Monthly Archives: December 2013

Car Buying: Wheeling & Dealing

So, you’re looking for a new ride and asking yourself:
• New or used?
• Car or truck?
• Options, features?
Whatever you decide, doing your homework FIRST is a must before you go and shell out big bucks. You want to compare the different products and prices out on the market.

NEW vs. USED
According to Autotrader.com, “For most people, we think it makes more sense to buy used, but there are some exceptions. Here are four questions to help you be a smarter consumer and navigate the new-used decision-making process:

Do you have a down payment or a trade-in with equity?
If your credit is good, you may have less problem buying new with little or no down payment than buying used. These are typically in the form of rebates, cash incentives and discounted financing. Financing a used car will almost always require money down, whether in cash or a trade-in with equity.

Is there a good reason you, rather than someone else, should take the huge new-car depreciation hit?
Because a new car loses between 20-30% of its value the moment it rolls off the dealer’s lot, buying used can be smarter. Some cars can depreciate up to 50% in the first three years.

Depreciation has little effect on owners who drive a car until the wheels fall off. After more than a decade or two, that old beater won’t be worth much in terms of trade-in or resale value any way.

Can you afford to maintain and repair a used car?
No matter how well a car has been cared for, at 30,000 plus miles, some bits and parts are going to naturally wear out; consequently, maintenance and replacement costs will be higher for a used car than a new one. Unlike depreciation, repairs and maintenance are hard costs that must be addressed as they arise. These are costs you will need to budget in. Do you have the discipline to do that?

If you buy a nearly new used car, you may inherit some portion of the new-car warranty providing some protection for a few months or even a couple of years. Many car companies now provide powertrain warranties for five, six or even ten years. But be sure to check the automaker’s rules on transferring the warranty before you buy.

Can you cope with the time a used car spends in the shop?
Not only does a used car cost more to keep operating, but it will likely spend more time in the shop. It may only be a day here and there, but could be a week or more for bigger repairs.

On average, new cars spend less time in the shop. Moreover some manufacturers or dealers offer loaner cars during routine maintenance visits while a car is under warranty. [Keep in mind new vehicles have fewer repair problems, so paying extra for an extended warranty is usually unnecessary.]

Once you answer these questions for yourself, you will figure out whether it makes more sense for you to buy a new or used car.”

OTHER CONSIDERATIONS
A used vehicle will usually cost less and you may be able to buy it without financing which would save you in interest charges. And, if you pay cash for the vehicle, you can get by with liability insurance; however, your vehicle will not be covered against damage, loss or theft. If you do finance it, the lender will require you to purchase full coverage insurance (expensive) which drives up the cost.

But, responsibly managing your loan can help you to build your credit history which will help you qualify for other types of credit.

STEP ONE: Needs vs. Wants
Determine what you really need then go on to what you want and prioritize those extra perks.

Time needed: Consider how long you need the vehicle. Are you planning to use this vehicle for a short period, say a year or two, or is this something you plan to use for a long time?

Purpose: Is this vehicle just going to be used locally, to and from school and work? How far is that? Or, are you planning to drive cross-country to visit family and friends on a regular basis?

Type, size, style, features: Do you need a car or truck? 2-door or 4-door? Two-seater or minivan? Identify the features you need vs. what you want – in Houston, A/C is a must but heated seats probably not so much.

Money: Carefully evaluate how much you can spend. Be realistic about what you can afford to pay monthly on your vehicle (don’t forget insurance). Include fuel type and consumption – you don’t want to get stuck with vehicle that only uses premium and gets 8 miles a gallon! And remember, the cost of repairing foreign or antique cars could be high.

Model: Once you have decided on a type of vehicle, you should check out different makes, models (Ford vs. Toyota vs. Nissan vs. Chevy, etc.) and features included.
Some websites like MSN Autos (see below) will allow you to “build” your vehicle using the dealers’ cost for options so you can get a good estimate of what you will pay.

