Buying A New Car

A new car is second only to a home as the most expensive purchase many consumers make. According to the National Automobile Dealers Association, the average price of a new car sold in the United States is $28,400. That’s why it’s important to know how to make a smart deal.

Buying Your New Car

Think about what car model and options you want and how much you’re willing to spend. Do some research. You’ll be less likely to feel pressured into making a hasty or expensive decision at the showroom and more likely to get a better deal.

Consider these suggestions:

• Check publications at a library or bookstore, or on the Internet, that discuss new car features and prices. These may provide information on the dealer’s costs for specific models and options.
  
• Shop around to get the best possible price by comparing models and prices in ads and at dealer showrooms. You also may want to contact car-buying services and broker-buying services to make comparisons.
  
• Plan to negotiate on price. Dealers may be willing to bargain on their profit margin, often between 10 and 20 percent.

Usually, this is the difference between the manufacturer’s suggested retail price (MSRP) and the invoice price.Because the price is a factor in the dealer’s calculations regardless of whether you pay cash or finance your car — and also affects your monthly payments — negotiating the price can save you money.

Consider ordering your new car if you don’t see what you want on the dealer’s lot. This may involve a delay, but cars on the lot may have options you don’t want — and that can raise the price. However, dealers often want to sell their current inventory quickly, so you may be able to negotiate a good deal if an in-stock car meets your needs.

Learning the Terms

Negotiations often have a vocabulary of their own. Here are some terms you may hear when you’re talking price

• .Invoice Price is the manufacturer’s initial charge to the dealer. This usually is higher than the dealer’s final cost because dealers receive rebates, allowances, discounts, and incentive awards. Generally, the invoice price should include freight (also known as destination and delivery). If you’re buying a car based on the invoice price (for example, “at invoice,” “$100 below invoice,” “two percent above invoice”) and if freight is already included, make sure freight isn’t added again to the sales contract.
  
• Base Price is the cost of the car without options, but includes standard equipment and factory warranty. This price is printed on the Monroney sticker.
  
• Monroney Sticker Price (MSRP) shows the base price, the manufacturer’s installed options with the manufacturer’s suggested retail price, the manufac-turer’s transportation charge, and the fuel economy (mileage). Affixed to the car window, this label is required by federal law, and may be removed only by the purchaser.
  
• Dealer Sticker Price, usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, such as additional dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating.
  

Financing Your New Car

If you decide to finance your car, be aware that the financing obtained by the dealer, even if the dealer contacts lenders on your behalf, may not be the best deal you can get. Contact lenders directly. Compare the financing they offer you with the financing the dealer offers you. Because offers vary, shop around for the best deal, comparing the annual percentage rate (APR) and the length of the loan. When negotiating to finance a car, be wary of focusing only on the monthly payment. The total amount you will pay depends on the price of the car you negotiate, the APR, and the length of the loan.

Sometimes, dealers offer very low financing rates for specific cars or models, but may not be willing to negotiate on the price of these cars. To qualify for the special rates, you may be required to make a large down payment. With these conditions, you may find that it’s sometimes more affordable to pay higher financing charges on a car that is lower in price or to buy a car that requires a smaller down payment.

Before you sign a contract to purchase or finance the car, consider the terms of the financing and evaluate whether it is affordable. Before you drive off the lot, be sure to have a copy of the contract that both you and the dealer have signed and be sure that all blanks are filled in.

Some dealers and lenders may ask you to buy credit insurance to pay off your loan if you should die or become disabled. Before you buy credit insurance, consider the cost, and whether it’s worthwhile. Check your existing policies to avoid duplicating benefits. Credit insurance is not required by federal law. If your dealer requires you to buy credit insurance for car financing, it must be included in the cost of credit. That is, it must be reflected in the APR. Your state Attorney General also may have requirements about credit insurance. Check with your state Insurance Commissioner or state consumer protection agency.

Trading in Your Old Car

Discuss the possibility of a trade-in only after you’ve negotiated the best possible price for your new car and after you’ve researched the value of your old car. Check the library for reference books or magazines that can tell you how much it is worth. This information may help you get a better price from the dealer. Though it may take longer to sell your car yourself, you generally will get more money than if you trade it in.

Considering a Service Contract

Service contracts that you may buy with a new car provide for the repair of certain parts or problems. These contracts are offered by manufacturers, dealers, or independent companies and may or may not provide coverage beyond the manufac-turer’s warranty. Remember that a warranty is included in the price of the car while a service contract costs extra.

Before deciding to purchase a service contract, read it carefully and consider these questions:

• What’s the difference between the coverage under the warranty and the coverage under the service contract?
  
