

Understanding pricing
Even before you step foot on a car lot and introduce yourself to a sales representative, it is crucial that you understand how each vehicle is given a price. If you’re researching vehicle prices, you will likely come across these terms.

The manufacturer’s suggested retail price of a vehicle (MSRP), also known as list price, is the manufacturer’s recommended price at which to sell a brand new vehicle. It’s not required that a dealer adhere to this amount, but according to the experts at Bankrate.com, it is required by law to be posted on the vehicle window’s Monroney sticker, along with the destination (freight/shipping) charge.

This differs from the invoice price, which is the amount the manufacturer initially charges the dealership to obtain and, in turn, sell the car to a buyer. The invoice price can be lowered by rebates, incentives, holdbacks and other ways to ensure the dealer makes a profit.

According to the DMV.org’s guide to understanding car financing, incentives and rebates can also be offered to retail customers looking to purchase the vehicle. The dealer may launch a short-term program to offer financial enticement to buyers in order to sell certain models. Manufacturers can also temporarily reduce the price of a model in a rebate program to make the cost accessible to more buyers.

Understanding financing
Once you negotiate and agree upon a fair price for the vehicle, the process moves to financing the purchase. Since most people don’t pay the entire bill up front, the transaction will be financed, distributing the cost across multiple years to be paid back with interest in monthly installments.

The Federal Trade Commission’s Consumer Information guide explains that the annual percentage rate (APR) measures how much the loan will cost the buyer and expresses it as a negotiable percentage. The APR includes not only the basic interest rate but also other fees involved with making a loan. The APR can be affected by many factors, from your credit history to local competition among dealerships. If you have poor credit history, based on an inconsistency of bill payment and financial dependability, you may be deemed a non-prime lender and receive a higher rate.

Interest rates can either be fixed, remaining the same throughout the entire repayment term, or are variable and fluctuate based on the current index.

Once you pay the initial down payment on the vehicle, the remaining balance will be financed and will consist of the principal, the amount of the vehicle cost still owed, the interest charges and any other fees.

Understanding your future
Ideally, you will continue to make monthly payments until you repay your auto loan on time. If you happen to pay it off early, Bankrate.com experts warn that you might be charged a prepayment penalty by the dealer, so inquire beforehand.

If, down the road, you believe you could get a better deal on the loan than you currently have, you can refinance the loan, either with the current lender at a new rate or with a different lender. Refinancing allows your loan to be reevaluated and potentially adjusted to a better rate.

According to DMV.org, there are two things you don’t want to have happen to your new car: be upside-down or have it repossessed. If you are upside down or underwater on a loan, the vehicle has negative equity and you owe more on it than it is worth. If you fail to make your payments on the vehicle, your lender might repossess your car, taking the vehicle from you without warning or court involvement.

Hopefully by understanding how the auto financing process works and what these common phrases mean, you can avoid any penalties or pitfalls and purchase your next car without issue.

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

Vehicle Details: Best Cars for Summer

Get ready to hit the road in style
With the warmer months finally here, it’s time to start planning that summer vacation you’ve been dreaming of. Here are a few vehicles that are ideal travel companions whether you’re heading out alone or with the family.

Kia Soul
For the money, you can’t get much better than the newest Kia Soul. Currently residing as the No. 1 ranked Compact by U.S. News & World Report, the Soul was also named to the Best Cars for the Money and Best Cars for Families list. The Soul (MSRP $16,100) is available in Base, + and ! trim levels, and is now also available with a turbocharged 1.6-liter four-cylinder engine that makes over 200 hp. You can haul over 60 cubic feet of stuff, and the Soul can also be equipped with leather upholstery, ventilated front seats and a Harman/Kardon® audio system, making it a great choice for road trips.

Ford Mustang
There are few vehicles as iconic as the Ford Mustang, and whether you choose the Coupe (also referred to as Fastback) or Convertible, summer is always better with a sports car. Starting with the 2017 Mustang Fastback (MSRP $25,185), you get a 300 hp V6 with the Shelby GT350 cranking out a tremendous 526 hp. There are four engine choices. For those who want the open-air feeling of a convertible, the Mustang gives you the best of both worlds. “For the money, in the segment, nothing can touch it. Not even excuses,” says Autoblog about the Mustang. Available features include the SYNC infotainment system, Shaker Pro audio system and a navigation system.

Honda Ridgeline
A pickup may normally be associated with winter driving, but the 2017 Ridgeline (MSRP $29,475) isn’t your typical compact pickup. Currently sitting atop the U.S. News & World Report’s list of the best Compact Pickups, the Ridgeline has many features that set it apart from the competition and make it a great summer vehicle. A lockable in-bed trunk with drain plug can be used as a 7.3 cubic foot cooler, while the truck bed audio system and available 150-watt/400-watt trunk-bed outlets allow you to plug in a TV or other electronics, making it the ultimate party vehicle. “No matter how it’s outfitted, the Ridgeline is a no-brainer of a truck: unmatched in smoothness and comfort, and full of innovation well beyond its unibody construction,” Car and Driver writes. “It deserved far more sales than it netted in its inaugural generation. Here’s hoping this one realizes its full potential.”

