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Refinancing? You’re in the Driver’s Seat!

Improving “the customer experience” is the name of the game in business these days. Companies are falling all over each other to stand out from the competition, say, by offering shorter delivery times, hot deals, stellar customer service, and buying incentives. They are getting much better at seeing things from the customer’s point of view and that’s great for all of us!

Auto refinancing is no different. RefiJet, for example, does the work of researching refinancing options and comparing loan products to pinpoint the ones that best suit our customers’ needs and then guides them through the entire process. Everything—from the first glimpse of our website through the close of each deal, has been carefully considered to take the pain points out of the refinancing process.

The RefiJet website has just two simple intake forms—essentially capturing contact information and birth date—and then uses a “personal concierge” to walk customers through the loan process. By having a single source to represent multiple lenders, customers can avoid the tedious task of calling all over to gather information and compare refinancing options on their own.

When getting started with your refinancing, you will need to have a few documents on hand so the lender can verify your qualifications. To make things flow as smoothly as possible, it’s a good idea to start gathering this information:

  1. Proof of employment and income—recent pay stubs or the W-2 from a prior year. If you don’t have a single employer, you can use your 1099s or tax returns.
  2. Proof of residence—documents that confirm your physical address, such as a driver’s license, bank statement or utility bill.
  3. Proof of insurance—either an insurance ID card, policy document or other information that demonstrates coverage for your vehicle.
  4. Vehicle information—specific details about your car, including its year, make, model and VIN.
  5. Loan information—amount of your current loan pay-off amount.

You may also want to take a look at your credit report before submitting a refinancing application to make sure it is accurate. Everyone is entitled to review their credit report for free each year at each of the major credit bureaus—Experian, Equifax and Transunion—and draw their attention to any errors. You can be sure that any lender will be checking it carefully and the last thing you want is for them to make decisions on your credit when it looks worse than it really is!

With all your documents in hand, the process just flows from there. You can be busy at work or at home, knowing that someone else is out there looking after your best interests. And especially when it comes to your hard-earned money, it’s nice to know that someone has your back.

How to “Bookout” Your Car

There will come a time when you need to know the value of your car. Say you are looking to trade in your car, refinance for a better rate or sell your car on your own. How will you know if you are getting a fair deal without knowing the base value others are using to calculate your costs? Also, if you have the misfortune of totaling your car in an accident, it’s helpful to know how the car would have been valued pre-accident to compare it to the pay-out from the insurance company.

In industry-speak, this number is called the car’s “book value” because it is derived mainly from three bibles of valuation in the automotive industry: the Kelley Blue Book, Black Book, and the NADA guide. Fortunately, like most everything else these days, these books offer online tools that can help you determine your own car’s value for free.

I decided to give these tools a “test drive” (excuse the pun) by visiting the two sites. First, I tried Kelley Blue Book at www.kbb.com. After filling in a simple questionnaire about the type of car I own, its specific features—down to the color and condition—the computer worked its magic, yielding a current value of between $12,257 and $14,128 for my 2014 Infiniti Q50, based on my geographic location. My results sheet included an overall consumer rating for the car, with customer reviews, a link to car comparisons and shopping options, and an offer to begin the trade-in process.

When valuing your car on the Black Book site, you are automatically redirected to www.newcars.com. Once you enter your make, model, mileage, option information and a few other criteria, you reach the results page—in my case a range between $12,800 and $15,170, pretty close to the Kelley Blue Book range above. Be sure to click on the option at the top of the page for determining your Black Book used car value, or the app will assume you are looking to purchase a car and immediately try to capture your contact information, including your mailing and email addresses!

The NADA site offers a wealth of information also, but it is a little more general. On its site, you can research car values in your area, get free dealer quotes and car history reports for specific vehicles. There is plenty of information that can help you make decisions about particular makes and models you are considering.

You may have heard the old aphorism “knowledge is power,” and in this case it’s absolutely true.

What is Simple Interest Anyway?

It’s one of those rare quiet days today at the office. Seems like the perfect time to talk about car loans and simple interest. Armed with this knowledge, you can be a far more informed customer when you speak to your lender.

You probably already know that when you borrow money from a bank or finance company, you need to compensate them for the privilege. The bank is viewing an investment in financing or refinancing your car strictly through a business lens: they lend you the money for your car purchase, and you repay the loan plus interest in monthly installments over a set time frame. For your lender, a loan to you is an opportunity to earn income in the form of interest payments. For you, the benefit lies in owning a car you can rely on for both transportation and enjoyment over the next several years.

In making a loan to you, how does the lender decide what to charge you for the use of its funds? Most auto loans use a simple interest formula to calculate your payment schedule. Let’s say you borrow $20,000 to refinance your car over a 48-month period at five percent interest. You can use an online “amortization calculator,” such as the one at www.amortization-calc.com, to get an idea of what your monthly payments would be—in this case, $460.59.

