Car Buying | What you need to know before buying from a dealership!

Spanish Coches Vintage Dealership

There is no-one behind that curtain... 

The Big Scary Floating Head of Auto Lending.

Few things can be as nerve wracking as buying a car from an Auto Dealership. The sales person takes you test drives, tells you about the car, but doesn't tell you the hidden things that are wrong with it.

So let's deep dive into the topic, and set you up for success. Hopefully you read this, and avoid the many pitfalls of the experience. Making you a winner in the end.

Buyers, Seller, Lender, Other Parties

Let's get the parties straight:

• Buyer: You
• Seller: Dealership
• Lender: The Bank(s)

The lender is not the buyer or seller. The lender is not involved in the sale of the car in any way. The lender simply receives an electronic application and makes a decision (Yes/No/Yes with conditions).

The lender then receives a contract weeks later, and that's when they find out if they are your lender.

The dealer is the one negotiating with you, therefore, you are negotiating with them. You are not a victim, a passive party, an innocent party... you are negotiating a sale with another party.

The reason I make this distinction right up front, is that many people go into a dealership with a "hand out"mentality, hoping to get approved for a car. Because they go in with this mindset, they are not in a mental or emotional position to bargain or negotiate. Then when things invariably go against them, they feel taken advantage of.

You are the buyer. Let that sink in... warm your blood... empower you... YOU are the buyer. The dealership needs you more than you need the dealership. There are 100's, if not 1,000's, of dealers near your home, and you chose this one or two.

The Walk Away 

Now that you know you are the Buyer, you are empowered. You must feel the freedom to walk away from the deal at any moment. Read every line of every paper. Never take a person's word for anything. If you sign a contract the Lender and Courts will hold you accountable to what you signed, not what you were "allegedly" told.

Use this to your advantage. Negotiate rates, terms, price, and products. Take days, weeks, to make a buying decision. It's better to walk away from a deal that you are not 110% sure about, than sign a deal you get stuck with, and don't want.

Terms & Condition

Being a buyer, you are responsible for the contract you sign. You are responsible to read, read, and read before you sign. Did the sales person tell you the payments would be $350.00, a lot can change between the sales person's desk and the finance manager's office. Make sure the paperwork you sign says what you thought it would. If you disagree, don't sign.

The Car History - AutoCheck or CarFax

You are only you, the Buyer, are responsible for checking the condition of the used product you buy. Many dealers buy a car at Auction in the morning, and sell it that afternoon, without so much as lifting the hood.

Generally, you cannot cancel the sale or return the car if it breaks down after purchase (even if it's 10 minutes after purchase and you haven't left the lot yet). So let me ask:

• Would you buy a toaster at a garage sale, without asking to plug it in to make sure it works?
• Would you buy a house without asking for a home inspection? 
• Why would you buy a car without taking it to you mechanic for a look over, FIRST?

As the Buyer, you not only have a right to ask for an inspection, you have a responsibility to. If you buy the car and then have it inspected, it's too late. You need to have it inspected first. Any dealer worth buying from will let you take it to your mechanic before you sign anything that says you are "buying" the car. If they don't let you take it to your mechanic, run away from that dealer, don't buy from them.

You can pull your own car histories from Auto Check or Car Fax. It's great if the dealer will do this for you, but it's not required by them. And you don't need them to do it. You can go the websites and pay for the histories yourself. Wouldn't you rather pay a little, than get stuck with a big mess?

But let's be clear. These histories are not a guarantee that nothing is wrong wit the car. The only things included in these reports are public records. Mechanics, Dealer's, Inspections, Registrations, and Insurance items may all appear.

• If the previous owner did oil changes in their home driveway, it may not appear. 
• If the previous owner had an accident, but paid out of pocket for repairs instead of involving insurance companies, it won't appear.

These do not offer any assurances. They are; however, an indicator of things that you may need to know.

Price vs Value

The Kelly Blue Book or NADA value is NOT what you car is worth. Rather, they are an indication (an average) of what other people have paid for a similar year, make, model, and miles. Purchases change the values provided by KBB and NADA.

This means that there is no such thing as the car being "worth" more or less than you paid. These do give you an indication of what other people have paid. Trulia.com does a great job of showing you if the price is over or under the average.

Use this to your advantage. There are only two people who can establish the value of this vehicle. The Buyer (you) and the Seller (dealer/private party). Once you come to a price that they agree to sell it for, and you agree to buy it for, that is the new value.

Negotiate.

