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End of Car Lease: Now What?

The Dollar Stretcher
by Gary Foreman

Dear Dollar Stretcher,
My husband and I have really started getting serious about getting out of debt. About 2 years ago we decided to lease a maxed out Suburban.  It is our only vehicle so we justified the $507 payments with that logic.  It has been a wonderful car for our family of five. But, we are trying to decide what our best strategy should be now that our lease will be over next April, and we now have 70,000 miles on the vehicle.  On top of that, my husband now needs a vehicle because of a job change.  The "buyout" at the end of the lease is around $25K.  We know we now have upside down equity in the thing. My husband has a small bonus coming and we are trying to  decide if we should or could trade it in for a used vehicle with less mileage and pay out the penalties. Or, ride out the lease and pay out the penalty next April and turn the keys over then.  Buying the truck/car next April for $25K with probably 100,000 miles on it seems a "bit pricey." We finally have carved out a budget for our family,and we are paying off the bills. However, this is a question we can’t seem to get answered. Could you help us?  

Mary

Mary has discovered one of the secrets of auto leasing. Often the deal looks much better at the beginning than at the end. And, unfortunately for her, the end of this lease could get ugly. And Mary’s not alone. About one third of all new cars delivered in 1997 were leased. So let’s take a look at the situation and see what choices Mary has and try to figure a way to compare them.   First, let’s consider the basic data. Mary’s family needs a second car.

That probably means that a ‘maxed out’ anything is out of the question. They’re also facing some hefty excess mileage charges. Depending on their lease the charge could be in the $6,000 range. Finally, if they want to end the lease early there will be a penalty to pay.  There are four different options for Mary. The first would be to turn the Suburban in early. If they do that they’ll face the early termination fee.  They would get out of a car that they can’t afford sooner. And it’s possible that the dealer would waive the termination fee if they bought the replacement car from the same dealer. 

The second alternative is to buy the car from the dealer at the end of the lease. Mary will face the excess mileage and wear charges. Assuming that she can find a four year 10% loan, the monthly payment will be $634 on a $25,000 loan.

The advantage would be that they know and like the Suburban. Normally you wouldn’t touch a 3 year old car with 100,000 miles, but they know that this car has had an easy (if busy) life. It’s also likely that they won’t have to actually pay $25,000 for the car. Much of the excess mileage and wear fees should be applied to reducing the cost of the vehicle. In reality, it should cost more in the $21,000 range. But, that’s up to negotiating with the dealer. The disadvantage of buying the Suburban is that it’s more car than Mary’s family can afford.  

The third alternative is to turn in the Suburban at lease end. Pay the excess use fees and walk away. That would allow Mary to buy something less expensive. For instance, a 1997 Ford Taurus four door wagon with 45,000 miles and typical equipment retails for about $13,700.  A four year loan on this car would run $347 a month. Is the Taurus a ‘step down’ from the Suburban. Sure it is! But maybe it’s what Mary’s family can afford. The disadvantage is that if the dealer knows that you’re not going to buy from them they’ll get all they can on the wear and tear charges. Some minor flaws could be overlooked if Mary were buying or leasing another car from the dealer.  

The fourth choice is for Mary to buy the Suburban at lease end and then sell it herself. It could be that the car is worth more on the open market and Mary could make some money on the deal. Not likely because of the mileage, but it pays to check it out.   Which option will be best for Mary and her family? Probably to turn in the Suburban at lease end. If they’ve just been able to fit the $507 Suburban lease payment into their budget, it’s going to be hard to cover the cost of two cars. To illustrate, if they found two cars for $10,000 each and financed them both over four years each would have a monthly payment of $254. Combined that would equal the Suburban lease.

Of course, there’s still additional insurance, registration and maintenance on the second car to consider. And it might be hard to find two used cars that can be financed over a four year period. In any case, two less expensive cars would seem to make sense.   The one wild card in this deal is the value of the Suburban. With that many miles it’s a bit of an oddball. Using blue book retail price for a 1997 Suburban with that mileage I got a value of about $22,000 depending on options. It will be worth less next April. It could be that the dealer is willing to adjust the buyout substantially or that Mary knows someone who would really like to buy her car. But, it seems highly unlikely that they should buy the Suburban and keep it.  Should they use Hubby’s bonus to terminate the Suburban lease early? Probably not. Even if they saved half of the $507 monthly lease in a cheaper car for the next nine months ($2,281), they’d give most of that back in early termination fees unless the dealer would waive the fees on a trade-in. The bonus should be used for a down payment on a replacement or to cover the excess mileage charge that will come due at the end of the lease.

Sad to say, but Mary was a poor candidate for the lease they signed. Leases are generally best suited for businesses or people who can afford a new car every few years. And they’re especially bad for people who drive mega-miles yearly. Lease deals usually look better at the beginning (low monthly payments) and worse at the end  (mileage penalties and you don’t own the car).

