Category Archives: New & Used Auto Loans

When NOT to Cosign an Auto Loan

To cosign, or not to cosign. That is the question. While cosigning an auto loan for a friend or family member can help them get a car they might not be able to afford on their own, you could be taking on undue risk. As the cosigner, you’re agreeing to pay the amount due and perform all the agreements stated on the contract if the borrower fails to meet contractual obligations. You’re on the hook for the loan payments if the other person stops making them for any reason. Even if they die.

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As the cosigner, you’re essentially the loan company’s Plan B.

Sometimes, the risks of cosigning for someone don’t outweigh the rewards, even if the person is your [insert relationship here!]. Here’s when you should think twice about cosigning an auto loan.

Think twice about cosigning a loan when…

You’re planning on making a major purchase soon.

Considering renovating your home, buying an investment property, or purchasing anything that might require credit? Then be careful. Being a cosigner could ding your credit in two ways.

First, if the other person fails to make their auto loan payments on time, your credit could be damaged right along with theirs.

But let’s say they never miss an auto loan payment. There’s another risk to consider, too.

Cosigning an auto loan will increase your debt-to-income ratio, which is the percentage of your debt payments in relation to your income. Any auto loan you cosign for will show on your credit report, even if the financed car isn’t yours and you never get to drive it. New lenders will review your debt-to-income ratio when you apply for financing, and they might not be too excited when they learn you could be on the hook for someone else’s auto loan.

“Because you’re liable for [the loan’s] balance in the event of a default, being a cosigner can decrease your ability to get new credit,” says Money Crashers.

It doesn’t matter if the other person makes their payments on time. “Cosigning a loan can also lower your credit score because the amounts you owe makes up 30% of your FICO score,” adds Money Crashers.

According to Smart Assets, a debt-to-income ratio of 36% is generally accepted as good. The closer you get to 36%, the more your credit score could drop and the more hesitant a potential lender might be. Keep your debt-to-income ratio low for less stress and more credit opportunities.

Your relationship with the borrower is rocky.

You may feel tempted to cosign for a loved one to show them you care, to help them out of a tough time, or because you feel guilty for things that happened in the past. These feelings are completely normal and understandable.

Keep in mind, however, that cosigning a loan could make your relationship worse, not better. When you turn a personal relationship into a financial relationship, you put a lot of undue stress on the personal relationship.

“You’re putting your relationship in real jeopardy,” Megan McArdle, business and economics editor for The Atlantic, told NPR.

McArdle explains, “If you become this person’s primary creditor, which is what’s going to happen if they default, that really damages the relationship. And even if you don’t, you know, as Dave Ramsey, the financial guru, likes to say, Thanksgiving dinner tastes different when your father-in-law is asking – is looking at you across the table and wondering why you couldn’t pay off your car loan and yet you have a TV or whatever. Keeping those kinds of decisions outside the family, outside of relationships is usually better for everyone in the long run.”

There are libraries of information about the psychology of money, and especially around money and family. Don’t put your most important relationships at risk by cosigning a loan.

Remember that cosigning a loan means:

  • You’ll be responsible for the loan.
  • Your credit could take a hit.
  • You’ll have difficulty financing your own purchases.

Are these risks you’re ready to take?

You can help in another way.

Having a friend or family member cosign is one way many drivers are able to get car loans with little to no credit, but it’s not the only way. You can help a loved one get behind the wheel of a new or used car by:

  • Helping them build better credit. Can you help them set a budget, stick to it, and improve their own credit situation? It might not take as long as you think. Teach your loved one how to build their own credit and you’ll be doing them a favor for years to come.
  • Gifting them money for a bigger down payment. Making a bigger down payment means they’ll need to borrow less, and this could make a car loan easier to get with poor or no credit.
  • Comparing auto financing options. Their first option might not be the best financing option, especially if they’re trying to get a car loan with minimal credit. Different lenders offer different loan terms and interest rates. Encourage them to shop around. Another lender may not require a cosigner!

If you have a friend or family member asking you to cosign a loan with them, there’s a chance they simply haven’t done their research. Have they compared all available loan options? Have they researched how to qualify for an auto loan? We can help. Encourage your loved one to try myAutoloan, where we present applicants with up to four auto loan offers at once. We even work with applicants who have bad credit… which could help keep you out of a bad cosigning situation.

