How to Avoid Going “Underwater” in your Vehicle….Loan
In a previous post, we spoke about ways to get out of an “underwater” car loan.
In this post, we will discuss a few ways to avoid getting into an “underwater” situation in the first place.
When you become interested in purchasing a vehicle, the first step you should make is to check your credit. This will help you determine what interest rate you may qualify for. You want to shoot for an optimal rate. If you have a credit score over 720, this will put you in a better tier and you could expect to pay a rate of 3.724% or less. Consumers whose credit scores are sub 720 can expect to pay an average of 5.098% or higher according to creditdonkey.com. A high interest rate is almost a sure fire way to end up underwater in your auto loan. Check with your local credit union or bank, as they will often have rates and terms that will match or beat the terms of a dealership.
Do your research! Shop around. Check out what the average selling price is of the car(s) that you are interested in to ensure you get a decent deal. KelleyBlueBook, TrueCar, and Cargurus can help with this. This will help you know what to expect when you walk on a dealer’s lot.
Factor In Depreciation. Cars are depreciating assets, but some cars depreciate faster than others. You want to purchase a car that doesn’t depreciate at a fast rate to ensure that as you pay the balance down on the loan, the value will be in line with it.
(*There will be a future post on vehicles that you may want to avoid purchasing due to rapid depreciation.)
Make a down payment. This will immediately cut down the loan balance and help you get ahead of the depreciation curve.
You don’t need the “add-ons”. When you are finalizing your auto purchase and signing the paperwork, you will be offered myriad of upgrades, warranties, protections, and insurances. Most of these you will not need. I am not totally opposed to some of these items, but keep in mind that they will increase the cost of your vehicle and loan balance. It will be enticing because stretched out over the term of the loan will minimally increase your monthly payment.
The shorter the loan term, the better. Don’t be tempted to extend the term of your loan over a longer period of time in order the get a lower payment. This is very enticing, but it is accompanied by a higher interest rate. This will prohibit the loan principal from being paid down as fast; therefore, leaving you with a higher risk of ending up underwater.
Buy used vs. new- Cars depreciate the most in the first two years. Consider purchasing a 1-2 year preowned certified vehicle. It will be less expensive than purchasing a new one, and it will have absorbed the largest depreciation hits already.
Avoid taking on the balance of your trade-in on your “new” car. If you are already underwater in a car and decide to trade it in on another vehicle, that balance has to go somewhere. It gets added into the cost of the vehicle you are purchasing. When you bring negative equity into a new loan, you are burying yourself in the loan from the start. Make sure to start off on the right foot.
Good luck on your next vehicle purchase!
When is the Best Time of Year to Buy a Car???
Well, Q4 is upon us. This is what I consider to be the best time of year to purchase a car.
As you probably already know, dealerships have goals and quotas to meet. Included in this would be end-of-year goals. Making a car purchase at the end of the year could increase your chances of getting a better deal. According to iseecars.com, the months of November and December offer 26.9% and 23.5% more deals than average, respectively. If I were in the market for a new car, I would begin my search now, in October. There are deals to be had in October, and it gives more time research and compare prices. Pick 3-5 vehicles that you are interested in and compare pricing, options, rebates, promotions, etc…
In addition to quotas, another prompt for dealers to discount cars is due to overstock. The new models begin to roll out late summer and fall, and the dealer has to make room for these new cars. For instance right now, you may begin to see better deals on the 2019 models as the 2020 models are beginning to fill up the dealer lots. Pay attention if a vehicle has been redesigned for the new model, you may begin to see significant discounts on the current model, because they can appear to be less desirable. On the flip side of this, if you are in the market to lease a vehicle, you may see better lease deals on the newer model compared to the current model. Tip: Ask the dealer to show you a side by side comparison of 2019 and 2020 model lease rates. The newer model will likely have better rates due to residual value. Residual value on a lease refers to the estimated value of the lease vehicle at the end of the scheduled lease term.
If you are in the market for a preowned vehicle, there are deals to be had, they just may not be as heavily discounted compared to new vehicles. Larger dealers will begin to receive an influx of people who want to trade in their cars for the latest models and lease terms will be coming to an end. This will present an opportunity to purchase a nice preowned vehicle.
When doing your research and preparing for your car purchase, there a few things to keep in mind.
If the vehicle you want is a strong seller and in high demand, there may not be much of an incentive for a dealer to discount the price.