At this point Mary needs to make sure that they’ll have enough money saved  to pay the penalties that will be due at the end of the lease. If they can cut down on the number of miles they drive that could be helpful. She’ll also need to consider carefully how much they can afford to spend on cars and how old a car they can drive. It’s possible to own a car for $300 per month, but they’ll need to think of smaller, less expensive cars and/or plan on keeping a car for seven to ten years.

We hope that Mary finds two cars that make her family happy and fit within their budget.

Gary Foreman is the Editor of The Dollar Stretcher website.

Rental Cars for Less

The Dollar Stretcher
By Gary Forman

Ah, summertime! Our thoughts turn to travel and vacations. And if you’re like many Americans, some of that time will be spent behind the wheel of a rental car. We’ll spend about $16 billion this year for rented wheels. So let’s take a look at how to get the best deal on rental cars. 

First the basics. To rent a car you’ll need to be over 25 years of age, have a valid driver’s license and credit card. Many rental companies will also check your driving record. If you’ve had a problem with accidents, tickets or driving while intoxicated you might not be able to rent a car.  Next, you’ll need to decide how big a car you’ll need. Remember that a "mid-size" isn’t the same at all rental companies. Ask which specific models are included in a class. Make sure that you’d be reasonably happy with any of the models in that class. In most cases you won’t get a guarantee of a specific make and model. 

You’ll be offered optional insurance. You can buy collision damage waiver (CDW), liability insurance and coverage for your personal items in the car. Your current auto or homeowner’s policies may already cover these risks. If they do you don’t need any additional insurance. Even if your  auto policy doesn’t cover rental cars, it’s possible that your credit card does. Some provide coverage if you use the card to charge the rental. A phone call will verify what insurance you have. It’s time well spent.  Ask specifically about mileage charges. Some companies will charge for every mile over 100 per day. That’s not very far if you’re on vacation. 

If you don’t think that the extras are profitable for the industry, check this out. One consulting firm that specializes in advising car rental companies brags that they can turn a 7% increase in sales into a 100% increase in profits. That means the consumer is buying things they don’t use.

Once you know what you need it’s time to go shopping. And, even though you’ll only have the car for a short time, it’s worth a little effort.  As a general rule, it’s good to book your car at the same time that you book your airline and hotel. Prices can change often. Last week’s best price could be lower today. The more time you have the better your chances of finding a bargain.  Make sure that you get the price including all taxes and surcharges.  Have them include any insurance that you might require.

Don’t forget to include a car seat or ski rack if you’ll need one.  Ask about discounts. They’re available for a wide number of memberships and affiliations.  If you’ll be using a coupon or an ad, read the fine print carefully.  Sometimes the car advertised is only available on a ‘limited basis’. That could mean that by the time you get there the special won’t be available.  Find out when you make your reservation.  Taxes can vary even within the same destination area. Airport surcharges are common. The airport charges the rental company and they pass it along to you. That will translate into a cheaper rate off the airport. 

If your pick-up and drop-off locations are different you may face a drop-off charge. Find out in advance. Don’t forget to ask about fees for additional drivers.  If you’ve had an accident or two you’ll want to know whether they’ll check your driving record. It’s legal for them to refuse to rent you a car if  your record isn’t up to their standards. You’ll be turned away even if you have a reservation.  Renting a car is definitely one case where you should read all the fine print. The conditions and limitations could be different than what you thought the agent has said. If that happens the contract will be the final word.  Ask if there’s a charge for ‘no shows’ or early returns. There’s nothing wrong with making a reservation and then canceling it if you find a better deal later.

In fact, you should shop again before you leave. If you  find a better deal, take it. You can even call the company that you have the reservation with. If you don’t cancel at least once, you’re probably not trying hard enough to find a bargain! 

There are also some things to remember when you go to pick up your car. If no cars are available in your class, the rental company should upgrade you to the next larger class without additional charge.  Be prepared to show them your driver’s license and insurance card. You’ll also need a credit card with a credit balance large enough for this transaction.  Look the car over carefully before you leave the lot. Any scratches or dings should be noted on the rental agreement and initialed by the rental agent. Proof now is better than your word later. 

Find out about fuel. Some companies will charge you a set amount regardless of how much gas is in the car when it’s returned. If that’s the case do not refuel. You will not receive credit for your generosity.  If you are responsible for returning it with a full tank, buy your own gas. You’ll pay less for gas, even near the airport, if you refill the tank before returning the car.  Usually rates are for a 24 hour day with a one hour grace period. So if you keep the car for 26 hours you’ll end up paying for two days or paying for additional hours at an hourly rate. 

When you return the car make sure that they inspect it for any damages. You want them to acknowledge that you returned the car without any new wrinkles.  So there you have it. Even if you’ve never rented a car before, a little extra time and effort can help insure a wonderful trip. Happy vacationing!

Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher website and ezines. You’ll find hundreds of free articles to save you time and money. Visit Today!

Old Van Or New Car

from Jonni McCoy

Q. I have an older van that really needs to have major repairs, such as brakes and possibly a new/rebuilt  engine.  We put a new transmission in it before Christmas while I was still working.  I am at home now and use the van primarily for carting the kids to the store and to the pool, etc. My husband has the "I want a "new" car urge and keeps talking about using my van for a trade-in.  We figure that we could "afford" payments of $200.00 a month but that would be all of our discretionary budget. How do we decide which is the best use of our money?  Fix the old or invest in a newer vehicle? MichelleRaytown,  MO  

There are several questions to consider.

I doubt that you can get a brand new car for your trade in plus $200 payments, so you will probably get another used one. Is that going to be any better than the one you have?

Do you want to have NO discretionary money? Can you or your husband really live without any "extras" for a few years?

Can you and your kids live "bone dry" financially just so you can have a newer car?

The $200 per month comes to $2400 per year. Do you think you would spend more than that on repairs?

These are just a few of the questions that you should ask yourselves before making that decision. I am sure that you have others issues to consider in addition to these.

Jonni McCoy is the author of "Miserly Moms – Living On One Income In A Two Income Economy" and "Frugal Families – Making The Most Of Your Hard Earned Money!"

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How To Save on Gasoline

by Dr. Charlotte Gorman

As gasoline prices continue to escalate, many people are looking for ways to reduce the burden of higher prices while still doing the driving necessary to their work and other activities. Below are some suggestions which will save you a considerable amount of money on gasoline. The suggestions are excerpts from my book The Frugal Mind: 1,483 Money Saving Tips for Surviving the New Millennium.

Ways to Save

1. Ask yourself every time you plan to use your car, truck, SUV, or van, "Is this trip really necessary?" Every mile you drive your vehicle will cost you at least an average of 36 cents. If the trip is not necessary, think twice before using your vehicle.

2. Drive at a conservative speed on the highway. According to the U.S. Department of Energy, most automobiles get about 20 percent more miles per gallon on the highway at 55 miles per hour than they do at 70 miles per hour.

3. Consider purchasing an automobile which gets the best gas mileage. For example, generally, the following get better gas mileage: lighter weight vehicles, vehicles with smaller engines, vehicles with manual transmissions, those with four cylinders, and those with fewer accessories. Check the "fuel economy" labels attached to the windows of new automobiles to find the average estimated miles per gallon for given makes and models.

4. Decrease the number of short trips you make. Short trips drastically reduce gas mileage. If an automobile gets 20 miles per gallon in general, it may get only 4 miles per gallon on a short trip of 5 miles or less. The U. S. Department of Energy says that trips of 5 miles or less make up 15 percent of all miles driven each year, but these trips burn 30 percent of the gasoline.

5. Cut down on the number of shopping trips. Try to plan your shopping so that you can run all of your errands in fewer trips. Combine trips. Driving to run errands many times a week can become very expensive. 6. Run necessary errands on your way to and from work. You can also run errands during your lunch break by walking to nearby stores, the library, and other places.

7. Make a list of all errands in order of their location before you leave home. Move from one to the other without backtracking. Backtracking requires additional gasoline.

8. Run errands when the traffic is least congested. You will minimize stopping-and-going and, thus, save on gasoline.

9. Don’t drive all the way across town to save five cents on an item. As pointed out above, " it costs an average of at least 36 cents a mile to own and operate an automobile." If you drive 10 miles, it will cost you $3.60 or more.

10. When shopping several grocery stores, consider how far they are from each other and whether you could still save money over the cost of automobile ownership and operation if you drove to all of them to purchase, for example, advertised specials.

11. Minimize stopping-and-starting. It wastes gasoline.

12. Try to drive at a steady pace. Try to avoid unnecessary and repetitious speeding up and slowing down. Jerky driving uses more gasoline.

13. Try to avoid, as much as possible, stop-and-go traffic. It increases fuel consumption.

14. Accelerate smoothly and moderately. Accelerating very rapidly uses more gasoline. Jumpy starts and fast getaways can burn over 50 percent more gasoline than normal acceleration. Once you have reached your desired speed, keep a steady pressure on the accelerator, just enough to maintain the speed.

15. Warm-ups should not exceed one minute. The gasoline consumed in long warm-ups is not offset by any great improvement in engine performance.

16. Turn off your engine if you stop for more than one minute. (This does not apply if you are in traffic.) Restarting the automobile will use less gasoline than idling for more than one minute. Don’t wait until you unbuckle your seat belt, turn off the lights, turn off the air-conditioner, gather items from the seat to take with you, etc. before you turn off the engine. When you turn off the ignition, your gasoline costs stop.