Used Car Loans – Direct to Consumer

Direct to consumer used auto loans can cancel negative equity!

Yes it’s true.  Thinking of buying a used car?  If so, you’re making a smart financial decision.  New vehicles lose 20 to 30 percent of their value the moment a new owner drives them off the lot.  For many people, that means acquiring negative equity on their car loan balances right from the start.  By using a direct lender and buying a good used car, you can avoid this negative equity trap.

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Why Negative Equity Hurts

Negative equity is the amount over a car’s value that a person owes on it.  For example, if Joe owes $30,000 on his brand new car, but after driving it off the lot, it’s worth only $24,000, he has acquired $6,000 in negative equity.  The more Joe drives his new vehicle, the more it depreciates.  Because of this, Joe is going to be difficult for him to ever reduce his negative equity.

Joe may not feel the impact of this negative equity for many years; however, when he eventually goes to trade in the vehicle, he may get a surprise.  If his $6,000 negative equity amount remains even, he may try to trade the vehicle in while owing $10,000, only to discover it is worth $4,000.  He now must cover some of that negative equity or, (upon the purchase of another car), his negative equity hole will grow well beyond $6,000.  Eventually, there will come a day of reckoning, where Joe must cover the whole negative equity amount or be unable to purchase another vehicle.

Why Buying a Used Car Could Help

When you decide to go the used car route, you create much less negative equity at the time of purchase.  If you buy it close to its fair value, you may have some negative equity, but you’re still in pretty good shape.  The smaller amount of negative equity can be more easily covered with a down payment.  Making extra payments on used auto loans is another way to eliminate negative equity.

The Loan Matters

How much interest a consumer pays on their used auto loans makes a huge difference in the amount of negative equity they generate.  By choosing a used vehicle, you’ve made a one smart move.  Make a second smart move by opting for a used car loan that comes direct to consumers, available from money-saving sources like myautoloan.com.

Used car loans direct to consumer saves you the most money because you deal directly with the lender and there are no hidden fees.  When you obtain auto financing through a dealership, the dealer makes profit on the loan by adding percentage points to the interest rate, known as the reserve.  In addition, there may be dealer fees tacked on the loan, which you must finance at the higher interest rate.  Check out a finance calculator to see for yourself.

Adding hundreds or thousands of dollars to an auto loan balance never helped anyone avoid the negative equity trap.  In order to avoid this hassle, obtain used car financing direct from the lender before even setting foot on a car lot.  Having preapproved financing in hand before car shopping not only saves you on the financing, it also gives you negotiating leverage.  Learn more by checking out one of our handy guides.

Direct to consumer used auto loans can also be used for private party purchases. Purchasing from a private party with direct to consumer used car financing provides one of the best ways to prevent negative equity.  By getting both the car and financing much cheaper than possible through a dealer, you create the least amount of negative equity and possibly none at all.

People who decide to work with a direct lender for their used car loan direct save the most money and have the least negative equity.  When you avoid the depreciation of a new car and the extra financing charges of the dealership financing, you put yourself in a vastly better financial position.  Paying off a negative equity car loan is painful, let’s face it and it can become difficult to do.  To keep negative equity minimized, obtain used car financing direct from one of the lenders at myautoloan.com.  Having a choice is real empowerment!

Buying a Used Car? 10 Best Midsize Cars Under $15k

Are you a bargain shopper? A deal hunter? Then there’s a good chance you’re looking for a practical, midsize used car under $15k. From Toyota to Buick, Honda to Chevrolet, there’s a great midsize car on this list for you. Find a reliable and stylish used car on the list below and apply for a used car loan on myAutoloan. Here we go!

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Which midsize used car is best for you?

#1. 2010 Ford Fusion Hybrid

Average Price Paid – $5,136*
MPG – 41 City, 36 Highway

If more space for the family and more money in the gas budget sound like big wins to you, then consider a used 2010 Ford Fusion Hybrid. This smooth-riding hybrid sedan is a crowd favorite, boasting excellent safety scores, a sleek interior, and plenty of room for passengers. The one drawback? The 2010 Ford Fusion Hybrid is short on trunk space, thanks to its battery pack.

Perfect for drivers who value… safety, fuel economy, and the environment.