The Buyer's Order/Purchase Order

Once you agree to buy the car, you will be asked for sign a Purchase Order, or Buyer's Order, or Invoice (goes by many names). This is not a loan contract, yet. This is an agreement to buy the car, and it's fairly binding, so do not sign lightly. Read it all first. Make sure you agree.

The Loan: Dealer vs Pre-Approval

You don't have to use the dealer for financing. You can go to any numbers of banks and third parities to get the financing on our own. The last purchase I made, I used a bank's pre-approval. I went to the dealer with a blank check, and the only thing we had to discuss were the sales price and products.

The upside to a pre-approval is that you don't have to be stuck there forever playing the finance game, where they pretend they cannot get a better deal, then magically come back with one.

The downside, if you are a good negotiator, you may get a better deal with the dealer's financing.

Little known fact: The Dealer actually has some say in the final Annual Percentage Rate (APR) you receive. The bank sends the dealer a "spread" of x-y percent for this credit tier, and the dealer sets the final APR. So you CAN negotiate APR if you are pushy about it. The dealer's won't give it up easily, they make money on the difference.

Aftermarket Products

The dealer sells products that go with your loan. I wrote more about Guaranteed Asset Protection (GAP)(here) and Warranties (here). Since you can read more at those links, it is sufficient to say that you should make sure you understand what these are for. Only buy what you feel is worth it.

The banks DO NOT, (are not allowed to) require any of these add-on products to finance the loan. If the dealer tells you they are required, you should probably run away and report that dealer to your local Attorney General. Buy somewhere else.

The Retail Installment Sales Contract (RISC)

Otherwise known as The Contract. Once you sign this, there is no turning back. The RISC outlines the purchase, trade-in, down payment, add-on products, and most importantly the terms and conditions of the loan.

There is a section right up top called the Truth In Lending Act (TILA) Disclosure. This will cover the total amount financed (opening balance of the loan), APR, payment, payment start date, everything. Read all of it, you will be held to everything you signed (not what you are told).

Returning the Car (Canceling the sale, Unwinding the Deal)

There are exceptions, lemon law rules, state and county requirements... but the for the most part you cannot return a car after purchase.

In most states around the country there is "No Cooling Off Period", which means that you cannot cancel the sale or loan. You cannot cancel within 3 weeks, 3 days, 3 hours, or even 3 minutes. The ink could still be wet on the paperwork and you cannot cancel.

Some dealer's offer a return policy, some states require one. Most lemon law's only cover brand new vehicles and not pre-owned (used) cars. Even then, most lemon laws cover a defectively made product, so you are going to file the dispute with the manufacturer (Ford, Honda, Etc.), not the dealer.

In rare instances, you can either find a reason to force the contract to be voided (such as an undisclosed deferred down payment), but it's not likely. I'd give you a 15% chance of that working. In some instances you can apply enough pressure on the dealer through media, social media, that you can get the to unwind, but again... not likely. I'd give you a 10% chance of that working.

If you asked nicely, and they didn't try to make you happy, they probably won't back down with pressure, they will get more firm and rigid.

The Insider

The Insider is a BIG fan of Dave Ramsey:

• Go read/listen/watch Dave Ramsey and he'll teach you how to do it right!

• Listen to The Dave Ramsey Show (HERE)

• Or by his most popular book: (HERE) The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

Read more →

Car Buying | What you need to know before buying from a dealership!

Spanish Coches Vintage Dealership

There is no-one behind that curtain... 

The Big Scary Floating Head of Auto Lending.

Few things can be as nerve wracking as buying a car from an Auto Dealership. The sales person takes you test drives, tells you about the car, but doesn't tell you the hidden things that are wrong with it.

So let's deep dive into the topic, and set you up for success. Hopefully you read this, and avoid the many pitfalls of the experience. Making you a winner in the end.

Buyers, Seller, Lender, Other Parties

Let's get the parties straight:

• Buyer: You
• Seller: Dealership
• Lender: The Bank(s)

The lender is not the buyer or seller. The lender is not involved in the sale of the car in any way. The lender simply receives an electronic application and makes a decision (Yes/No/Yes with conditions).

The lender then receives a contract weeks later, and that's when they find out if they are your lender.

The dealer is the one negotiating with you, therefore, you are negotiating with them. You are not a victim, a passive party, an innocent party... you are negotiating a sale with another party.

The reason I make this distinction right up front, is that many people go into a dealership with a "hand out"mentality, hoping to get approved for a car. Because they go in with this mindset, they are not in a mental or emotional position to bargain or negotiate. Then when things invariably go against them, they feel taken advantage of.