17. Run your automobile air-conditioner only when really necessary. Alternatively, use the economy vent. Running the air-conditioner results in more fuel consumption and fewer miles per gallon of gasoline.

18. If your automobile is equipped with a cruise control, use it when possible. It helps you get better gas mileage. Most automobile manufacturers recommend, however, that the cruise control not be used in heavy traffic or on wet roads for safety reasons.

19. Change the air filter when needed. A clogged filter wastes gasoline.

20. Change the fuel filter at regular intervals. A dirty filter reduces fuel economy.

21. Have your automobile tuned-up as recommended in your owner’s manual or as needed. A poorly tuned engine could consume three to nine percent more gasoline than a well-tuned one. The tune-up will pay for itself in gasoline savings and performance. 22. Check your tire pressure regularly. Keep your tires inflated at the recommended pressure. Tire pressure that is too low will increase rolling resistance and reduce gas mileage. You can lose about two percent in fuel economy for every pound of air pressure under the recommended pounds per square inch.

23. Consider radial tires. The use of radial tires can mean from three to five percent improvement in gas mileage in the city, seven percent on the highway, and 10 percent at 55 miles per hour after the tires have warmed up for 20 minutes. Radials also last longer. (Remember: Never mix radials with conventional tires on the same axle.)

24. Keep the front wheels of your vehicle in proper alignment. If the wheels are out of alignment, the vehicle will use more fuel.

25. Remove unnecessary weight from your automobile. Generally, the lighter the vehicle, the less gasoline it will use. An extra 100 pounds decreases fuel economy about 1 percent for the average car, and 1.25 percent for a small car.

26. Vacation near home this year. Most of us fail to see and enjoy the attractions in our own city or state. Instead, we tend to drive long distances for a vacation. People hundreds or thousands of miles away from us drive to see our attractions, and we drive to see their attractions even though we haven’t seen our own nor have they seen their own. Discover some exciting things close to home this year and save hundreds of dollars in transportation costs, including gasoline.

27. Shopping by mail or on the internet can save gasoline. However, make sure you aren’t spending more on the items you order than you would pay for them in a local store plus the cost of operating your car at 36 cents or more per mile.

28. Instead of driving around, telephone around or use the internet to compare prices, to find out about the availability of an item, or to get other particular information. Telephoning or using the internet will save on your gasoline costs (and help reduce impulse buying).

29. Order needed items over the telephone or internet and have the items delivered to you if the overall delivered cost of the items is less than the price of the items on the shelf in the store plus the cost of driving your automobile to the store and back. Some drug stores, small neighborhood grocery stores, cleaners, department stores, and other types of stores and businesses provide "free" delivery service.

30. Shop around for the best price on gasoline. There could be as much as 20 cents or more per gallon difference in price at different places that sell gasoline.

31. Some service stations advertise "Save 4 cents per gallon when you pay cash." For example, by paying cash rather than using your credit card, you could save 60 cents on a 15-gallon purchase. Such savings could accumulate to a relatively large amount over time. If a service station does not advertise savings for paying cash, you may wish to ask the manager or owner if he or she would be willing to offer such a saving to you if you pay cash rather than use your credit card.

32. Consider purchasing a shopping card offered by such places as Wal Mart which gives you a three cents-per-gallon discount at their pump if you use the shopping card when paying for the gasoline.

33. Pump your own gasoline. Save as much as 10 cents to 20 cents per gallon.

34. Don’t overfill your gas tank. The gasoline draining down the side of your automobile is lost and may also damage the finish on your car.

35. Figure your gas mileage each time you purchase gasoline. If the miles per gallon begin to drop, you can check for possible causes and make the necessary adjustments or repairs.

About the Author
Dr. Charlotte Gorman is an Extension Agent, Family & Consumer Sciences, Texas Cooperative Extension, Texas A & M University System. She is the author of The Frugal Mind, The Little Book of Living Frugal, and Speak for Yourself.

Buying A Car

Q . Any tips on how to buy a car and not get taken?

Buying a car is one of the most stressful things ever, especially for those of us who are very concerned about getting a good deal. For one year I worked as an account executive in a retail automotive advertising agency. You know those screaming car ads on the radio, those were my ads. (Not my proudest career move.) But from working with some of the shadiest and some of the most straight up car dealers, here are my tips:

1-If buying a new car, check with some of the better websites. (www.car.com, www.edmunds.com, www.autobytel.com). What you are looking for? The invoice price. Ideally you want to pay anywhere from $1500 to $2000 above invoice. But be warned there are several ways that dealers can make more off of your sale. This is pretty complex. Additional costs that you should expect to pay: Destination fee, tags, tax and title.

MENTION THAT YOU HAVE BEEN SHOPPING ON LINE, I knew a dealer that would automatically drop the cost because he knew that people that were on the internet were more car price savvy.

