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:
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.
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.
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.
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!
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:
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.
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:
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!
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:
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!
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.
Can a Poor Credit Report Be Fixed?
You may have heard about the benefits of refinancing your car loan—with just a little bit of effort, you could end up saving hundreds or even thousands over the life of your loan. But what if you have tried to refinance but have gotten turned down because of your less-than-stellar credit score?
It’s easy to despair over a downturn in your credit, but it’s much more productive to do something about it! Having ups and downs in your score is not that unusual, frustrating as it may be. However, it’s a mistake to just accept this truth as gospel and give up on your hopes of refinancing.
The first step is to make sure these credit reports are even accurate. Every U.S. citizen is legally entitled to review their credit report for free each year at each of the major credit bureaus—Experian, Equifax and Transunion. The report lists your previous addresses, phone numbers and payment status on your credit cards, home mortgages, home equity lines of credits and other debts.
There are dozens of ways a mistake could be made, so it’s a good idea for everyone to check their credit report quarterly, whether you are applying for credit or not—better find problems early than let them catch you by surprise down the road. The list of mistakes or problems could include:
If you find inaccurate information on your credit report, the next step is to report these issues to the credit bureaus so they can correct them. The company is required by law to investigate disputes and update you and the other major credit bureaus. Though the process may seem like a lot of bureaucratic effort, it’s important to fight any impulse you may have to let things slide. It’s well worth your while to spend time working through these errors now and checking your credit frequently to follow up. Ongoing credit monitoring services are available for this purpose.
Those who don’t have the time or ability to work through these issues on their own can turn to an outside credit repair service for help. These services can communicate with credit bureaus on your behalf and work to remove incorrect items—but their role is not to remove unfavorable information that is actually correct.
The most important thing you can do to repair your credit is to change your habits. Be sure to start paying your bills on time, every time—even if you are only paying the minimum amount due. At some point in time—seven years for most items—the time limit for posting these negative items will pass and they eventually will be removed from your report automatically, providing you with much more financial freedom.
You know the feeling…the first few weeks in a new job and everyone speaks in what feels like a foreign language jumbled together with secret codes and random letters that obviously mean something super important.
I don’t know about you, but I HATE the feeling of being the person in the room who doesn’t know what is going on. I tell myself over and over and over again, “You’ve got to fake it ‘till you make it.”
Everyone else seems so comfortable and capable, and the topics seem complicated and overwhelming. My style is to sit back and observe quietly, take a lot of notes, and say to myself that, if these dorks learned it, I certainly can too.
Of course, once you learn it, you realize that they are no smarter than you at all. It is all just lingo, acronyms, jargon, and other short-hand ways of conveying information. WTF? Ha! Perfect example!
Your car is likely the second most expensive thing you own, and probably not something you buy with any regularity. So, it is a big decision and a big deal. Adding acronyms and unfamiliar terms into such an important transaction can be intimidating and frustrating.
If you are thinking of refinancing your car, I don’t want you to feel like I did. Information is power. So, I thought I would share with you a few of the things I learned when I started working in the auto finance biz.
APR –Annual Percentage Rate: The cost of the interest paid by the borrower (YOU) per year. It is always stated as a percentage, such as “6.99% APR” meaning, you will pay 6.99% of the current loan amount each year you are paying off your loan.
ATF – Amount to Finance: The amount of money that you are borrowing to buy your vehicle.
Backend: (Does that word make anyone else giggle?) Backend items are additional add-ons like insurance, maintenance contracts, accessories, extended service contracts or warranties, etc.
Cash Back Refi: A type of refinancing that allows you to use the equity you have in your vehicle to get cash back while refinancing your car loan. In other words, when you refinance, you pull money out of the equity you have in your vehicle to use for something else like; maybe you have a credit card you want to pay off or unexpected expenses like medical bills, wedding costs, legal fees, etc.
DTI – Debt-to-Income Ratio: The percentage when you divide your monthly payments by your monthly gross income. So, if you make $3,000/month and you have $1,500 in payments each month, your DTI is 50%, meaning it takes 50% of your monthly income to make your payments.
FICO Score: A score based on your credit and payment history, and calculated by a credit bureau agency used by potential lenders to help determine your ability to make payments. The better your FICO score, the more likely you are to be approved for a loan. Your FICO score isn’t the only factor though. So, if you have bad credit, the terms might be different, but many people can still get a loan.