Reviews: Look up information ratings and recalls.
– Natl. Highway Safety & Transportation Agency: http://www.nhtsa.dot.gov
– Edmunds: http://www.edmunds.com
– Kelly Blue Book: http://www.kbb.com
– MSN Autos: http://www.autos.msn.com

STEP TWO: Where to buy?
If you’re not rolling in the dough, you may want to consider a used car. But, where can you find quality used vehicles?

Used Car Superstores: these offer a high-tech, no-haggle way of buying a used car and some will have limited warranties and possibly financing options. BUT, used car financing is usually pretty pricy because of high interest rates.

Car Rental Agencies: often they will offer 1 or 2-year old vehicles with less than 25,000 miles on them. Good records are kept on these vehicles and it is possible to get a limited warranty. Wear and tear varies and can be heavy due to the number of different drivers.

Banks & Loan Companies: in order to collect on unpaid loans, these companies sell repossessed vehicles. The type of vehicles and their condition varies greatly, but it is possible to get a good price.

Private Owners: individuals often sell their vehicles in classified ads. It is possible to get a well-maintained car cheaper than you could at the dealership. If you go to a private owner make sure to get proof of legal ownership before you hand over any money and try to get the maintenance and repair records, too.

Dealerships: Many car dealerships offer “Certified” used vehicles which usually means it is a late model vehicle, usually with low mileage, that passed a dealer inspection. Prices are usually higher because these cars many times come with a limited warranty and can be financed. Be aware, though, used car loans generally charge the highest interest rates.

Auctions: Government, private, and online vehicle auctions are becoming increasingly popular. Some common things to remember about buying vehicles from auctions are:
a. you will need funds for on-the-spot payment,
b. getting a warranty is rare, and
c. it is unlikely that you will be able to take a car to a mechanic for inspection before you purchase it and you may not even get a test drive!

STEP THREE: Check it out!
It is always wise to carefully inspect a used vehicle before any money changes hands.

History: Several companies provide a report of a vehicle’s repair history using the vehicle identification number (VIN) – just go to a search engine like Yahoo or Google and type in “car history.” You can see if the car is a lemon, a salvaged vehicle or if it has been in a major accident BUT some issues may still go undetected. You should also get a copy of the car’s service record, which can help predict whether the car is likely to perform well for another few years.

Exterior: Walk around and check for rust, blisters or mismatched paint, lights, loose bumpers, misaligned body panels. Make sure all the turn signals and headlights are in good working order. Open and close the doors, windows and trunk– if they don’t close tightly, it could mean the car was in an accident. While walking around, pop the trunk and if there’s a spare tire, remove it – if there is rust in the wheel well, chances are it has been underwater (not good).

Interior: Ensure all the following are in good working order:
• Seat belts – try each one out to make sure they buckle and unbuckle properly.
• A/C, heating, radio, mirrors, hand brake
When checking the upholstery, see if there are any horizontal water marks on seat backs – if so, it is another indication the vehicle may have been flooded.

Inspection: Have a mechanic inspect the vehicle. Take it to a reliable repair shop or auto diagnostic center and have the mechanic give it a once-over. You will have to pay for this service, but the money you invest up front may save you many more dollars down the road. Ask for a written estimate of the costs to repair any problems the mechanic finds, and use that estimate as a bargaining chip when you make your offer.

Make sure the vehicle has a current state inspection sticker otherwise you’re responsible for getting that before you can legally hit the road.

STEP FOUR: Before you sign on the dotted line…
• Take your time to read and understand the entire written agreement, it is legal and binding once you’ve signed it. Ask questions and don’t sign unless you are satisfied with the answers.
• Be sure all blank spaces are filled in, any of the salesperson’s verbal promises are included, and any type of warranty is clearly spelled out.
• If you are required to make a deposit, ask whether it is refundable, and under what circumstances, and make sure the information is also included in the contract.
• Be sure to get a signed statement verifying the mileage at the time of sale. Most state laws require dealers of used cars to provide the buyer with this information in writing.
• Before you buy, know what safety requirements are mandatory in Texas. Older vehicles may not have airbags, child safety seats, seat belts, anti-lock brakes or security systems.
• In Texas, unless it’s spelled out in writing, the vehicle is sold “As Is” meaning any verbal promises or warranties do not have to be honored.
• Also, in Texas, the “Lemon Law” helps consumers to get NEW vehicles repaired or replaced if it has a recurring problem. If you buy a used car, the Lemon Law doesn’t apply.