2- Newspapers have tons of car ads that have some legitimate good deals. BUT READ ALL OF THE FINE PRINT! If it seems to good to be true…it probably has one heck of a disclaimer. One of my responsibilities were to make sure that the ads were properly disclaimed. Bring the ad(s) with you. If the deal car has a stock number next to it, this most likely means that the car will be "Sold" when you get there, at this point the dealer will try to get you into a different car.

3- Try to buy a car that’s already on the lot. If a dealer has to order your car or trade with another dealer, you lose some buying power. The longer a car sits on the lot the more pressed the dealer is to move it. This is also another complicated financing thing for the dealer.

4-When you are really ready to purchase, the check book is your back pocket, try to buy on the last weekend of the month. Some people will disagree, but I know that the sales people have tremendous pressure on them to close as many deals at the end of the month. This is when the dealers will be the most anxious to get your sale on their report to the factory. Those are my tips. But the upside of all of this is that this industry has come a long way. Their are regulations that will protect you as the consumer. Good Luck!

My husband asked the person selling the car if he had any objections to having the car checked out by a mechanic.  We have a friend that’s a mechanic and he checked it out for us.  He told us everything that was wrong and approx. what it would cost to have it fixed.  In 1998 we bought a 1993 Dodge Caravan for $3,500.  I’m still driving it.  We checked around and talked to another couple that had just bought a 1992 Dodge Caravan, and they had paid approx. $12,000. and were having to take care of some problems.  If they say it’s in good condition, but don’t want it checked out, I would question it.  Gary & Goldie

My husband has been in the car sales business for 12 years. He has run into a lot of good people and some real dillys !  Just like everything else there are good and bad salesman and good and bad customers !  One thing that should be done first off is to research the car you want to buy. Know as much about it as possible. That helps you and the salesman, you know what you want and why.  Second, most dealerships don’t like to be "used" while you’re shopping  around and many won’t give you the "bottom" price unless they know you’re  serious.  And it is always best to buy a car that is a year or two old. Buying brand new is not cost effective.  Most salesmen are just trying to make a living, their NOT there to rip you off. My husband is often told he is too nice to be a car salesman !  But… Watch out for the "salesman of the month" too. He may be trying  to out sale every other guy and may be quite a "wheeler-dealer ".  M & M

CAR DEALERS’ VERY TRICKY TRICKS Now You Can Beat Them At Their Own Games reprinted from Bottom Line/Personal  www.bottomlinesecrets.com  MKB

In response to people looking for advice on buying a car I have a few tips.  First know, that I sold cars for many years and have seen it all. Do as much research as you can via the net or "car shopping". Once you have determined what you want you can find out what the dealer pays for a car on the net or even in consumer reports. Remember, you want to work a price from dealer cost or invoice, a car salesperson wants to keep the price as close to sticker or MSRP as possible. Second, don’t disclose that you have a car to trade in until you have agreed on the price of the new car. You can also do research on the net for your trade-in. Check out Kelly Blue Book or Edmund’s. A car salesperson will always ask you what payment you are looking to be at, keep that to yourself until you have agreed on a final price for the new car and trade-in. Third, check out your financing options (i.e., see where your bank is at in terms of interest rates). Some Auto websites can calculate payments for financing or lease. Make sure you go into a dealership armed with as much info as possible and remember………try not to get caught up in the emotional part of buying a car. That’s where you can run into problems. It’s just a car. And if not that one there will be another one. Try to find a salesperson you like and can trust, one that can guide you through the second biggest purchase of your life after a house.  The automobile industry is stereotyped by many, however there are some good guys out there, I know, I was one of them!  MEK

Automobile Topics

How To Save On Gasoline

Auto Insurance for Teens and Adults

Finding The Best Auto Financing

Buying a Car

Getting Out of an Auto Lease

End of Lease: Now What?

Fixing Used Cars

New Car vs. Used Car

Rental Cars For Less

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Fixing Used Cars

Q.   We have a 92` Ford Tempo that has been diagnosed as needing a new motor. The thing is dying fast. The problem is we still owe 1,700 on the car and it`s probably only worth 1,000 even if there was nothing wrong with it. The motor, we were told would cost over 2,000 to replace. So we can`t sell it, drive it or even donate it, (since we still owe on it). Do any of you kind people have any ideas on how to get at least some money out of this car or to fix it for less than 500.00? Any suggestions would be appreciated. Thanks Joyce

• About your car you should check the local junk yards to see if they have a rebuilt motor for your make and model you get this for close to 200.00 I would next suggest that you find a back yard mechanic to put it in for you or buy the manual and do it yourself. My husband has replaced a couple motors over the years and has not found it to be to difficult. Hope this helps.  Tonette