• What repairs are covered?
  
• Is routine maintenance covered?
  
• Who pays for the labor? The parts?
  
• Who performs the repairs? Can repairs be made elsewhere?
  
• How long does the service contract last?
  
• What are the cancellation and refund policies?

To File a Complaint

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Close the gap in your car insurance

What could make a bad car deal worse? A wreck that leaves you owing thousands on a car you don't own anymore.

By Liz Pulliam Weston

If you did everything wrong while acquiring your last vehicle, you may still be able to do at least one thing right. And that's buying so-called "gap insurance."

Gap insurance kicks in when the amount your insurer would pay for your totaled or stolen car falls short of what you still owe on the loan or lease.

Chances are good you need gap insurance if:

You purchased a new car and didn't have a down payment of at least 20%.
You're leasing a car.
You're financing for more than four years.
You rolled debt from your last car into your current auto loan.
I outlined why these car-buying practices are usually bad ideas in "The real reason you're broke." They are, unfortunately, fairly common scenarios that typically leave people "upside down," or owing more on their cars than the vehicles are worth.

Yet gap insurance remains a relatively unknown product, said Patrick Olsen, managing editor of Cars.com.
"As soon as you drive off the lot, depreciation kicks in," Olsen said. "I don't think people are aware of the danger they could be in."

If you don't make a 20% down payment, for example, you'll be upside-down on the car from the minute you drive off the lot, and you'll typically stay that way for two to three years, depending on the length of your loan. If you get in an accident or the car is stolen during that time, you may be in trouble.

"The insurance company will pay you what the vehicle is (currently) worth, and that's not necessary the same as what you owe," said Mike Meredith, financial editor for MSN Autos. "It could be a lot less."

You could be pushed over the edge

Here's an example. You buy or lease a car for around $25,000. Several months down the road, it's totaled, but your insurance check covers only the car's current value, which is about $20,000. Not only do you have to find new wheels, but you're on the hook to the finance or lease company for that $5,000 gap. It's not uncommon for cars to lose two-thirds of their value in just three years.

If you rolled debt from your old loan into your new one, that amount you owe could be even larger. One out of four vehicles that are financed includes debt rolled over from a previous vehicle, according to vehicle research site Edmunds.com, and the average amount of so-called "negative equity" is more than $4,000.

If your finances are already shaky, the gap between what you owe and what you're paid could be enough to push you right over the edge.

"It could be the difference between staying afloat and having to declare bankruptcy," said Phil Reed, consumer advice editor for Edmunds.com and co-author of the book "Strategies for Smart Car Buyers." At a minimum, you could be saddled with expensive and unwelcome debt.

If you're not sure where you stand, you can use the Kelley Blue Book tool on MSN Autos to see how much your car is really worth and compare that to what you owe. Insurers typically pay an amount somewhere between the car's trade-in value and what you'd get in a private sale.

Not to worry
Now, there are two scenarios where underwater drivers don't have to worry about gap insurance:
If it's already included in your lease. In some states, including New York, leases by law must include gap coverage, Olsen said.
If your auto policy is written to cover the gap. This isn't the norm, but some auto policies promise to pay off a loan regardless of what the car's worth. You can try reading your policy to see if you're covered for any gaps, or simply call your insurer and ask.
If you don't have coverage already, the solution fortunately doesn't have to be that expensive. A premium of a few hundred dollars should cover you for the life of the loan or lease. You typically can buy the coverage:

From the dealership or auto finance company. It's probably the most expensive choice, especially if you roll the cost into your monthly note. You'll be paying interest on it, plus paying for coverage even after you're no longer upside-down on your loan.
From your current auto insurer. It's usually the best choice, if your insurer offers the coverage. Farmers Insurance, for example, offers gap coverage at a flat rate of $25 every six months to Washington drivers. You can drop it once you're sure you're in the black.
From another insurance carrier. You can look for gap insurance providers; make sure they have top marks from one of the rating services such as A.M. Best, Standard & Poor's or TheStreet.com Ratings (formerly Weiss Ratings).
The best time to shop for coverage is before you even set foot on the dealer's lot, Reed said. He advises calling your insurer to get a quote for coverage as soon as you decide what car you're going to buy. But all isn't lost if you fail to plan that far ahead.

"It'll be cheaper through your agent than through a dealership," Reed said, "but you can always buy it (at the dealership) and cancel it later" once you've got coverage with your insurer.

If you're a savvy enough negotiator, you may be able to get the dealership to lower its premium, Meredith said, particularly if you already know what coverage would cost through your insurer.

Some dealerships and insurers require you to get the coverage when you buy the car, but others let you add it later. If you don't have gap coverage and need it, it's worth the effort to search for a company that will sell it to you.

