Automobiles

When Do You Donate A Car?

November 8, 2017 By Twila Van Leer

Car Donation — Remember that you must itemize deductions if you want to claim a tax benefit.

There are several reasons why you want to donate a car to charity when it has outlived its usefulness to you. But to maximize the tax benefit, you need to discuss issues before calling the charity to which you intend to donate.

Remember that you must itemize deductions if you want to claim a tax benefit. You could itemize even if the donation is your only deduction, but that may not be the best choice.

Consider the math: If you are in the 28 percent tax bracket and the allowable deduction for the vehicle, you will save $280 in taxes. If you are in the 15 percent bracket, the same allowance will net you just a $150 reduction in your taxes.

If the car donation is your only deduction, you would fare better claiming the standard deduction. The only way in which a car donation improves your deductions is if you have a number and their total, including the car, exceeds the standard deduction.

The donation must be to a charity that qualifies. It must be recognized by the IRS as a 501c3 or a religious organization. To determine if the organization you want to donate to meets these specifications, call the IRS toll-free number, 877-829-5500.

Fair market value is defined by the IRS as “the price a willing buyer would pay and a willing seller accept for the vehicle.” Under current IRS rules, there are very specific conditions under which you can claim a deduction at fair market value: If the charity auctions the vehicle for $500 or less, you claim either the fair market value or $500,whichever is less; If the charity plans to make “significant intervening use of the vehicle” you can claim fair market value; If the charity says it intends to make a “material improvement,” rather than just routine maintenance before disposing of it , you can claim fair market value; or if the charity gives or sells the vehicle to a needy person at a price significantly below fair market value, you can claim the whole amount.

Automotive website Edmunds offers an “Appraise Your Car” calculator to help you determine fair market value. IRS Publication 4303 also offers a vehicle pricing guide.

Only about 5 percent of donated vehicles meet the stringent requirements for use by a charity. About a third are junked and the rest are auctioned to benefit the charity.

You may be able to give a more substantial amount to the charity if you sell the vehicle and donate the cash. The goal is to maximize your tax deduction, so consider the possibilities and then make the move.

Tips For Buying A New Used-Car

November 6, 2017 By Twila Van Leer

Those who buy used cars know that it’s a crap shoot. You can luck out with a diamond or end up with a lemon. There are no guarantees, but some guidelines may minimize your chances for ending up with the lemon.

Begin by assessing your needs. If you commute and want something with good mileage, that’s a different thing from wanting a vehicle with four-wheel drive and traction control. If you have a camper, jet skis or boat to tow, there is another list of must-haves.

Know up front what you are looking for and what you can eliminate from the search before you hit the lots.

Know what your budget will allow and don’t buy something you can’t easily afford. A time-tested guideline suggests that your total monthly auto expenses should not exceed 20 percent of your monthly income, hopefully less. A number of useful auto expense calculators are available online. Edmunds offers a “How Much Car Can I Afford” calculator, for instance.

Get pre-approved. You can simplify the shopping process by knowing in advance how much your lender is willing to finance. Being able to pin down that amount may give you some bargaining leeway when you begin the search and possibly lower the interest rate you’ll be paying.

Don’t overlook fees and the down payment you’ll need up front (usually 10 percent of the cost.) Fees include sales tax, document preparation and registration. Request a breakdown of fees and ask questions before signing. Don’t forget to add the cost of car insurance, which is required the minute you leave the lot.

Don’t be in a hurry. Shop around, either online or at the local lots. Check out the private owners and dealers in your area by perusing their websites. Your best chance of avoiding the lemon scenario is to plan well, be realistic about the financial commitment and take awhile so you avoid buyer remorse.

Should You Refinance Your Car

November 1, 2017 By Twila Van Leer

Car Refinancing — Should you look at redoing your car loan? There are some reasons that it is a good approach.

When your finances get pinchy, refinancing your larger loans is a tempting idea. Should you, for instance, look at redoing your car loan? There are some reasons that it is a good approach.

Your own situation, lifestyle and other financial commitments should all be considered before you dive into a refinance, but here are some tips:

Car purchases in general have a lot of options. If, on second thought, you think you may have made the wrong choice, reconsider. Paying off the loan more quickly can save as much as $1,000 over the term of the loan. It makes it worth the initial stress of making slightly larger monthly payments.

If interest rates have dropped while you have been paying on the vehicle, refinancing is a good idea. If the deal originally called for a interest rate higher than 6 or 7 percent, you almost certainly will see a savings at a lower rate. Getting your financing through a financial institution rather than through the dealer may get you a better deal. Do a little comparative shopping and see where you can get the best interest.

If during the time you have been paying monthly installments your credit score has improved, you have a bargaining chip for better terms, especially if the car payments, in particular, have been regular and on time. If getting out of debt has been a target you have faithfully zeroed in on, you can reward yourself by looking at a car refinance that will lessen the pressure a bit.

