FINANCES

Gap Insurance May Save You Thousands of Dollars

June 28, 2018 by admin 1 Comment

Here’s an unpleasant thought: you buy a new car and within months it’s stolen or totaled following an accident. You believe that your insurance coverage is excellent, but are soon rudely awakened when your finance company sends you a bill for thousands of dollars. Had you chosen gap insurance, your finance company wouldn’t be demanding payment. That is if you knew about such coverage in the first place.

car crash gap insurance — Is your auto insurance sufficient for protecting you against total loss?

What is Gap Coverage?

Gap insurance, also known as gap coverage, pays the difference between what you owe on your vehicle and what your car is worth. Gap coverage is especially important if you do not put enough money down on your new car and its value has slipped below what you owe on it.

For instance, you buy a new car and pay $27,500 for it, putting $2,500 down. You take out a loan for $25,000 and five payments later your outstanding balance falls to $23,500.

Unfortunately, you get into an accident that destroys your car, which soon reveals how vulnerable you really are. You file a claim with your insurer and the insurance company sends your finance company a check for $19,500, representing the value of the car minus your $500 deductible. The difference here is $4,000, an amount that your finance company says that you still owe on the loan.

That gap represents the difference between the loan balance and your insurance payment, monies that you must repay.

Going Upside Down

Many car shoppers are “upside down” or “underwater” with their auto loans, a term that also describes some homeowners.

Typically, borrowers are upside down for two reasons:

1), they do not put enough money down, and

2), the car loses a significant amount of its value within the first few months of ownership.

Indeed, it is not uncommon for a new car to depreciate rapidly with Edmunds.com noting that a new vehicle loses on average 11 percent of its value the moment it drives off the dealer’s lot. Several months later the car’s value may fall by 25 to 30 percent, making it entirely possible that you owe more to your finance company than what your insurer says it is worth.

Gap Protection Coverage

You may not need gap protection if you put 20 percent or more down and your loan term is short, such as for 36 months. Some consumers make the mistake of rolling their related fees and taxes into their loan and perhaps adding extended warranty coverage as well.

One way to make sure that you are not buying a car that will immediately put you underwater is by using an auto loan calculator such as the one that’s available online from Bankrate.com. Then, compare that number with what Kelly Blue Book lists as your vehicle’s depreciation rate.

As long as you owe less for your vehicle than what it is worth, then you are okay.

Buying Gap Insurance

Before you run out to buy gap coverage, you should review your loan purchase agreement as you may already have it. Such coverage is more common if you lease a vehicle than if you were to finance one. In any case, your finance company may have added that coverage with your agreement.

Indeed, some lenders require gap coverage because they know you may find it difficult to settle the difference later on.

Your current insurer may offer gap coverage, a small cost that’s added to your auto insurance bill. Contact your insurer to get a quote for the gap or actual cash value insurance.

Keep in mind that you will still have to pay a deductible and may receive less money if your car has high miles or is in poor condition. You can cancel gap coverage once you determine you are no longer upside down.

Avoid a Financial Catastrophe

Gap coverage may save you from financial calamity, enabling you to get back on your feet quickly. Without such coverage, you may find yourself unable to afford a replacement vehicle, worsening an already serious problem.

See Also — 7 Ways to Trim Car Insurance

Photo credit: La Cara Salma via Wikipedia. This file is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported, 2.5 Generic, 2.0 Generic and 1.0 Generic license.

Car Repossession and How to Avoid It

November 4, 2015 by admin 3 Comments

It happens — you lose your job, get sick or you experience some other financial setback and begin to fall behind on your bills. One of those monthly accounts may be your car payment, what provides transportation to help you find a job, take the children to school, and to simply live your life.

For most Americans, life without a car is not merely an inconvenience, but a hardship. If you fall behind on your car payments, you should know that your creditor may repossess your vehicle. Here’s what you need to know about car repossession and how to avoid it.

