Used Automobile Dealers Facing Tough Market Amid New Car Competition

Years ago, it appeared that purchasing a used automobile was a prudent and practical thing to do because it was much more affordable compared to acquiring a brand new vehicle. Fast forward to 2013, industry experts concur that used car dealerships are having a difficult time in this market as potential car owners are shifting towards new rather than used.

Speaking with The Nation in September, Somchai Trakulpirom, general manager of Master Certified Used Cars, noted that the used car industry needs to make adjustments in its business model and provide better offers than what is presently being offered by their counterparts.

The difficult market, for instance, is suggesting that consumers are buying because of the attractive promotions that are being listed, such as zero down payment, low interest, inexpensive bi-weekly or monthly payments and other special promotions – stronger offers are even expected as dealerships attempt to clear out their inventories.

Most of these heightened promotions have been running since the summer and have been fueled because of the federal government’s first-car-buy initiative launched last year. Dealers are looking to build upon its new car sales growth it has been experiencing for quite a while now.

In addition, with the rise of smaller, smart cars, they’re maintaining a price that is just as affordable as a superior, used vehicle model: the Chevrolet Spark LS is $12,995, Smart ForTwo Pure is $13,240 and the Nissan Versa S Sedan is $12,780.

Anuchart Deeprasert of the Thai Hire Purchase Association reported that finance lenders have found a 20 percent reduction in used car loans – other estimates suggest as much as 30 percent. However, the organization did say that it expects used car purchases to return to normal growth sometime next year.

Furthermore, used vehicles, according to Trakulpirom, consist of a depreciation rate of between 10 and 25 percent. This means bad debts equates to fewer loans and financial institutions are becoming fastidious in approving loans due to the large number of high rate of bad debts.

“For example, the first-car-buyer scheme, which at first looked attractive because of the increased production volume and cash flow, has been responsible for stealing future demand,” Trakulpirom told the news media outlet. “Some buyers made purchases under the scheme to make a direct profit, while some buyers who would not be able to afford a vehicle in normal conditions are now facing difficulties in paying the monthly installments, and are allowing the vehicles to be repossessed by the finance companies, resulting in a large number of bad debts.”

He added: “If finance companies have a large number of repossessed vehicles, they will be more careful with loan approvals and deny more applications. Demand for used cars is now controlled by financing requirements.”

Last month, forecasters and analysts predicted softer prices and an enhanced used vehicle selection in 2014. This is due in part to the sheer number of eight- to 12-year-old cars that currently need to be replaced. Although most concur that prices of used vehicles will not plummet, it is believed that smaller and mid-sized cars will experience the highest price drop because of competition in that market base.

Nevertheless, with the Motor Expo 2013 gearing up, auto manufacturers and dealers may unite and increase its promotions, such as a low-down-payment offer for civil servants and state-enterprise officers as well as even a grace period.

The sales of 98,000 vehicles per month are surely an incentive for both manufacturer and dealer to persist in running these campaigns to draw in more consumers throughout 2014.

A Car Lease Buyout: Welcome Home a Car Full of Memories

You neither have to leave your car nor the memories attached to it.

It is tough to forget things that have touched your heart. Memories that you created while driving your car will remain in your heart forever. But, what if you have to give away the car after the lease period gets over? Do not lose heart because you can consider the option of a car lease buyout and keep your car with you forever.

Is it smart to buy your Leased Car?

Car leasing comes with the option of buying the car at the end of the lease period or before the period gets over. It is called a ‘car lease buyout’. It simply means to buy your leased car – either with cash or loan. Since you know it’s condition very well, there will be no surprises for you in the future. A car lease buyout option is safer than purchasing a different used car because you will be able well-aware of the situation of it.

Multiple Benefits of a Car Lease Buyout

Every individual has a passion. And if you want to become a proud car owner, a car lease buyout can help you with it. You can buy your leased car and never let go of your fond memories. So, why opt for it? The answer lies in its multiple benefits:

· Good Opportunity

The purchase price of a leased car is less than the current market value of it. A car lease buyout option gives you an opportunity to bring home your favorite vehicle. If you can’t buy your leased car with cash, do not worry. There are many auto financing companies that will help you with a loan. A good selection of the loan will provide you with low interest rates.

· Elimination of Surprises

You are aware of the car’s condition. And, as you had planned for returning it at the end of lease period, you have left no stone unturned in taking good care of it. So, when you opt for a car lease buyout option, there will be no surprises or shocks in the near future.

