FWIW

Some good financial info!

Why It’s Far Cheaper to Buy a Car than Lease
Plus 5 more things you need to know before you set foot on the auto dealer’s lot

http://www.barrons.com/articles/why-...ase-1488585027

"Buying a car is probably your first big-ticket purchase. The good news is that if you’ve got a job and a decent credit score you’re not going to have much trouble borrowing to finance a purchase.

But it’s on you to make sure you nail a deal that not only gets you a car today, but also doesn’t shortchange your future. “Cars are an expensive blind spot,” says Ryan Frailich, a New Orleans financial planner. “People tell me they can’t save for retirement or save more for retirement, yet they don’t think anything of the fact that they are making a monthly car payment of $400 or $500, when they could have bought a less expensive car with a smaller payment.”

For example, while you may have no problem qualifying for a 60-month deal that costs you $450 a month, let’s say that you instead opt for a bit less auto bling that costs you $300 a month, and you re-direct the $150 in monthly savings into retirement savings.
More from Barron’s Next

At the end of the five years, you own your (five-year-old) car outright either way. But with the cheaper payment you’ve also managed to jumpstart a nice retirement fund of nearly $10,500, assuming a 6% annualized gain. If you then just leave that stash growing for another 35 years it could be worth $80,000 come retirement. And that’s just for your first car; follow this routine for every car purchase in the coming decades and you are buying more than a car, you are buying financial freedom.

“It’s not about the Starbucks latte you don’t buy in your 20s or 30s that sets up your future,” says Allan Roth, founder of Wealth Logic financial advisory in Colorado Springs. “It’s buying a modestly priced car that you keep forever.”

Okay, maybe not forever. But certainly for a lot longer than the loan term.

For instance, after making the last $300 monthly car payment you now have $300 the following month — and for many months after — that can go toward other financial goals. Maybe plumping up an emergency fund? Three years of saving $300 a month in a bank account would leave you with nearly $11,000 tucked away. Stick with your car for a full 10 years and you will be able to save up more than $18,000 after making the final payment in month 60. Sure, some of your savings might be needed to pay for auto maintenance — if you can’t handle it out of your monthly cash flow — but you’re still likely to come out way ahead.

Yet none of that is doable if you opt for a high monthly loan payment. Even worse is if you fall into the leasing trap, which seems to be happening all too often. The car data experts at Edmunds.com say young adults are the most voracious leasers. More than one-third of millennials in 2016 were opting for leases.

The allure is understandable. The payments are lower, so you can “afford” a nicer car. But with a lease you are basically just renting a car for three years. You have the option of buying it after the initial lease period, yet few people go that route, opting instead to return the car and lease a new model with the latest tricked-out tech.

That’s setting you up for the auto equivalent of the gerbil that can’t break away from the treadmill. You just keep rolling over into a new lease, which means you will never be without a monthly car payment. You’ll be renting a car forever.

That should drive you crazy now that you understand the financial cost.

In addition to avoiding leasing, here are some tips for keeping your car costs in check:

Recognize that a car may be a necessity but it is also a lousy investment. Cars are the classic example of a depreciating asset. A new car loses about 20% of its value the moment the wheels leave the dealer lot. And its value keeps falling from there. Given that bleak return on investment, you goal should be to minimize your costs.

Buy Used. Let someone else be the sucker who buys new and absorbs the steep loses that come from depreciation in the first few years. Engineering advances over the past few decades means cars that are five or 10 years old — or even older — are still plenty reliable. (Bonus: your insurance costs will also be lower.)

Aim to Be Below Average…on Your Loan Term. The average new-car loan term is 68 months. FWIW, that’s nearly double the time it took your parents or grandparents to pay off a car in the 1970s. Stretching out payments over longer periods — which reduces the monthly bill — is how the financing world entices you to buy too much car. Choosing a car you can pay off in 36 or 48 months will free up more cash flow sooner that you can put toward more important financial goals.