Like most insurance, it's something you may never need, Meredith said, but "it's a really good thing to have if you need it."
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.

12 Secrets Your Car Insurer Won't Tell You

Knowing how the industry works can save you a lot of money and grief. Here are the secrets behind the premiums, and how you can save after an accident.

By MSN Money staff

Getting a good deal on auto insurance is hard enough. Keeping your premiums from rising? That can feel like playing a game where the rule maker refuses to tell you the rules.

Here are a dozen ways the industry works, with tips to help you save:

If you have good credit, you'll pay less. Almost all insurers -- including the top five -- pull your credit report. Why? Studies have shown a direct correlation between your credit score and the likelihood that you will file a claim. Insurers also know that if you pay your bills in a timely fashion and have had the same credit accounts for a long time, you're more stable than someone who pays late and frequently opens and closes accounts. They use this information to create your "insurance risk score," which is one factor that determines your auto-insurance rate.
Tip: Your insurance-risk score is not available to you, but it may be similar to your credit score. If you have unusual credit activity, wait a month for it to return to normal before buying auto insurance. If your credit history is shaky, clean it up as soon as you can.

Your car model affects your premium. You won't get these numbers from your insurer; in fact, you may not be able to get them at all. But the auto insurers do have a rating system for every car make and model. Most use a system devised by the Insurance Services Office, which starts with the cost of the vehicle and then factors in safety and theft data. Cars are given a rating from 1 to 27, and the higher the number, the higher your premium.
Pay in full to avoid installment fees. "Fractional premium" fees are usually charged when you pay your annual premium in installments rather all at once. Payments usually are offered on a six-month, quarterly or monthly basis, but almost every insurance company charges an administrative fee for breaking up the payments. The more you break it down, the more those fees add up.
Tip: Ask about fees for paying in installments. If the fees are small enough, it may be worth it. Remember that insurance companies can cancel your policy for late payment, many times with minimal notification, so make sure you won't miss an installment. If you can pay the premium up front, it may simplify the process and save you a few dollars.

That Pearl Jam CD in your car isn't covered. Stolen or damaged personal items like compact discs aren't covered by your auto insurance.

Tip: You can file a claim on your home insurance. Most home-insurance policies will cover smaller, less expensive items such as compact discs. However, if you carry expensive items such as computer equipment, ask about a rider to your home-insurance policy. It's wise to take photos or video of any expensive personal items before they go missing.

Bad drivers will pay You'll pay for your bad driving. The industry standard is to increase your premium by 40% of the insurer's base rate after your first at-fault accident. For example, if the company's base rate is $400, your premium will go up by $160. Not all auto insurers play by this rule, though, and some may increase your individual rate by 40%. Regardless of what formula they use, in the majority of cases, your rates will go up.

Tip: Some insurance companies have a "forgive the first accident" policy. The qualifying variables are wide-ranging, so ask your company if it has a forgiveness policy and how to qualify.

You'll pay for your friend's bad driving, too. If your friend borrows your car and crashes it, you'll have to file a claim with your insurance company. You'll have to pay any deductible that applies, and your rates will probably go up as a result of your claim.

Tip: If your friend didn't have permission to take your car, in most cases you won't be held liable for the damage. But if your friend is uninsured and causes damage that exceeds your policy limits, the injured party can come after you for medical and property-damage expenses. Best bet? Don't lend out your car.

The value of your "totaled" car may surprise you. Auto-insurance companies don't use the standard Kelley Blue Book or National Association of Automobile Dealers value. Instead, each company has its own proprietary list of car values, and most have specialized software for valuing cars in each region. They take into consideration the car's mileage and pre-accident condition.

The insurance company may also ask local dealers what they'd charge for a similar replacement car. However, the insurer will consider quotes from suburban towns as reasonable estimates, even if you live in the city. You might have to drive several hours to reach the cheapest dealer, just to save the insurance company money. And they might be quoted a better deal than you could get if you walked onto the lot.

Tip: If you disagree with your insurance company's value determination, there are several things you can do:
Next time, get "gap" insurance. It will pay the difference between what an insurer will cover and what you owe, which can be several thousand dollars.

If you have maintenance records that show you've had the oil changed every 3,000 miles and you've had the car checked routinely by a mechanic, present copies to the insurance company to show the car was in good condition. If you've been paying premiums on any special parts or upgrades, make sure those are included in the insurance company's evaluation.

Get price quotes on replacement cars from three dealers within a reasonable driving distance and submit these to your insurance company. Ask the insurance company for a list of dealers within a specific distance who can sell you an equivalent car for the value the company is claiming.

