What Credit Score Do I Need to Buy a Car?

What Credit Score Do You Need to Get An Auto Loan?

If it’s time to purchase a new vehicle, you may be wondering about one obstacle that could get in your way: your credit. Maybe you’re unsure how good your credit is and you don’t know what credit score is needed to buy a car either.

Unfortunately, there’s no simple answer to this question. No matter your credit score, you can probably find a way to finance a car loan if you absolutely must buy a new vehicle. The real question is what your credit score will cost you when you make the purchase. The better your credit score, the better your chances of getting a cheaper rate.

So while there’s no minimum credit score for a car loan, your credit history can make a big difference.

Bad Credit Scores Mean Much Higher Interest Rates

According to data from Experian Automotive, the difference in interest rates on a new car loan for someone with excellent credit versus someone with very poor credit is over 11 percentage points. In fact, 2.84% was the average interest rate someone with a super-prime (excellent) credit score paid in the first quarter of 2017, while those with deep subprime (very poor) credit paid an average interest rate of 13.98%.

To illustrate this difference, consider that you apply for a 60-month loan on a car that costs $25,000. With a 2.84% interest rate, the total cost of your car would be $26,847 with payments of $447 per month. Not too shabby.

For the same loan but an interest rate of 13.98%, your car loan would cost you $34,887, and you’d pay $581 per month. That’s more than $8,000 extra! Clearly, poor credit can result in you paying a lot more for your new vehicle.

The difference was even starker for those financing used cars. Those with super-prime credit paid an average rate of 3.56%, while those with deep subprime credit paid an average of 19.62%—more than 16 percentage points higher.

Average New Car Loan Rate by Credit Score (Q1 2017)

  • Super-prime (781–850): 2.84%
  • Prime (661–780): 3.77%
  • Nonprime (601–660): 6.60%
  • Subprime (501–600): 11.05%
  • Deep subprime (300–500): 13.98%

Note that the credit labels above represent Experian’s credit ranges. Other credit reporting agencies use different scales and labels.

Average Used Car Loan Rate by Credit Score (Q1 2017)

  • Super-prime: 3.56%
  • Prime: 5.29%
  • Nonprime: 9.88%
  • Subprime: 16.48%
  • Deep subprime: 19.62%

The dealer may also evaluate your credit using another type of credit score called VantageScore. VantageScore, which was developed by all three of the major reporting agencies, assigns different weights to different parts of your credit history, such as on-time payments, balances, and utilization. Some people may benefit from a lender using their VantageScore, while others may be at a disadvantage.

Where to Start If You’re Unsure

If you’re nervous about letting a car dealer check your credit—but even if you aren’t—it’s helpful to check your score yourself in advance. You can check your credit report for free to make sure you don’t have any surprises and to find mistakes.

Note that the credit score an auto lender uses may be a slightly different because it will be tailored for an auto loan. Still, it’s a good start—if your general credit score is strong, you can also bet that the score the dealer uses is strong.

We also recommend that you try to get pre-approved for a car loan from a bank or credit union before setting foot in the dealership. With a set interest rate in hand, if the dealer can offer you a better rate, perfect! If not, you’ll be prepared to pay what your bank approved you for.

A Word of Caution

Credit inquiries related to auto loans made within a short time frame (usually 14 days, or 45 days depending on the credit score model being used) are supposed to count as a single inquiry. However, some of our readers have found their credit scores dropping after multiple car dealers sent credit inquiries for financing. This is another reason why getting pre-approved before going to the dealership is a good idea.

If you still have questions about how your credit score can affect your car-buying decisions, check out our auto loan resource center, or visit one of the links below.

Here’s What Else You Should Know about Auto Loans:

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Looking for Auto Insurance? Here Are 6 Things You Need to Know

auto_lot

Let’s get one thing out there: no one is especially psyched to get car insurance. You get it because it’s a financial safeguard against damage to your car or injury to you or others (and maybe because it also happens to be legally required in some form nearly everywhere in the US). Car insurance is complicated, and drivers often don’t know what to expect from the process.

Let us break down the basics so you’re better able to find the right coverage for you. Here are six things you need to know.

1. What Car Insurance Is 

As a licensed insurance agent, I find that many people I talk to don’t quite understand what insurance is or why they need it. I get it. After all, insurance is rather abstract—it’s not a physical object you buy at a store. Further, if all goes well for you, you won’t ever have to use the coverage you paid for. So it’s often hard for people to see the value.

In the simplest terms, insurance is a promise from an insurance company to support you financially in the event that something unfortunate occurs and causes you financial loss or other damage. You pay an insurance company money (your premium) for a policy that details your coverage (who/what is protected and to what dollar amount), and the insurance company is responsible for paying if something happens and you incur a loss (damage to your car, a broken leg, etc.). Insurance companies do this by pooling risk among all the people they insure, collecting premiums from everyone and using those funds to pay claims for those who need it.