#2. 2010 Mercury Milan

Average Price Paid – $4,958 – $6,316
MPG – 22 City, 29 Highway

The year 2010 is a good one for used vehicles! The 2010 Mercury Milan offers discerning drivers the athletic handling of a coupe or convertible, but the spacious interior of a family sedan. Unlike the 2010 Ford Fusion Hybrid, the Milan boasts a big trunk, and it’s available in AWD with a V6 engine.  

Perfect for drivers who value… excellent safety ratings, attentive handling, and ample cabin space.

#3. 2012 Chevrolet Malibu

Average Price Paid – $7,367 – $9,649
MPG – 22 City, 33 Highway

Can you say “Malibu” without thinking of sunshine and palm trees? We can’t, and that’s one reason we love the 2012 Chevy Malibu. This cheery sedan offers slightly above MPG for its class, as well as quality handling and strong brakes. Drivers love the Malibu’s comfortable and expansive front seats, sleek interior design, and smooth ride.

Perfect for drivers who value… balanced handling, an accommodating interior, and great fuel economy.

#4. 2012 Honda Accord

Average Price Paid – $8,264 – $12,261
MPG – 23 City, 34 Highway

Honda Accords have almost a cult following, and for good reason: they’re amazing, especially the 2012 Honda Accord. Boasting excellent safety scores for its class, spacious seats in the front and back, and agile handling, the Honda Accord is crazy fun to drive for a midsize sedan. The 2012 Accord is also available in a coupe body style.  

Perfect for drivers who value… reliability, safety, and fun!

#5.  2014 Toyota Camry Hybrid

Average Price Paid – $13,110 – $14,228
MPG – 43 City, 39 Highway

The Ford Fusion Hybrid and Toyota Camry Hybrid are equal competition for one another. The 2014 Toyota Camry is known for its quiet ride, comfortable passenger space, and strong acceleration. This last feature is especially important, as hybrids generally have a reputation for lackluster, if not wimpy, acceleration. But the 2014 Camry Hybrid? It drives like a gas-only sedan.  

Perfect for drivers who value… the zippiness of a sedan, but the fuel economy of a hybrid.

#6: 2015 Hyundai Sonata Hybrid

Average Price Paid – $13,978 – 15,994
MPG – 36 City, 40 Highway

Wowee, does this car have some pep in its step for being a hybrid! The 2015 Hyundai Sonata Hybrid ranks in the middle of the pack when it comes to used midsize cars. It boasts comfortable seats, easy-to-use technology, and solid reliability. What’s more, this used car gets extra points for a a great warranty.

According to U.S. News & World Report, “Hyundai offers a long certified pre-owned warranty, and used models are often thousands of dollars less than comparable Toyota Camry and Honda Accord hybrids.”

Perfect for drivers who value… a snappy driving experience and the peace of mind that comes with a warranty.

#7: 2010 Mazda Mazda6

Average Price Paid – $4,786 – $7,093
MPG – 21 City, 30 Highway

Weren’t sure you could afford a car as stylish as a Mazda? Well, you can! The 2010 Mazda Mazda6 stands out from the crowd. With sleek styling that’s downright sexy, athletic performance, and a spacious trunk, the 2010 Mazda Mazda6 has a lot to be proud of. The only thing critics don’t love? The fuel economy. At 17-21 MPG in the city and 25-30 MPG on the highway, this Mazda’s fuel economy leaves something to be desired, especially compared to the Chevrolet Malibu and Honda Accord.

Perfect for drivers who value… sport performance and sleek styling. Zoom, zoom!

#8: 2014 Kia Optima

Average Price Paid – $10,363 – $16,174
MPG – 23 City, 34 Highway

According to U.S. News & World Reports, this sweet ride has one of the strongest base engines in its class. Tall riders may have trouble in the back seat, but they can hop in the front, can’t they? They’ll have plenty of space! The Optima’s limited backseat headroom is balanced by a nice interior, strong engine, and a smooth ride.

Perfect for drivers who value… a powerful engine at an affordable price.

#9: 2014 Subaru Legacy

Average Price Paid – $11,439 – 16,522
MPG – 18 City, 25 Highway

Love. It’s what makes a Subaru, a Subaru, and we’re in love with this Subaru! With standard all-wheel drive and a spacious cabin, you’ll be ready to hit the mountains anytime Mother Earth calls your name. The 2014 Subaru Legacy is one of the only midsize cars with standard all-wheel drive, which makes it an ideal ride for drivers who live in climates with unpredictable weather, snow, or ice.