Finance Charge: The total amount of interest that is paid over the full term of the vehicle loan. If your loan is the whole enchilada, the interest is the enchilada sauce. To calculate how much of your payment is going towards interest (the sauce) and how much towards principal (the enchilada) throughout your loan term, you can find an “amortization” calculator here.
GAP: Coverage for the difference between what is owed on your vehicle and what the vehicle is worth if it is totaled in an accident or stolen and not recovered. It is different from, and in addition to, regular insurance coverage.
MSRP a.k.a. Sticker Price: An acronym/term for “Manufacturer’s Suggested Retail Price.” This is the retail price as determined by the manufacturer.
NADA, Book, or Kelley Blue Book Value: The retail value of your car set by one of the vehicle valuation guides (NADA-National Automobile Dealers Association, or Kelly Blue Book Value).
LTV – Loan-to-Value Ratio: The percentage of your loan amount to a vehicle’s value. For example, if a car is worth 25,000 and the loan is for 20,000, your LTV would be 80% (20,000 ÷ 25,000).
PTI – Payment-to-Income Ratio: The percentage of your income that an auto loan payment will require. For example, if your monthly income is $2,000 and your loan payment is $500, Your PTI is 25% ($500 ÷ $2,000).
POI – Proof of Income: Paystubs, employment verifications, bank statements, and other items that prove your income.
POR – Proof of Residence: Utility bills, driver license, lease agreement or any other documentation that displays proof of where you live.
Refinancing: Financing an existing car loan with a new loan. Refinancing happens when a borrower wants to lower their monthly payment or interest rate, change their auto loan term (length of loan period), or pull some cash out of their equity. The new loan pays off the old loan and creates a new loan, with new terms, and a new lender.
Stips: Short for stipulations, these are items that are required by a lender to fund a loan. May include proof of income, proof of residence, registration, proof of insurance or any additional information the lender may feel is necessary to approve your loan.
Term: The number of monthly payments on a loan. Car loans range from 24 to 84 months, with 60 months being average.
Total Cost: The cost of a lease agreement or car loan, including, the price of the car, all fees, add-ons, taxes, and interest charges.
Upside-down: When the balance owed on a vehicle is more than the current value of that vehicle (no bueno).
Now you have all the info you need so you won’t have to fake it ‘till you make it!
Did you know that you can have your own personal concierge to help you through the whole process? You can! Contact RefiJet at 800.260.5355. You will be so glad you did.
*Talk to you later
Driving for the Long Haul
When you’re looking to purchase a new car, its value 10 or 15 years down the road may be the last thing on your mind! You may be thinking more about the car’s appearance, features and performance first and foremost. But wouldn’t it be nice to purchase a vehicle that’s also likely to last a long time?
What the Research Says
We took a deep dive into the research and were amazed at the number of studies you can find online related to car longevity and value. One great resource is the industry research firm iSeeCars.com, which was co-founded by tech veterans from TripAdvisor and SAP. The firm just released a study that ranked the top 15 cars that were kept by their owners for 15 years or more. Their methodology involved analyzing ownership records of 750,000 cars from the model years 1981-2003 that were sold in 2018. The results of their research may surprise you.
Incredibly, out of the 15 spots, a full 10 were occupied by Toyota models! And every other car on the list was also Japanese-made. For the top four spots, owners were at least twice as likely as other owners, on average, to hold on to their cars for 15 years or more. The full list contains a mix of SUVs of all sizes, one luxury vehicle, two minivans, three sedans and a lone hybrid—the Toyota Prius. The report also contains more specialized analysis of top SUVs, light-duty pickup trucks, sports cars and luxury cars.
Top Cars Owners Kept for 15 Years or Longer*
Average for all cars (7.5%)
*iSeeCars.com data 1/19
Be Diligent About Service
If you purchase a nameplate with a strong single-ownership track record, and regularly maintain your car as recommended by the manufacturer, your car may safely last a decade or more. For added peace of mind, you may also want to consider an extended warranty that would kick in after your original warranty expires. These service contracts can vary widely in what they provide—whether offered by the vehicle manufacturer or a third party—so be sure to look carefully at the coverage it offers for the price, as well as exclusions, deductibles, term length and other factors.
If you are a numbers geek—or just want to be really sure you are buying a car that holds its value well—there is plenty more research you can do online. Here are a few of the reports we recommend:
Our final recommendation? Once you choose your new vehicle, be sure to put away the numbers and focus on just enjoying it!