This may be a similar case for smaller independent used car dealers. Their profit margins may not be as large and they may not have the overstocked inventory problem to contend with to warrant heavy discounts.
The end of the year is not the only time there are good deals offered. Take advantage of holiday sales events and promotions. Christmas and New Year’s, but also Memorial Day, 4th of July, and Labor Day sales can have good discounts.
Most importantly, exercise patience. When negotiating a car purchase, be willing to walk away if you do not feel good about the deal and if isn’t right for you. Wait for the deal that you want (if it is within reason). Chances are you will not likely get a $20,000 car for $12,000. Do your research so that you know what your ideal car is selling for. Truecar.com and Cargurus.com are great resources for price comparisons.
Good luck on your car purchase journey!
The Power of Written Goals…
Since it is the beginning of the year, I’m sure you have several goals….Perhaps fitness, financial, spiritual or otherwise. I have a question…
Are you putting your goals in writing or are they just in your head? Goals that are only in your head are just dreams. While dreams are awesome, and they are the inception of goals, there are additional steps that have and need to be taken in order to manifest those dreams into existence.
Here are a few of my thoughts and experiences regarding goal setting.
Write down your goals…There is POWER in seeing written goals. It incites action!
Revisit your goals often. This will serve as a reminder to keep you on track to achieving those goals. Don’t let them become an afterthought. You may become tired at times during this journey and you will also probably encounter distractions or deterrents.
I like to post my goals on sticky notes and place them in locations where I have to see them at least daily.(i.e. My bathroom medicine cabinet)
This helps me with holding myself accountable. In the morning, I ask myself what can I do today that he get me one step closer to reaching my goal? At night, I ask the question, what did I do today to bring me closer to my goal? If I don’t like the answers, that means that I have to work harder and be more intentional the following day.
Keeping my goals visible allows me to pray and meditate on them often as well. I usually place an inspiring Bible verse or verses near the goals. I am acutely aware that I cannot accomplish my goals on my own.
I encourage you to try this practice of writing down your goals for at least 90 days and see how it goes. I am willing to bet that if you have never done this before, you will see a significant difference in your goal achievement results.
Don’t just make a resolution and let it fade away in a few weeks. Set goals and crush them!
- Published in Business, Finance, Fitness, Health, personal finance
Interview with a Car Enthusiast…
Not too long ago, I discovered another really cool channel on YouTube! Me being the Corvette guy that I am, the Corvette in the thumbnail caught my eye. As I watched a few videos, I became more and more interested in the channel. The creator of the channel was making videos on his likes, and dislikes of his corvette. The transparency is what really caught my attention. He did videos on the purchase of his corvette. He was transparent about the cost and financing of his purchase. I felt that this added a lot of value to YouTube viewers. Being so intrigued, we reached out to “Mr. Cars, Costs, and Technology” for a Q & A session.
What inspired you to create your YouTube channel?
I’ve always had a passion for cars and videography/photography. YouTube seemed like the perfect outlet with the best of both worlds.
We know that you are a Corvette guy, so what do you like most about Corvettes?
Corvettes have always caught my attention even as a child. They’re like America’s automotive superheros. Corvettes offer an incredible experience and performance that’s actually attainable for an average person.
How much did saving and planning play a part in the purchase of your Corvettes?
Financial planning and saving played a huge part in the purchase of both of my Corvettes. At my age the odds were stacked against me to own a car like this. It was imperative that I research every cost involved
from the sticker price to the maintenance and insurance premiums. Taking a disciplined approach to savings was the only way for me to purchase my Corvettes without putting my other financial goals at risk.
How long was the savings/planning period, before purchasing your first Vette? What about the second?
Saving to purchase my home was the most challenging obstacle within the last 5 years. Once that process was complete, I never changed my spending habits which allowed me to save up for my first Corvette very quickly.
The first Corvette took about 2 years after purchasing the house. There was a roughly 2 year gap between the first Vette (C6) and the second one (C7). Luckily I was able to
use the equity from the first Corvette to expedite the process of purchasing the second one.
What was your first car?
A 1998 Ford Expedition.
What is your dream car?
It’s hard to decide on just one, but currently my dream car is the rumored C8 mid-engine Corvette. If I had to choose one that is currently available it would be the Koenigsegg One:1 .
Favorite driving music?