Tow Truck — (Public domain photo supplied by Jelson25.)

Lien on Me

If you take out a loan to purchase a used or new car, the bank, credit union or other financial enterprise has what is known as a “lien” on your car. A lien means the creditor holds title to your car until you pay off the loan. It also means that if you fall behind on your payments, the creditor has the right to repossess your vehicle and sell it in a bid to recoup its loan losses.

Individual state laws determine how repossessions are handled — you may have the right to regain possession after the fact — typically that involves catching up on late payments and paying related fees, including court costs. If your car is already repossessed it will cost you much more to get it back than by simply keeping up with your payments.

Have a Conversation

Fall behind on car payments and you may feel like hiding under a rock. However, withdrawing from a painful situation will only make matters worse. Indeed, your car loan creditor may interpret your actions as avoidance — in doing so you risk losing your car to repossession.

The moment you fall behind on your car payment — or any payment for that matter — you should get in touch with your creditor advises Jay F. McKirahan, an automotive and consumer attorney with Mac Murray, Petersen & Shuster LLP in Ohio.

McKirahhan says consumers should explain their situation and ask about available options. He noted, “Lenders do not want your car to be repossessed because their goal is to make their profit money over the life of the loan. Try to offer your lender a solution with what you can do in the short term – your goal is to keep paying something until you can make up the shortage.“

Indeed, you may have more options available than you thought possible explains Netiva Heard, a Certified Credit Counselor, Personal Finance Coach, and owner of MNH Credit Solutions in Illinois. Said Heard, “See if you are eligible for any hardship programs that will allow you to place some or all of your past due payments to the end of the loan, make partial payments, interest only payments, or possibly refinance out of that loan and into another with more favorable terms, if you bring a qualified co-signer to the table.” Like McKirahhan, Heard emphasized lenders want your money, not the car and will work with you especially early on.

Your Action Plan

As long as the car is with you, avoiding repossession is possible. Again, your state determines when a loan default takes place — it may be as little as one day after your payment is due or up to 30 days later. Typically, you’ll receive a notice in writing from your creditor once the loan is in default. That notice may include instructions from the creditor on how to reinstate your loan. Read both the default letter and your loan agreement carefully to understand your rights.

One of the easiest ways to hold off car repossession is to make up your late payments. Here, you need to make payments and make whatever late fees and charges are assessed.

If your financial situation is particularly dire and you foresee no possible way to procure the required funds to forestall car repossession, you may find relief by selling the car. Here, you should notify the creditor of your intent to sell with the understanding that the buyer must have cash on hand or the financing arranged to purchase your vehicle. You may have a brief window to exercise this option before the creditor initiates repossession.

Still another option is to surrender the vehicle to your creditor. Technically, you’ll avoid the embarrassment and the costs associated with car repossession, but you may still be liable for the loan deficiency — the amount of money owed on the loan that goes beyond the value of the car. Know that your credit will still suffer, but it may not reflect so poorly on you as would an outright car repossession.

Car Repossession: Other Options

There are a few other options to help you avoid or at least delay car repossession.

First, if your finances are in terrible shape and personal bankruptcy is the only way out, then filing for bankruptcy will delay repossessions, at least temporarily. In the interim, you may find a way to catch up on payments and avoid further action.

Second, if your credit is in decent shape, refinancing the car loan is an option. This choice is only worthwhile if the interest rate is lower than your current loan and your monthly payment amount drops.

Finally, if your creditor violates your rights under your state’s consumer laws or breaches the contract, you may have recourse. Even if your car is eventually repossessed, the creditor and its repossessor (repo man) must always follow the law. If you suspect otherwise, seek legal counsel.

Fiat Chrysler Weighs Its Minivan Options

February 17, 2014 by admin 1 Comment

Chrysler presses Canada for financial support.