· Top Choice

You already have the car that you like. There is no question of research or test drive. Although you will have to undertake negotiating process with the lessor, it is better than starting the car buying process from scratch.

A Car Lease Buyout: A Choice for Every One

Your happiness is your choice. If you like your leased car, it is the right time to buy it. A car lease buyout provides you with two options. Following are the two options with you:

· Lease End Buyout

It means that you can buy your leased car after the lease contract ends. It requires you to pay the residual value of the car. A residual value is the car’s worth at the end of the lease. It is usually agreed upon at the beginning of the lease period and is mentioned in the contract. So, is it a smart decision to opt for it? Compare the residual value to the current market value of the car. When the residual value is less than or equal to the market value, buying the car is a good deal. Also, you can opt for it if:

– Overall performance of the car is good.

– It doesn’t require repair.

– You are able to get a loan at a good interest rate.

· Early Lease Buyout

It gives you an option to buy your leased car before the end of the lease period. It is better to consider it if:

– The car has exceeded the allowed mileage limit.

– You are unable to keep up with the maintenance cost.

– There is interior or exterior damage to the car.

Early lease buyout option may not be a good deal because of additional depreciation fees. So, it is wise to wait till the lease period ends in order to get the best deal.

Shopping for a car takes a lot of time and energy. But, a car lease buyout will help you. Let your passion have wings with the ownership of your leased car. Buy the known car, which helped you create your memories, to build more memories!

How to Win the Financial Battle Vs Your Automobile

Think in the Long Term (for Models)

Buy the car you want – but only after it is at least two years old, and three would be better. By doing this, you automatically save hundreds of thousands of dollars over your lifetime.

When I was 23, I wanted to buy a nice four-door sedan, and I was drawn to the Cadillac STS. The new model had a base price of more $50,000, and with any kind of little extras the sticker was almost $55,000. I was doing very well at a young age, but I wasn’t doing that well to blow 50 grand on a new car.

I was thumbing through my local paper (yes, this was before the Internet changed everything) and saw an ad for a 2½ year old Cadillac STS for $19,500. The car had less than 40,000 miles on it and came with an extended warranty to 90,000 miles. It was gorgeous, shiny and just serviced.

It was an attractive price since the first owner was eating the depreciation.

According to the average car will lose 11 percent of its value the second you roll it off the lot and an additional 15 percent to 20 percent the first year you own it. The second-year depreciation (loss) is another 15 percent, for a loss of at least 45 percent over the first two years.

Depreciation is usually calculated off of the base price, not the extras. This could be the sport package that raises the price $10,000 but only gives you $2,000 back after the first year or two. So it’s quite possible to find beautiful cars with manufacturer warranties still in place and pay 35 percent to 50 percent less than the first owner did when purchased new.

I drove that car for four years, had very few out-of-pocket repairs, and sold it for $3,500.

So what kind of deal could you get today? When I was young, one of the dream cars was a Ferrari Testarossa, and its price was around $200,000. You can buy one now for around $50,000, and most don’t have that many miles on them because they’re babied by the owners.

Think in the Short Term (for Loans)

If you finance your auto purchase, you can save a lot of money by keeping the term to no more than 36 months. This builds equity in the car faster and saves on interest.

This might be difficult because the monthly payment is higher than if you finance over six years, and it’s higher than a monthly lease. If you finance $25,000 at 5 percent interest for three years, your monthly payment will be $749.27, and your total payout will be $26,974. If you extend that loan out to six years, your monthly payment drops to $402.62, but your total payout rises to $28,989. That’s $2,015 more out of your pocket to own the car.

Assuming you buy the car with a small down payment, by financing it for six years, your loan pay-down is going at a much slower pace than the depreciation on the vehicle, creating an “underwater” situation on the car almost from the get-go. During the three-year program, you’re paying down the car faster than it’s depreciating, giving you options if you have to sell the vehicle.

If you truly can’t afford that three-year payment, take out a five-year option and send a little extra every month toward the principal to pay it off sooner.

Leasing a newer model looks attractive because the monthly payment is less, but you might not want to do that. I’ll explain why next post, when I offer several other ways to save loads of money when purchasing an automobile.

Believe it or not you might be better off buying your own car rather than funding your 401k or IRA!

Is College Debt Really Necessary? What Parents and Students Should Know

“Had the people who started Facebook decided to stay at Harvard, they would not have been able to build the company, and by the time they graduated in 2006, that window probably would have come and gone.” – Peter Thiel, co-founder of PayPal.

