The answer to an extent depends on the state you live in. Basically, there are two types of states, those in which the registered owner holds the title and ones in which the financial institution holds the title. If you find yourself in the position to assist someone close to you with the purchase of a new or used vehicle, but want to maintain the security of the loan, you must list yourself as the lien holder. Every state has their own process or form for this, but many include a section on the back of the title itself that allows you to add the lien holder information. Once this is signed by both parties and the vehicle is registered, the person providing the loan will be the senior creditor on the vehicle. This would allow repossession of the vehicle for any reason provided the states due process requirements are met. I would definitely check with your friendly neighborhood attorney before attempting repossession. And never confront anybody directly about these matters, you never know what may be said or done.

So the answer to the question is simply to make sure you are listed as the lien holder on the title and you will be all set. Remember that at the time that the debt is satisfied the lien must be released, which requires a little additional paperwork. Another recommendation I would make is to be sure to have directions in your estate for resolution of this in case something happens to you before the debt is satisfied. Better safe then sorry.

The question asks if the current model year, in this case the 2009, is a year old. The answer to this is very simply, YES. As far as any lender or leasing company is concerned the car is a year old the moment a new model year is available. Lets talk a little about leasing for a moment since this will illustrate the concept better. A component of the lease is the residual value. The residual value is the estimated value of the vehicle at the end of the lease. This value is determined by the leasing company and is non-negotiable. The higher the residual value, (or the less value the car is expected to lose) the lower the payments.

Since the new model year is available sometime during the previous calendar year (i.e. 2010 model bought in 2009) a new car bought in the beginning of the model year is worth more than one that is bought at the end of the model year (since the new one is coming out). What happens is that as the model year progresses, most leasing companies will reduce the residual value for newer auto lease contracts. So if you take a percentage of the estimated first years depreciation and divide that over a year that would be about the reduction of the residual value. The percentage used varies by leasing company.

So, the difference in the residual value between a new car bought at the beginning of the year and the end of the model year could vary by thousands. This often means that you can lease a new model for less than you can the older model. Tricky huh.

Okay, so back on track. The above long-winded explanation was designed to show you that lenders and leasing companies believe and are willing to bet that the value of a brand new 2009 is thousands less than the 2010 sitting beside it, even if there have been no feature or design changes. If there is a redesign, the difference may be staggering.

In my opinion there are very few instances when it makes financial sense to buy the outgoing model. Especially in an economy like we are in. The fact is that the invoice price (or whatever the dealerships true cost is) does not decrease with time so the question becomes how much are they really willing to lose to sell that car. Most of the time it is no where near the amount the new car has depreciated over the year. This means you are in a lose lose situation, and the one with better information loses less – usually the dealer.

NEGOTIATION TACTIC: Ask them to pull a used car booksheet on the exact car you looking at with 12,000 miles on it. This is a HIGH estimate of what you should pay for the car. Watch how fast the switch you to the new model and then wait for a less savvy buyer to take the older model for a few hundred dollar discount (that they would have gotten anyway on the newer model). Why do I say compare it to a used car with 12,000 miles? I realize this car is new – you are taking a page from the dealers trade-in playbook. They will never, never give you value for low mileage on a new car, but you can be sure they will ding you hard if you are over mileage. You are basically trying to get a best estimate of what the value is of the car if you were to try to sell or trade it immediately. If you can get close to this price than go for it, maybe.

An additional thought: Remember that if you are financing the new car you are looking at the loan balance decreases much slower than the value of the car. So if you are financing a car that is a year old, you are much farther underwater during the loan than you would be with a newer model. Don’t start any farther behind the 8-ball than you have too.

My final opinion, and I can only speak for myself. I would never buy or lease the outgoing model year. It is a bad financial move. The best thing to do if you want to buy the old one to get a great deal, find a private party selling it and buy it from them using the negotiation tactic above. Unfortunately, the truth is they are likely so far upside down on the car, they couldn’t afford to sell it to you for the real value. So back to the new 2010.

I welcome all feedback and comments. Thanks for reading.

The principal of GAP insurance on a new car purchase is that in the event that the car you bought is stolen or wrecked, the GAP insurance will pay the difference (or “gap”) between what you owe on the vehicle and what the market value is of the car. This is important to know because the nature of automotive financing is that as an amortized loan the majority of the payments in the beginning of the loan are mostly interest. So you may have made a years worth of payments and you still owe as much as you borrowed initially. This is sad but true. The insurance company, who you faithfully pay every month, wants to pay out as little as possible for the loss. So depending on the type of car and the specifics of the car buying deal the difference between the insurance payout and the auto loan could be substantial, up to and sometimes exceeding 20%. So on a $30,000 car, the gap could be over $6,000. Without GAP insurance this is money you owe the bank. They do not care where the car you bought is or what happened, they want to be paid.