***Update: Chrysler Withdraws Financial Assistance Request to the Federal and Provincial Governments in Canada***

It was supposed to have been settled by now. If everything was done according to plan, Chrysler would have identified the brand slated to receive the next generation of its minivan and the one that would get its crossover derivative.

Chrysler minivans: Made in Canada.

A collection of Chrysler minivans, all built in Canada.

CEO Sergio Marchionne made it plain a few years back that only one minivan was needed with either the Chrysler Town & Country or the Dodge Grand Caravan transitioning to a crossover utility vehicle based on the platform underpinning the next generation minivan. That announcement has yet to be made, but minivan-related news is front and center.

Making an Investment

Instead of brand decisions, we now have Fiat Chrysler Automobiles (FCA) asking for as much as CAN$700 million in incentives from federal and provincial governments to update its two Ontario manufacturing plants. That contribution would partially defray the CAN$3.6 billion Fiat Chrysler Automobiles says it will cost to retool Windsor and update Brampton.

The Windsor plant has been the exclusive builder of Chrysler minivans since Dodge and Plymouth models were introduced in 1983. Brampton builds Chryslers large cars including the Dodge Charger and Chrysler 300. Together, the two assembly plants represent FCAs entire manufacturing presence in Canada.

That presence could be jeopardized if both Ontario and Canada decide not to contribute funds. For its part, the Canadians want FCA to pledge a long-term commitment to build cars in Canada reports Toronto’s Globe & Mail. The federal government recently announced that it wound invest another $500 million in its Automotive Innovation Fund, but it hasn’t promised that those funds will go to Fiat Chrysler. At least not exclusively.

Minivans to Mexico?

Marchionne raised eyebrows last month at the Detroit auto show when he said that the company had alternatives to continuing to build minivans in Windsor, reports the Wall Street Journal. That may include shifting product to Mexico where labor costs are much lower than in Canada. Of the three North American Free Trade Agreement (NAFTA) countries, Canada’s labor costs are highest followed by the United States and much further down the list, Mexico.

Canada and Ontario contributed billions of dollars in loan money in 2009 to help General Motors and Chrysler, loans that have since been paid back. Still, the country has shed more than 50,000 automotive jobs since 2000 and another 8,000 direct manufacturing jobs would be affected if Chrysler pulled up stakes. Tens of thousands of supplier and spin off jobs would also likely go away. In all, Chrysler employs 10,245 people in Canada as of Jan. 2014

Meanwhile, Down Under

A Chrysler exit would not decimate the country’s automotive industry composed of multiple manufacturers including GM, Ford, Toyota, and Honda. And, unlike Australia, the Canadian industry is heavily tied to the US and Mexico, with suppliers, components, and new vehicles moving back and forth across each border. Yet, it also raises the stakes for the remaining manufacturers, each competing in a global industry where maintaining operating costs is crucial for competitiveness and the bottom line.

Australia’s auto industry is in dire straits with Toyota following Ford and GM by announcing the end of domestic manufacturing within the next four years. The prospect that Canada might someday lose its manufacturing base and go the way of Australia is not lost on provincial and federal government leaders. What type of proposal they make to keep Fiat Chrysler from fleeing might also set a precedence for other manufacturers to follow as they weigh their own needs.

Photo courtesy of Fiat Chrysler Automobiles, N.V.

How to Dispute an Auto Insurance Claim Payout

April 27, 2013 by admin 2 Comments

Getting in a car accident is a hassle enough, but when your auto insurer fights you over its claim payout, it can be just like getting injured all over again.

Claim Payout Dispute

As a consumer, you have every right to question your claim payout, but you to exercise both patience and resolve as you address this problem. For a minor accident, you may find that it is simply not worth disputing with your car insurance company. For a major accident, fighting back may spell the difference between getting a new car or being stuck with the one you’re currently driving.

insurance claim payout Let’s take a look at several steps you can take to win your claim payout battle:

1. Review your insurance policy. Yes, car insurance people make mistakes. No, you’re not immune from making mistakes yourself.