Of course, there are many other details that go into the whole system, but we’re keeping it simple.

2. What Different Insurance Types Cover

The type and amount of coverage each person needs varies, but these are the coverage basics you should know.

Liability coverage is legally required for drivers in almost every state. It covers the other driver in a crash you cause, and it includes injury and property damage. If you see numbers like 25/50/10 or 30/60/25, that shows the liability coverage limits for (1) bodily injury per person, (2) bodily injury per accident, and (3) property damage—each in thousands of dollars. For example, 25/50/10 means your coverage will extend up to $25,000 per individual injured in an accident, $50,000 for all persons injured in an accident, and $10,000 for property damage.

In no-fault states, you are required to carry coverage (normally personal injury protection or PIP) for your injuries regardless of who caused the accident.

Collision coverage, which covers damage caused in a crash, and comprehensive coverage, which covers damage from other events including weather (fire, flooding, etc.) as well as theft, are often collectively called full coverage.

Other coverages include uninsured motorist coverage, which protects you and your vehicle from damage caused by people who don’t have insurance, and medical payments coverage, which covers select costs for injuries you and your passengers sustain in a collision.

3. How to Get Car Insurance

You can easily go online, call a company or two, or even walk into a local insurance agent’s office to talk to them about getting coverage. But how do you know which company to contact?

Insurance companies spend billions of dollars every year on advertising, so you could probably rattle off a few big car insurance brands you’re familiar with. But it’s important for consumers to know that not all insurance companies are the same—in fact, they all have different ways of pricing policies, and many look for certain types of customers with certain risk profiles to do business with.

This is why it’s more important than ever to compare car insurance quotes from as many companies as possible. Getting multiple opinions and understanding the market will help you find the best rate around.

4. Why You Pay What You Do

Insurance companies determine what you pay for insurance based on dozens of “rating factors”—all having to do with who you are, where you live, what you drive, and other details of your history, both on and off the road. Everything is about statistics, and insurance companies assign certain levels of risk to each of these factors to gauge the likelihood that you will file a claim.

For example, teens are considered high-risk drivers because they have so little experience behind the wheel and are statistically likelier to be in an accident—and thus file more claims—than older drivers, so they often pay much more for their premiums.

Other risk indicators include some obvious ones (like your driving record) and some less-obvious ones (like your ZIP code). There are also certain factors, like your credit score, which only some states allow to be used in determining your rate (it’s prohibited in California, Hawaii, and Massachusetts).

5. How to Lower Your Risk and Your Rates in the Future

You can’t change certain insurance rating factors, like your age, but you can make a few changes to reduce your risk in other areas. Here are a few tips:

  • Drive safely and maintain a clean driving record.
  • Consider sharing a policy with someone you live with.
  • Bundle your renters or homeowners policy if you can.
  • Pay your premium in full at the start of your policy or sign up for auto-pay.
  • Maintain insurance coverage with no lapse between policies (even for a day).

6. When to Get Insurance 

The obvious time to get car insurance is when you’re getting a car, but it’s critical that you don’t have a lapse in coverage between insurance policy terms. I highly recommend shopping around for car insurance before you begin the car-buying process. Shopping early also allows you to account for your premium in your car-related expense budget.

Other times to switch insurance could be if you get married, move, or have another big event in your life; if your rates increase for no apparent reason; or if you need to add a new teen driver to your policy.

Additionally, it’s important to compare rates every six months to make sure you’re staying up to date on any changes that might occur if you move, get a speeding ticket, or even have a birthday.

Once you’re ready to start your insurance search, you can use Credit.com’s comparison tool to get a car insurance quote and compare rates.

Image: istock

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Shopping for a New Car? Use the 20/4/10 Rule

auto car driving drive

Imagine you’re in the market for a new vehicle. Where do you begin your car-buying process? Do you already have a dream make and model in mind? What’s your budget? Are you already browsing the interwebs for the car you want? If you are, you’re already starting off on the wrong foot — at least according to the 20/4/10 rule.

What is the 20/4/10 rule?

The 20/4/10 rule helps car shoppers figure out how much car they can actually fit into their budget before falling in love with a vehicle they can’t afford. It emphasizes calculating what you can afford before you set out shopping.

The rule might seem obvious — before you buy something, you should make sure you can afford it, right? — but it gets tricky when it comes to financing, and many don’t take the time to include annual ownership costs. If you don’t, you could end up with monthly transportation costs that could force you to live paycheck to paycheck or take on more debt.

Follow the 20/4/10 rule, and you might avoid accidentally biting off more than you can chew.