•I’d suggest going to a junk yard. A local mechanic should be able to install it for you, or try the local technical school. Some technical schools also rebuild motors at cost. My car was totaled, axel broken, side crushed and they had to cut the top off to get my daughter out. The motor was perfect! It sits in a junk yard in another state. Here in SC, we have a lot of accidents with young teenagers having new cars and wrecking them. I’m sure the motors are perfect in many of those vehicles in junk yards.  Betty

• If you have a community college in your area, check to see if they have an auto mechanic department.  the students will be working on your car, but there are very skilled mechanics there that teach the class and make sure they do well.  this is also a good way to get rid of a car with very little value.  you may even get to write it off as a deduction. -Lauren

• Check your local Vo-tech or even high school – they may have an auto mechanics class that could rebuild the engine for you for parts.  Sally

• This is in response to the person with the ’92 Ford Tempo, looking for less expensive motor option. My old car needed a new engine when it blew a head gasket. I could not afford to replace the engine until I found a reputable company that sold used car parts (engines, carburetors, transmissions, etc.). I bought a used engine for $500 and then called around to have a mechanic put it in for me. In our area this cost another $500. $1000 is a lot of money but it was less than half the quotes I received for a new engine and labor! Try calling around and see what you can find. Good Luck!  Nicola

• Consider yourself lucky if you can get a new motor for your vehicle for only $2,000! There is simply no way to avoid paying for repairs on any vehicle made after 1990. Vehicles these days are being made in such a way that repairs are deliberately expensive. "They" don’t want you to repair your vehicle — car manufacturers want you to buy a new vehicle! If you want to avoid making car payments on a new vehicle, then you have to start making repairs on the car you now have. Cars don’t last forever and they are not an investment. You need to set up a savings account that will be designated for yearly car repairs only. Count on putting about $2000 a year into that account. Some years you may only need to spend $500 a year on repairs, some years you may need a full $2000. It’s cheaper to get your car repaired at $2,000 a year than to have to pay $5000 a year on car payments (in addition to the normal maintenance and car repairs you will still be faced with on a new vehicle). In the long run, you’re better off repairing your old car, even if it is the sum of $2000 a year. If you are the original owner of your car and have all the repair records, at least you know what work has been done on the vehicle, what possibly needs to be done in the future, and the best part — your car is paid in full! If you are truly a frugal person, this is your way to go. Don’t even consider getting a used motor for your vehicle. It’s not worth it. Take your car to a reliable mechanic, and get a new motor put in and make sure there’s a warranty on it  (something you won’t get with a used motor).  Karla

• One way to get cheaper work done on a car is to let the local high school or tech school shop class work on it.  They often will do it for just the cost of the parts – or less if they have a sponsor.  The only problem is that it might take them all semester.  Lorainne

• Part of being frugal is not just getting rid of things when they break. This might be your golden opportunity to learn to fix a car. My first car-fixing experience was when I was in college and my car  blew it’s water pump, then it’s head gasket. I had no money and needed the car to continue doing my paper routes. I had never really worked on a car before since my father was always paranoid I would screw things up on the family car if I dabbled. However, I had no choice but to fix my car. So I went to the auto parts store and bought the Hanes manual and set to work. It took me a while (about a month of working evenings and weekends) and it ended up costing about 200$ when all was completed. It was hard, but not impossible. I just went to the parts counter at my auto supply store and at the dealer and asked lot’s of questions. Those guys want to sell parts, so they are willing to answer questions (don’t bother asking a mechanic, he or she will just suggest you bring it in). I  learned a great deal and received a huge confidence boost. Later, I helped a friend fix her engine (which also had blown a head gasket) and did the job in 2 weekends. Don’t be intimidated, just do it on your own terms at your own speed. My friend insisted that she wear rubber gloves (surgical type latex gloves) so as not to get so dirty. A "real" mechanic would probably not do that, but who cares. She got her car fixed and saved a bundle doing it….and she didn’t spend an hour every evening scrubbing her hands. If fixing it is just not for you then consider giving a great opportunity to a local high school student or taking it to the local junior college. The kid could use the experience and the college needs broken vehicles to fix so as to teach the students. Just don’t expect it to be done in a day by either method.  Erik

• It seems to me that the person first needs to find out what kind of engine is in his/her Tempo (V-4, V-6, etc., amount of horsepower, and gear ratios; check original owner’s manuel, if available; if not, ask someone who knows), then look for the engine (in the same model car, or perhaps another Ford product) at auto salvage lots (if any exist in their area).  The next cheapest thing to do would be to find out the same information about the current (worn out) engine in the Tempo, and shop for a rebuilt engine, which is a previously used engine which has been rebuilt, and is usable for another car.  Rebuilt engines can be found in the Yellow Pages, and so can Auto Salvage lots, if any exist in the owner’s area.  (Rebuilt parts for the car may also be purchased, if there’s any hope at all for the orginal engine in the car; rebuilt parts offer a significant savings on all repair jobs, but there is still the labor to contend with, and the person should be careful to have a good, trustworthy mechanic look at the car.  A good mechanic (as described) can often fix a car for alot less money than one who does not know his stuff.  Ask around, and find out who a "good" mechanic is; word-of-mouth is sometimes the only way to really learn this, and it sometimes can be done in your own workplace by taking a "poll" among your co-workers.  If they’ve had "bad" experiences with mechanics (they’ve probably had SOME experience), they’ll usually be more than happy to tell you their special "mechanic’s story"; listen up; there’s alot to be learned, if only from "bad" experiences, which have cost them alot of money.  Those will tell you who to avoid when shopping for a mechanic; their reputation among the public is of great importance!  I hope that this will help my fellow reader.  Please withhold my name (women aren’t supposed to know these things, anyway!)  This is a "been there, done that" story!  Thank you.  Mary Ann