Perfect for drivers who value… safety and the ability to confidently drive in rough weather.

#10: 2012 Buick Regal

Average Price Paid – $8,634 – $10,966
MPG – 19 City, 31 Highway

The 2012 Buick Regal has won multiple awards. It was voted the 2012 Best Upscale Midsize Car for the Money and 2012 Best Upscale Midsize Car for Families. What a combination! The 2012 Regal boasts a turbocharged engine, great fuel economy (eAssist model), a stylish interior, and a powerful turbocharged engine. Critics love its graceful design, smooth brakes, and luxury-style amenities for the folks in the front seat.

Perfect for drivers who value… the finer things in life, but for less!

Ready to shop midsize used cars?

The key to getting a good deal is shopping around, whether you’re buying a car, a house, or getting an auto loan! Find the best used car for you with help from U.S. News & World Report. And the best used auto loan? Turn to myAutoloan! Apply online with myAutoloan and compare up to four used car loan offers at once. You’ll choose the best loan for your needs, just like you’ll choose the best car for your needs.

*Average price paid based on 32536 ZIP code

What Does It Mean to Lease a Car?

You have to add a leased car to your auto insurance policy. You might have to make a down payment. And you’ll definitely have to make monthly payments on a leased car. Leasing a new car sounds pretty similar to buying a new car with an auto loan, doesn’t it? In a way, yes, but there are some important differences between the two. myAutoloan is here to explain!

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What is leasing a car?

When you lease a car, you do not own it. You do not have any ownership interest in the vehicle. You get to drive a (typically) new car for a few years and you only pay for the depreciation that occurs while you have the car, plus interest.

Leasing a car is a little like renting a car, but for a really long time. Think years, not a weekend getaway. You make payments for the use of the car over a certain time period, then return the car at the end of the period. Most car leases are for 2-3 years. When your car lease is up, you have the option to buy the leased car or give it back to the dealer and walk away.

Why do people lease cars instead of buy cars?

As you can see, buying a car outright isn’t the only way to get a new set of wheels.

According to data from Statista, 28.28 percent of the new cars in the U.S. were on lease in the fourth quarter of 2017. After they weigh the cars, many drivers choose to lease instead of buy. One option isn’t necessary better than the other. In the end, it all depends on your preferences.

Pros to car leasing

  • You can make a lower down payment
  • You could get a lower monthly car payment than buying
  • You can get the latest safety features and technology
  • You can drive a new car every few years
  • You have lower repair and upkeep costs since the car is newer and you’re under the factory warranty
  • From month-to-month, it can be less expensive than buying

Cons to car leasing

  • You can’t modify the car as you please
  • You have to keep  your annual mileage under a certain amount, typically 12,000 miles
  • If you drive hard and fast, you could face expensive wear and tear charges at the end of your lease
  • It’s expensive to terminate a lease early
  • Lease contracts can be confusing and filled with confusing lingo
  • You can’t sell the car or return it whenever you want

Can I lease a car?

Yes, you probably can! You will likely need to make a small down payment, less than the usual 20% of a car’s value if you were buying, and then make monthly payments per the terms of your lease.

Your monthly payments are likely negotiable. Search for carmakers’ “lease specials” and check out dealership websites to learn about special lease offers. You don’t need a perfect score in order to lease a car, but you might need a good one in order to qualify for a lower interest rate. Most low interest and “no down payment” lease incentives are reserved for drivers with admirable credit scores. A credit score below the mid-700s may not qualify.

Can I buy my leased car?

Yes, you can buy a leased car with help from myAutoloan! We can connect you with a competitive lease buyout loan that gives you the freedom to buy your currently leased car. Use the loan to buy your car at the end or before the end of your lease—it’s up to you. Get started by filling out our fast, secure, and cost-free application. You’ll be matched with up to four loan offers from real, verified lenders who are ready to do business with you.  

If you’d rather buy a car, we’re here for you, too. Get ready to buy a car and compare up to four auto loan offers in minutes on myAutoloan.

What’s the Best Age & Mileage for a Used Car?