The first step is to review your policy to learn what is covered and what is not. You may not be aware that you have a $1,000 deductible instead of the usual $500 deductible, thus the lower claim payout check. Your insurer spells out the claims procedure, explaining how long it takes for claims to be made and how long you have to challenge the claim payout.

2. Contact a third party. Your insurer sends an in-house appraiser to review your car’s damages, thus that appraiser’s findings are usually final. But, not always.

You may be allowed to use your own claim adjuster, an individual that works for you, to file his own claim amount. Your insurer will then review the findings from both adjusters and may give you more money based on the latter’s findings.

3. Mediate or arbitrate your claim payout. You can sue your insurance company in a bid to obtain a better claim out, but keep in mind that you will have to go to court. A court case can drag out, while mediation or arbitration can be handled swiftly. Moreover, you need not be present to handle this — your lawyer can do it for you.

Mediation and arbitration keep you out of the court and can be resolved amicably between the two parties. On the other hand, a lawsuit may create a hostile atmosphere and take longer to resolve. Contact your attorney about your legal options.

Claim Considerations

It isn’t your insurance company’s wish to drag out your insurance claim or claim payout request. Settling this matter outside of court is important too as your insurer must pay for legal representation. Document your dealings with your insurance company and, if you can prove that damage was substantially more than what the insurer says that it was, then offer copies of your findings to prove your viewpoint.

See Also — Hail Damage and Your Car Insurance

Your Rental Car Insurance Options

March 23, 2013 by Scott Johnson Leave a Comment

Hertz Offic — Do you have sufficient insurance coverage
for your next car rental?

It is a plan: you will fly with your family across the country, pick up a rental car and make your way up and down the coast. That kind of trip can be so relaxing as well as educational. But, the education you do not want is to discover that your rental car insurance coverage was insufficient, especially following an accident. For, if your insurance coverage is weak or nonexistent, you will be responsible for repairs or in some cases the replacement value of a totaled rental vehicle.

You can avoid a huge heartache and taking a possible financial bath by exploring your rental car insurance options before visiting Hertz, Avis, Enterprise or other car rental company.

Rental Company Insurance

Your rental car company offers insurance coverage, what you will pay when you rent a car unless you ask to have it waived. There are various types of insurance offered with each one designed to reduce your liability although it may not completely eliminate it if there is a deductible present.

You may want to choose both the collision damage waiver and the loss damage waiver if you do not own a car. Or, if you own a car and you have basic insurance that does not include comprehensive and collision coverage, then car rental company auto insurance may be right for you.

Credit Card Providers

It is almost a given that you will be using a credit card to pay for your car rental. In fact, it is
usually a requirement at most National, Hertz, Enterprise, Thrifty, Budget, Alamo and Avis locations. Some will also take a debit card, but a credit card offers certain protections that a debit card may not provide.

For instance, if you hold a Visa Standard Credit, a Visa Rewards Credit or a Visa Premium Rewards credit card, then collision and theft coverage is included on auto rentals when you use these cards. Coverage is automatically activated when you complete the entire rental transaction with your Visa card and decline CDW coverage.

American Express includes care rental loss and damage insurance with eligible AMEX cards. Simply use your American Express card when paying for your rental car and then decline the collision damage waiver when offered same by the commercial car rental company. Check with MasterCard, Discover or other accepted card for their respective policies.

Your Auto Insurer

If you have car insurance, your auto insurer may have you covered. Typically, you need both comprehensive coverage and collision coverage with you picking up the deductible if you file a claim. Some insurers include special rental car insurance coverage that covers the deductible. Contact your insurance provider to learn what options are available to you.

While relying on your auto insurer can be a good way to turn down the collision loss waiver, keep in mind that filing a claim can raise your rates. Moreover, you may discover that there is much more of a hassle involved with choosing the auto insurance route than relying on your credit card company or rental car company for coverage.