I have seen people that have destroyed their credit by not making good on this obligation. It is very tough to tell someone who has no car that they can’t buy a new car because of this situation. I have also seen a person who was able to buy a new car but needed to tack $9,000 onto the loan for the gap on the car that was stolen. That equates to about $180 extra a month. Just because they didn’t buy GAP insurance.

So back to the question, is buying GAP insurance on your new or used car a good idea? First of all, GAP insurance should cost between $250 and $500. Any less than that, be skeptical. Any more, tell the dealer to go fly a kite. Or whatever words you want to use.

Buying GAP insurance is a good idea if you are financing or leasing a car, truck or SUV with little or no money down. If you are putting down more than 20% PLUS taxes, title and license then it becomes less of a benefit and I would probably skip it unless you are buying a car that is known to lose its value quicker than most.

If you have ANY negative equity that you are rolling into the transaction without a doubt get GAP insurance.

I have seen dealers sell GAP to people who pay cash for a car, this is basically stealing. Do not fall for that one. If this happens to you or someone you know, demand a refund. If they resist, the Attorney General of your state would love to hear about it.

Another thing to know about GAP insurance is that it is cancellable. Meaning if you sell the car before you pay it off there may be a pro-rata amount of the cost that you can recoup. Call the GAP company to find out.

CONSUMER ALERT: Many auto insurance companies are now selling GAP or something similar as an addon to car insurance policies. I would not recommend this at all. This is a huge conflict of interest. Because they are determining the value of the car and therefore the size of the gap, you could be in the position where they decide to fix a wrecked car that should be totalled because it is cheaper for them. You don’t want to end up in an unsafe or worthless car because your insurance company fixed it when they should have sent it to the scrap yard.

Dan, I hope this answered your question and that other car buyers out there can benefit from this post. Thanks for reading the Intelligent Auto Guide.

Buying a used car from a dealer can cause even more stress and anxiety than buying a new car. Why? Because there are no two identical used cars, so apples-to-apples comparisons are almost impossible. Research and preparation are crucial if you want the best deal. In most cases you will pay more to buy a used car from a dealer, but this is not always without benefit.

The Auto Buying Guide covers the details and steps of how to buying a used car from a dealer. This post will discuss the advantages and disadvantages. The advantages of buying a used car from a dealer are considerable. The biggest advantage is the dealer is required by the local and Federal Government to stand behind the car they sell. The guaranty is limited, but it does cover you for enough time to identify any serious underlying problems. Another advantage is that you can drive your old car in and drive a new car out the same day. Financing is also much simpler when buying a used car from a dealer. You can still finance on your own, but just about any lender or auto finance company will grant a loan on a used car that is at a dealership.

The disadvantage of buying a used car from a dealer is that there is likely going to be some haggling, so you need to know what you are willing to pay. Do some research on Auto Trader to see what your chosen model is selling for on the open market. When you are at the dealership ask for the “Book Sheet”. This is the list of equipment, number of miles and approximate wholesale value. They don’t have to show it to you. But the better deal you are getting the more likely you are to see the Book Sheet, since they will use it to show you what a “great deal” you have. The important thing to know is what is available on the market at other dealers. All of them think they have the best selection at the best price. It is up to you to determine if that is true. You will also be paying sales tax and fees when buying a used car from a dealer, so include that in your budget.

If you want to learn everything you need to know about how to buy a used car at a dealer, check out the Auto Buying Guide.

There are two different types of auctions, dealer auctions and all the rest. Dealer auctions are conducted by various auctioneers across the country including Mannheim. In order to buy at or even visit these auctions you need to be a licensed auto dealer in your area. These auctions are where auto dealers auction used cars that were traded that they don’t want or can’t sell, rental car companies unload entire fleets, or wholesalers sell cars they have acquired from their sources. Finance companies and lenders will also auction repossessed cars here as well. These auctions are the most likely to have a great selection of quality used cars.

If you do not have an auto dealers license than you need to find a dealer that is willing to acquire a vehicle for you. You can find these on Craigslist sometimes or in the newspaper. Any used car dealer (and new car dealers in many areas) is able to do this, the question is what level of service you will receive. The advantage to buying a used car in this manner is that you are likely to get a great deal at prices below private party prices. With the right dealer at your side, you can find some real gems.

There are disadvantages though. This is a professional’s game, and it is no joke. The auction moves fast and you will be bidding against people that do just this for a living. You could easily get roped into paying more for a used car than you should. Basically, if you have the highest bid, you probably overpaid. So make sure you have done your research and work with someone you trust. Also, you will not be able to test drive the car or be able to have a comprehensive prepurchase inspection done. So there is a certain leap of faith required.

Depending on your state, you will likely have to pay sales tax and other assorted fees since you have to conduct the transaction through a licensed used car dealer. Depending on the dealer are working with you may have to pay for the car at the auction itself, so if you are planning on financing the purchase of the used car this can complicate things.

The rest include any auction that is conducted by government agencies or any auction that allows any average Joe to participate. I would not recommend buying anything at any of these, unless you are prepared for the possibility that you will end up with a piece of junk. These auctions are often promoted as having repos or trade-ins, but likely they will have one or none of these. I would stay away from these.