If you still aren't satisfied, you can step up the process and go to mediation or arbitration. Mediation involves presenting your case to a neutral party for help in reaching a compromise; arbitration is a binding decision. You can also, of course, take the issue to court.

Check into "diminished value." Say your car has been in an accident, but repaired. Is it worth less than the exact same car that hasn't been in an accident? It's a hot topic, but some say yes. In 14 states, you're allowed to file a claim with your insurance company for that lost value.

Tip: Thirty-six states and Washington, D.C., allow insurance companies to exclude payments for diminished value, so if you live in one of those states, you won't get to claim the loss. But in Florida, Georgia, Hawaii, Kansas, Louisiana, Maine, Maryland, Massachusetts, North Carolina, South Dakota, Texas, Virginia, Washington and West Virginia, you have a chance of getting a diminished-value payment. If you weren't at fault in the accident, you often can make a successful case against the insurance company of the driver who was at fault.


You may not owe sales tax on your replacement car. Twenty-eight states require auto insurers to pay for the sales tax when you replace your totaled vehicle with a new or used car: Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Vermont, Washington, West Virginia and Wisconsin.

Tip: Make the request; don't expect the insurer to offer to pay upfront. Even in states that do not require sales-tax reimbursement, you should request it. Many auto insurers will not deny the request because the policy requires that they make you "whole," returning you to where you were before the accident at no cost to you.
-Accident value of your car. If the insurance company values your car at $10,000, and you purchase a new car for $20,000, the tax will be calculated on $10,000.

Odds and ends

Hit by an uninsured motorist? Try to "stack." Stacking uninsured/underinsured motorist (UM/UIM) coverages means collecting from more than one auto-insurance policy that you hold. Most states forbid this practice, but 19 states allow it or don't address it.

Tip: Check the language of your policy to see if stacking is allowed.

There are two scenarios for stacking: First, if you have multiple cars on your policy with UM/UIM coverage on each, you can collect the limit of your UM/UIM coverage under as many vehicles as necessary to cover full payment for damages. Second, if you have more than one policy with UM/UIM coverage, even if they're from two different insurers, you can make a claim under each policy until all your damages are recovered.

You can wait to add your teenager to your policy until he or she is licensed. You are not required to add your teenager to your policy just because he or she has reached driving age. In most cases, you can wait until he or she has a license -- or, if you're in a high-risk insurance pool, a permit.

Tip: Don't forget to tell your insurance company that you have a licensed teen. If you have to file a claim on his or her behalf, your insurance company is entitled to charge you back premiums from the date your teen received a license.

You must officially cancel your insurance policy when you switch insurers. Your policy most likely states that you can cancel your coverage at any time by notifying the company in writing of the date of termination. However, most people assume that if they decide to terminate the policy at the end of the coverage period, all they have to do is ignore the bill. The insurance companies don't see it that way. They will send you another bill for the next premium payment, and when you don't pay it, the company will cancel you for nonpayment. That goes on your credit record.
Tip: Call your insurance agent or the company and let him know you are canceling your policy. Give a specific date, or you may end up uninsured for a period of time. The company will send you a cancellation request. Most often, the form is already filled out and all it requires is your signature. Make sure you read it to check for errors.

You may have to prove to your former insurance company that you have new coverage. And if you've financed your car through a dealership, update the dealer on your new insurance information, because purchase contracts often require proof of coverage.

Updated April 18, 2007

Keep Your Old Clunker or Buy a New Car?

It may clang and bang, but your despised old car may be the best bargain around.
By Des Toups

Let's divide the car-buying universe into two camps: those who keep a car until it drops, and those who think a new car will change their lives.

To the first, a round of applause. There's nothing short of the bus that's cheaper than keeping a car until it crumbles into a pile of rust. Almost any car can be nursed to 200,000 miles without endangering your life, and even a new engine is cheaper than all but the cheapest used cars.

To the second, another round of applause, because the 16 million or so new cars they buy every year instantly become used cars soon available at a considerable discount to those in Camp 1. And a moment of silence, because a new car will change their lives in ways they never foresaw on the dealer's lot.

If you're in a drive-until-the-muffler-is-dragging wannabe, read on. We'll look at ways to keep your car on the road longer and realistically weigh the costs of upgrading.

I'd love to keep my old car, but …

It no longer fits my life. You may have taken up gardening in a big way but still own a Corvette. You may feel nervous about taking your '78 Ford on a trip to Colorado. Your little Accord may be a tight squeeze when family comes to town. The answer to all: Rent. Why buy a gas-sucking pickup because you visit Home Depot twice a year or a $30,000 sport-utility because you take the kids skiing for a week at Easter? Even at $100 a weekend, renting is far cheaper than a car payment. Plus you get to drive the very latest without worrying about insurance, license tags, maintenance or depreciation. Or try swapping cars with a friend, returning it gassed-up and clean (with the oil changed, too, if the loan was more than a day or two. You want to be able to ask again next year.).