Rule #1: Put down at least 20%

A vehicle is a depreciating asset. The experts at Carfax estimate a new car loses 10% of its value the moment you drive off the lot. And the depreciation continues from there. Edmunds.com estimates a new vehicle loses over one-fourth of its value in the first year alone. For that reason, you should be prepared to put down at least 20% of the purchase price. If you do this, you’ll finance payments for the vehicle’s actual estimated value when you leave the lot instead of the full purchase price, which the vehicle isn’t worth anymore.

Take this example: You finance a new car for its full purchase price of $34,000, then lose your job the next day. Now, you might need to sell your new car, but you can sell it for only $30,600 — because the car already lost 10% of its value once it left the lot. Since you put $0 down at financing, you’ll still owe $34,000 after the sale. On the other hand, if you’d put down at least $6,800, you could sell the car that day for its estimated value and only lose out on half your down payment.

You might not be able to estimate exactly how much car you can afford, but if you are able to put down at least 20% of the purchase price, you should be in an OK financial position. On top of that, you’ll have smaller payments and possibly finance it for a shorter period.

Rule #2: Finance the vehicle for no more than four years

The longer your financing agreement is, the more you’ll pay in interest over time. So don’t be swayed by dealers or lenders who try to sell you on a lower monthly car payment — chances are your payment is so low because the term of your loan is long.

You can use the MagnifyMoney loan calculator to see this rule at work. If you borrow $25,000 to purchase a car (at a 4% APR) and agree to a six-year financing deal, you’ll wind up paying $3,161 in additional interest charges by the time you pay off the loan.

If you agree to a four-year loan instead, you’ll pay just $2,095 in interest — a savings of over $1,000. Of course, that shorter term loan also comes with a higher monthly payment — $564 versus $391 — but you are saving more over the long term.

Think of it this way: If you can’t afford the monthly payment required to pay off the car in four years or fewer, it’s probably outside of your budget.

Rule #3: Keep your total transportation costs under 10% of your monthly income

This last part is where it gets easy to overspend. You should try to keep your total transportation costs — your car payment, insurance, gas, and maintenance — under 10% of your monthly income.

So, if you earn $5,000 per month, your total transportation costs shouldn’t cost more than $500.

How to save on the cost of a new car

Try these tips to keep your overall transportation costs low.

Get pre-approved for financing

Avoid financing your vehicle through the dealer, and get pre-approved for financing at a lower rate before you show up at a dealership. Financing your auto loan at a lower rate can reduce your monthly loan payment. If you walk onto the lot with a pre-approved auto loan rate from a bank or credit union, you can use that as leverage for negotiation.

However, if you let the dealer find the loan for you instead, you’ll lose negotiating power, and there won’t be a way for you to tell if the dealer’s loan rate is the best offer you can get. Avoid making these other common mistakes when searching for a car loan.

Buy used

More people are purchasing used cars than ever before and saving a bundle in the process, according to Edmunds. Over 38 million vehicles sold in 2015 were used, a year-over-year increase of 5.6%.

When you buy used or certified pre-owned vehicles, you avoid financing a larger balance, and could even skip financing altogether if you’ve got enough cash on hand. If you buy used, avoid engine trouble by having the vehicle inspected by an independent mechanic before you sign off. You can use a resource like Car Talk to find a mechanic in your area.

Buy a car that holds its value

Depreciation is a car owner’s largest transportation expense during the first five years of ownership, more than fuel, maintenance, and even insurance.

A car that holds value well will depreciate less over time compared to the average vehicle, so you may not lose out on as much in depreciation costs if you sell the vehicle after a few years. Carmakers like Honda and Porsche are known for building vehicles that hold their value well over time according to Kelley Blue Book.

Lease instead

Leasing a car will usually result in a lower monthly payment, and you’ll likely save money with a lower down payment and lower tax fees over time. However, you could be subject to extra charges if you ding up the vehicle, or drive more miles than stated on the lease agreement. It doesn’t always work for everyone, so consider your personal needs first.

On the plus side, you’ll upgrade to a new vehicle every few years and won’t need to deal with the hassle of selling a car.

Look for gas savings

Gas isn’t always an unavoidable expense. You can make a few changes to your fueling habits like filling up before you hit “E” or signing up for a gas rewards credit card to save money. You could also cut down transportation costs by cutting back how often you drive or by carpooling some days to school or work. Learn more ways to reduce your gas spend here.

Comparison shop

Don’t get lazy with must-haves like maintenance and insurance for your vehicle. Comparison shopping is the best way to save on costs like these that may differ from provider to provider. Insurance companies have made it easier to compare quotes with online comparison portals like this one from Progressive. You could also try going through your bank or credit union for discounted rates with select companies.

