I guess I’ll never understand how the criminal mind works.

Still, the fact remains that identity thieves falsely purchase cars on a regular basis. While banks, dealerships, and credit bureaus develop processes to prevent this crime, one simple and relatively low-tech option has done wonders to deter identity thieves – requiring a thumbprint on the vehicle purchase contract.

Requiring a thumbprint to buy a car deters thieves, but it’s hardly necessary.

Collecting a thumbprint allows law enforcement to determine the ACTUAL identity of the person who signed the contract after the fact, all but guaranteeing an identity thief will be caught. While this program is currently voluntary in the city of Los Angeles, many car dealerships that have been victims of identity theft are excited to begin the program.

Unfortunately, many potential customers are also deterred by the thumbprint requirement. Some consumers regard a thumb print on a contract as an invasion of privacy. Others are concerned about their “biometric” identity information being stolen. Most consumers, however, find providing a thumbprint to buy a car excessive and perhaps a little insulting. After all, shouldn’t the current system stop theft in the first place?

The answer, refreshingly, is yes.

The vast majority of falsified vehicle purchases occur at dealerships with loose or non-existent identity checks. Conscientious dealerships will pause a transaction if there is any question about names, addresses, social security numbers, and/or dates of birth not “adding up.” Between the credit bureau, the driver’s license, the credit application, and the story from the identity thief, most of the time dealers have more than enough information to stop the false purchase from happening in the first place.

But sales people and sales managers often hide or ignore facts that don’t agree with the records, deciding that the conflicting information is “incorrect” in order to complete the sale. The truth is that most well-managed dealerships have no problems with identity theft because the stop the problem when it walks in the door.

If a dealership asks you for a thumbprint, there’s very little harm in providing it. Still, the fact remains that your personal information ought to be enough. Hopefully someone will put a stop to this practice and ask car dealers to pay a little more attention to the documents they already have.

1. Buy a new Toyota. Toyota Motor Credit is now one of the largest auto lenders in the US, and for good reason – they can borrow money from Wall Street at interest rates that other auto lenders can only dream about. That means they can offer loans at a better interest rate to consumers, even customers with bad credit. While Honda, BMW, and Mercedes also enjoy preferred lending from big banks, they don’t offer the sort of terms that Toyota provides for credit-challenged customers.

2. Buy a new truck or SUV. There has NEVER been a better time to buy a new truck or SUV. Huge discounts, generous cash incentives, and aggressive finance offers are available for anyone looking to buy a new truck or SUV. While it’s going to be more expensive to fill-up these vehicles, all the discounts and incentives mean a person with less-than-perfect credit can often get a loan offer. Just make sure to buy a smaller truck or SUV (say a Toyota Tacoma or Rav4) that you can afford to fill up.

3. Have you called your credit union? Credit unions often use generous lending guidelines that are favorable for most consumers – especially for anyone with a poor credit history. They also offer a personal touch and a loan approval process that many consumers find friendly and helpful. If you don’t currently belong to a credit union, check with your employer and/or H.R. department to find out what options are available to you.

4. Check out the certified used cars. GM, Ford, and Chrysler now offer aggressive certified used vehicle programs with great warranties and aggressive financing, just like Toyota and Honda have been doing for years. If you’re trying to buy an inexpensive vehicle with bad credit, a CPO car might be worth a look.

5. Stay away from “buy-here-pay-here” car lots. Because of the current credit climate, a buy-here-pay-here dealership may seem like a decent option. However, for most consumers, a buy-here-pay-here car loan is a bad idea. First, the payments are rarely reported to the credit bureaus, meaning that you’ll get little or no benefit from making all of your payments on time – your credit score will not improve. Second, many of the vehicles being offered at these dealerships aren’t worth half of what consumers are being asked to pay. Steer clear of this option if at all possible.

6. It’s all about cash. Now more than ever before, auto lenders are requiring substantial amounts of cash down. Historically, lenders have found that requiring a large cash down payment from a customer dramatically reduces the chances that they will default on their loan. So, if you’re trying to buy a car and your credit is poor, it’s time to buckle down and save. Put off any non-essential expenses, save as much cash as you can, and you’ll increase your chances of getting approved with every dollar you can put down. Figure 10-20% of the purchase price will be your required down payment.