Auto Insurance Help for Teens and Adults

I really don’t like paying my automobile insurance every month, do you? For that matter, I don’t like paying any insurance bill of any type. But as we all know, insurance is a necessary and important part of our financial life. It protects our interests in case of an accident, theft, damage or bodily injury.  Your goal is to get adequate insurance coverage at the lowest cost possible. The good news is that you can have some control over how much you spend for insurance. There are ways to reduce your insurance costs and pay less by paying attention to this article and calling your agent to make the necessary changes.  Top 5 Ways for Teens to Save on Insurance 1. Hey teens, if you are a “good student” defined as a 3.0 or better GPA, you could get a break on your insurance. If your parents make you pay your own insurance, crack open those books and get studying. If your parents pay for your insurance, consider yourself lucky. You can show your appreciation though by maintaining that 3.0 average. 2. Tell your agent when you have three years of driving  experience. Inexperienced operators, three years or less usually have higher rates. When you have your three years in, communicate it. Don’t assume your agent will automatically know! 3. Teens, I know you want to drive a Porche or Pantera but how about driving a car that only needs liability and uninsured motorist coverage. The costs for collision and comprehensive can drain a pocket book. This is usually recommended for cars valued at less than $3,000. The other vehicle is still covered by insurance if an accident is your fault and if it’s not your fault, your vehicle is covered by the other driver’s insurance.  But be realistic about your driving style. If you are an aggressive driver and refuse to drive defensively, consider retaining your collision coverage, (unless you want to save money.) Then you should consider changing your driving style. 4. Register and insure your vehicle under your parent’s name.  This can save you money on premiums. Also, list yourself on the policy as an occasional driver instead of a primary driver. Your premiums will be reduced and you can stay home more and study. 5. If you get a ticket, it’s easier to pay the ticket and be done with it. But what you really should do is go to traffic school and get the point(s) taken off your record. The Internet has made it easy to take a traffic course electronically at a fraction of the cost. You can do it in the convenience of your own home in your own time. Check with your local DMV office if this is an approved web site for your county. Top Six Ways for Adults to Save on Insurance 1. Carry your home and auto insurance policies with one agent. You should get a great discount as a result. But do check around for price comparisons. I had my auto policy separate from my home insurance for years because the price wasn’t even competitive. Just last year, my auto insurance company revised their homeowner rates to be competitive and I switched over. The result was a 20% discount on my automobile policy. 2. When shopping for a car, remember that insurance rates are usually based on the value of the vehicle. A cheaper car can mean cheaper insurance. Different cars will have different ratings, so check out the rates with the insurance company BEFORE you buy a car. You don’t want any unexpected surprises. Also, dual airbags, anti lock brakes and security systems usually qualify you for a discount. Be sure to let your agent know if your vehicle has any of these qualifications. 3. If you are 55 or over, there is a course you can take called the “mature driver test”. Take it, pass, and they’ll lower your rates. Sounds like a great deal to me! If you are still driving when you turn 80, your rates will probably go up again so get all the discounts you can now. 4. Do you have two vehicles? If so, can one of them be classified as a “pleasure” vehicle? If your car isn’t used for commuting everyday in rush hour traffic, your insurance rates can be lowered. Consider car pooling with a spouse or friend to make this happen! 5. Raise your deductible to $500 or even $1000 if you can afford it. This will reduce your monthly premiums. Many people are afraid to do this in case of an accident. Remember, you only need to pay the deductible if an accident is your fault. What are odds that an accident will be your fault? Review your past driving record. Analyze and evaluate your personal situation and decide what’s best for you. 6. Are you paying for any duplicate insurance coverage such as car rental or medical? Sometimes these are already covered by a towing service such as AAA Road Service membership or medical coverage provided by your employer? * // * // * // * // * // * // * // * // * // * // * // * // * Doris Dobkins is the author of “Financial Freedom From A-Z” and publisher of the weekly ezine $mart Money New$ featuring financial strategies and money saving tips. To subscribe, send email to: [email protected]  or check out her web site: http://www.creativefinances.com

Finding the Best Auto Financing

The Dollar Stretcher
by Gary Foreman

Dear Dollar Stretcher
We normally buy used cars and trucks but we decided to buy a new truck from a dealer. What advice would you give us to deal with the new car dealers. Sheryl 

Sheryl’s question really has two parts. Naturally, she’ll want to get the best price from the dealer. We looked at that last time. But, unless she’s paying cash for the car, finding the best auto loan could reduce the cost of the car by up to 5%.
So how can Sheryl find the best financing? Let’s examine some strategies and pitfalls.