You are the buyer. Let that sink in... warm your blood... empower you... YOU are the buyer. The dealership needs you more than you need the dealership. There are 100's, if not 1,000's, of dealers near your home, and you chose this one or two.

The Walk Away 

Now that you know you are the Buyer, you are empowered. You must feel the freedom to walk away from the deal at any moment. Read every line of every paper. Never take a person's word for anything. If you sign a contract the Lender and Courts will hold you accountable to what you signed, not what you were "allegedly" told.

Use this to your advantage. Negotiate rates, terms, price, and products. Take days, weeks, to make a buying decision. It's better to walk away from a deal that you are not 110% sure about, than sign a deal you get stuck with, and don't want.

Terms & Condition

Being a buyer, you are responsible for the contract you sign. You are responsible to read, read, and read before you sign. Did the sales person tell you the payments would be $350.00, a lot can change between the sales person's desk and the finance manager's office. Make sure the paperwork you sign says what you thought it would. If you disagree, don't sign.

The Car History - AutoCheck or CarFax

You are only you, the Buyer, are responsible for checking the condition of the used product you buy. Many dealers buy a car at Auction in the morning, and sell it that afternoon, without so much as lifting the hood.

Generally, you cannot cancel the sale or return the car if it breaks down after purchase (even if it's 10 minutes after purchase and you haven't left the lot yet). So let me ask:

• Would you buy a toaster at a garage sale, without asking to plug it in to make sure it works?
• Would you buy a house without asking for a home inspection? 
• Why would you buy a car without taking it to you mechanic for a look over, FIRST?

As the Buyer, you not only have a right to ask for an inspection, you have a responsibility to. If you buy the car and then have it inspected, it's too late. You need to have it inspected first. Any dealer worth buying from will let you take it to your mechanic before you sign anything that says you are "buying" the car. If they don't let you take it to your mechanic, run away from that dealer, don't buy from them.

You can pull your own car histories from Auto Check or Car Fax. It's great if the dealer will do this for you, but it's not required by them. And you don't need them to do it. You can go the websites and pay for the histories yourself. Wouldn't you rather pay a little, than get stuck with a big mess?

But let's be clear. These histories are not a guarantee that nothing is wrong wit the car. The only things included in these reports are public records. Mechanics, Dealer's, Inspections, Registrations, and Insurance items may all appear.

• If the previous owner did oil changes in their home driveway, it may not appear. 
• If the previous owner had an accident, but paid out of pocket for repairs instead of involving insurance companies, it won't appear.

These do not offer any assurances. They are; however, an indicator of things that you may need to know.

Price vs Value

The Kelly Blue Book or NADA value is NOT what you car is worth. Rather, they are an indication (an average) of what other people have paid for a similar year, make, model, and miles. Purchases change the values provided by KBB and NADA.

This means that there is no such thing as the car being "worth" more or less than you paid. These do give you an indication of what other people have paid. Trulia.com does a great job of showing you if the price is over or under the average.

Use this to your advantage. There are only two people who can establish the value of this vehicle. The Buyer (you) and the Seller (dealer/private party). Once you come to a price that they agree to sell it for, and you agree to buy it for, that is the new value.

Negotiate.

The Buyer's Order/Purchase Order

Once you agree to buy the car, you will be asked for sign a Purchase Order, or Buyer's Order, or Invoice (goes by many names). This is not a loan contract, yet. This is an agreement to buy the car, and it's fairly binding, so do not sign lightly. Read it all first. Make sure you agree.

The Loan: Dealer vs Pre-Approval

You don't have to use the dealer for financing. You can go to any numbers of banks and third parities to get the financing on our own. The last purchase I made, I used a bank's pre-approval. I went to the dealer with a blank check, and the only thing we had to discuss were the sales price and products.

The upside to a pre-approval is that you don't have to be stuck there forever playing the finance game, where they pretend they cannot get a better deal, then magically come back with one.

The downside, if you are a good negotiator, you may get a better deal with the dealer's financing.

Little known fact: The Dealer actually has some say in the final Annual Percentage Rate (APR) you receive. The bank sends the dealer a "spread" of x-y percent for this credit tier, and the dealer sets the final APR. So you CAN negotiate APR if you are pushy about it. The dealer's won't give it up easily, they make money on the difference.

Aftermarket Products

The dealer sells products that go with your loan. I wrote more about Guaranteed Asset Protection (GAP)(here) and Warranties (here). Since you can read more at those links, it is sufficient to say that you should make sure you understand what these are for. Only buy what you feel is worth it.