Don’t just take the first estimate you get for a repair. Mechanics are known to pad the bill with unnecessary repairs from time to time. After you figure out what’s wrong with you vehicle, get an estimate from a few different mechanics in your area. That way you’ll make sure you’re getting the best value before paying for maintenance and repairs.

The post Shopping for a New Car? Use the 20/4/10 Rule appeared first on MagnifyMoney.

What an Interest Rate Hike Could Mean for Your Wallet

We spoke with a couple of financial advisors to find out what the Fed's new benchmark rate may mean for your money.

On Tuesday and Wednesday, the Federal Reserve, the U.S. central bank that determines interest rates, plans to meet in Washington. Unless something goes off the rails, chances are the Fed will approve another quarter-point hike in interest rates. You may not think that affects you, but chances are it will. We spoke with a couple of financial advisers to find out what the Fed’s new benchmark rate could mean for your money.

Auto Loans 

Though lenders have begun offering variable-rate loans, most car buyers take out fixed-rate loans. Since the loan is fixed, the Fed’s interest hike probably won’t have a direct impact on your loan, said Robert Dowling, a financial planner with Modera Wealth Management in Westwood, New Jersey. However, if you’re in the market for a new set of wheels, prepare to face higher interest rates for the new loan.

Credit Cards

Credit cards, which typically come with variable interest rates, will definitely be affected by the Fed’s rate hike, said Dowling. If you maintain a balance, as many consumers do, expect to see your monthly payments go up — and your balance balloon if you aren’t careful.

If you can’t afford a higher monthly payment or feel compelled to pay off your debt, now’s the time. Ridding yourself of debt will free up your budget and help you improve your credit score. Debt is one of the key factors lenders use to determine whether to extend credit. You can learn more about the high price of debt and its affect on your credit score here. (Not sure where your credit stands? View two of your credit scores for free on Credit.com.)

Mortgages

With interest rates expected to rise, prepare for your monthly mortgage payment to rise along with them if your loan has a variable rate, said Jude Boudreaux, a financial planner based in New Orleans. “The higher the interest rate and more variable the debt, the more of an issue [the Fed rate hike] certainly is.”

Higher rates also put pressure on the sale of homes, though you shouldn’t rush to buy one if you aren’t financially ready. “People never go to the bank and say, ‘I want to spend $300,000 on a house,'” said Boudreaux. “They go to a lender and say, ‘Here’s my income and my debts, what can I afford?’ So when interest rates rise, what they can afford is less.” You can see how much home you can reasonably buy here.

Savings Accounts & Certificates of Deposit

At times, major banks quickly respond to Fed rate hikes by paying higher interest on savings accounts. That isn’t always the case, but it doesn’t hurt to shop around if you want better rates. According to experts, online banks, community banks and credit unions may raise their rates faster as they attempt to lure customers away from major banks.

Refinancing

“The Fed has made it clear that they would like to raise rates this year, so in general, what that means for us is if we have debt that we can lock in at lower interest rates, great,” said Boudreaux. If refinancing your home is on the agenda, “take a hard look at those numbers.”

Likewise, if you’re burdened by student loan debt and looking to move from a federal to private lender, “that would be a high priority too,” said Boudreaux, who’s seen interest rates soar in response to the Fed. Doing what you can now to offset higher costs in the future could be a boon for your savings.

Keep your eye out Wednesday to see what happens next.

Image: gruizza

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7 Things to Know About Giving (or Getting) a Car for Graduation

If you're planning to buy a car for the new grad in your life, here's some advice on making the right choice.

Behind every diploma bestowed at high school and college graduations is a lot of hard work. And for some lucky grads, that hard work gets rewarded with a milestone gift: their own car. If you’re planning to buy a car for the new grad in your life, we’ve got some advice on making the right choice. And if you’re the recipient, we’ll share a few tips to help you drive into the future with confidence.

What to Consider If You’re Giving a Car to a New Grad

You’re so proud of your new grad for all their hard work that you’ve decided to shell out for a set of wheels to carry them on to their next adventures. Whether you’re getting your grad started with a well-loved (read: used) older car you bought from a neighbor or you’re splurging for a brand-new ride with all the bells and whistles, it’s important for you, the buyer, to take a moment to consider the realities of this major purchase — and of the needs of its soon-to-be owner.

1. Consider Total Cost of Ownership When Choosing a Car

First, let’s talk money. The car you buy should fit into your own budget, of course. But you also have to consider the total cost — including ongoing costs — of the car. Here are some things to think about.

Gas: If, for example, your child will be driving the car back and forth between home and an out-of-state university, would they (or you, if you’re footing the gas bill) be burdened by the costs of a gas-guzzling vehicle? If so, a fuel-efficient car might be a better option.