Before she even shops for a loan it’s wise to get a copy of her credit report. If there are errors on the report, cleaning them up before applying for a loan will save money. Remember, the interest rate you pay will be directly related to your credit history.

Once Sheryl has reviewed her credit report, it’s time to shop for a loan. The local credit union or bank is likely to have a better financing offer than the dealership. So she’ll start looking for a loan before she ever sets foot in a dealership.

There’s another reason to shop for a loan before shopping for a car. The signed deal to buy the car isn’t really complete. It probably includes a "subject to financing" clause. That means that you haven’t really bought the car until you arrange financing. 

So you could be sitting in the dealership dreaming of that new cruiser. Then the dealer discovers that you don’t qualify for the low rate that they’ve quoted to you. Will you be willing to walk away from your dream car for ‘a few dollars more each month’? The dealer counts on the answer being ‘no’. 

Avoid the problem by starting the loan shopping at your bank. Tell them how much you’d like to spend on a car. They’ll check your credit. After that they’ll propose an interest rate and what your payments would be. Have the interest quoted to you as an Annual Percentage Rate (APR) so that you can compare offers. 
Write out a list of questions to ask the loan officer. This isn’t a simple document. Some seemingly minor clauses can be expensive later. For instance, find out what happens if you want to pay the loan off early.

Once your questions are answered it’s time to negotiate. Most newspapers list the rates charged by different banks and credit unions for auto loans. Ask your bank if they’ll match the lowest rate on the list.

And don’t concentrate on getting the cheapest monthly payment. Sure, you need to know that the payment is affordable. But a lower payment could hide the fact that you’re actually paying more for the loan. 

Your goal should be to get the lowest APR. On a 48 month, $25,000 loan a 2% difference in APR will cost you an extra $24 each month. That’s a difference of $1,142 over four years. And, depending on your credit history, rates can vary by 3 or even 4%. That’s a lot of money to give away. 

Make sure that you know how many payments you’ll make. Remember that a loan can cost more even if the monthly payments are the same. All they need to do is to make the loan last longer.

Avoid balloon payments. They’re a disaster waiting to happen. Sure they’ll lower your payments now. But if you can’t afford a higher payment now, where will you get the money to make the bigger balloon payment later? 

Credit insurance is not required by federal law. And it’s very expensive life insurance. Negotiate with the lender. Some may require it. But, if your credit history is good you can always look for a lender that’s more flexible. 

Don’t forget to check out any credit unions that are available to you. Often their rates are cheaper than banks.

There are two other popular methods of financing cars to consider. Some homeowners choose to borrow against the equity in their house and use that money to buy a car. And, generally, a home equity loan carries a lower APR than a car loan. But, it’s important to repay the loan in a timely manner. Remember, you can’t borrow $25,000 against your home every four years without paying it back.

Another option is to tap into your 401k retirement plan. Many 401k plans will allow you to borrow to buy a car. This can be a good idea, but you do need to be careful. First, some plans require you to completely repay any loans if you leave your job or are laid off. Second, you might find that you’re not allowed to contribute while you have a loan outstanding. That could significantly effect the size of your retirement nest egg. Take the time to ask questions before you borrow the money. Making a mistake with your retirement plan could be very expensive. Read every paper before you sign it. And, if you don’t understand it, ask for an explanation. If you don’t understand the explanation, ask for a copy of the document that you can take to a professional or trusted friend for help.

Make sure that the finance papers look the same after they come back from the credit manager. It’s not uncommon for them to change the interest rate. And sometimes they conveniently forget to mention that fact to the buyer. 

Once you’ve found good financing it’s time to find a car you like and negotiate a price with the dealer. Then you can see what financing they have available. That puts the dealer in the position of having to match the well-shopped financing that you’ve already arranged. 

Generally, dealers don’t actually loan you the money to buy }our car. They sell the loan for a bank or finance company. And they’re paid based on how high the interest rate is. The more }ou pay, the more they make. Perhaps they’ll have something better. If so, great. If not you won’t find yourself stuck with overpriced dealer financing.

Sheryl has two opportunities to save on her new truck. We hope that she takes advantage of both of them. 
________

Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher website http://www.stretcher.com/save.htm You’ll find hundreds of free articles to help stretch your day and your budget. There’s even a free weekly ezine. Visit today!