Those repair bills are really adding up. Then do the math. Does the cost of repairs exceed the cost of a new car? A typical new car is $21,000, about $350 a month for five years after 20% down. A rebuilt transmission might run $1,500, a huge outlay in one chunk, but far less than the $4,200 a year you'd spend on new-car payments alone. If you can't afford repairs twice a year, it's unlikely you can afford a new car payment every month. In any case, anybody with a car older than three years should be tucking aside $50 a month for repairs and maintenance. If the gods smile, you'll never use most of it and you'll have a tidy sum to blow on your next car.

I'm nervous driving an older car. Maybe little things are beginning to go: a new thermostat one month, a starter the next. You might simply spend $50 on a AAA membership and carry a cell phone, reminding yourself that even new cars aren't immune to mechanical failure. The upside of frequent breakdowns is that you'll get to know mechanics quite well. Find one you like. Flatter him. Pay your bills on time. And the next time he fixes your car, ask him to take a few minutes to see what else will need repair soon.

The repair costs more than the car is worth. A $1,500 engine rebuild that keeps your '83 Toyota on the road still makes good financial sense. It's at this point, however, that all but the flintiest drivers begin to think about upgrading.

Which brings us to our next question:

Am I ready for a newer car?
Your first step is to do nothing except write a check to yourself in the amount you're thinking you can afford every month. Put aside a car payment every month for three months (long enough for at least one of life's little emergencies to crop up).

To pass the time, make three phone calls: one to your bank, to find out what kind of rates they charge on loans to people with your credit history; one to your insurer, to ask the rates for comprehensive insurance on a model you think you'd like to buy; and one to your local DMV, to see what registration and licensing would cost.

At the end of three months, ask yourself these questions:

How much did it hurt? If you skimped at all on other bills or shorted the amount of the payment, you're not ready.
Would I have enough left over to pay for insurance and licensing fees each year?

Would I pay this much every month for the car that's in my driveway already? Sooner or later, every new car becomes an old car, and you'll feel about the next car just the way you do about your old clunker.

Would I rather have the cash? Our typical car payment, $350, adds up to more than $1,000 in just three short months. Perhaps you'd prefer to get a tan in Mexico and limp along with ol' Betsy another year.

Could I continue to save for another year and simply pay cash? Five grand would buy any of hundreds of reliable used models. Save for two years and you're in new-car territory, if your old car will fetch a few thousand.

If the craving for a shinier car hasn't passed in three months, at least you begin the shopping process with a few months' worth of car payments and a more realistic idea of the hit your wallet will take.

Side note: Never skimp on maintenance

Pay special attention to the things that will cost you a fortune if they break. That means regular oil changes, tire rotations and transmission tune-ups, even if the car is running fine. Timing belts, for example, are spendy at as much as $600, and replacing one for no other reason than that the odometer has turned 90,000 miles might seem wasteful. But let one break and you'll find that repairing bent valves could cost you three times that. Replacing torn CV boots, those plastic housings that keep grime and grit out of the car's constant-velocity joints, costs about a third as much as a CV joint repair. (If your owner's manual is long gone, MSN Autos has a free online service, My Car, that tracks your car's service schedule.)

Des Toups is senior editor at MSN Money in Seattle.

20 Ways You Waste Money on Your Car!

Don't spend a nickel without a darned good reason. Bone up, wise up and don't let anyone lead you astray.
By Des Toups

Cars make us irrational. We call them our babies and lovingly wax them every Saturday -- or we turn up the radio to drown out the sound of a dragging muffler. Either mindset will cost you money, sometimes a lot of it.
Walking the line between obsession and neglect means you never spend a nickel without a good reason -- and good reasons can include spending money on something that’s not broken.

Here, then, are 20 ways you waste money on your car.

Premium gas instead of regular. Buy the cheapest gasoline that doesn’t make your car engine knock. All octane does is prevent knock; a grade higher than the maker of your car recommends is not a “treat.”

3,000-mile oil changes. Manufacturers typically suggest 5,000 miles, 7,500 miles or even longer intervals between oil changes (many car markers now include oil-life monitors that tell you when the oil is dirty -- sometimes as long as 15,000 miles.) There may be two recommendations for oil-change intervals: one for normal driving and one for hard use. If you live in a cold climate, take mostly very short trips, tow a trailer or have a high-revving, high-performance engine, use the more aggressive schedule. If you seldom drive your car, go by the calendar rather than your odometer. Twice a year changes are the minimum.