Insurance: This is the most expensive consideration after the vehicle itself. Neil Richardson, licensed insurance agent and adviser for The Zebra, says to keep insurance in mind right from the start as you shop for cars. If insurance is an afterthought when you’ve already purchased the car, you could be in for some unpleasant surprises. Further, the car you select will affect your insurance premium if your grad will be on your insurance policy (more on this below).

Maintenance: Consider the expenses related to repairing or replacing parts on the vehicle if it’s damaged in some way. Foreign car repairs may be much more expensive than domestic, but that’s not a hard-and-fast rule. Further, new cars may include manufacturer warranties or maintenance as part of your package, but if your grad is savvy with tools or has an interest in cars, they can take care of plenty of at-home car maintenance issues.

2. Prioritize Safety & Utility

When car shopping, safety should stay top of mind. The Insurance Institute for Highway Safety ranks the safest cars in different categories, from minis to large pickup trucks.

Also think about where and how much your recipient will be driving. If they’re headed for college or a new job in a crowded city, they’ll need a car that fits cramped streets and narrow parking spaces. A new college grad with a quick commute will appreciate a different kind of car than one whose new job requires them to be a road warrior.

3. Insure it

If your gift recipient is a high school grad who lives at your residence, they may get lower premiums if they stay on your policy, but whether that’s possible depends on your situation. If they’re headed to an in-state college or university, they can stay on your insurance policy as long as their primary residence is still your home address, Richardson says. Students leaving the state for college, though, may have to get coverage on their own, as rates are dependent on where the driver lives and “garages” the vehicle.

Remember that if your new grad is on your insurance policy, you could be held liable for damage they cause in an accident. For this reason, Richardson says it’s generally a good idea to go beyond the state-required minimums in liability coverage.

4. Get Your Paperwork in Order

Getting close to a decision? Before you seal the deal, prepare for some extra paperwork. Whether you’re heading to the dealer or buying a car privately, you’ll need to be prepared with the right documentation, such as the recipient’s driver’s license and current insurance, an IRS cash-reporting form and a security report. (Questions? Read more details about each of these documents.)

If You’re a New Grad Who’s Been Gifted a Car

So now you’re the proud owner of a new diploma and a car. Sweet! Take a moment to savor the payoffs for your hard work and generosity of your gift giver.

Once you’ve posted lots of photos of your new ride, you might be thinking about all the new freedom your car gives you or how you’re going to upgrade the stereo system. But there are some other things you need to keep in mind when it comes to how this car will affect your life. Nail down these details and you’ll be well on your way to acing this whole “#adulting” thing.

1. Know the Impact on Your Wallet

Even if you aren’t making payments on your new vehicle, a car can still have a huge impact on your wallet. (Here’s how car insurance affects your credit.) How much will you need to budget for gas, parking, insurance, registration and regular maintenance? Your folks or your generous benefactor may be picking up some of these expenses for you, at least in the short term. Be sure to establish clearly with others about who’s paying what and check in regularly to make sure necessary expenses related to your car are taken care of.

2. Your Insurance History Starts Now

We know that dealing with auto insurance for the first time is complicated, so it’s extra important to be clear on how your policy works, whether it’s in your name or you are on your parents’ policy for now. If you’re a registered driver of a registered vehicle, your insurance history starts now (even if you’re not paying for it), and a clean driving record and demonstrated history of continuous insurance coverage will mean huge savings on your insurance in the future.

If you’re in college, you can start building your insurance record by staying on your parents’ or legal guardians’ policies if they OK it. According to Richardson, as long as the parents’ address is still the primary residence of the student, on-campus housing is considered temporary since students have to leave at the end of each semester, so students can still be covered on their parents’ policy. Once they move off campus to a more permanent situation, i.e., a house or apartment, then they will need their own coverage. (Here are the states where your credit score really matters for car insurance coverage. No matter where you live, it’s a good idea to know where your credit stands — you can find out for free on Credit.com.)

If you’re not in college and you’ve moved away from your parents or guardians altogether and no longer share an address, you’ll have to have your own policy.

3. Keep That Car in Tip-Top Shape

Finally, regular preventive car maintenance will probably be the last thing on your mind as you adjust to college life or settle into a new job. So go ahead and set some reminders in your calendar to take care of oil changes, wiper fluid and other routine maintenance for your car. You’ll prolong the life of the car and make it less likely that problems will pop up just when you don’t need them — like on your Spring Break trip or on the way to a job interview.

Car not in your budget for a graduation gift? Consider these eight graduation gifts your kids will actually use. 

Image: kali9

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The 10 Safest (& 10 Most Dangerous) States for Teen Drivers

An analysis found Mid-Atlantic states were among the safest for teen drivers.

Teen drivers are safer in the Mid-Atlantic states than in the Midwest, according to an analysis by CarInsurance.com.