The banks DO NOT, (are not allowed to) require any of these add-on products to finance the loan. If the dealer tells you they are required, you should probably run away and report that dealer to your local Attorney General. Buy somewhere else.

The Retail Installment Sales Contract (RISC)

Otherwise known as The Contract. Once you sign this, there is no turning back. The RISC outlines the purchase, trade-in, down payment, add-on products, and most importantly the terms and conditions of the loan.

There is a section right up top called the Truth In Lending Act (TILA) Disclosure. This will cover the total amount financed (opening balance of the loan), APR, payment, payment start date, everything. Read all of it, you will be held to everything you signed (not what you are told).

Returning the Car (Canceling the sale, Unwinding the Deal)

There are exceptions, lemon law rules, state and county requirements... but the for the most part you cannot return a car after purchase.

In most states around the country there is "No Cooling Off Period", which means that you cannot cancel the sale or loan. You cannot cancel within 3 weeks, 3 days, 3 hours, or even 3 minutes. The ink could still be wet on the paperwork and you cannot cancel.

Some dealer's offer a return policy, some states require one. Most lemon law's only cover brand new vehicles and not pre-owned (used) cars. Even then, most lemon laws cover a defectively made product, so you are going to file the dispute with the manufacturer (Ford, Honda, Etc.), not the dealer.

In rare instances, you can either find a reason to force the contract to be voided (such as an undisclosed deferred down payment), but it's not likely. I'd give you a 15% chance of that working. In some instances you can apply enough pressure on the dealer through media, social media, that you can get the to unwind, but again... not likely. I'd give you a 10% chance of that working.

If you asked nicely, and they didn't try to make you happy, they probably won't back down with pressure, they will get more firm and rigid.

The Insider

The Insider is a BIG fan of Dave Ramsey:

• Go read/listen/watch Dave Ramsey and he'll teach you how to do it right!

• Listen to The Dave Ramsey Show (HERE)

• Or by his most popular book: (HERE) The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

Read more →

Car Buying | The secrets of Service Warranties & Manufacturer Warranties

Spanish Coches Vintage Dealership

Paying for Repairs & Maintenance

The problem with owning and buying cars (also applies to houses, appliances, etc)... is that they break down. Whether the car is new or used, there will be repairs eventually. Even paying for maintenance (tires, oil changes, timing belts, water pumps, etc.) can be costly.

So how are you paying for all of those repairs?

The Best Option: Cash

In a perfect world you would be that you have a significant savings, and you pay cash for all of these things. It's not as hard as it sounds. Just don't act like the costs above are a surprise. They WILL come up, just plan on that now.

Start making payments of any amount toward those costs now, into a savings account labeled "Car Fund". Whether you pay $5, $25, or $100 per month into the Car Fund, you will be prepared for most repairs before they come up.

Repair Insurance: Service Warranties

What many people realize is that they have failed to save in the past (for whatever reason) and may fail to do so in the future. These people opt to pre-pay for potential repairs. The primary difference between "Insurance" and "Warranty" is that Insurance is typically paid for monthly, and a warranty is a one time purchase of a specific amount of money, for a specific amount of potential reward.

As with any insurance company the corporation you purchase the warranty from is betting you wont' need it or use it. You will pay $X dollars betting they will pay $X+, they are betting they will pay $X-.

Cost

The average cost of a Service Warranty purchased as an Aftermarket Product from an auto dealership will be between $1,500 - $3,000. They are hoping that the total cost of any repairs they pay for you will not be more than that.

You should check to see what the lifetime payout cap is, if you buy a Service Warranty for $3,000, but the company will only pay $4,000 over the life of the warranty, you did not benefit from the purchase.

Exclusions

There are many exclusions often included with a warranty.

Most are "Powertrain" only. The Powertrain is your Engine and Transmission (internal components only). That means something inside the device has to break before you are covered. Items attached (alternator, air conditioner) do not count, and are not covered.

You could get Bumper to Bumper, but even then you need to read the list of items covered. They may cover the break calipers in case of breakage, but not brake pads or rotors.

No two warranties are the same, read, read, read, read them before you buy. Do not be surprised when you pay for $3,000 Service Warranty and then have a repair cost is does not cover (which is common).

Other Products

• Manufacturer Warranties

A Manufacturer Warranty typically covers most major components for the first number of miles and years. One of the best I've ever seen was Hyundai, who claimed a 100,000 miles/ 10 year warranty. But Last I heard it was non-transferable. That means, if you  buy the car used at 5 years, you don't get the other five. You have to be the original new owner to use their warranty. Other's are transferable, so do your research.