Taking false economies. Better to replace a timing belt on the manufacturer’s schedule than to have it break somewhere in western Nebraska. Better to pop for snow tires than to ride that low-profile rubber right into a tree.
Using the dealer’s maintenance schedule instead of the factory’s. Of course he thinks you should have a major tune-up every 30,000 miles. Most of the tasks that we generally think of under the heading of “tune-up” are now handled electronically. Stick to the manufacturer’s schedule unless your car is not running well. If your engine doesn't "miss" -- skip a beat or make other odd noises -- don’t change the spark plugs or wires until the manufacturer says so.

Using a dealer for major services. Independent shops almost always will do the same work much cheaper. Call around, owner’s manual in hand, to find out, mindful that the quality of the work is more of a question mark. Some dealers may tell you using outside garages violates the car’s warranty. This is a lie.

Using a dealer for oil changes. Dealers sometimes run dirt-cheap specials, but otherwise you’ll usually find changes cheaper elsewhere. If you’re using an independent shop for the first time, you might inconspicuously mark your old oil filter to make sure it has indeed been changed. And don’t let them talk you into new wiper blades, new air filters or high-priced synthetic oil, unless your car is one of the few high-performance machines built for it.

Not replacing your air filter and wiper blades yourself. Buy them on sale at a discount auto-parts store rather than having a garage or dealer replace them. Replacement is simple for either part, a 5-minute job. A good schedule for new air filters is every other oil change in a dusty climate; elsewhere at least once every 20,000 miles. Treat yourself to new wipers (it’s easiest to buy the whole blade, not the refill) once a year.

Going to any old repair shop. At the very least, make sure it’s ASE-certified (a good housekeeping seal of approval from the nonprofit National Institute for Automotive Service Excellence). From there, look for a well-kept shop with someone who’s willing to answer all your questions. Estimates must include a provision that no extra work will be done without your approval. Drive your car to make sure the problem is fixed before you pay. Pay with a credit card in case there’s a dispute later. Be courteous and pay attention. A good mechanic is hard to find.

Changing your antifreeze every winter. Change it only when a hydrometer suggests it will no longer withstand temperatures 30 degrees below the coldest your area sees in winter. Your dealer or oil-change shop should be happy to check it for free. Every two years is about right. But you also should keep your cooling system happy by running the air conditioner every few weeks in winter to keep it lubricated, checking for puddles underneath the car and replacing belts and hoses before they dry and crack.

Replacing tires when you should be replacing shocks. If your tires are wearing unevenly or peculiarly, your car may be out of alignment or your shocks or struts worn out.

Letting a brake squeal turn into a brake job. Squeal doesn’t necessarily mean you need new rotors or pads; mostly, it’s just annoying. Your first check -- you can probably see your front brakes through the wheels on your car -- is to look at the thickness of the pads. Pads thicker than a quarter-inch are probably fine. If your brakes emit a constant, high-pitched whine and the pads are thinner than a quarter-inch, replace them. If your car shimmies or you feel grinding through the pedal, then your brake rotors need to be turned or replaced.

Not complaining when your warranty claim is rejected. Check Alldata and the National Highway Transportation Safety Administration (NHTSA) to see if a technical service bulletin (TSB) has been issued about the component in question. Manufacturers often will repair known defects outside the warranty period (sometimes called a secret warranty). It helps if you’ve done your homework and haven’t been a jerk.

Not keeping records. A logbook of every repair done to your car can help you decide if something’s seriously out of whack. Didn’t I just buy new brake pads? With a log and an envelope stuffed with receipts, you’ll know who did the work and when, and whether or not there’s a warranty on the repair. And a service logbook helps at resale time, too.

Buying an extended warranty. Most manufacturers allow you to wait until just before the regular warranty expires to decide. By then you should know whether your car is troublesome enough to require the extended warranty. Most of them aren’t worth the price.

Overinsuring. Never skimp on liability, but why buy collision and comprehensive insurance on a junker you can probably afford to replace? Add your deductible to your yearly bill for collision and comprehensive coverage, then compare that total with the wholesale value of the car. If it’s more than half, reconsider.
Assuming the problem is major. If your car is overheating but you don’t see a busted hose or lots of steam, it might be the $5 thermostat, not your radiator. Or it may be that ominous “check engine” light itself that’s failed, not your alternator.

Not changing the fuel filter. Have it replaced as a part of your maintenance -- every two years or according to the manufacturer’s schedule -- rather than when it becomes clogged with grit, leaving you at the mercy of the nearest garage.