The Process of Amortization

Here’s where the concept of amortization factors in. When you make your first month’s payment of $460.59, you are paying five percent on the entire $20,000 you borrowed. As you make payments, however, a portion will be applied to interest and a portion to pay down principal. This ratio of interest/principal will vary as your loan is gradually paid off over the 48-month period. This is because as you make payments, your principal will decline by a bit each month so you will owe less in interest on the remaining amount.

Using the example above, www.amortization-calc.com shows the first and last two months of payments (see chart below). Your first month’s payment of $460.59 will include a higher component of interest than any other month. While the first month’s payment shows $83 applied to interest and $377 applied to principal, by the final payment of $460.59 four years later, only $2.00 is applied to interest and $459 is applied to principal. This is called an amortizing loan, based on simple interest.

MonthInterestPrincipalBalance
Mar, 2019$83$377$19,623
Apr, 2019$82$379$19,244
MonthInterestPrincipalBalance
Jan, 2023$4$457$459
Feb, 2023$2$459$0

Though the concept of amortization may sound complicated, don’t be concerned. You still are paying the same $460.59 each month. Your lender will do the allocation between interest and principal for you and apply your payments properly each account. And once your loan is paid off, the car is yours, free and clear!

Understanding Your Car Loan Agreement

You’ve successfully negotiated the purchase of your new car. Congratulations! Owning a car is a major source of pride and accomplishment for most Americans, and if you live in an area without reliable public transportation—a great convenience too.

Before you can lay claim to that shiny new (or new to you) car, however, there will be paperwork—especially if you are planning to seek financing. Mistakes can happen, and part of the responsibility for avoiding them lies with you. Make sure you understand everything that appears on your loan document, especially your monthly payment amount. Review the details carefully and be sure to ask for clear explanations that make sense to you before signing. Here’s a look at what to expect as part of your contract:

  • Vehicle Identification Number (VIN). Yes, we realize this sounds obvious, but make sure that the car you chose is actually the same one being sold to you. The VIN is the unique identifier for every car, located below the lower left corner of the car’s windshield. Make sure that the number on the contract is identical to the one that appears on the vehicle.
  • State sales tax. Don’t forget about sales tax! The amount will vary from state to state and can even vary city to city. In Colorado, for example, taxes will run at about 11 percent, adding significantly to the price of your car. Fortunately, it can be included in your financing, so you might not feel the impact as much.
  • Vehicle registration fee. The state charges you a fee to register the car and issue your license plates. These can vary depending on the cost of the car you are purchasing, so a pricier car can result in higher fees.
  • Documentation fee. This is the amount the dealer assesses to cover the costs of facilitating the loan. It’s a good idea to review this figure with your finance rep to make sure it passes the “reasonableness” test.  Unlike many dealers and other vendors, RefiJet does not charge customers any fee for their service to facilitate a loan.
  • Loan terms. Review the terms carefully to understand exactly what you will owe. Make sure the interest rate, length of the loan and items included match with what you’ve been promised. Also, check on the rules for prepayment, late fees and other possible penalties.
  • Other charges. Your loan may include costs for extras such as an extended service contract or GAP. Take the time needed to make sure that what appears on the loan contract matches your verbal agreement.

When reviewing your loan contract, don’t let high-pressure sales tactics dissuade you from asking questions! You should be clear on every line item listed and it should all fit together within the context of your discussions with the dealer. Also, keep in mind that it’s always a good idea to have a knowledgeable person with you when it comes to signing on the dotted line.

Four Ways to Get the Most Out of Your Service Contract

When you purchase a new car—and often a used one, for that matter—you will typically be asked whether you want to buy an extended service contract (ESC) to provide coverage for repairs needed after your manufacturer’s warranty expires. Good question. Should you go for that extra peace of mind an extended warranty provides or save your money and put it directly toward future repairs. There is no one “right way” to answer this question, but consider these four factors:

  1. Coverage – This category “covers” a lot of ground. First and foremost, is to compare the coverage offered by the extended warranty with the original manufacturer’s warranty. If repair or replacement of an item is already included with the free manufacturer’s warranty, there’s no need to duplicate coverage through an ESC. And if you do need a replacement, find out whether the parts will be supplied by the manufacturer or a less-desirable after-market source. Also, be sure the time period or mileage amount covered by the policy is significantly greater than on the original warranty to get the most value—especially if you are purchasing a second-hand vehicle. Finally, make sure you know exactly what’s covered; does the ESC provide “bumper to bumper” coverage or just coverage for your car’s power train?
  2. Fees – When considering an ESC, be sure to read the fine print – every word of it! Some services may require deductibles or fees, so it’s important to understand exactly what other costs you may incur over the life of your contract. Note that there may be different costs involved depending on the service being provided, so it helps to get the full picture before buying.
  3. Claims – If you have a claim, find out who will handle it. Does the dealer take care of the repairs or will you be referred to a third party? Be sure you understand whether claims are valid if your problem occurs out-of-state, during non-business hours or if you have relocated.
  4. Maintenance – To get the most out of your car—and your manufacturer’s warranty—you need to comply with your car’s maintenance requirements. As a rule, ESCs don’t cover maintenance services, such as oil changes, brake repairs, filter replacements and fluid refills. In fact, some extended warranties may even become voided if you don’t take proper care of your vehicle.