Drive the Best Possible Rate Deal. Your credit score plays a leading role in determining the loan rate you are offered. FICO credit scores range from 300-850. Loan interest rates are sliced into score tiers. For example, moving from a score between 660-689 to a stronger score that falls between 690-719 can land you an interest rate that is two percentage points lower based on recent rates. Over the life of a 48-month, $25,000 loan, you would save more than $1,100 with the lower rate.

Pick up some expert tips on boosting your FICO credit score.

Get a Loan Offer from Your Bank or Credit Union. The dealer will be almost as happy to finance your purchase as he is to lease you a car. But you can gain negotiating leverage by getting approved for a loan from your bank. If the dealer can offer a lower rate, great, go for it, otherwise take the bank’s deal. Or the dealer might come down to beat your bank’s offer. Either way, you come out ahead."

I disagree with the option of buying used!
Too many flood cars on the market that go to auction with cheap prices waiting for suckers.
Keeping a brand new vehicle for 10+ years negates the initial depreciation hit as well as coming with all new parts and a warranty.

Telcoman

 

Yeah, keeping a car that isn't a collector is a waste as an "investment."

Buy what you can afford, don't lease the American dream.

 

Just like it says above there: Whenever I explain leasing to someone else I tell them that they are basically renting a car. As most people opt to hand in the keys for a new lease and then the cycle repeats.

It all revolves around people wanting a car they can't afford. Leasing is seen as a viable method to get a hold on a new/luxurious vehicle (or any vehicle above your needs) that is beyond your real affordability.

 

Beware of cheap 3rd party warranties

Large N.J. car dealer sold customers fake warranties, suit alleges

http://www.nj.com/bergen/index.ssf/2...arranties.html

"A prominent used car dealership tricked its customers into paying thousands of dollars for fake warranties, a class action lawsuit filed earlier this month alleges.

Richard Catena Auto Wholesalers Inc. employees allegedly duped customers into buying warranties that did not exist and kept the money, according to the complaint filed by Susan Chana Lask, the attorney representing the clients who brought the suit.

The suit alleges that the insurance for the warranties was not properly funded and that the dealership didn't respond to customers who were unable to get their cars fixed under the invalid warranties."

If it sounds too good to be true it usually is

Telcoman

 

I bought my G and it came free with one of those fake warranties. After 7 months, 3000 miles I reported a bad wheel bearing and window motor. They wouldn't replace it. They said it was a pre existing condition, lol.

 

Some more good information.

The Car Was Repossessed, but the Debt Remains

https://www.nytimes.com/2017/06/18/b...=top-news&_r=0

Thinking of financing a used car that you really can't afford?

"More than a decade after Yvette Harris’s 1997 Mitsubishi was repossessed, she is still paying off her car loan.

She has no choice. Her auto lender took her to court and won the right to seize a portion of her income to cover her debt. The lender has so far been able to garnish $4,133 from her paychecks — a drain that at one point forced Ms. Harris, a single mother who lives in the Bronx, to go on public assistance to support her two sons.

“How am I still paying for a car I don’t have?” she asked.

For millions of Americans like Ms. Harris who have shaky credit and had to turn to subprime auto loans with high interest rates and hefty fees to buy a car, there is no getting out.

Many of these auto loans, it turns out, have a habit of haunting people long after their cars have been repossessed."

"The reason: Unable to recover the balance of the loans by repossessing and reselling the cars, some subprime lenders are aggressively suing borrowers to collect what remains — even 13 years later.

Ms. Harris’s predicament goes a long way toward explaining how lenders, working hand in hand with auto dealers, have made billions of dollars extending high-interest loans to Americans on the financial margins.

These are people desperate enough to take on thousands of dollars of debt at interest rates as high as 24 percent for one simple reason: Without a car, they have no way to get to work or to doctors."