Interested in learning how to buy a used car from a dealer? Read part 3.

When you are buying from a private party there are some distinct advantages and disadvantages. The advantages include dealing directly with the owner of the car. There is no middle man, no run around, it is nice and easy. You can often get a better deal on a used car from a private party. Another advantage is that some states do not require sales tax on a private car sale; this alone could save $1,000s.

However, there are some disadvantages as well. First of all, if the person you are buying the used car from has financed or leased the vehicle then they do not have the title, which means you cannot drive off with the car clean and clear. It can take up to 10 business days to get a title from a lender. So basically, you hand over your hard earned money to someone you don’t know, accept some sort of agreement (make sure it is in writing, ideally a Bill of Sale) and wait for the title. Where this gets complicated is what happens to the car in the meantime? You paid for it, but it legally belongs to the seller. So do you take the car? Not likely, the seller is still responsible for the car. Do they keep the car? You already paid for it. What if they put miles on it, or scratch it, or wreck it? Then what? See the problem?

Another potential pitfall when buying a used car from a private party is that unless that car is still under factory warranty, what are you really getting? If the transmission goes out the next day, week or month, then how good of a deal did you get? You are unprotected. A prepurchase inspection is always recommended, but it can’t protect you from what might break, just what is broken or showing significant wear. A resource for you is a used car history report from a service like AutoCheck, or Carfax. These services compile information on vehicles. While not always accurate they can help you identify problems such as if the car has a salvage title, how many owners it has had and where it came from. This last one is important because there are a lot of hurricane damaged cars around being passed off in far off states as quality used cars. The history reports will only show accidents if there was a police report filed and/or the auto body shop reports the damage.

Buying a used car from a private party using financing can be a challenge as well. There are fewer lenders that will finance a private party used car purchase because there is greater risk to the bank due to the aforementioned factors. The ones that will often charge a higher interest rate to do the deal.

Read the next section of this post if you are interested in finding out how to buy a used car from an auction.

So the strategy is this: Since most people think that the best day to buy a car is at the end of the month, you should be like the salmon swimming upstream. Because there is traditionally a lot of business on the last day, or couple days of the month, the dealer tends to be less motivated to really drop their prices. They say they do, but it is not always the case. They can be more picky about there deals.

The surefire best day to buy a car is the first Tuesday or Wednesday of the month. It is even better if it is right after a holiday weekend. The reason is that the masses have come and gone and this period is the absolute slowest time of the month. To the dealer this is no excuse for not selling cars, so they are extra motivated to sell cars. If you are the only customer there, they will bend over backwards to make sure you buy a new car.

An important thing is remember is that car sales starts over every day for the dealer, they could have sold 100 cars the day before, if it is 5pm and they have only sold a few, they will do whatever it takes to make a deal. Use this to your advantage.

Have you read it? Good. Okay, so here we go. When you are considering leasing a new car around the time of model year change the effects of the depreciation are more pronounced. In order to follow this you need a basic understanding of auto leasing. In essence, the residual is based on the projected value of the vehicle at the end of the lease term. Because the leasing companies take all the risk on the future value of that car, they reduce the residuals as the model year progresses. And remember, the lower the residual the higher the payment. So at the end of the model year the residual is as low as it is going to get since the car is essentially a year old. Keep in mind that every $1,000 the residual drops, your payment goes up by at least $29 per month, plus interest on a 36-month lease. This is a much larger effect than the same reduction on a purchase, since the term is generally longer.

So. Conversely, the residual is highest at the beginning of the model year. When comparing leasing the outgoing model with the incoming model it is not impossible that the payment on the incoming model is actually lower than the outgoing model, even if they are charging you less for the old model. It is important that you compare for yourself and don’t get snowed into leasing a year old car.

The first thing that needs to be looked at is how long you plan on keeping the car. While it is true that you will save some upfront money by buying last year’s model. And after all, it is a brand new car. But there is more to it than that. First of all, why are you saving money? There are 2 reasons: Generally speaking, a dealer will be more likely to offer a bigger discount on the last year’s model to make room for new inventory. The other reason is that often auto manufacturers will adjust their base pricing sometimes throughout the year, but almost definitely at the beginning of the new model year. So basically, even if there have been not changes to the car, the new model will be a couple hundred dollars more than the old model sitting next to it. So between these two factors you may save a few hundred or a few thousand. But is that really worth it?

An important point to remember before you decide what is the best month to buy a new car is that cars depreciate, and fast. So basically, once the new model year hits the dealership floor, the last model is a year old. If you don’t believe me, try to trade that car in, or just look at Kelley Blue Book and you will see. Assuming that the average car loses 20% of its value in the first year (some are better and some are worse), that means that the $20,000 car you just bought is instantly worth $16,000 before you have even driven it home. So if you can get the dealer to reduce his price by 20% you are even money. Good luck with that, I have never seen that happen.

If you are interested in the best month to lease a new car visit this post.