Ever since I can remember, I was inculcated with the belief that in order to truly succeed in America, you have to get at least a 4 year degree from a prestigious university; even if it means taking on a ton of debt that you may work your entire adult life to pay off.

I also came to believe that if you really want to stay on the top of the heap, then you need to take on even more debt and get a graduate degree, hence my own post-graduate alphabet soup, including law school.

In high schools across the nation, statistics are still being trotted out by guidance counselors to “prove” that young people have no chance of success without that high-priced sheepskin, or that, if they somehow manage to land a job without one, they will never get promoted and will be stuck in bottom-of-the-ladder limbo land for all eternity.

Twenty years ago, the idea that “you have to go to college to make good money” might have been more truth than myth.

Now, though,, the ever-escalating cost of tuition, fees, and books at America’s universities means that post financial collapse parents might want to take another, perhaps more jaundiced view of the entire higher education system even as the old school narrative continues to be shoved down their throats by university marketing departments.

As a financial educator, I have had numerous concerns about my own clients taking on the costly burdens associated with financing their child’s college education. Truthfully, it makes me more than a bit queasy when I see clients raiding their savings and retirement accounts to send Junior to a fancy private school.

This is especially true in a financial system in flux, where, for the first time ever, over 50% of the unemployed and underemployed have college degrees. To make matters worse, there is a bubble on the horizon; large, paper-thin, and waiting for one tiny pin prick to explode it.

This bubble comes in the form of easy-to-obtain student loans that many are finding are not so easy to pay back. A 2012 article on CNN’s website reported that, at a time of record high unemployment for college grads, student indebtedness had reached an average of nearly $27.000.

“… Two-thirds of the class of 2011 held student loans upon graduation, and the average borrower owed $26,600, according to a report from the Institute for College Access & Success’ Project on Student Debt. That’s up 5% from 2010 and is the highest level of debt in the seven years the report has been published.” (1)

Beyond the expense of college there is also the thornier issue of whether most college kids are learning anything of real value that can be applied to the new economy. The education cartel, always in need of fresh blood and fresh wallets, has systematically smeared those who work in the trades as “blue-collar,” or “uneducated,” and thus somehow inferior to those with Ivy League degrees.

Matthew B. Crawford, a fellow at the Institute for Advanced Studies in Culture at the University of Virginia, and author of the bestseller, Shop Class as Soulcraft: An Inquiry into the Value of Work, has posited that the degradation of manual labor and the rise of so-called knowledge-based jobs was wrongheaded and that the future will belong to those who actually know how to do things such as build custom furniture, repair a car, or install heating and air conditioning units.

Says Crawford:

“While manufacturing jobs have certainly left our shores to a disturbing degree, the manual trades have not. If you need a deck built, or your car fixed, the Chinese are of no help. Because they are in China. And in fact there are reported labor shortages in both construction and auto repair. Yet the trades and manufacturing are lumped together in the mind of the pundit class as “blue collar,” and their requiem is intoned. Even so, the Wall Street Journal recently wondered whether “skilled [manual] labor is becoming one of the few sure paths to a good living.”

Crawford also observes that “If the goal is to earn a living, then, maybe it isn’t really true that 18-year-olds need to be imparted with a sense of panic about getting into college (though they certainly need to learn). Some people are hustled off to college, then to the cubicle, against their own inclinations and natural bents, when they would rather be learning to build things or fix things… ” (2)

The Cartelization of Education

We need only look, says bestselling author and trend forecaster Charles Hugh Smith, to the advent of the higher education cartel to see the reason for our obstinate addiction to the “old school” higher education system and the instance that insistence that everyone needs to go to college. There is a lot of money to be made, says Smith, and an elite cadre of cartel bosses who stand to profit by promoting that myth.

“Why does the old style system still persist even though it is already demonstrably inferior? In addition to the financial disincentives, there is another reason: the current system retains a monopoly on assessing student learning and granting credit for demonstrated accomplishment. The schools are able to do this because they have arranged a monopoly on accreditation. This is ultimately a grant of state power.

As a result, modern colleges and universities have collectively become a rent-seeking cartel, an alliance of nominally competitive institutions that maintains a highly profitable monopoly of accreditation. To grasp the power of the cartel, consider a typical Physics I course even at MIT is almost entirely based on Newtonian mechanics, and the subject matter is entirely in the public domain. Only a cartel could arrange to charge $1,500 and more per student for tuition and texts, in the face of far lower cost and superior quality materials, for subject matter that is no more recent than the 19th Century.” (3)

Jeffrey Tucker, CEO of the startup Linerty.me and publisher at Laissez Faire Books, agrees with Smith and maintains that cartelization has ensured that a return on investment in higher education is far from a sure thing for most students and their parents.