• Tire and Wheel

This essentially covers tire rotations, tires replacements, and even wheel replacements for a number of years, miles, or both. This can be a good coverage, but Discount Tires offers an equal protection for far less on their new tires.

• Windshield Repair

This replaces your windshield if you have damage. Honestly, this is kind of a waste of money. If you have full coverage insurance, which I do even on my $2,000 cash cars, windshield replacement is usually built in. When it's not, it's available as a rider for cheap. Just get this through your insurance company.

• Care Programs

This one is interesting. Think "Oil Changes", but it can encompass more. Imagine you could just pre-buy all your oil changes for five years. That's a weight off the shoulders of people living from day to day, with little savings.

Additional Costs

With any of these additional programs you purchase, you are adding a balance to your loan (assuming you are financing the car). ANY balance you add, will cost you interest on that balance over time. So you are not just paying $3,000 for a service warranty, or $800 for Care Program, you are paying interest on that over five years (or your term) also.

Therefore, as I said in the start, it's better that you run the Dave Ramsey plan and pay cash. Save for expenses. See my STORE for suggestions on books from Dave Ramsey.

The Insider

The Insider is a BIG fan of Dave Ramsey:

• Go read/listen/watch Dave Ramsey and he'll teach you how to do it right!

• Listen to The Dave Ramsey Show (HERE)

• Or by his most popular book: (HERE) The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

Read more →

Car Buying | The secrets of Service Warranties & Manufacturer Warranties

Spanish Coches Vintage Dealership

Paying for Repairs & Maintenance

The problem with owning and buying cars (also applies to houses, appliances, etc)... is that they break down. Whether the car is new or used, there will be repairs eventually. Even paying for maintenance (tires, oil changes, timing belts, water pumps, etc.) can be costly.

So how are you paying for all of those repairs?

The Best Option: Cash

In a perfect world you would be that you have a significant savings, and you pay cash for all of these things. It's not as hard as it sounds. Just don't act like the costs above are a surprise. They WILL come up, just plan on that now.

Start making payments of any amount toward those costs now, into a savings account labeled "Car Fund". Whether you pay $5, $25, or $100 per month into the Car Fund, you will be prepared for most repairs before they come up.

Repair Insurance: Service Warranties

What many people realize is that they have failed to save in the past (for whatever reason) and may fail to do so in the future. These people opt to pre-pay for potential repairs. The primary difference between "Insurance" and "Warranty" is that Insurance is typically paid for monthly, and a warranty is a one time purchase of a specific amount of money, for a specific amount of potential reward.

As with any insurance company the corporation you purchase the warranty from is betting you wont' need it or use it. You will pay $X dollars betting they will pay $X+, they are betting they will pay $X-.

Cost

The average cost of a Service Warranty purchased as an Aftermarket Product from an auto dealership will be between $1,500 - $3,000. They are hoping that the total cost of any repairs they pay for you will not be more than that.

You should check to see what the lifetime payout cap is, if you buy a Service Warranty for $3,000, but the company will only pay $4,000 over the life of the warranty, you did not benefit from the purchase.

Exclusions

There are many exclusions often included with a warranty.

Most are "Powertrain" only. The Powertrain is your Engine and Transmission (internal components only). That means something inside the device has to break before you are covered. Items attached (alternator, air conditioner) do not count, and are not covered.

You could get Bumper to Bumper, but even then you need to read the list of items covered. They may cover the break calipers in case of breakage, but not brake pads or rotors.

No two warranties are the same, read, read, read, read them before you buy. Do not be surprised when you pay for $3,000 Service Warranty and then have a repair cost is does not cover (which is common).

Other Products

• Manufacturer Warranties

A Manufacturer Warranty typically covers most major components for the first number of miles and years. One of the best I've ever seen was Hyundai, who claimed a 100,000 miles/ 10 year warranty. But Last I heard it was non-transferable. That means, if you  buy the car used at 5 years, you don't get the other five. You have to be the original new owner to use their warranty. Other's are transferable, so do your research.

• Tire and Wheel

This essentially covers tire rotations, tires replacements, and even wheel replacements for a number of years, miles, or both. This can be a good coverage, but Discount Tires offers an equal protection for far less on their new tires.

• Windshield Repair

This replaces your windshield if you have damage. Honestly, this is kind of a waste of money. If you have full coverage insurance, which I do even on my $2,000 cash cars, windshield replacement is usually built in. When it's not, it's available as a rider for cheap. Just get this through your insurance company.