7. Get your family involved. While we’ve never been an advocate of co-signed loans, if the situation is truly desperate a co-signer can often help a person with bad credit get a car loan. Spouses, parents, and siblings are the most helpful, and they usually have to reside in the same state. It’s also important to note that co-signers don’t help much with an approval if you’ve already had a car loan without a co-signer. This should be a last-resort option.

It’s important to remember that this credit crisis will likely be short-lived. Analysts estimate that the credit climate will normalize in the next 18 months. While it will never be like it once was (when nearly anyone could get a car loan regardless of credit history), people with bad credit should be able to get car loans again very soon. Make sure to apply for credit at a few different lenders too – that will help you figure out what your options are. We have a recommended list of auto lenders you can register with.

I am looking to buy a new car and am a little scared about financing. I was turned down by Bank of America because they don’t accept anyone for financing with less than three years of credit. I am 26, my credit score is 745, and I have 5 credit cards (all without balances). I want to get financing, but do not want to do any guess work. Can you tell me who might consider financing me for a car?

Answer:

I wouldn’t put too much stock in the opinion of any one bank. In my experience, there are really two kinds of lenders – banks that want to be in the business of auto loans and banks that don’t.

Most banks don’t want to be in the business of lending money on cars. It’s a difficult business for a bank to be in without a large dedicated auto lending staff. I’ve been amazed multiple times by the vast difference in lending between banks.

Take your situation. You have a 745 credit score, and assuming you’ve had the same job and residence for at least six months, you should have no trouble getting a loan — even being a first time buyer. In fact, you should even be able to get a decent interest rate. Yet Bank of America turns you down. ANY ONE of the captive auto lenders (GMAC, Ford Motor Credit, Toyota Motor Credit, etc.) would love to have your business. The same goes for the larger national auto lenders like Chase and Wells Fargo.

My advice would be to contact your local credit union. They will probably offer you the best finance terms of any lender. However, I would also suggest you keep an open mind towards dealer-provided financing. You definitely fall into the “A” credit category, and auto dealers (with their huge lending portfolios) can often beat the best deal you can find on the street. If you get pre-approved at a local credit union or two, you’ll have a good estimate of what you can expect in terms of interest rate.

My recommendation: You should apply to a local credit union and ignore the fact that Bank of America “doesn’t look at people with less than three years.” You have an excellent credit score, and assuming you’ve got good job and residence stability, you should have no trouble getting financing.

I’ve broken-up with my boyfriend-girlfriend, and my problem is I co-signed on a car for him/her. I’ve asked them to take my name off the loan and get the car under his/her own name. What should I do to avoid being taken advantage of? Is there anyway for me to get off the loan and make my ex boyfriend-girlfriend pay for the car themselves?

This is a tough situation, and it’s a fairly common occurrence as well. Co-signing for ex-girlfriends-boyfriends and ex-wifes-husbands is always a problem. Obviously, you had no idea they were going to be your ex when you co-signed the loan, but now that you’re broken up you want to remove yourself from their loan (and their lives).

The good news is that you CAN get off your ex’s loan – but only if your ex is willing to co-operate. Here’s how:

1) Convince your ex to refinance the car without you. Your local credit union will give your ex the best deal. He or she can often refinance the loan for the same interest rate or better. Of course, if your ex has no credit (or if they’ve been late with the payments), that won’t work.

2) Convince your ex to trade their car in for a new vehicle. When it’s traded in, it’s paid off and over for both of you. You sign a few papers at the dealership and you’re all taken care of. If you really want out of the loan, you can even offer your ex some money towards a down payment. It’s a tough pill to swallow, but it’s worth it in some cases to be done.

3) Convince your ex to give you their car. This is a long shot, but maybe you can swap cars with your ex. You get the car and you don’t have to worry about missing a payment and/or the car being destroyed.