Not knowing how to change a tire. Have you even looked at your spare? Make sure it’s up to snuff and all the parts of your jack are there. Changing a flat yourself is not only cheaper, it’s faster, too.

Not keeping your tires properly inflated. Check them once a month; otherwise, you’re wasting gasoline, risking a blowout and wearing them out more quickly.

Car washes. Ten bucks for long lines and gray water? Nothing shows you care like doing it yourself.

Another Financial Score That Can Hurt You -Debt to Income Ratio

We all know about credit scores, but there's another figure lenders watch: the debt-to-income ratio. It's a good indicator of your financial well-being.
by Erin Peterson for Bankrate.com.
By now you know your three-digit credit, or FICO, score is a very important number in your financial life, but did you know there's also a two-digit number that can be just as significant?
It's your debt-to-income ratio, and it can shed a light on, and help you better understand, your true financial picture.
The good news is, getting this number doesn't cost you a penny, and it can be calculated in just a few minutes at your kitchen table.
So, if you think getting insight into your financial life requires sifting through your retirement investments, reading through every fund prospectus and tallying your expenses to the penny, think again.
It's true that nitty-gritty details can make a difference, but you can get a fairly accurate understanding of your financial picture by spending just a minute or two calculating your debt-to-income, or DTI, ratio. By knowing the ratio -- and how to improve it -- you can increase your chances of getting a better mortgage, a better car loan and even better credit card rates.
Start with a list - Your debt-to-income ratio is exactly what it sounds like: the amount of debt you have in the form of mortgages, car loans, student loans and credit card debt, as compared to your overall income.
To calculate your overall DTI ratio, sometimes known as a back-end ratio, add up all of your monthly debt obligations -- often called recurring debt. Include your mortgage (principal, interest, taxes and insurance) and home equity loan payments, car loans, student loans, your minimum monthly payments on any credit card debt, and any other loans that you might have. Do not include expenses such as groceries, utilities and gas. Take this total and divide it by your gross monthly income from all sources. If you're not good at long division or don't have a calculator handy, go to Bankrate's calculator section to use our debt-to-income ratio calculator.
Some lenders will exclude the mortgage payment from this equation, but they lower the acceptable ratio for receiving a loan. The concept is the same: It measures your debt load in comparison to your income.
Let's say you and your spouse together earn $83,000 per year, or $6,916 per month. Your total mortgage payment is $1,350, your car loans total $365, your minimum credit card payments are $250, and your student loans add up to $300. That equals a recurring debt of $2,265 a month. Divide the $2,265 by $6,916 and you'll find your DTI is 32.75%.
In general, you'll want to keep that number below 36% -- a threshold that loan officers and credit card issuers often use as a factor when they determine how much they're willing to lend you. "If you go higher than 36%, you are on a slippery slope," says Diane McCurdy, a certified financial planner and the author of "How Much Is Enough?" Lenders might give you money, she adds, "but they'll give you higher interest rates, and if anything goes awry, they'll sock it to you."