You’re all about saving money, which is why you’re looking to buy a used car instead of a new car. You’re wondering, though… how old is too old? At what age are used cars more of a financial drain than an asset? The answer may surprise you. (Hint: To some degree, age is just a number.)

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Vehicle age, mileage & depreciation

How does depreciation work?

Cars depreciate. They lose value. Your goal is to buy a used car that’s already done its bulkload of depreciation. Is it possible? Sure is.

First, you’ve got to understand how depreciation works. Let’s say you buy a new car for $34,968, the estimated average transaction price for light vehicles in the U.S. in 2017, according to Trusted Choice Insurance.

As soon as you drive off the lot, the car is worth $31,121. That’s an 11% decrease in value.

When it’s time to celebrate your car’s first birthday, your car will have decreased in value by 25%. It’s now worth $26,226.

At three years old, your car’s value will have decreased by a whoppin’ 46%. It’s worth $18,882.

And five years later? Your precious ride is worth a mere $12,938. It’s value will have decreased by 63%.

Keep in mind that depreciation isn’t an exact science. Some depreciation factors can’t necessarily be measured in dollars and cents. A brand, color, or vehicle type can unexpectedly fall out of favor with the public, making a car that’s only one or two years old unattractive to many buyers.

Gauge the age. Find your sweet spot.

Buying a used car that’s juusstt the right age can help you beat the biggest slump in depreciation. Let another driver take the biggest hit so you don’t have to. According to various car buying and selling resources, including Edmunds, Consumer Reports, and U.S. News & World Report, the “right age” can vary greatly.

One to two years old – Edmunds recommends buying a car that’s one or two years old, driving it for three years, and then selling it before the next big price slump. This might be a good option for drivers who love having the latest gadgets and don’t mind maintaining a car payment.

Two or three years old – According to Consumer Reports, two- and three- year old used vehicles have already taken the biggest depreciation hit. Continuing ownership expenses, like insurance and taxes, are still a bargain, and you still get to drive a vehicle with most new modern amenities.

Up to 10 years old – After gathering data on depreciation, problems, and repair costs for cars from one to 10 years old, U.S. News & World Report found that even 10-year old cars cost more in depreciation than they absorbed in repair bills.

Whoa, whoa. Read that again. They found that even 10-year old cars cost more in depreciation than they absorbed in repair bills. That means to some degree, you don’t necessarily have to worry about a car’s age being a burden.

Their analysis shows that the best way to find the cheapest used car is to buy the oldest modern car that you can still find running and in good condition. For the best safety features, stick to cars that are 2012 and newer. That’s the year electronic stability control became mandatory for all cars.

In the end, U.S. News & World Report suggests “buying as old a car as you’re comfortable driving that’s in good condition and reflects diligent care form the former owner.”

With most modern, relatively well-maintained cars, age is just a number. Ah, thanks for the wisdom U.S. News & World Report.

Want specifics on a used car you’ve been eyeing? You can actually calculate the depreciation of any car using the car depreciation calculator. Just enter in the purchase price of the vehicle, it’s current age, and the number of years you plan on owning it. The calculator will tell you the annual, total depreciation and estimated value of your vehicle at the end of the ownership.

Consider maintenance over mileage.

If age is just a number, is mileage a big deal when buying a used car?

Most drivers average 12,000 miles per year. If the used car you’re looking to buy has far more average miles/year than that, start asking the owner or dealer questions. How and where was the car driven? Why so many miles? Was the vehicle regularly maintained during this time and do you have the service records to prove it?

Typical used car mileages

  • One to two years old: 12,000 to 24,000 miles
  • Three to four years old: 36,000 to 48,000 miles
  • Five to six years old: 60,000 to 72,000 miles
  • Seven to eight years old: 84,000 to 96,000 miles
  • Nine to ten years old: 108,000 to 120,000 miles

If the previous owner can show that the car has been continuously well-maintained, a few extra miles here and there doesn’t need to be a deal breaker. Like U.S. News & World Report said, the best way to find the cheapest used car is to buy the oldest modern car that you can still find running and in good condition “and reflects diligent care from the former owner.”

Find your best used car (and your best used car financing)

There is such a thing as the “used-car-buying-sweet-spot.” It’s just different for different drivers. Once you’ve found a used car you feed good about driving, whether it’s two years old or five, apply for a used car loan through myAutoloan. You’ll receive up to four financing offers and can choose the best finance rate for you.