4) Hope that something happens to the car and/or your ex (kidding!). Seriously, that’s about the only other way something will change. If you ex can’t or won’t consider any of the other options, you’re sort of out of luck.

You have reason to be concerned about sharing a loan with your ex – if they miss a payment or let the car get repossessed, your credit will suffer. If you can’t your ex to agree to do any of the above, you should set aside some money to make payments just in case he or she can’t or won’t.

One other suggestion – be as nice as possible to your ex and explain to him or her that if they fail to make a payment, it will hurt their credit more than it hurts yours. After all, your ex needed you to co-sign for them in order to to get a loan in the first place. If he or she doesn’t make the payments, what makes you ex think they’ll get another loan again?

It’s been my experience most people recognize it’s in their own best interests to make their payments and get their ex off their car loan. This situation usually works out just fine.

I am graduating college soon and I would like to lease or purchase a new car. I have a credit score of about 640 and a cosigner who’s credit score is 730. I don’t have a job yet, but I have enough money saved to cover my car payments for about 8-10 months, and I should have a job soon after graduation. Will I have any problems getting approved for a new car because I don’t have a job?

You shouldn’t have any problem getting approved. You’ve got cash, you’ve got a strong co-signer, and you’ve got a brand new college degree. While it’s true you don’t have a job yet, it’s not going to keep you from getting a new car.

Most car manufacturers offer “first-time buyer” programs tailor-made for people like yourself. Usually, these programs require you to put 10% of the car’s price down and provide a copy of your diploma to qualify. These programs also require that you have a checking account, and that you don’t have any negative credit (like late payments, delinquent student loans, etc.).

You should also consider leasing a new car instead of buying one. First of all, you’re probably at a point in your life where your needs can change dramatically in the next two or three years. Today, you might want a nice little sports coupe. In two years you might need to trade that coupe in for a sedan (to support a new family). The point is that you never know how your life is going to change – the only certainty is that, when you’re young, it WILL change. So, instead of locking yourself into a new car loan for the next 5 or 6 years, consider a short term lease (24 or 36 months) and fairly inexpensive payment ($350 a month or less). That gets you into a reliable new car using a first time buyer program, and gives you the flexibility to switch it up later without too much trouble.

Make sure to read our questions you should ask yourself before leasing a new car, and do lots of new car research before you buy. Congratulations on your graduation!

1) You can get a better interest rate. If you can get a rate at least 1 percent better (and preferably 3 or 4 percent better), go ahead and refinance your auto loan. You won’t get much benefit from anything smaller than 1 percent. Mentally it may seem like 5.99% is better than 6.25%, but the reality is that they’re so close it’s not even worth your time.

2) You’re at risk of defaulting on your car loan because you can’t afford to make the payments. If you’re one or two months away from repossession, by all means refinance your car.

3) If you’re at risk of defaulting on your home loan because you can’t afford to make mortgage payments unless you can lower your car payments.

However, if you’re thinking about getting equity out of your car so you can get money to pay other bills, you should know that this is NOT a good reason to refinance. Cars do not have equity since they are depreciating assets, and each day they are worth less than the day before.

Banks sometimes offer “car equity loans,” but don’t get sucked it. Even if your car is worth more than you owe right now, that won’t last long. Borrowing against any equity you have today is always a mistake – all you’re doing is stealing from your own future by adding more payments to your current loan. Would you rather make an extra two years of payments on your car so that you can have an extra $100 today? Probably not.

Unless you’re at risk of defaulting on a major asset, don’t refinance. If you refinance for extra cash, you’ll regret it in two or three years when your car should have been paid off and you’re still making payments.

If you do need to refinance, keep the following in mind:

• Don’t pay any fees unless they’re minor (such as the $20 your bank may charge for a new title or lien). Walk away from “refinancing fees” and “loan origination fees,” and other charges along that line. The bank should be happy for your business and shouldn’t charge you for it.