… even if the teen does everything right-every test trained for and taken five times, every activity listed on the portfolio, a high GPA, top of the class, early applications and admissions-you are not home free. You are going to spend six figures, but there is also a high opportunity cost: you remove your child from remunerative work for four years, and this is after four years of no employment in high school. That means both lost income and lost job experience. College is costly in every way. (4)

Citing what economists refer to as “inelastic demand,” Tucker writes that the cartel is exceptionally aware of, and deliberately contributes to, parental unwillingness to forego a four-year college education for their children, even if it means putting themselves in the poor house.

“Parents would gladly step in front of a bus to save their children, so facing debt and financial loss for a few years seems just part of parental obligation. This is why, in economic terms, the demand for college is relatively inelastic: Parents keep paying and paying no matter how bad it gets,” he argues. (4)

I see a lot of angst concerning this issue among my own clients. As the parent of a high school student, I understand it. The idea of college “no mater what” is so ingrained in our thinking that when a child tells us they are considering postponing college or even not going at all, parents tend to panic.

However, the stakes are higher than ever before and the potential for damage to the parents’ own financial well-being is enormous, not to mention the contribution education debt makes to our national economic malaise.

Parents and students need to ask themselves honest questions about the value of a traditional four-year degree, what the potential return on that investment will be, and whether or not there are viable alternatives.

Student Debt and Wall Street

As of this writing, current student debt stands at around $1.2 trillion dollars, more than the entire gross domestic products of some nations, including Canada.

After what we’ve discussed in previous chapters, it should come as no shock to you that many banks have turned these college loan obligations into (surprise, surprise) “investments” and are busy shopping them on Wall Street as subprime debt.

The market for these educational loans is relatively small compared to the market for home loans, so I doubt that it will be as massive a bubble as we had during the housing market.

However, if the Fed continues to hold interest rates down, investors might be desperate enough to snap more of them up. Then we could have another potential economy-damaging event on our hands.

Teresa’s Takeaway: Alternatives to Traditional 4-Year Degrees

Many of my clients are able to fund their kids’ education without incurring any debt due to their diligence in creating and maintaining their own private finance system using specially-designed insurance policies. In fact, I set up many of these policies that have as their express purpose the funding of a university education.

That being said, however, I never think it is a good idea to spend money simply because you have it available.

If you are a young person considering college or graduate school, do your research and question your motivations. Before saddling yourself or your parents or grandparents with a lot of debt- consider alternatives to four-year colleges, such as online degrees, community colleges, and trade schools. Ask yourself if what you really love and want to do

Find out if what you want to do really does require a college degree in the first place. Amazingly there are lots of high-paying jobs that don’t require 4-year degrees.

Look into local and community colleges, where your expenses are often a fraction of what private universities charge.

If you’re a recent high school graduate, take a year to “cool off,” work, save and travel. Gain a better understanding of yourself, your strengths and weaknesses. Learn what you have to offer to the world. Contribute to the global conversation in a meaningful way as a volunteer.

A bright spot in all of this is the fact that there are some great alternatives to the traditional sheepskin; alternatives that might actually broaden a students’ understanding of the world and give them skills that are needed in the new economy without bankrupting mom and dad.

Bestselling author James Altucher, a longtime proponent of re-thinking college, provides a few real alternatives to college.

Altucher suggests that some college prospects might be better off taking their college savings and starting a business.

He also suggests traveling to a country such as India and immersing your self in a culture completely different than your own.

You will learn what poverty is. You will learn the value of how to stretch a dollar. You will often be in situations where you need to learn how to survive despite the odds being against you. If you’re going to throw up you might as well do it from dysentery than from drinking too much at a frat party, “he writes. (5)

For even more ideas of what to do instead of college, check the resource section of this book for a link to Altucher’s report “40 Alternatives to College.”

