5MinuteAutoLoan.com Blog

It is very important to keep your insurance record clean, therefore carefully consider whether or not you should file a claim in the first place. When you phone your insurance provider saying that you may be filing a claim, they are going to put that on your insurance record. Whether the accident is your fault or not, you should check out first, whether you can pay for the damage. If you can pay for it yourself, don’t file a claim.

Document as many details as possible of the accident and to get witnesses who can corroborate your story. Keep track of the information you will need to file your auto insurance claim. File the insurance claim as soon as possible with your insurance company. If there is a dispute between you and the other party in the accident, you may get quizzed by the other driver’s insurance company about what happened at the accident. In this case, make sure you document everything you say and get correct details of the Insurance agent you spoke to.

If your car gets wrecked in the accident, once your claim is approved, the insurance company will assess the damage and ask you to send it to a pre-approved shop to get it fixed.

Getting a car loan easily may be a thing of the past in these tough times of the credit squeeze. The finance wing of General Motors Corporation, GMAC LLC, is going to place curbs on its lending activities. Only customers with credit scores of at least 700 may be eligible for an auto loan, making it more difficult for many buyers to purchase a vehicle.

Detroit-based GMAC hiked the rate auto dealers pay for making loans outside of GM incentive programs by 0.75 percentage points. In a letter sent to dealers today, the company also said that most loans would not extend beyond a period of 60 months at the maximum. The curbs on customer credit come even as GM and GMAC stave off rumors about their own futures. 

According to Standard & Poor’s analyst Robert Schulz, GM’s sales slumped by 18 percent in 2008, and a further slide due to the credit crisis may see the automaker facing bankruptcy if business shows no signs of recovery. In June this year, GMAC had to come up with $60 billion of credit to bail itself out, as the company’s home mortgage came under severe pressure from foreclosures.

GMAC has seen some turbulent times as it posted $5.4 billion in losses owing to depressed auto sales and seven losing quarters with its Residential Capital LLC business. About 5,000 ResCap employees lost their jobs, and about 200 GMAC Mortgage retail offices were closed down because of weak responses in the real estate sector. GM holds a minority stake in GMAC after its 2006 sale to majority owner Cerberus Capital Management LP. Cerberus, a New York-based private equity firm, also owns Chrysler Financial, which has so far not changed its auto lending criteria. Spokeswoman for GMAC, Gina Proia said that the company’s focus was to manage the business prudently in the days of turbulent markets.

If you are planning to buy a car and get confused by all the loan jargon, take some time to do your homework before you sign on the dotted line.

The interest on a loan is usually calculated on a flat rate or on a reducing balance interest rate which can be either daily, monthly, quarterly or annually. Stay away from attractive “flat interest rates”. The effective interest rate actually becomes higher with this method of calculation, rather than the normal methods like annual reducing balance or monthly reducing balance. The reason for this is that the principal amount doesn’t get reduced with EMI payments. So you end up paying more interest, apart from the loan amount.

On a ‘reducing balance’ interest rate, each interest payment is calculated as the previous balance multiplied by the annual interest for12 months. With each monthly payment made, the balance amount owed, becomes smaller and smaller. So the next payment is calculated including interest on the smaller balance.

FICO is your personal credit score, a tool used by credit agencies to assess your financial status. FICO stands for Fair Isaac Company, the organization that created this credit report score. FICO is the most trusted and the most frequently used score, especially by auto loan lenders. Other credit institutions such as leasing firms, rental firms, and mortgage firms, also use FICO ratings to make decisions about extending finance for a loan. 

Your FICO score can be anywhere between 300 and 850; the higher the score, the better your credit rating is. The score will be awarded according to your financial behavior and credit history. Very often, with a high FICO score, you can negotiate for a lower interest rate on a loan.

You can improve your FICO score by regularly paying your bills, being discretionary with credit card withdrawals and wiping your old debts clean. You need to be able to handle your credit well to enjoy a good financial profile.

TransUnion.com concluded its analysis of trends in the auto loan lending industry, for the second quarter of 2008. This report analyses credit card, auto loan and mortgage data pertaining to the consumer lending sector. There has only been a marginal increase in the national 60-day auto loan delinquency rate from 0.65 percent to 0.68 percent, between the first and second quarters of 2008. The auto loan delinquency rate registered an increase of 11.5 percent in comparison to the second quarter of 2007 (0.61 percent).

The District of Columbia auto loan delinquency rate was highest at 1.41 percent, followed by Mississippi at 1.25 percent. Alaska recorded the lowest auto loan delinquency rates of 0.22 percent, followed by North Dakota with 0.30 percent and Wyoming at 0.41 percent.