"With their low credit scores, buying or leasing a new car is not an option. And when all the interest and fees of a subprime loan are added up, even a used car with mechanical defects and many miles on the odometer can end up costing more than a new car.

Subprime lenders are willing to take a chance on these risky borrowers because when they default, the lenders can repossess their cars and persuade judges in 46 states to give them the power to seize borrowers’ paychecks to cover the balance of the car loan.

Now, with defaults rising, federal banking regulators and economists are worried how the strain of these loans will spill over into the broader economy.

For low-income Americans, the fallout could, in some ways, be worse than the mortgage crisis.

With mortgages, people could turn in the keys to their house and walk away. But with auto debt, there is increasingly no exit. Repossession, rather than being the end, is just the beginning.

“Low-income earners are shackled to this debt,” said Shanna Tallarico, a consumer lawyer with the New York Legal Assistance Group.

There are no national tallies of how many borrowers face the collection lawsuits, known within the industry as deficiency cases. But state records show that the courts are becoming flooded with such lawsuits.

For example, the large subprime lender Credit Acceptance has filed more than 17,000 lawsuits against borrowers in New York alone since 2010, court records show. And debt buyers — companies that scoop up huge numbers of soured loans for pennies on the dollar — bring their own cases, breathing new life into old bills.

Portfolio Recovery Associates, one of the nation’s largest debt buyers, purchased about $30.2 million of auto deficiencies in the first quarter of this year, up from $411,000 just a year earlier."

"One of the people Credit Acceptance sued is Nagham Jawad, a refugee from Iraq, who moved to Syracuse after her father was killed. Soon after settling into her new home in 2009, Ms. Jawad took out a loan for $5,900 and bought a used car.

After only a few months on the road, the transmission on the 10-year-old Chevy Tahoe gave out. The vehicle was in such bad shape that her lender didn’t bother to repossess it when Ms. Jawad, 39, fell behind on payments.

“These are garbage cars sold at outrageous interest rates,” said her lawyer, Gary J. Pieples, director of the consumer law clinic at the Syracuse University College of Law.

The value of any car typically starts to decline the moment it leaves the dealer’s lot. In the subprime market, however, the value of the cars is often beside the point.

A dealership in Queens refused to cancel Theresa Robinson’s loan of nearly $8,000 and give her a refund for a car that broke down days after she drove it off the lot.

Instead, Ms. Robinson, a Staten Island resident who is physically disabled and was desperate for a car to get to her doctors’ appointments, was told to pick a different car from the lot.

The second car she selected — a 2005 Chrysler Pacifica — eventually broke down as well. Unable to afford the loan payments after sinking thousands of dollars into repairs, Ms. Robinson defaulted.

Her subprime lender took her to court and won the right to garnish her income from babysitting her grandson to cover her loan payments."

"Ms. Robinson and her lawyer, Ms. Tallarico, are now fighting to get the judgment overturned.

“Essentially, the dealers are not selling cars. They are selling bad loans,” said Adam Taub, a lawyer in Detroit who has defended consumers in hundreds of these cases.

Many lawyers assisting poor borrowers like Ms. Robinson say they learn about the lawsuits only after a judge has issued a decision in favor of the lender."

"Most borrowers can’t afford lawyers and don’t show up to court to challenge the lawsuits. That means the collectors win many cases, transforming the debts into judgments they can use to garnish wages.

The lenders argue that they are just recouping through the courts what they are legally owed. They also argue that subprime auto lending meets an important need.

And collecting on the debt is a critical part of the business. The first item on the quarterly earnings of Credit Acceptance, the large subprime auto lender, is not the amount of loans it makes, but what it expects to collect on the debt.

The company, for example, expects a 72 percent collection rate on loans made in 2014 — the year that a used 2009 Volkswagen Tiguan was repossessed from Nina Lysloff of Ypsilanti, Mich.

