Syd Robinson Is "Your Car Guy"

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What Is Gap Insurance And Do I Need It?

Posted on September 18, 2014 at 4:10 PM Comments comments (3)

Gap Insurance, what is it and should I have it?



In most situations these days people trade in their old vehicles to get a new one. Most people owe money on their trade and most likely they owe more money on it than it's worth. In this case you are transferring negative equity from the trade onto the new vehicle. For example you buy a car for $20,000 with taxes included. You trade your vehicle in and you owe $5,000 more than what the dealer is allowing you. This Negative equity is then added into the new loan. So now you owe $25,000 on a car you just purchased for $20,000.


You have an accident and the insurance company tells you that it is totaled. Great! Now the insurance company figures the value of the vehicle was 18,000. So they will pay the $18,000 minus your deductable. Say you have a $1,000 deductable. Insurance company cuts a check for $17,000. Guess what, you still have a loan balance of $8,000 and no car.


Gap insurance will pay the short fall on the loan so you can then go and get a new vehicle. With out gap insurance you would still have a loan. A bank may not lend you money on a new vehicle until the old loan is satisfied. An extremely bad situation.


I would highly recommend getting gap insurance if you are financing with little money down or bringing in negative equity into the deal. Most car dealerships offer gap insurance as well as other products. Their finance manager should go over these options with you if you have them arranging the financing. It only raises your payment by a few dollars per month but is worth it for the peace of mind help protect you finacially.


If you purchase a vehicle and either put a lot of money down or otherwise end up in a equity position then you don't need Gap Insurance.


Hope this helps. Later

Syd Robinson "Your Car Guy"

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How to Choose a Car that Fits your Needs and your Credit!

Posted on August 20, 2014 at 5:25 PM Comments comments (0)

How to Choose a Car that Fits your Needs and your Credit!
by Joy Mali

Choosing the right car can be a difficult decision to make, especially when you start to consider your budget and your credit. Securing an auto loan and a credit score go hand in hand. The better your credit score, the better loan you can get. Knowing your credit score can help you make the right decision when it comes to buying a car. Before you buy a car, you should think about your financial health and what you really need in a new car.

Know Your Credit Score before You Shop

The best way to go car shopping is with the knowledge that you are preapproved to get your auto loan. It can be quite embarrassing to go to the car dealer, take a test drive, and go through the haggling that comes with buying a new car, only to find that you can't get a car loan or that your rate is going to be very high because of your bad credit score. Checking your credit score range about six months before you plan to apply for a loan is ideal because this will give you plenty of time to correct any errors or change any habits that may be keeping your credit score down.

If you have a strong credit score, you should be able to secure a great loan with the best rate possible. Having a credit score of 720 or above will pretty much guarantee the best rate for an auto loan. On the other hand, if your credit score is in the low 500s, you should expect to see a loan rate about twice the lowest rates offered. The minimum credit score for an auto loan, or any loan for that matter, is typically 500. If you have a score lower than 500, you have bad credit that makes lenders think you aren't worth the risk. Still, even with the worst possible credit, you may be able to find a loan. You should just expect very high rates and some rather outrageous terms for the loan. Whatever you are looking for in a car, it's important to understand that lenders determine auto loan rates by credit score. Great scores lead to great rates, and bad scores give you the worst rates.

Assess Your Auto Needs

Besides asking yourself what is a good credit score to buy the car you want, you also should consider what you really need in a car. This is especially true if you have a credit score in a lower range. A low credit score may indicate that you are not handling your debt well. If this is the case, consider buying a car that won't add much to your debt level. Make sure that the monthly payments are manageable. Rather than going for the expensive model or the dream car, look for something that is more sensible but will still fit your daily driving habits.

You may have to adjust your needs based on your credit score. If you are barely at the minimum credit score for an auto loan, you may need to buy a smaller car or even an older car than you had originally planned. You may have to pass on some special features that are important to you. Whatever you end up doing when you pick the right car for you, you have to make sure it fits in your budget and that you will be able to make all of the payments in full each month.

Using an Auto Loan to Improve Your Credit Score

If you do have bad credit, you can actually use an auto loan to help improve your credit score. An auto loan and credit score can work together. When you take out the auto loan, be sure you make all of the monthly payments on time. By doing this, you will be adding an account in good standing to your credit score, and this will show potential lenders that you are worth the lending risk. If possible, you could even pay down the balance early, as long as there are no penalties for doing so. Auto loans typically do not carry any penalties for an early payoff. In the long run, you always save money by taking out the smallest loan possible and paying it off as quickly as you can.

Whenever you are in the market for a new car, you should always make an effort to figure out what your credit score is well in advance. This will help you make adjustments so that when it is time to apply for the loan, you can get the best loan rate possible. It's also important to evaluate what your needs are. If you have bad credit, you should probably consider getting a less expensive car that will still meet your daily driving needs.

More Information:

Joy Mali is an active blogger who is fond of writing articles on Finance and educating people to monitor their credit report on regular basis to minimize the risk of fraud. Follow her on Twitter to know more on how to pick the right car for your credit.