References:

(1) Report CNN Money “Average Student Loan Debt Nears $27,000”

(2) Crawford, Matthew B. Shop Class as Soulcraft: An Inquiry into the Value of Work

(3) Smith, Charles Hugh, Higher Education Cartel, Meet Creative Destruction, Sept. 9,2013

(4) Tucker, Jeffrey A.”Is There A Viable Alternative to College?” The Freeman, July 2013

(5) Altucher, James “8 Alternatives to College” The Altucher Confidential. January 8, 2011

How to Improve Your Credit After Bankruptcy

As you may know already, Chapters 7, 11, and 12 will remain on one’s credit report for ten years from the filing date. A Chapter 13 bankruptcy is reported for seven years from the filing date. Accounts included in a bankruptcy will remain for seven years from the date reported as included in the bankruptcy. Your ability to re-establish your credit after filing bankruptcy is better now than it has ever been. After your bankruptcy is discharged, you will start receiving a great number of solicitations offering to finance homes, vehicles and credit cards.

These are some of the following steps you should take:

1. Examine Your Credit Report – The very first thing you should do is obtain a copy of your credit reports and make sure there are no errors or inaccuracies in you report.

2. Pay Your Bills On Time, Every Time – Pay your bills and rent on time all the time. Remember your payment history is 35% of your credit score.

3. Bank Account – Start with a checking or savings account. Lenders may use this to determine if you are currently being responsible with finances.

4. Build With Store Credit – Apply for store credit cards or gas card. Use it for items you would normally pay cash for, this way it keeps your monthly balances within reason which makes it easier to pay off each month.

5. Secured Credit Cards – Apply for a secured card where you can deposit cash and charge against it. Pay advances back over two months so that they will be reflected as positive marks on your credit report.

6. Friends Or Family – Find a friend or relative that is willing to co-sign for you on a loan or add you to their credit file.

7. Look For The Right Lenders – Search out lenders that are more apt to consider to help you even with a bankruptcy.

8. Buying A Car – If you buy a car, make sure it’s a used car so you do not get hit with the depreciation that occurs during the first two years of a new car purchase.

9. Stay Away From Payday Loans – Payday loans that are at high interest rates they are a “bad credit” trap.

10. Be Proactive – Often times writing a letter to each of the credit bureaus explaining the circumstances that initially lead you filing for bankruptcy.

One of the most important lesson to learn in dealing with the challenges of a bankruptcy is to be patient. Understand that the path to bankruptcy did not happen overnight. And neither will the path to improving your credit. By following the tips above, the path to improved credit score is very possible. If you adhere to these 10 tips you will be able to improve your credit score and your life.

Some Useful Tips for Monitoring and Repairing Your Credit

We all know our credit score is the heartbeat of our financial lives. We must do all we can to protect that all important 3 digit number!

If your credit is bad, it can prevent you from many things, such as car loans or home loans. Credit rating will fall based on unpaid bills or paying fees too late. The tips listed here can help raise your credit score.

Financing homes can be difficult when your credit score is low. FHA loans might be a good option to consider in these circumstances, because the federal government guarantees them. FHA loans offer lower down payment or pay closing costs.

The first step in credit repair is to build a commitment to adhere to it. You must be dedicated to making some significant changes and stick with them. Only buy the things that are absolutely needed.

A good credit report means you are more likely to get financing for a mortgage on the house of your dreams. Making regular mortgage payments in a timely manner helps raise your credit score. This is helpful in the event that you want to borrow funds.

Negative info stays on your history for up to seven years!

You need to work with your creditors when you have credit cards. This prevents you from sinking further into debt or further damaging your credit in good standing and repair any damage that may have been caused.

Give your credit card company a call and ask them to lower your credit card. Not only can this tactic prevent you from getting yourself in over your head with debt, but it will be reflected in your credit score because it shows that you are responsible with your credit.

Even though the particular credit item may not be accurate, any small mistake in the item, date, could make the entire entry invalid and eligible for removal.

Bankruptcy should only be viewed as a last resort. This will have damaging consequences to your credit report for ten years. It might seem like a good thing but in the long run you’re just hurting yourself.

Take the time to carefully go over your credit card statements. It is solely your responsibility to make sure everything is correct and error free.

Avoid using credit cards at all. Pay with cash instead. If you absolutely have no other choice but to use a credit card, always pay the balance in full each month.

Debt collection agencies can be the most difficult part of a bad credit. These letters stop collection agencies that harassing debtors, but the consumer remains responsible for paying the debt.

Your credit score will also suffer from opening new lines of credit. When offered large discounts or incentives for opening a new credit card, resist the urge to open a new store credit card. If you continue to increase your debt, your credit score will be greatly reduced.

Hopefully some of these tips gave you some insight into taking care of your credit rating. If you have any questions, please visit us at www.lsfcreditservices.com