• Don’t add more time to your loan. Unless you’re desperate to lower your payment, try to get a loan that ends at the exact same time your original loan would have. For example, if you buy a car using a five-year loan, and in a couple of years you decide to refinance it, don’t take out another five-year loan. All you’d have done is extend the amount of time that you’ll be paying for your car.

• Check with your credit union. Credit unions have great rates, they want to help you, and they’re willing to work with you more than a regular bank will, especially if you’re in a situation where you’re at risk of defaulting.

Of course, instead of refinancing your car, you can try and trade it in for a less expensive vehicle. Take a look at our tips on negative equity or being upside down, and make sure to figure out your car payment budget before try and trade-in your car.

Listen to this article.

There are a few things that cause you to be “upside down”: It might be that you’re trading in too early, your vehicle could have damage of some kind that affects its value, or it could be that the market has depreciated faster than you anticipated. Most of the time you can overcome negative equity by financing it into your next car loan, but that’s not always the best option. Negative equity can get dangerous, especially when it starts to compound.

For example, you buy a new car, decide to keep it for two years, and then trade it in. When you trade in a new car that quickly, you will have negative equity. However, let’s say you decide it’s not a big deal; you just take your negative equity (let’s say $3k worth) and roll it into your second car. You drive that second car for a couple of years, and then decide you want to trade the second vehicle in (again two years is too soon). You’ll still owe the negative equity from your first car (negative equity is always paid off last) plus negative equity from the second car because you’re trading in too early.

Following our example, let’s you have $3000 in negative from your first car and $3000 in negative from your second car. With a little luck and a high interest rate, you manage to take that $6000 in negative equity and roll it into your third vehicle. Let’s say you really like this third vehicle, and you want to keep it, but something happens and you need to trade it in. When you go to the dealership, you’ll have the negative equity from the first and second cars, as well as the negative equity from this third car because you’re trading it in too soon as well. Add it all up, and you’ll probably have $10,000 in negative equity. Unfortunately, you really can’t take that amount of negative equity and finance it into anything.

This is how negative equity gets dangerous – it follows you from one car to the next, at least until you completely pay something off.

If you have negative equity, here’s what we recommend:

• Take a step back and ask yourself: “Do I need to buy right now?” If the answer is “no,” or “I’m not sure,” postpone your purchase.

• If you have major damage that’s hurting your car’s value, call your insurance company and get it taken care of. If the damage is minor, go to your local body shop or detailer to get rid of the dents and scratches. In fact, just cleaning and waxing your car will increase its resale value (and therefore reduce your negative equity).

• Rather than going to the dealership, put your vehicle on craigslist and try selling it yourself – you can sometimes cover all of your negative equity when you do that. Take a look at our tips on selling your car yourself, since there are some safety issues with that.

• If you have credit insurance or an extended warranty on the car you’re trying to trade-in, find out if you can cancel your coverage. If you can do this it will reduce your payoff (and therefore your negative equity).

As always, take your time when buying a new or used car. Do your car research, get multiple car financing quotes, and feel free to contact us with your questions.

Regardless of your credit score or credit history, here are some tips you can use to save time:

1) Get your paperwork together. To prove your income, you’ll need your most recent paystub. To prove your residence, you’ll need your most recent phone, electric, or cable bill. Finally, if you have any credit problems like collections, bankruptcy, or leftovers from a messy divorce, get that paperwork together too. Put everything in an envelope and bring it with you when you go to see your lender – that way you’ll only have to make one trip.

2) Get your list of personal references together. When you apply for an auto loan, you’re usually required to give the name, address, and phone number of three or more friends or relatives that don’t live with you. If you get this information together ahead of time, you won’t have to scramble to figure it out while you’re completing your application.

3) Talk to your boss, office manager, or human resources department. When you apply for an auto loan, most lenders will call and verify your employment. Let the person in charge of employment verification know that you’re expecting an auto lender to call about you – that way they’ll be ready to provide what the bank needs quickly and accurately.