If you have leased a vehicle and the lease is about to expire and you are debating whether to purchase the car or trade it in on something else, consider carefully. The car industry has reported a glut in leased car returns and you may be able to capitalize on that fact. Don’t jump into a new arrangement until you have done some research.

If, in the end, your objective is to have more free money, then a refinance extending the term of the loan, with smaller monthly payments, may be what you need. The negative, of course, is that you will be on the hook for a longer period of time, but freeing up more money will help take away the sting.

Tips For Holiday Car Deals

December 17, 2015 By Twila Van Leer

Many Americans like to make big-item purchases – cars, for instance – part of the excitement of the holidays. There’s something about a big red bow atop a new vehicle that makes the purchase memorable.

And the car dealers have learned that piggy-backing on such events as Black Friday, offering good deals and holiday discounts, helps their trade.

For instance, Lexus, trying to overtake Mercedes and BMW as leaders in the luxury car market, has its “December To Remember” promotion in full swing. Leases on low-mileage cars in the $40,000 range are going for $319 per month with a $3,000 down payment.

GM’s Chevrolet started heavy-duty advertising on Black Friday weekend, offering zero percent financing for six years or 20 percent off the sticker price on many of its 2015 models. And other manufacturers are making similar offerings to attract holiday sales. If you are in the car-buying mode, here are some things to keep in mind.

You should be able to wangle at least 10 percent off the sticker price of an unsold 2015 model, possibly more on higher-priced large trucks and SUVs. Some Ford dealers have made a cost reduction of more than $9,600 on some 2015 F-150 trucks. That’s the country’s most popular vehicle. Lease deals are low because interest rates are low and resale values high for vehicles coming off lease. It’s nice to have the 2015 stock off the lot so the 2016 models can show to best advantage. But dealers advise against buying something less than satisfactory just because it appears to be a good year-end deal. If you don’t like something about the vehicle when you take it off the lot, you’ll like it a whole lot less down the road.

Understandably, dealers make the best deals on the models they have the most of on hand. Slow-selling midsize cars, small vehicles and electric/gas hybrids are in that category. The manufacturers sometimes make incentives available to dealers to help promote sales of the slow-selling models. It pays to shop around rather than make a hasty decision.

Automakers keep tabs on inventories by dividing sales per day into the number of vehicles on the lots. A 60-day supply is considered adequate.

The deals are out there, so if your merry Christmas includes a new vehicle, proceed. But proceed with caution and take a clear-eyed look at all the options so you’ll drive into the New Year with the best possible deal.

How Wise Are Lengthy Auto Loans?

October 24, 2015 By Twila Van Leer

When you buy a new car with terms stretching five years or even more, what are the financial consequences?

Obviously, you’ll pay more interest. But in the meantime, your earnings likely will grow and the monthly payments will be more affordable. You might be able to increase your payments, erasing the effects of the interest.

Car buyers are increasingly using this tactic to pay for vehicles, which are becoming more expensive all the time. Experian Automotive reports that 30 percent of all new vehicles purchased in the first three months of this year were financed over six to seven years. Sixteen percent of used vehicles, ditto.

Lower interest rates, more extensive manufacturer warranties and the better durability of today’s vehicles make the longer pay-off periods acceptable to many buyers. People today tend to keep a vehicle longer as well, on average about eight years, according to automotive sources.

Before diving into a long-term loan for a car, consider these factors:

Look at overall costs, not just the monthly payment. The salesman on the lot will try to focus your attention on monthly element, but consider total price, down-playing sticker total and interest. Keep in mind that the interest on an auto, unlike mortgage interest, is not tax deductible.

If you can come to the lot with a preapproved financial guarantee in hand, you can negotiate based on total cost and consider the details later. Compare the preapproved amount with the dealer’s offer and then make a decision. An Edmund’s interest rate calculator will provide an honest appraisal of how much you will pay over the term of a six or seven year loan. The calculator can be accessed at http://www.edmunds.com/calculators/simplified-pricing.html

How long do you estimate you will have the vehicle? If you expect that you will have it for some time after it is paid off, you can look forward to a period free of car payments. The trade-off may be more costs for car repairs and upkeep. The amount you can expect for trade-in value also will have declined.

Most experts in the field discourage using a long-term loan to purchase a used vehicle. Suppose your choice of a used vehicle is three years old. If you are still paying on it seven years later, it is 10 years old and for many vehicles, that is approaching the end of its usefulness.

Depreciation is a factor. In the case automobiles, it begins the moment you drive it off the dealer’s lot. If you choose to sell the car in the first few years, you are looking at a loss if depreciation has outstripped the value. And the potential for accidents may enter into the picture. If you total your vehicle when it is three years old, for instance, it’s likely you still owe more on the loan than the vehicle’s current worth. That’s known in the trade as being upside down on the loan.

A long-term loan may be the answer to your desire for a newer, safer car, but don’t leap until you are sure of all the financial facts.

Automobiles

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