The website analyzed the number of teen driver fatalities per capita, the strength of each state’s Graduated Driving License (GDL) laws, teen drinking and driving rates, teen emailing/texting and driving rates and average annual insurance costs for teen drivers.

In 2015, 2,898 teens’ passenger vehicle drivers were involved in fatal vehicle crashes nationwide, according to the Insurance Institute for Highway Safety (IIHS). While that represents a slight uptick from the prior year, teen drivers are much safer than they were in the 1970s, when they were involved in close to 10,000 crashes a year.

GDL Laws

CarInsurance.com found that states with strong GDL laws, which limit young drivers, tended to be safest for teens. Strengthening laws in states where they are weak would save lives, IIHS said.

No matter where teens live, they are considered among the highest risk drivers on the road, because of their inexperience. That makes them very expensive to ensure. However, many insurance companies offer discounts to for students with good grades. Check out these other car insurance discounts you should ask about, and remember that many factors, including your credit score, can impact your auto insurance rates. (Your score can also affect your auto loan rate. Check two of your credit scores free on Credit.com.)

Here are the 10 safest and 10 most dangerous states for teen drivers, along with results from a Centers for Disease Control survey asking teens about whether they drank alcohol while driving and texted or emailed while driving.

10th Safest State: Vermont

Teen drivers drinking and driving: 7%
Teen drivers texting/emailing and driving: 33%

9th Safest State: Maine

Teen drivers drinking and driving: 5%
Teen drivers texting/emailing and driving: 39%

8th Safest State: Hawaii

Teen drivers drinking and driving: 7%
Teen drivers texting/emailing and driving: 41%

7th Safest State: Virginia

Teen drivers drinking and driving: 7%
Teen drivers texting/emailing and driving: 31%

6th Safest State: California

Teen drivers drinking and driving: 7%
Teen drivers texting/emailing and driving: 32%

5th Safest State: Massachusetts

Teen drivers drinking and driving: 9%
Teen drivers texting/emailing and driving: 40%

4th Safest State: Connecticut

Teen drivers drinking and driving: 7%
Teen drivers texting/emailing and driving: 30%

3rd Safest State: Pennsylvania

Teen drivers drinking and driving: 5%
Teen drivers texting/emailing and driving: 35%

2nd Safest State: New York

Teen drivers drinking and driving: 8%
Teen drivers texting/emailing and driving: 29%

Safest State: Maryland

Teen drivers drinking and driving: 7%
Teen drivers texting/emailing and driving: 26%

10th Most Dangerous State: South Dakota

Teen drivers drinking and driving: 8%
Teen drivers texting/emailing and driving: 63%

9th Most Dangerous State: Louisiana

Teen drivers drinking and driving: 7%
Teen drivers texting/emailing and driving: 39%

8th Most Dangerous State: Iowa

Teen drivers drinking and driving: 7%
Teen drivers texting/emailing and driving: 39%

7th Most Dangerous State: Nebraska

Teen drivers drinking and driving: 10%
Teen drivers texting/emailing and driving: 49%

6th Most Dangerous State: Mississippi

Teen drivers drinking and driving: 7%
Teen drivers texting/emailing and driving: 44%

5th Most Dangerous State: Alabama

Teen drivers drinking and driving: 11%
Teen drivers texting/emailing and driving: 44%

4th Most Dangerous State: Wyoming

Teen drivers drinking and driving: 10%
Teen drivers texting/emailing and driving: 52%

3rd Most Dangerous State: Kansas

Teen drivers drinking and driving: 9%
Teen drivers texting/emailing and driving: 39%

2nd Most Dangerous State: North Dakota

Teen drivers drinking and driving: 8%
Teen drivers texting/emailing and driving: 58%

Most Dangerous State: Montana

Teen drivers drinking and driving: 11%
Teen drivers texting/emailing and driving: 55%

Image: kali9 

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3 Things You Must Do Before You Lease a Car

Three Things You Must Do Before You Lease a Car

I tend to drive my cars until they die, and a couple of years ago that’s what happened. In need of a new car, but not sure what I wanted for the long-term, I considered leasing a vehicle. But if buying and financing a car seemed confusing, leasing seemed even more overwhelming. I ended up buying instead.

Turns out, though, that while leasing isn’t for everyone, it can have some advantages. Lower monthly payments and more flexible credit score requirements may be two of them.

If you are thinking about leasing, here are three things you can do to help improve your chances of getting approved.

1. Check Your Credit

Your credit score plays a key role in the lease you get. “There are going to be different tiers of credit that will be evaluated,” said Scot Hall, Executive Vice President of WantALease.com, an online marketplace for new lease deals. “If you have better credit, you will get better rates unless it’s a dealer-subsidized lease.”