Car Insurance

So, before you take a trip, make sure that you are covered. Calls to your insurer and credit card provider can reveal much, otherwise expect to pay an extra $10 to $20 per day to protect your rental car from an accident, theft or total loss — that’s a small price to pay when taking that dream vacation.

References

Insurance Information Institute: Do I Need Separate Rental Car Insurance? http://www.iii.org/individuals/auto/a/rentalcar/

Insure.com: The Basics of Rental Car Insurance http://www.insure.com/car-insurance/rental-car-basics.html

See Also — How to Avoid an Unsafe Rental Car

About Car Insurance Classifications

March 10, 2013 by Stephen Catalano 2 Comments

car accident

Besides home insurance, car insurance is another expense that most consumers face each year. But unlike home insurance which is based largely on your personal address, auto insurance is determined by a number of factors, including what classifications are applied to you. Thus, your insurance costs may be based mostly on factors you have no control over or what insurers use to rate and underwrite consumers.

Lets take a look at car insurance classifications and how you can find the coverage that is right for you.

Insurance Verbiage

Please know that the language auto insurers use may be slightly different, which can make it difficult to compare policy estimates. Insurers seek to classify consumers to determine risk and for underwriting purposes.

Under personal auto insurance, you may hear of preferred class and non-preferred class or standard and non-standard classifications. Beyond these classifications there are tiers that are based on a number of personal factors, what we will examine next.

Rate Classifications

Auto insurers look at ways to further differentiate drivers. There are some restrictions on how insurers can do this with various states limiting such determinations. For instance, insurers may not discriminate against certain drivers based solely on moral character, a past criminal record or a physical disability. Your religion, creed, gender, ancestry, marital status and job occupation usually will not keep you from obtaining insurance.

Car insurance companies can set rates based on your age, gender and marital status. For instance, if you are 19-year-old single male, you will typically pay more for insurance than a similar aged female. Moreover, your rates will be higher than a driver who is married and in his or her 30s.

Where you live is an important factor in determining your insurance rates. Generally, you will pay more for insurance if you live in the city than in the country. Further, your insurance rates may be determined based on your zip code or even your neighborhood.

Vehicle Choice

Another classification for insurers is your choice of vehicle. Insurers have a very good idea what your car will cost them if repairs are needed. Indeed, the Insurance Institute for Highway Safety rates new vehicles those models that score higher in crash testing can incur a lower insurance rate than those that score lower. If your car is rated a top safety pick by the IIHS, expect to receive favorable insurance coverage.

Other factors insurers use are based on your cars engine size and performance, its overall value, the availably of replacement parts and its group or body style. For instance, plan to pay more for insurance if you buy a luxury car or a sporty coupe than you would for a standard sedan with a four cylinder engine.

Usage and Prior Coverage

How often you drive will have a huge bearing on your insurance costs. The more often you drive, the higher your coverage. You may need to present your vehicle to an insurance agent to review its condition as well as the miles on the odometer.

Insurers will also look at your prior coverage. Cancellation for nonpayment of premiums and your claim history can work against you. That information is readily shared between insurers.

Insurance Underwriting

The safest drivers can expect to receive best rates, individuals with clean driving records for the past three to five years. Nonstandard underwriting is for higher risk drivers including those under age 25 and drivers with multiple tickets, driving infractions or a poor payment premium history. Insurance approval for such drivers is more difficult to obtain and can be more costly too.

If you are not sure what you stand with your insurance company, your agent can help. Although the division points between classifications are not uniform across insurers, you can get a very good idea where you stand by understanding what risk factors apply to you.

References

State of Wisconsin: Consumers Guide to Auto Insurance http://oci.wi.gov/pub_list/pi-057.pdf

Forbes: How Does Your Car Insurance Company Classify Your Ride? http://www.forbes.com/sites/moneywisewomen/2012/01/31/how-does-your-car-insurance-company-classify-your-ride/