4) If you have a trade-in, find out your exact payoff. Many times when people apply for an auto loan, they estimate their trade-in payoff. The trouble with estimating your payoff is that your new lender may use your estimate as an exact value. If your payoff is actually substantially higher than you estimated, your loan may need to be re-approved for a higher amount. If your payoff is lower than you estimated, your interest rate might be higher than it should be. Save everyone some time (and yourself some money) and find out your exact payoff before you apply for a new loan.

5) Make sure you’re as truthful and accurate as possible. When you complete your credit application, you may need to list former residences, former employers, etc. If you accurately list all this information, your application will be processed quickly. Also, if you lie about some aspect of your credit, there’s a good chance the auto lender will find out. At best, this will slow down your application considerably as the lender checks every aspect of your credit. At worst, your application will be turned-down.

Follow this five tips and your next car loan application will be processed quickly and efficiently, and you’ll get your loan as fast as possible. As always, see our recommended online car financing quote services and visit EasyFastCarLoans.com for fast car loan approvals.

Here’s what you need to know:

1) Special interest rates make sense for most consumers. Most people will save more money in interest charges than they could ever hope to save using a rebate. This is especially true of anyone with less-than-perfect credit. Special rates are usually offered by the manufacturer’s special financing arm which is more forgiving than a regular bank.

If you’re not sure about the rebate or interest rate, find out for yourself and use our payment comparison tool. You can compare the rebate to the financing side-by-side and find out what makes more sense in about 30 seconds!

2) Sometimes the rebates that are advertised are not available to all consumers. Believe it or not, it’s completely legal for a dealer or manufacturer to advertise a rebate that almost no customer will qualify for. Take a look at the fine print in the advertising and make sure you don’t need to be a student, a military veteran, or the owner of a previous model of that brand of car etc. to get the advertised rebate.

Finally, because it’s common for automakers to offer rebates for special groups (like AAA members, people who own competing vehicles, etc), call the auto manufacturer’s customer service line and find out what rebates you qualify for. Unfortunately, dealerships are not very good at figuring out who qualifies for these rebates so you can’t rely on the dealer to find out for you.

As always, take your time when buying a new or used car. Do your new car research, get multiple new car financing quotes, and feel free to contact us with your questions.

Listen to this article:

1. They want you to prove that you’re committed. By making a big down payment of a few thousand dollars, you demonstrate that you’re invested in the loan. Banks have found that when people make a big down payment they’re much less likely to default. A bank will want you to prove your commitment if you’ve had any credit issues in the past or if you’re a first-time borrower without an established credit history.

2. They want to reduce their risk. When a borrower defaults on an auto loan, it’s usually a pretty big loss for the lender. If your credit history makes the bank think that you might default, they’re going to ask for a down-payment (assuming they approve the loan in the first place). But if your credit history is clean, theres no reason to worry about you defaulting and you don’t need a down payment.

If you have bad credit or no credit, the banks will look for 10 percent down as a minimum. Most times they want substantially more than that – 20 or even 30 percent down. Keep in mind that if you’re a first time buyer, there are some programs for new vehicles – two examples are Ford and Toyota – where you can put little or no money down. As long as you meet their requirements, you’ll get a new vehicle with as little down as possible.

The answer to the second question, “How much should I put down,” is “as little as possible!” Cars are depreciating assets. If you can do anything else with your down payment to help you financially, by all means do it. If instead of putting your money down on a car, you can use your cash to buy a house or pay off a high-interest debt (such as your credit cards), you should do those things. You should also have an emergency cash fund so that if you get sick or laid off, you have enough cash to make your payments. There are usually better ways to spend money than using it for a car loan down payment.

There is one exception to this rule of putting as little money down as possible: if you can lower your car loan interest rate by putting a little money down, do so. If the difference between getting 5.99% and 7.99% is you putting some extra cash down, you’d be smart to do so. Sometimes just an extra $500 or $1000 down can get you a better interest rate. Getting a lower interest rate will save you a lot of money on finance charges in the long run.

So, do you need to make a down payment in order to buy a car? Only if your credit requires it.

How much money should you put down? As little as possible.

As always, take your time when buying a new or used car. Do your car research, get multiple car financing quotes, and feel free to contact us with your questions.