Chrysler Pacifica
A minivan is a great vehicle for any family road trip and the new Pacifica ensures everyone will be comfortable and happy. It was recently named the Best New Family Car for 2017 by Cars.com. Some of the family-friendly features you’ll find are the available Uconnect Theater with 10.1-inch touchscreens and integrated games, and a 20-speaker Harman Kardon premium audio system. The Pacifica benefits from the convenience of Stow ’n Go and a class-exclusive Easy Tilt Seating that gives third-row passengers easier access to their seats. The Stow ’n Vac integrated vacuum helps clean up any messes that may happen along the way too. All Pacifica models are efficient, but you can also get a hybrid model—the only one in the segment—with a remarkable 84 MPGe rating.

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

Does Gender Impact Auto Insurance Rates?

A few facts you need to know

If you drive a vehicle, as most people do, auto insurance is a fact of life. And everyone is continuously looking for ways to cut their rates. But there are some interesting facts that you may not know when it comes to gender and its impact on those rates.

Car insurance rates are based on various factors, including your age; the make, model and year of your vehicle; and both your driving history and driving record. Location is also crucially important, with insurance rates varying greatly by state. But gender can also impact your rates, with women generally paying less than their male counterparts. While this may seem unfair on the surface, when you dig a bit deeper you’ll see there’s a rationale behind this decision as well.

The Insurance Institute for Highway Safety notes that “Many more men than women die each year in motor vehicle crashes. Men typically drive more miles than women and more often engage in risky driving practices including not using safety belts, driving while impaired by alcohol, and speeding. Crashes involving male drivers often are more severe than those involving female drivers.”

A 2015 study from InsuranceQuotes found that a 20-year-old male will pay just over 20 percent more than a 20-year-old female. “At the end of the day, young men are less cautious, riskier, more distracted drivers,” the study notes.

According to a 2015 article in the Huffington Post, there are three states (Massachusetts, North Carolina and Hawaii) that don’t allow gender to play a role in the setting of insurance rates. Pennsylvania, Michigan and Montana apply the same set of rating factors to both men and women, so there’s no difference in rates in those states either.

There are a few things you can do to alleviate the insurance burden you’re facing; this is especially true for younger drivers who may feel the heaviest crunch of high insurance costs. There are good student discounts of around 20 percent for students who maintain at least a 3.0 GPA and take part in a Driver’s Ed course. If you don’t drive a lot, you can also consider a pay-as-you drive policy that factors in how far, how well and how often you drive. Making fewer small claims and shopping around to compare pricing can also keep your premiums low.

There are many things to consider when it comes to auto insurance rates, but the most important thing you can do is speak to your insurance representative and ask about the best ways for you to save. If you do your homework, you may be able to save big.

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

Do You Need a Co-signer for Your Auto Loan?

If you don’t have enough income or good enough credit, you may need a co-signer

As with any type of loan, your income and credit history will be major determinants of whether you are approved for an auto loan application. If you’ve been denied for an auto loan, you may want to consider using a co-signer.

Understanding how a lender determines loan approval
According to a January 2016 article in The Balance by author of “The Everything Improve Your Credit Book” Justin Pritchard, the lending company or financial institution must have reason to believe you will pay back the loan in order for you to be deemed worthy to receive the auto loan. A financial institution looks at two factors to determine whether you are credible: your credit score and your income.

Your credit history is a true indicator of how well you repay your loans; if you’ve borrowed money through loans previously and have successfully paid them off, or are making on-time payments, the lender will be more likely to believe you are a safe bet and will approve your loan application. On the other hand, if you have a poor credit score from defaulting on loan repayments, or don’t have any borrowing history, the financial institution may not want to approve you for a loan, explains Pritchard. To the financial institution, such a person is a bad investment, as the likelihood of the financial institution being repaid decreases.

Lenders also consider the income of the individual in deciding on a loan application, says Pritchard. In fact, the financial institution often calculates a debt to income ratio to determine if you make enough income to cover the expense of the loan payment each month.

Larger vehicles are generally more expensive than smaller ones, but smaller cars can also be more costly depending on the make and the engine build. The price of the vehicle and its calculated monthly payments under a loan in comparison to your monthly income will determine whether you have a low enough debt to income ratio to afford the monthly payments.

When to bring in a co-signer on your auto loan
If you have poor or no credit history, or your debt to income ratio is deemed too high by the lender, you will likely not be approved for a loan. In essence, the financial institution has determined you are too risky and will likely struggle to repay the loan, so it is unwilling to work with you.

A co-signer can help you meet the income and credit score requirements of the financial institution, as the financial institution considers the added income and credit history of the co-signer to the loan terms, explains Pritchard.

“Co-signing happens when somebody promises to pay a loan for somebody else. This happens when a [financial institution] won’t approve a loan (or it won’t approve the original application, but it’s willing to lend if a co-signer is involved),” says Pritchard in an October 2016 article in The Balance.

To the financial institution, the co-signer acts as a backup plan to collect payment if you default on the loan repayment. And if the co-signer has good credit history, the financial institution knows that at least one person on the loan has experience borrowing and repaying loans on time, adds Pritchard.

“The co-signer (who presumably has strong credit and income) promises to ensure that the loan gets repaid by signing the loan agreement with you. In other words, the cosigner takes full responsibility for the debt — if you don’t pay off the loan, your co-signer will have to do it.

“As a borrower,” Pritchard explains, “you need to have sufficient income and good credit to qualify for a loan. Using a co-signer therefore boosts your appeal as a borrower to the financial institution if you can’t meet the loan application requirements on your own.”

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