• Care Programs

This one is interesting. Think "Oil Changes", but it can encompass more. Imagine you could just pre-buy all your oil changes for five years. That's a weight off the shoulders of people living from day to day, with little savings.

Additional Costs

With any of these additional programs you purchase, you are adding a balance to your loan (assuming you are financing the car). ANY balance you add, will cost you interest on that balance over time. So you are not just paying $3,000 for a service warranty, or $800 for Care Program, you are paying interest on that over five years (or your term) also.

Therefore, as I said in the start, it's better that you run the Dave Ramsey plan and pay cash. Save for expenses. See my STORE for suggestions on books from Dave Ramsey.

The Insider

The Insider is a BIG fan of Dave Ramsey:

• Go read/listen/watch Dave Ramsey and he'll teach you how to do it right!

• Listen to The Dave Ramsey Show (HERE)

• Or by his most popular book: (HERE) The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

Read more →

Car Buying | The secrets of Guaranteed Asset Protection (GAP) Insurance

Spanish Coches Vintage Dealership

Introduction to Guaranteed Asset Protection (GAP) Insurance Coverage

When you go to a Car Dealership to buy a car, the sales person will eventually hand you off to a Finance Manager, who will want to sell you additional products. The products are known as "Aftermarket Products" or "Back End Products".

One of the two most common is GAP, the other is Service Warranty which we will cover later.

The idea behind GAP is actually fairly sound. It solves a problem many have encountered.

• Let's say that you buy a car, then you get in a wreck (the other guy's fault), and the vehicle is deemed a total loss "totaled". The insurance company pays out the "Fair Market Value (FMV)" for your vehicle.

• Let's now say that the FMV for your car is $16,000.00; however, you still owe $20,000.00. 

• That means that the insurance does NOT pay off your loan. You are still left with a balance of $4,000.00 to continue to pay on, even though you don't have the car anymore. 

Many people do not realize that the money you borrowed is owed whether you have the car or not. Even if you bought a car and the engine blew up the next day, you owe the money for the entire loan in most cases.

You paid cash for the car?  GAP is meaningless to you, because GAP only pays the deficiency balance of a loan.

Financing the car? Hopefully you paid 20-30% down on the car and only financed the rest, in which case your FMV should remain over the loan balance forever.

But, if you are like most of the USA, you financed a car for the full, or nearly full, value. This means that the car is worth less than the loan balance 30 seconds after you signed the paperwork. This is because part of the value of any car is the "number of previous owners". So when you became owner 2 (or 3, 4, 10, etc) you reduced the value considerably. Are you the first owner? Great, it just became used and you reduced the value too.

If you are "upside down", owe more than it's worth, you probably need GAP, or a GAP like product.

GAP Insurance

GAP then comes in to pay the difference between what you owe ($20,000) and what the regular insurance paid ($16,000), which means gap pays that remaining $4,000 for you. If you paid $800 for the GAP, and they ended paying $4,000 for you, you win.

And that's the name of the game in insurance. Someone might pay car insurance for their entire life and never use it. Another might pay for a few months, and total the car. Insurance companies bet on that.

There is no monthly bill for this coverage, because you paid a one time fee for it. Typically the products is added to the total amount you are financing, so you don't notice it much if you are only thinking about the "monthly payment".

GAP is NOT required for financing

**** This is important ****

Under no circumstances should any finance manager at a dealership tell you that GAP is required for financing. This is part of Anti-Tying regulations in the banking industry, and it is illegal.

Most GAP contracts actually tell you in bold letters above the signature that it's not required for this reason.

If any finance manager tells you that the bank is requiring GAP to get the loan approved... RUN. That dealer is lying about something that could get them in big trouble. If they lie about that, they probably lied about everything else.

GAP Exclusions

Most GAP contracts have exclusions. They will not pay for late payments, late interest, late fees, repossession fees, etc. If you paid late in any way, it could either void the GAP or reduce your coverage.

GAP Costs

The average GAP contract is going to cost between $300-$900 at a dealership. The secret they won't tell you is that they dealership only paid $60-$100 for it from the GAP company. The rest is 100% profit for the dealership.

You can usually negotiate the cost of the GAP with the dealers in exchange for other issues on the car.

GAP Alternatives

Many, if not most, insurance providers offer GAP as a "rider" to an existing policy. But most of them don't call it GAP, because GAP get's a bad rap in the auto industry.

Your insurance company might call it something else:

• Total Vehicle Replacement
• Loan Payoff Coverage
• Etc

The name will be different, but the description of the coverage will match the example I gave above.