Alaska also revealed the largest improvements in delinquency from the previous quarter with 40 percent decrease from 0.37 percent; New Hampshire decreased 35 percent from 0.65 percent and Wisconsin decreased 18 percent from 0.55 percent.

With a squeeze on credit today, many car dealers are trying to get customers to bite, by offering them loans of up to 84 months, using lower monthly payments as bait.  The rule of thumb for anyone looking to buy an auto should be-if you can’t pay off a car in 60 months, you can’t afford it any way.  Having a car loan drag on for six to seven years can be nothing less than a financial nightmare.

Longer loans attract higher interest rates and over a longer period, you’ll be paying a higher rate. By the time the car is paid off, you would have paid a lot of money in interest, which is not tax deductible, therefore of no real benefit to you.

Your new car or truck will lose 20% to 30% within a year of rolling out of the dealer showroom. With a 60-month loan, you will owe more than what your car is worth, after two years. But with an 84-month loan, you will still owe the same in the 6th or seventh year of pay-back time. And what can you realistically hope to get when you trade your car in finally?

The leading automobile makers General Motors Corporation, Ford Motor Company and Chrysler LLC are considering a proposal to seek about $50 million in low cost loans from the federal government to help them modernize their assembly plants and develop next-generation fuel-efficient vehicles.

The top executives at these companies, each incurring significant losses as industry sales decline, are expected to meet the government officials in Washington in this regard, the industry sources said. They will also meet the Congressional leaders and the Federal Reserve officials, it is said. Meanwhile, it is learnt that the three companies are preparing plans to act as one entity to get low-cost funding.

The auto makers and some part suppliers are seeking low-interest loans to manufacture fuel-efficient cars as the high gasoline prices have increased the demand for fuel-efficient cars. Meanwhile, many automobile companies have been hit by the fall in the demand for trucks and SUVs as the fuel price inched towards $4 per gallon. They are hopeful of getting these loans, the industry sources said. It may be mentioned here that both Republican and Democrat presidential candidates recently supported providing more capital to automobile makers for the research and development of fuel-efficient cars.

The Insurance Institute for Highway Safety named the 2009 Ford Escape as a Top Safety Pick, from a sample of 8 SUVs tested. The vehicles included the Ford Escape, Escape Hybrid, Mercury Mariner, Mazda Tribute, 2008 Mitsubishi Outlander, 2008 Nissan Rogue and 2009 Volkswagen Tiguan.

In the IIHS frontal offset crash test, the Ford Escape rated as” Good”, owing to a new seat design which improved its crashworthiness. The Insurance Institute for Highway Safety revealed that smaller SUVs were better equipped with safety measures to deal with crashes, as auto companies incorporated more standard safety items into this popular segment. All the vehicles tested were equipped with standard electronic stability control and side airbags, but the IIHS President Adrian Lund highlighted the Escape.

General Motors is offering a one-year/12,000-mile bumper-to-bumper warranty on used vehicles, in a bid to draw customers shying away from cars and trucks built in Detroit. The guarantee holds good for all 2003 model year GM Certified Used Vehicles from Buick, Chevrolet, GMC, Saturn and Pontiac sold in the Japanese-made autos record better resale values than autos made in Detroit, a considerable drawback for domestic brands.

The one-year/12,000-mile bumper-to-bumper warranty will take care of vehicle flaws apart from regular wear and tear. GM gave out a five-year, 100,000-mile limited powertrain warranty for its used vehicles in 2007; its current bumper-to-bumper warranty stretches for three months or 3,000 miles.

General Motors sold a record number of 451,000 used cars and trucks in 2007; but sales figures in 2008 for certified used-vehicles were at an all time low, due to a weak economy and shy-high gasoline prices. Most consumers, hit by the credit squeeze, have made drastic lifestyle changes to delay new vehicle purchases.

Fundamentally your credit score shows a lender, how credit-worthy you are. As a potential borrower, the higher your credit score, the better the interest rates you are likely to be offered. Whether you buy a car or a house, if you have a higher credit score, it is taken for granted that you are a responsible person, who makes payments on time, and therefore get a better rate than the person that with a lower credit score.  

Monitoring and managing to get a good credit score maybe more important than you think. Your credit score will determine the interest rate you can pay on a home loan, a car loan, on credit cards as well as for insurance on your car, your health and your home. It can also swing things your way when you are look for a job or an apartment to rent. With poor credit you may be looked upon as someone who is not a reliable employee.

You could also fall prey to a lender who will see that you need the money and suddenly raise their rates. So you have to be able to control how much debt you have, check where your expenses and try to improve your credit score.