With all the interest and fees on her Credit Acceptance loan factored in, the car ended up costing her $28,383. Ms. Lysloff could have bought a brand-new Volkswagen Tiguan for $22,149, according to Kelley Blue Book.

When Ms. Lysloff fell behind, the trade-in value on the car was a fraction of what she still owed. Last year, Credit Acceptance sued her for $15,755."

"The strategy at Credit Acceptance, which has a market value of $4.4 billion, is yielding big profits. The Michigan company said its return on equity, a measure of profitability, was 31 percent last year — more than four times Bank of America’s return.

Credit Acceptance did not respond to requests for comment.

Some of the people who got subprime loans lacked enough income to qualify for any loan.

U.S. Bank is pursuing Tara Pearson for the $9,339 left after her 2011 Hyundai Accent was stolen and she could not pay the fee to get it from the impound lot. When she purchased the car in 2015 at a dealership in Winchester, Ky., Ms. Pearson said, she explained that her only income was about $722 from Social Security.

Her loan application listed things differently. Her employer was identified as “S.S.I.,” and her income was put at $2,750, court records show.

Citing continuing litigation, U.S. Bank declined to comment about Ms. Pearson.

Auto lending was one of the few types of credit that did not dry up during the financial crisis. It now stands at more than $1.1 trillion.

Despite many signs that the market is overheating, securities tied to the loans are so profitable — yielding twice as much as certain Treasury securities — that they remain a sought-after investment on Wall Street.

“The dog keeps eating until its stomach explodes,” said Daniel Zwirn, who runs Arena, a hedge fund that has avoided subprime auto investments.

Some lenders are pulling back from making new loans. Subprime auto lending reached a 10-year low in the first quarter. But for those borrowers already stuck with debt, there is no end in sight.

Ms. Harris, the single mother from the Bronx, said that even after her wages had been garnished and she paid an additional $2,743 on her own, her lender was still seeking to collect about $6,500.

“It’s been a nightmare,” she said."

Telcoman

 

All very good information, especially what you posted about warranty company's! Unless you're buying a warranty from the dealership, I've seen some very bad results from aftermarket scam company's!
Gary

 

I bought one of those third party warranties for about $200 when I bought my car used. Within a month I had the car inspected and left rear wheel bearing was shot. Tried to claim it under that warranty... and they called it a pre-existing condition lol.

I got my money back eventually, but those companies make it hell to get your parts and services.

 

3rd party warranties are hit-or-miss.

I bought a 3-yr extended warranty from a company called ToCo, which includes an additional 100k miles of limited warranty for like $60/month. The problem is that they don't cover normal wear-n-tear items like suspension, brakes, tires, and even the cd changer/navigation. So after 2yrs with the warranty not being used, I canceled the coverage this year.

As far as leasing a vehicle, its basically throwing money down the drain. I'll never lease a depreciating asset like a car because you get nothing back at the end.

 

I can say my experience through CarMax was phenomenal, especially with their warranty. I purchased my car used back in 2012, a 2006 model and CarMax sold me bumper to bumper warranty until the car hit 125,000 miles or 6 calendar years for about $1,900.

So far, they've:

-resealed my oil pan
-changed the lower control arm bushings
-replaced the fuel pump sending unit (they actually replaced the entire unit because the warranty approved it)
-resealed a leaky axle
-gave me a new gauge cluster because the "set" light for cruise control wouldn't come on
-replaced the motor that moves the gauge cluster up and down
-replaced the rack and pinion
-replaced the window motor on the driver's side

It's like $6,700 in repairs total... and I'm still covered until Feb of 2018 or another 12k miles

They seem to be the exception and not the rule.. I remember paying for an extended warranty on a new car once... then two months later getting a letter in the mail saying something the along the lines of "It hurts us to inform you that we took your money but we are still bankrupt. We are keeping your money and you are not getting anything in exchange for it ever, except a good hard lesson."

 

This includes the alignments too!

Question - do you have an aftermarket remote start?