“WOULD I LIE TO YOU?”
Whether you buy new or used, look out for dishonest salespeople who will do their best to squeeze every last penny out of you. Here are some of typical come-on lines they may try to use:

• “We’re losing our shirt on this deal!” You should have done your homework online and know EXACTLY what they’re making on the deal.
• “The website prices are wrong.” Again, doing your research ahead of time will tell you what you should expect.
• “It’s not exactly what you want but…” They may have something on the lot that’s very close to what you want but it probably includes a lot of extras you didn’t bargain for.
• “This car won’t be here tomorrow…” Then, they’ll try to scare you by giving you the old “now or never” routine – always take ample time to consider any offer.

Use the same common sense you would when you’re making any kind of large purchase and always check out the dealer with the BBB: http://www.bbb.org

For more information, check out our “Resources”

Scams May Vary but the Techniques Are Always Similar

by Barbara Parrott McGinity, LMSW

Last month’s column on the Grandparent Scam was originally written nearly 5 years ago but I repeated it because I still hear about the scam even today. What I did not expect was the number of calls from readers.

As with all of these columns, I give you my phone number because I welcome your calls. Your stories and experiences give me fresh examples of how scammers continue to target older adults. This column seems to really hit home as it has generated the greatest response to date.

While I love to hear from you, it has mixed results. Some people call to tell me they had a suspicious phone call, but did not respond. That gives me cause to cheer.

Regretfully, some people call because they have been victims and want to know if they can get their money returned. Sadly, the answer is no. Once you have sent that wire or given the Green Dot number over the phone, the money is almost immediately picked up by the criminals overseas. These calls make me sad and I realize the importance of educating people about how scams work.

How are we going to stop these scammers? One way is for you to share your experiences with others. When a scam story hits close to your own experience, tell people what made you suspicious and how you stopped yourself from being a victim.

Here are a couple of the stories I heard from callers. Maybe this incident or something similar happened to you. If so, cut this column out and share with friends, neighbors and family.

1) Mr. K called to tell me about an incident in the parking lot of a local grocery store. As he was getting out of his car, a woman drove up in a truck and said, “you sure are looking good since you got out of the hospital.” Ironically, he had been in the hospital a few weeks ago so he thought maybe he did just not remember her.

The conversation continued, but then quickly turned to her personal problems. Her husband had left her, she is taking care of her children, times are hard, and then she asked if he could help her out with a little money. He did not have any money with him but offered to buy her groceries. As they went into the store, he needed to go to customer service and told her to start shopping and he would catch up. At the customer service counter, he was told about people working the parking lot targeting older adults and asking for money. He went out the back door and drove off.

Luckily he was not a victim. But that is only because he did not have any cash with him at the moment, otherwise he might have given her a few dollars. And how long do you think it takes to find a senior citizen in a store parking lot that has recently been in the hospital? Probably not too long.

What is the lesson? Remember stranger danger!! Do not talk or give money to people you do not know, even if they say they know you! And never give money to anyone who comes up to you in the parking lot or store. Run away!!

2) Mrs. M called to share her story about the Publisher’s Clearinghouse call she received saying she had won alot of money. What caught her attention was they told her to go buy a Green Dot card. The Publisher’s Clearinghouse comes to you…they do not ask you to send them money.

The Green Dot card was new to her. But I hope you will read this and become very familiar with this card. Instead of sending people to Western Union to wire money, they have you go to the store and put money on a Green Dot card. Then you call them with the numbers found on the back. You can buy these green dot cards at nearly every checkout counter at the grocery store, drug store so they are very convenient. More importantly, the cashier is not trained to watch for potential fraud like the customer service staff are and they do not ask questions.