Checking your credit reports at least a month before you plan to start shopping is ideal, since that will give you time to dispute and fix mistakes. While you are at it, check your free credit scores as well (you can access two of your scores free on Credit.com). You will get an idea of where you stand and whether there are potential issues with your credit.

What kind of credit scores are required to qualify for a lease? “(If) you do have good credit it really unlocks the door to the best lease deals. You’ll be able to take advantage of some of the lease specials,” said Edmunds.com Consumer Advice Editor Ron Montoya.

In addition, it may be easier to qualify for a lease than a loan on certain vehicles, at least when it comes to your credit scores. The make and model of the vehicle you choose will also affect your options. Experian Automotive found, for example, that the average credit score of someone who took out a loan for a new Jetta in the fourth quarter of 2014 was 716, while the average credit score for someone leasing one was 692. But for someone driving a new Grand Cherokee, the average credit score for a loan borrower was 735, while the average credit score for a lessee was 728.

average credit score

2. Know Your Cash Flow

One of the distinct advantages of leasing is that it may allow you to pay less per month than if you financed the same vehicle. According to Experian Automotive, the average monthly payment for a new lease was $420 in the fourth quarter of 2013, and the majority of leases (66%) were for a 24- to 36-month term.

But your lease payments may be lower than a loan payment for a similar vehicle. For example, the average lease payment for a Jetta was $287 while the average loan payment was $389. And for a Grand Cherokee, the loan payment averaged $611, compared to $470 for the lease payment.

average payment

Keep in mind that these monthly payments don’t take down payment or trade-in into account. And if you lease, you’ll either have to turn in the vehicle or purchase it when the lease term is up. “Consumers need to fully understand any potential cost on the back-end and be sure they can meet the terms of the lease – such as mileage limits and wear and tear,” said Melinda Zabritski, senior director of automotive credit for Experian Automotive.

3. Don’t Just Shop for a Car, Shop for a Lease

Unlike auto loans (which are available from a variety of sources including banks, credit unions, dealers and even online), leases today are largely controlled by the manufacturer. “Nearly all leases are done on a captive basis,” said Hall. For example, “Ford Motor Credit Company does most of the leases for Ford vehicles.”

That means you may be able to get a better deal if you are flexible and willing to consider a vehicle from a different manufacturer.

In addition to credit, the company offering the financing looks at your debt-to-income ratio and the “lease-to-value” ratio – in other words, how much you are financing compared to the value of the vehicle, said Hall. If you are having trouble qualifying, you may need to put additional money down or get a co-signer, he adds.

The good news is most people who apply for a lease qualify for one. Lease approval rates during the month of January were above 70%, according to SwapALease.com. Though that’s down from 73% in December of 2013, it’s up from September 2013 when a little more than 62% of applications were approved.

And there’s still another option: If you’re not ready to commit to a two- or three-year lease, you can consider taking over the remaining term on someone else’s lease. As long as your credit is in the same “tier” or better than the person whose lease you are assuming, you shouldn’t have much trouble qualifying, says Hall. Sites like SwapALease.com and LeaseTrader.com help bring together consumers who want to get out of leases and those who want to assume one and allow you to try out leasing without a longer-term commitment.

Image: Len44ik

This article has been updated. It originally ran on March 20, 2014.

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6 Reasons to Leave Your Car Insurance Company

Here are six signs it's time to break up with your auto insurance company.

You might be familiar with a few scenarios that could make your auto insurance rates change: You bought a new car, moved, got in a car accident, or even got married or graduated from school. In all these cases, it’s important to shop around for car insurance to ensure you’re getting adequate coverage — at the right rate — to meet your needs.

Even if you’re happy with your car insurance company, simply checking out the competition on a regular basis (we recommend every six months) can help keep your current rate low because it indicates to your insurance company that you’re on the lookout for better deals, and your insurer will, therefore, be motivated to keep you.

Insurance rates and policy details vary widely by insurer and by person. If you get a quote from a dozen insurance companies, many of the quotes might look quite similar, while others might show your premium varying by hundreds of dollars.

Even if your rates and coverage were equal among a handful of insurance companies, we remind you: It’s not all about price.

Insurance is intended to protect you when you need it — legally, medically, financially. You want to make sure you choose the company and service that meets your needs and has your back. If you’re not getting that support, you might consider changing insurance companies.

The Zebra’s licensed insurance agent and adviser Neil Richardson offers his expert advice on when it’s time to leave your insurance company:

1. Your Rates Increase (And It’s Not Your Fault)

As we’ve discussed, countless factors impact your auto insurance rates, including where you live, what kind of car you drive, your driving record and insurance history, and your personal information such as age, gender, marital status, credit score and more in many states. (You can view two of your credit scores for free on Credit.com.)

When any of these factors change, your rates may change, too. Sometimes it’s for the better (the older you get, the lower your rates drop — until about age 60, that is), and sometimes for the worse (if you cause a collision, your rates could rise nearly 50%!). Long story short: It shouldn’t be a huge surprise.