I like a little bit of everything, but believe it or not I’m a Christmas music fanatic. Outside of the few months that I can enjoy Christmas music I prefer the sound of my Corvette.
Where did you get your love of cars from?
I raced motocross as a kid, so I had a passion for engines and speed at a very early age. As I got older, cars began to open doors for me that dirt bikes could not. I still love that sport though and follow it closely.
They say that cars represent traits of the owner…What traits does your car have that represent you?
I would say consistent, practical, and made in America!
What do you think will be your next car purchase?
Z06!!
Lets say you have a dream 3 car garage? What vehicles would we find in it?
Koenigsegg One:1
2018 Corvette ZR1
2018 Ford F150 Raptor
Check out Cars, Cost, and Technology on YouTube.
- Published in Interview, personal finance
The 5 “C”s of Credit(What Lenders look for)
When you apply for a loan, lending institutions consider a few factors when making the decision whether to approve or decline a loan.
The following is a breakdown of the criteria, also known as the 5 c’s:
Collateral: This is basically what secures the loan. For instance, physical property would be the collateral for a real estate loan, or a vehicle for an auto loan. There are even cases where you can borrow against your own money, which would be secured by a CD(Certificate of Deposit) or savings account.(This is an excellent way to build or repair credit). I will talk about this in more detail in a later post.
Capital: This is what would be what is used to repay the loan, such as your primary income. Investments, CD’s, or other liquid assets could be considered capital in the event of a loss of the primary source of income.
Capacity: This would be what your level of comfort is for repaying the debt. In other words, your ability to afford the loan repayment. This is where your debt to income ration comes into play. How does your monthly debt stack up against monthly income…
Character: Two words…Credit History. How has your payment performance been in regards to previous debts. Did you have late payments? Do you have any delinquent accounts? This history typically goes back 7 seven years.
Conditions: This is the final piece. What is the purpose of the loan or what will the funds be used for. Loan terms, interest, and fees are part of the conditions. The current state of the economy at the time of the loan is a condition as well.
When all of these factors are viewed as satisfactory, this is when your loan will been approved. Before applying for your next loan, underwrite yourself and answer the 5 c’s, that way when you walk into the lending institution, you can apply with confidence.
Business School with Jay-Z
A little over a week ago Jay-Z released his 13th solo album entitled 4:44. In typical Jay-Z fashion, the lyrics and wordplay are phenomenal. What intrigued me the most was that he shared what he learned about finance and business over the years with his listeners. As I thought more about it, he has shared this information throughout most of his albums. I will share a few lyrics that resonated with me and the meaning behind them.
Full Disclosure: The lyrics quoted may contain profanity, which Total Integration Fitness does not condone, but we would encourage you to take a look past some of the profane language to obtain the essence of the message.
“I coulda bought a place in Dumbo before it was Dumbo
For like 2 million
That same building today is worth 25 million
Guess how I’m feelin’? Dumbo”
“The Story of O.J.”
In the previous line Jay talks of buying V12 engines, or expensive cars, which are depreciating assets.
Key Takeaway: Invest in real estate or something that has a good return on investment.
“I don’t got the bright watch, I got the right watch
I don’t buy out the bar, I bought the night spot
I got the right stock”
“30 Something”
Jay is saying invest, instead of frivolous spending. Invest in a time piece instead of a trendy watch. Stop spending so much money in bars perhaps think of owning one.
Key Takeaway: Invest in the future. Spend wisely on something that could possibly generate income later.
“My stake in Roc Nation should go to you
Leave a piece for your siblings to give to their children too”. “Legacy”
Leave something for your children and their children.
Key Takeaway: Build generational wealth.
“I bought some artwork for 1 million
2 years later, that s**t worth 2 million
Few years later, that s**t worth 8 million
I can’t wait to give this s**t to my children”
“The Story of O.J.”
He bought a piece of art that doubled its worth in just one year. How much will it be worth when his children are older?
Key Takeaway: Resale value is everything! Think long term.
“I’m not a businessman; I’m a business, man!”
One of Jay’s most quoted lines. He saying that he is his own conglomerate.
Key Takeaway: We should think the same way. We are the CEO’s of our lives…
There are many more jewels that Jay-Z gives us regarding business throughout his discography. These were just a few that really resonated with us.
Spend wisely, invest in yourself and your family’s future, constantly think about return on investment(ROI)…