One of my favorite lines to seniors at presentations is to remember, you all have dollar signs over your head. They are coming after your real dollars and/or your healthcare dollars. Be safe, be smart, be cautious. Do not talk to strangers, do not let strangers in your home, do not wire money to anyone, do not answer your phone (use your answering machine), and please call someone to check it out BEFORE you act. My number is 713-341-6184 and I enjoy hearing from you.

Looking for the Perfect Holiday Gift?

Gift cards continue to gain popularity with the sale of cards rising this year to $100 billion. They are convenient and make spending hours in line, fighting traffic and hunting for that perfect gift a thing of the past. Gift cards leave us with more time to spend enjoying the holidays with family and friends rather than fighting the crowds at the mall.

A Consumer Report survey found that 62 % of consumers plan to give gift cards this year, but the sale of gift cards given in the spirit of the season can present some unwanted frustration. One problem experienced by shoppers is the purchase of gift cards from a retailer who later files for bankruptcy.

Bankruptcy leaves gift card holders unable to redeem the cards, plus many gift cards have strings attached which can surprise your loved ones attempting to redeem them. Cards purchased from retailers are usually easy to use and do not include fees but, they may have expiration dates rendering them worthless after a specified period of time or may only be good if used at a specific location. Bank issued gift cards often include fees as well as various terms and conditions including expiration dates. Gift cards may seem like the perfect gift but, in the end your loved one could end up with no gift at all.

If you are planning on using gift cards this holiday season here are some tips to help protect your purchases:

1) Where to buy your cards? Buy from a source you know and trust. Cards purchased at online auctions may be counterfeit or obtained fraudulently. Cards found on racks in grocery stores are subject to being used by a crook who has written down the number prior to you purchasing the card. Make sure that any card you purchase from a rack has not been tampered with or opened. If possible buy your cards from a customer service representative and from a secured area.

2) What to look for? Read the fine print. Know the expiration date on the card you purchase. Many cards expire one year after the date of purchase. Make sure you read the fine print to ensure that the card will hold its value and not be eaten up by fees. Many cards have fees attached which can include monthly fees and activation fees.

Get a receipt. Include a receipt with the gift card in case it is lost or stolen. This will make it easier for the store to replace the card and protect it from use by someone else.

Consider giving cash or sending a check. This year, with the number of potential bankruptcies, the Consumers Union recommends you forgo the gift cards and stick to just old fashioned, hard currency.

CFPB Oversees Student Loan Practices

CONSUMER FINANCIAL PROTECTION BUREAU TO OVERSEE STUDENT LOAN SERVICERS

Rule Brings New Oversight to Rapidly Growing Market Affecting Tens of Millions of Consumers

 

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) issued a rule today that allows the Bureau to supervise certain nonbank student loan servicers for the first time. The rule brings new oversight to the nation’s second largest consumer debt market – student loans – which have seen a rise in borrower delinquency in recent years.

 “Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules,” said CFPB Director Richard Cordray. “This rule brings new oversight to those large student loan servicers that touch tens of millions of borrowers.”

 More than 40 million Americans with student debt depend on student loan servicers to serve as their primary point of contact about their loans. Student loan servicers’ duties typically include managing borrowers’ accounts, processing monthly payments, and communicating directly with borrowers. When facing unemployment or other financial hardship, borrowers contact student loan servicers in order to enroll in alternative repayment plans, obtain deferments or forbearances, or request a modification of loan terms.

 A servicer is often different than the lender itself, and a borrower typically has no control or choice over which company services a loan. When problems arise because of servicing concerns, student loan borrowers may end up in trouble. They may miss a payment, owe more money because of additional interest on principal, or face future difficulties with credit because of a poor payment history.

 The Bureau currently oversees student loan servicing at the largest banks. Today’s rule expands that supervision to any nonbank student loan servicer that handles more than one million borrower accounts, regardless of whether they service federal or private loans. Under the rule, those servicers will be considered “larger participants,” and the Bureau may oversee their activity to ensure they are complying with federal consumer financial laws. To coincide with this new authority, the Bureau has also updated its Supervisory and Examination Manual to provide guidance on how the Bureau will monitor bank and nonbank servicers of private and federal student loans.