My insurance company denies offering "GAP", but my insurance company offers Total Vehicle Replacement Coverage as a rider to my full coverage insurance for less than $2/month.

That's WAY cheaper than buying it from the dealer.

But if you are one of those who tends to let insurance lapse, you may want to buy it from the dealer instead.

I hope that helped!

The Insider

The Insider is a BIG fan of Dave Ramsey:

• Go read/listen/watch Dave Ramsey and he'll teach you how to do it right!

• Listen to The Dave Ramsey Show (HERE)

• Or by his most popular book: (HERE) The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

Read more →

Car Buying | The secrets of Guaranteed Asset Protection (GAP) Insurance

Spanish Coches Vintage Dealership

Introduction to Guaranteed Asset Protection (GAP) Insurance Coverage

When you go to a Car Dealership to buy a car, the sales person will eventually hand you off to a Finance Manager, who will want to sell you additional products. The products are known as "Aftermarket Products" or "Back End Products".

One of the two most common is GAP, the other is Service Warranty which we will cover later.

The idea behind GAP is actually fairly sound. It solves a problem many have encountered.

• Let's say that you buy a car, then you get in a wreck (the other guy's fault), and the vehicle is deemed a total loss "totaled". The insurance company pays out the "Fair Market Value (FMV)" for your vehicle.

• Let's now say that the FMV for your car is $16,000.00; however, you still owe $20,000.00. 

• That means that the insurance does NOT pay off your loan. You are still left with a balance of $4,000.00 to continue to pay on, even though you don't have the car anymore. 

Many people do not realize that the money you borrowed is owed whether you have the car or not. Even if you bought a car and the engine blew up the next day, you owe the money for the entire loan in most cases.

You paid cash for the car?  GAP is meaningless to you, because GAP only pays the deficiency balance of a loan.

Financing the car? Hopefully you paid 20-30% down on the car and only financed the rest, in which case your FMV should remain over the loan balance forever.

But, if you are like most of the USA, you financed a car for the full, or nearly full, value. This means that the car is worth less than the loan balance 30 seconds after you signed the paperwork. This is because part of the value of any car is the "number of previous owners". So when you became owner 2 (or 3, 4, 10, etc) you reduced the value considerably. Are you the first owner? Great, it just became used and you reduced the value too.

If you are "upside down", owe more than it's worth, you probably need GAP, or a GAP like product.

GAP Insurance

GAP then comes in to pay the difference between what you owe ($20,000) and what the regular insurance paid ($16,000), which means gap pays that remaining $4,000 for you. If you paid $800 for the GAP, and they ended paying $4,000 for you, you win.

And that's the name of the game in insurance. Someone might pay car insurance for their entire life and never use it. Another might pay for a few months, and total the car. Insurance companies bet on that.

There is no monthly bill for this coverage, because you paid a one time fee for it. Typically the products is added to the total amount you are financing, so you don't notice it much if you are only thinking about the "monthly payment".

GAP is NOT required for financing

**** This is important ****

Under no circumstances should any finance manager at a dealership tell you that GAP is required for financing. This is part of Anti-Tying regulations in the banking industry, and it is illegal.

Most GAP contracts actually tell you in bold letters above the signature that it's not required for this reason.

If any finance manager tells you that the bank is requiring GAP to get the loan approved... RUN. That dealer is lying about something that could get them in big trouble. If they lie about that, they probably lied about everything else.

GAP Exclusions

Most GAP contracts have exclusions. They will not pay for late payments, late interest, late fees, repossession fees, etc. If you paid late in any way, it could either void the GAP or reduce your coverage.

GAP Costs

The average GAP contract is going to cost between $300-$900 at a dealership. The secret they won't tell you is that they dealership only paid $60-$100 for it from the GAP company. The rest is 100% profit for the dealership.

You can usually negotiate the cost of the GAP with the dealers in exchange for other issues on the car.

GAP Alternatives

Many, if not most, insurance providers offer GAP as a "rider" to an existing policy. But most of them don't call it GAP, because GAP get's a bad rap in the auto industry.

Your insurance company might call it something else:

• Total Vehicle Replacement
• Loan Payoff Coverage
• Etc

The name will be different, but the description of the coverage will match the example I gave above.

My insurance company denies offering "GAP", but my insurance company offers Total Vehicle Replacement Coverage as a rider to my full coverage insurance for less than $2/month.

That's WAY cheaper than buying it from the dealer.

But if you are one of those who tends to let insurance lapse, you may want to buy it from the dealer instead.

I hope that helped!

The Insider

The Insider is a BIG fan of Dave Ramsey:

• Go read/listen/watch Dave Ramsey and he'll teach you how to do it right!