Because auto insurance companies are businesses that must make money to stay afloat, they may raise premiums for their customers, likely following a high claims payout period in which they incurred hefty losses. You may or may not be able to find lower rates elsewhere (for example, if a violent storm caused damage in a certain geographical area, other insurance companies could be suffering the same losses from big claims payouts), but it’s worth shopping around.

2. Your Insurance Agent Is Inflexible About Your Policy

A big part of the insurance company choice comes down to customer service, and if you aren’t getting the results you expect, within reason, you might consider other options. You should expect a certain degree of flexibility from your insurance company, and if you speak with someone who isn’t flexible with your insurance requests, keep in mind that there are plenty of companies that would like to try to keep your business.

“Changes like updating coverage or adding or removing a vehicle are simple requests, so if you hit a roadblock with an agent, it can be a sign that you need a new insurer,” said Richardson.

You should have full access to your policy and the ability to make adjustments, even mid-cycle, so if you’re told it’s not an option, begin shopping around.

It’s also important to note that you should be realistic about rates. Every time you make an adjustment to your policy, whether you’re adding or removing drivers or vehicles, your rate will change. So, if your rate goes up a little in one of these instances, it likely doesn’t mean you’re being treated unfairly. Here are some things that may impact your car insurance.

And/Or a Member of the Company Is Rude to You

It goes without saying that if any member of the customer service team or an agent is rude to you, you should consider taking your business elsewhere.

“There are just too many insurance options out there for you to stick with a company that doesn’t value your business,” Richardson said.

There are certain issues outside a representative’s control, but you can always ask to speak with a supervisor to voice your concerns. And if you end up switching companies because of a customer-service issue that isn’t resolved to your satisfaction, mention the incident to your new insurer to avoid going through the same headache.

3. You Notice Changes to Your Monthly Bill That You Weren’t Informed About

If you’re billed monthly for your policy, the price should be consistent each billing cycle.

If you notice a change in your bill for which you were not contacted, it can be a sign that something’s amiss with your insurer.

“Sometimes policy updates get sent to your email spam, and sometimes phone calls or mailings are missed, but if you notice a change in your rate, you should look into it immediately,” said Richardson.

If you don’t feel you were adequately informed, shop around for a new company that meets your customer-service needs.

4. You Want 24/7 Agent Access

Many local insurance agencies aren’t available to customers at night or on the weekends, and while often this works just fine, if you’re the type of person who needs more access, you might consider a switch.

For instance: If you buy or lease a new car on a weekend and your insurer doesn’t have weekend availability, you might not be able to take your car home right away. Many dealers require proof of insurance (especially if you’re leasing or financing) before they allow customers to drive off the lot.

Plenty of big national insurance companies have 24/7 agent access, which can be a plus if you’re the type of person (or family) who regularly changes vehicles. Keep in mind, your local agent might be willing to make an off-hours exception for your insurance needs if you give them advance notice.

5. You Want to Conduct Insurance Business Online

Some of us are more comfortable conducting business online, and that’s OK. If you want to add or remove drivers or vehicles without speaking to someone on the phone, you’ll need an insurer who can meet your needs.

Insurers offering online access tend to be larger national brands, but every company is different, so check out all the options in your area. Most insurers spend a lot of money to allow customers online access, so if you want to know about an insurer’s online policies, just ask, and they’ll usually be happy to help you navigate.

If online access is important to you, remember that it’s just one piece of the insurance puzzle. You should always consider the importance of adequate coverage, as well as service and rates.

6. You Want to Add Drivers to Your Policy

When you have a new spouse, a newly licensed teen driver or a new roommate, you might consider adding them to your own auto insurance policy. Adding extra coverage or drivers to your policy often shifts both your needs and the discounts you qualify for enough that you might find you fit better — and save money — with another company.

Life changes — big or small — could put you in a new risk category, which might mean you’re a better fit with a different insurance company,” Richardson said. “There’s not an advertised rate for life-event changes, so you’ll need to shop around to see if you can get better coverage prices and discounts from other companies.”

If you’ve been with a company for a while, particularly a local one you know, the idea of changing companies might feel uncomfortable and make you feel a little guilty. But when it comes to insurance, you need to do what’s best for you.

Image: Mixmike

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The 14 Longest-Running Vehicles on the Road

These cars are the most likely to keep running up to 200,000 miles and beyond.

Image: Tomwang112 

The post The 14 Longest-Running Vehicles on the Road appeared first on Credit.com.

The 20 Worst States for Filing an Auto Insurance Claim

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Image: RuslanDashinsky

The post The 20 Worst States for Filing an Auto Insurance Claim appeared first on Credit.com.