Under today’s final rule, which was proposed in March, the Bureau estimates that it will have authority to supervise the seven largest student loan servicers. Combined, those seven service the loans of more than 49 million borrower accounts, representing most of the activity in the student loan servicing market.

Many student loan servicers perform their functions well. But the recent annual report by the Bureau’s Student Loan Ombudsman identified a broad range of concerns voiced by student loan borrowers in complaints to the CFPB. Borrowers submitted complaints to the Bureau highlighting:

  • Prepayment Stumbling Blocks: Since options to refinance high-rate private student loans are limited, many consumers attempt to pay off their loans in order to reduce the amount of interest owed over the life of the loan. But many consumers express confusion about how to pay off their loans early. For example, borrowers complained that servicers applied their payments in excess of the amount due across all their loans, not to the highest-interest rate loan that they would prefer to pay off first.
  • Partial Payment Snags: When borrowers have multiple loans with one servicer and are unable to pay their bill in full, many servicers instruct borrowers to make whatever payment they can afford. Many complaints described how servicers often divide up the partial payment and apply it evenly across all of the loans in their account. This maximizes the late fees charged to the consumer, and it can exacerbate the negative credit impact of a single late payment.
  • Servicing Transfer Surprises: When borrowers’ loans are transferred between servicers, borrowers say they experience lost paperwork, processing errors that result in late fees, and interruptions of routine communication, such as billing statements. Consumers complained that payment-processing policies can vary depending on the servicer. And, consumers said when they make decisions on the previous servicer’s practices, they can get penalized.

 Through supervision, the CFPB will be better able to evaluate the extent and scope of problems consumers face when dealing with larger nonbank student loan servicers. The student loan market has grown rapidly in the last decade and is now facing the stress of increasing numbers of borrowers who are struggling to stay current on their loans. This rule gives the Bureau visibility into the complete cycle of private student loan debt, from origination through servicing to debt collection and credit reporting.

 The Bureau will ensure that bank and nonbank student loan servicers are playing by the same rules. The Bureau already has supervisory authority over other nonbanks such as mortgage originators and servicers, payday lenders, larger debt collectors, larger consumer reporting agencies, and private student loan originators. Nonbank student loan servicers, regardless of size, continue to be subject to the Bureau’s enforcement jurisdiction. Servicers who are not considered “larger participants” may still be subject to the Bureau’s supervisory authority if the Bureau has reasonable cause to determine the servicer poses risk to consumers.

 Federal student loan programs comprise more than 85 percent of the total volume of outstanding student loans. These loans are serviced by private financial institutions who must comply with Federal consumer financial laws. The CFPB will continue to coordinate closely with the U.S. Department of Education, which now directly originates the vast majority of federal student loans in accordance with the program requirements in the Higher Education Act.

 Earlier this year, the CFPB announced that outstanding student debt totals approximately $1.2 trillion. The Bureau also estimates that 7 million student loan borrowers are now in default on their debt. In May, the CFPB published a report on Student Loan Affordability that discussed the potential impacts of high student debt burdens on consumers when it comes to homeownership, retirement security, entrepreneurship, and career choice, as well as potential options for policymakers.

Today’s rule also follows from CFPB efforts on a number of fronts to help make the student loan market work better for consumers. Student loan borrowers can use Repay Student Debt, an interactive web tool designed to help consumers navigate their repayment options, or they can use Ask CFPB to find answers to common questions, like whether to refinance a student loan. The CFPB recently issued a consumer advisory, including sample instructions to a servicer telling them to always direct any extra payments toward the highest-rate loan, saving consumers the most money. Last week, the CFPB asked borrowers to share their experiences about the processing of their student loan payments and asked several servicers to voluntarily provide information about their policies.

 Borrowers that have trouble with their servicers can submit a complaint. For more information, visit: http://www.consumerfinance.gov/students/.  

 A copy of the rule available at:  http://files.consumerfinance.gov/f/201312_cfpb_student-servicing-rule.pdf

 A factsheet on the student loan servicing rule is available here: http://files.consumerfinance.gov/f/201312_cfpb_factsheet_student-servicing-rule.pdf

 The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.ConsumerFinance.gov.