• Listen to The Dave Ramsey Show (HERE)

• Or by his most popular book: (HERE) The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

Read more →

Goal Setting | Priming your pump for a brighter future.

Dana Lookadoo Determination

Determination: a fixed purpose, the power and will to persist, resolve, to have the drive, to have grit, to go the distance, to be hell-bent on reaching a goal and getting it done no matter what.

Dave Ramsey calls is Gazelle Intensity. When the Cheetah of Debt or Life is trying to run after you and kill you, the only way to escape is to RUN!  Run hard, run fast, run often.

I say that because life does not tend to lean us in the direction of wealth, prosperity, or good fortune. Cars break, budgets bust, and jobs don't pay enough. There is never going to be enough month at the end of your money. If you are waiting to "Get Ahead" before you plan your life, you'll be 90 and wondering where the time went.

So now that you have all that information on banking and finances (we've discussed in previous posts), what’s next? 

What are you going to do different?

You know what a checking is, how items post, and how to keep a record. You know a little more about credit and debt. You know a little more about planning for retirement and investing.

What’s next?

            

If you aren’t a tither, that would be the first place to start. Malachi chapter 3 points out that the devourer comes to kill our financial crops.

By tithing you stop that devourer. Non tithers often say things like: “It seems like I put my money into pockets with holes in them.” Start by putting aside the money and paying your tithe.

Open a separate account and have your paycheck auto deducted for the amount needed. That is the first step toward financial freedom.

~Goals~

You need to set goals. What do you want to accomplish in the next 6 months, 1 year, and 5 years. You really don’t need to be that specific at first. Just make a list of everything you want to accomplish in life. Put a time frame next to it if you have one.

Feel free to have an unknown amount of time on large dreams. Also, don’t be discouraged if it takes longer than you planned, just keep going forward. Maybe you are dreaming of something but have no idea how long it will take, that is fine.

Just set goals. 

I have a friend who once made a simple list of everything he currently wanted to see happen in his life. There were goals about marriage, jobs, places he wanted to see, etc.

Within 2 years he pulled that out one day and realized all the items had been accomplished. It’s not so much about setting out a plan to make it happen; just the act of making goals will set your mind and spirit to working them out. 

You could even post the goals on the wall by your door, then everyday read them to yourself and every time you walk by just say:

“I receive that!”

~Taken Action~

            

Take action.

That is the most important part of making changes. If you have been overdrawn a lot in the past, or maybe you are right now, take the examples given earlier. Close out the account and deal with cash, or put away the card and checks, and deal with money orders. If you are not keeping a detailed record start one. 

If you want to know more about investing, get a book, do some Google searches and learn more. 

If you need to start saving; start by putting aside as little as $1 or $5 a paycheck. Use a jar at home if you can’t find a free savings account.

Once you have saved the amount needed to keep the minimum balance, usually $300, open the savings with it.

Some banks now offer plans that transfer money to your savings every time you use your card. 

~Be Creative~

You should have giving goals. I want to give this item, or that amount, by the end of the year. I’ve set a goal of giving away a debt free car.

I did it once.

I now have a goal of taking someone to a car lot and letting them pick the one they want. I’m not there yet, but I’m working toward that.

            

Have goals regarding your lively hood or calling.

What has God called you to do?

If you don’t know what your calling is yet, just consider what you are good at. It probably has something to do with it. Work toward your talents and passions.

If you are not sure what your passions or calling are, check out this article (HERE - Discovery | Finding your place in God's plan).

Make small attainable goals.

If you play guitar, learn a new song, work through a book that teaches you a new skill set or style.

If you are a computer person, buy a new program, or learn a new set of codes.

Attend a seminar or class that touches on your passion.

Whatever your station in life, take an hour, or even a day, to pray and ponder, what your goals ought to be. Make simple, attainable goals. If you have a large dream, break it up into smaller pieces. 

You want to own a multi million dollar restaurant? 

Great! Go get your business license, research what you need. 

What is the cost of the building, the equipment the upkeep?

Take steps; don’t worry about the money to start it, at first.

If you start taking steps and working toward it, God will bring the increase if it’s His passion that has been birthed inside of you. 

The journey of a thousand miles begins with a single step. Go stepping. 

The Insider

The Insider is a BIG fan of Dave Ramsey:

• Go read/listen/watch Dave Ramsey and he'll teach you how to do it right!

• Listen to The Dave Ramsey Show (HERE)

• Or by his most popular book: (HERE) The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

Read more →