So why is that number so important? It's all about proportion, says Laura Russell, a certified financial counselor with GreenPath Debt Solutions. "You can be making a lot of money every month, but if you've got the debt to match it, that can be a problem," she says. "It's important not to overextend yourself." The higher your number, the riskier it is for lenders to offer you loans -- and the more they'll make you pay for them.
Finding leverage - Though debt-to-income ratios don't have the kind of buzz that FICO scores do, they can play a key role in determining if you qualify for a loan and how much you can get. "Your debt-to-income ratio is one of the tools that banks will use to determine whether they'll lend you money for a mortgage, a car loan or a student loan," says Dave Hinnenkamp, the CEO of KDV Wealth Management.
While other factors, such as your FICO score and length of time in your home or job, will come into play into this equation, a good debt-to-income ratio can give you leverage to negotiate if other factors aren't in your favor. "The stronger you are financially, the more leverage you have when negotiating interest rates or loan amounts," says Hinnenkamp. "So there is an advantage to keeping that ratio low."
The DTI ratio is something lenders look at in addition to your credit score. Remember, your FICO score reflects only your payment history and does not have anything to do with your income. You can have a very high FICO score with very little income. Conversely, you can have very high income and a very low FICO score. That's why lenders use both.
To be sure you're on solid ground, McCurdy recommends trying to bring your overall DTI ratio to 30% or below. After all, you have plenty of other financial obligations, from groceries and utilities to restaurants and entertainment. "You never know when you're going to have an emergency," she says. "You don't want to get in trouble -- and potentially lose your home or car."
Cutting your ratio - Reducing your debt-to-income ratio can be challenging, since these financial obligations are, by definition, ongoing. But there are tactics you can use to start addressing the problem, says McCurdy. "Look at where your cash is going," she says. "Ask yourself where you can cut back."
- Find areas to cut costs. After you've looked at your budget and done some cost-cutting, take the money you've saved and put it into your highest-interest loans and debts -- most likely your credit cards.
- Double up on credit cards. McCurdy recommends at least doubling your minimum payment to start chipping away at your debt-to-income ratio. If credit cards aren't the problem, you can also pay more on any other loan, as long as there are no prepayment penalties.
- Stop charging. Once you've started making progress, make sure you don't rack up more credit card debt.
- Build an emergency fund. Have this money so you can replace your furnace or pay off a vacation without going back into credit card debt.
- Avoid major purchases. If you're teetering on the edge of problems, it might be wise to hold off on major purchases. "Don't overextend yourself with a new car loan or mortgage loan," Russell says.
- Consider getting help. If you still can't rein in your DTI ratio, you may need to get the help of a financial adviser who can help you consolidate loans and put you on the right track.
Another ratio
There's also a second, related ratio that's helpful if you want to judge whether you can afford to buy a certain house or if you want to know you can still afford to live in your existing home. Perhaps your income has dropped or expenses have changed significantly because of a new, higher interest rate, new tax increase or skyrocketing insurance costs. This figure is called the front-end ratio and you can calculate it by adding up the monthly mortgage principal, interest, taxes and insurance, and dividing it by your gross income. That number generally should be no more than 28%, says Russell. "You might see exceptions for a first-time homebuyer or someone with marginal credit, but in general, you don't want to go above that," she says.
Keeping your front-end and back-end ratios in check will help you stay financially stable. If you find yourself edging into dangerous territory, McCurdy recommends cutting back on spending for entertainment and restaurants, paying more than the minimum payment on your credit cards and tackling your highest-rate loans and credit card debts first.
Even if your numbers fit within the prescribed ratios, be sure that they make sense for you. "We're always being lured by advertising to buy these wonderful things," says McCurdy, "but just because you qualify for something doesn't mean you're managing your money well. If you take everything to the limit, you don't leave much room for error."

Biggest Mistakes Car Buyers Can Make

Yep, getting a new set of wheels is one of those wonderful sources of high-octane excitement -- but don't get too revved up.

Car-buying is, or should be, a calculated decision. It's a major purchase. So, before you go cuckoo for that coupe or raving for that roadster, consider these mistakes car buyers can make.

1.Buying the wrong vehicle: Sure, those SUVs look big and cool, and dealers are dealing. But do you need one to drive the mile and a half to bingo every Sunday? Is that racy red sports car really the best choice for your family-of-five-kids-and-growing?

2.Showing emotions in the showroom: If you fall in love with a car, be sure not to overreact and get too anxious. Give yourself some time to sit back and make sure it's the car for you. In short, don't let your heart rule your head -- it can lead to aching in both body parts. Also, keep a grasp on reality. If you can afford $20,000 and the object of your affection lists for $30,000, you might be able to negotiate it down to, say, $27,000, but there's no way you're going to be able to buy it for $20,000.

3.Choosing a dealer by location: No, dealers are not all the same, not even for the same exact makes and models. Ask around. Learn from friends' experiences. Also, determine your dealer's CSI (Customer Satisfaction Index), which is a ranking generally maintained by individual automakers for the dealerships that sell their vehicles. Ford, for example, gives out what's called the Blue Oval Award to dealers with a top ranking. The CSI is a reflection of how well an individual dealer satisfies its customers both in terms of sales and service. Ask your salesman about the dealership's awards. If he balks, you should walk. You can also check a dealership's complaint record with the Better Business Bureau.

4. Talking trade-in too early: This is another easy trap to fall into because dealers love to play the trade-in game. Don't let them muddy the waters. Negotiate a satisfactory price for the new car, and then bring up your trade-in. Another thought: If you bring in your old car full of trash and covered in mud, the appraiser will rightly assume you don't put much value on it yourself.

5. Going it alone when you need a helping hand: If hassles give you headaches and negotiations make you nauseated, turn it over to an auto broker or a service such as the AAA Endorsed Auto Buying Program, which nets members special pricing through authorized dealers.

6. Forgetting that it ain't over 'til it's over: Or, in the case of car buying, it ain't over 'til the business manager sings. You may think you bought your car once the sales manager shakes your hand and tells you what a great deal you got. But beware the business office, often called the finance and insurance office. Dealers often make as much money in this room as they do on the showroom floor. Insurance, dealer add-ons, extra fees and interest rate changes are among the common ploys you could get clobbered with on your way out the door.