Be sure to speak with your dealer’s sales rep or finance manager with questions, or contact the policy provider directly. Understanding the detail is the key to getting maximum value!

Five Tips for Insuring Your Teenage Driver

Nothing is more harrowing for a parent than the first time you get in the car with your brand-new teenage driver. Our advice is to start in the very biggest parking lot you can find, bring plenty of tissues to wipe those sweaty palms, and try your best to stay calm. Oh, and you might just want to skip that second cup of caffeine—your heart will be racing enough on its own!

The sad fact is that teens are notorious for their poor driving records. According to research by the AAA Foundation for Traffic Safety, 16- and 17-year old drivers are nearly ten times are likely to be involved in a crash than adults and six times more likely to be involved in a fatality than adults. The numbers are frightening, and parents have every right to worry.

The road to getting your teen driver licensed is not only stressful, but can be expensive too. Because teen accident and infraction rates are so high, the rates for insuring them are also high. Be prepared for a sharp increase in your insurance rates as you add new teen drivers to your policy.

Your job as a parent is both to help educate your new driver, and to protect your family’s assets in the event of an accident involving your teen. Aside from putting the time in working side-by-side with your teen to teach them the rules of the road, here are some additional tips to follow when insuring them:

  1. Don’t skimp on coverage. Remember that ultimately, your teen’s fate is tied to your own. While it is tempting to opt for the minimal coverage required, be sure that your policy has liability, comprehensive and collision coverage that is adequate to protect the assets of your entire family.
  2. Choose a reasonable car. Don’t be swayed into buying—or letting your teen use—a particularly fast or sporty car when first starting out. Check out safety ratings for cars you are considering and choose something that doesn’t invite speeding because of its turbo-charged performance.
  3. Explore discount options. Your teen may qualify for insurance discounts for things like good academic grades, defensive driving training and “away” time if they are at college and seldom driving the car. Buying a car loaded with safety features may also qualify for discounts, so your best bet is to check with your insurance provider.
  4. Go it together. Unless your teen driver already has a horrible safety record, it’s best to keep your teen driver on your own policy for the lowest costs overall. If your child has multiple speeding tickets or accidents, you may need to consider a separate policy to avoid jacking up rates for the entire family.
  5. Consider an app. Some insurance companies offer apps for tracking your teen driver and providing greater safety. For example, apps may send you speeding alerts, disable texting while driving and provide verbal feedback to the driver. Check with your provider for additional details.

The Five Basics of Good Car Maintenance

You’ve just bought yourself a new car. Take some time to enjoy it!  Chances are, it will drive just beautifully for a long time to come. But even if your car is still riding perfectly months from now, you can’t forget about routine maintenance!  While on-board computers and other sophisticated electronics have made cars run better and last longer than ever before, there are still some items that will require regular attention throughout the life of your car.

The most important thing you can do to keep your car running smoothly is to read and follow the recommendations in your car manual.  Many maintenance specifics will depend on the particular make and model of your car, so when in doubt—check your manual!

  1. Get periodic oil changes. Luckily for us and our wallets, cars can run a lot longer in between oil changes than they used to, especially if using synthetic oils.  Check your owner’s manual to find out your recommended change interval, typically between 7,500 and 10,000 miles.  Most experts agree that the conventional wisdom of having an oil change every 3,000 miles is no longer necessary.
  2. Check your fluid levels. Besides oil, there are several fluid levels you need to pay attention to for top performance and safety.  These include the radiator fluid, transmission fluid, power steering fluid, brake fluid, air conditioning coolant and washer fluid.  Check recommendations in your manual because some may need flushing too.
  3. Listen to your brakes. Fortunately, your brakes often will let you know when it’s time for a service call.  Be aware of these signs that your brakes need attention, especially if you often drive in heavy traffic or put a lot of miles on your vehicle: squealing, grinding, longer stopping times and steering wheel vibration.  Have them inspected periodically for wear and tear.
  4. Check your tires regularly. Check your tire pressures every few months and keep them inflated up to the level recommended in your user guide or posted on your driver’s side door jamb.  Inspect your tire tread for excessive wear using the indicators shown on your tire, especially if you notice any slippage on wet surfaces.  Also, rotate your tires at least twice per year to help them wear more evenly and last longer. Finally, be sure your car is balanced and aligned properly; if it is pulling to one side, it probably needs some attention.
  5. Replace worn-out items. Some parts of your car are not meant to last forever, and routine replacement will help keep your car running more efficiently and safely.  These include wiper blades; hoses and belts, which you can often inspect visually; and air filters, particularly if you often drive in heavy traffic or around construction sites.

The internet is chock-full of car maintenance information on sites such as Edmunds.com, cargurus.com and AAA, as well as on user forums and chat sites.  Also, find a local dealer or service advisor to answer questions and resolve problems—they are both “in the know” and ready to help.