How much is your car worth?

I work at a credit union, and I have members asking me how much we will loan them if they use their car for collateral (since you get a lower rate doing that than you would getting an unsecured loan). I always tell them that they can go on NADA.com to see how much their car is worth. I am always surprised more people don't know about this.

Here is the link to see how much a used car is worth ...

http://www.nadaguides.com/usedcars.aspx?LI=1-21-0-5002-844-923-59881&l=1&w=21&p=1&f=5004

Our credit union will usually lend you the "Clean Retail Value" of your car as long as your credit is decent.

Your loan balance should always be less than what your car is worth. You never want to be "upside down" (owing more on your car than what it is worth). There are plenty of people who are, though. They usually got their car financed somewhere like Drive Time where they will give you a rate of 18% or more, which is insane. Any rate higher than 10% right now is too high, and you should be getting a rate somewhere between 0% and 5% if you have good credit.

Also, dealerships will use books like "Kelly Blue Book" to tell you what your car is worth. I would always ignore what the dealerships tell you. NADA is a much better guide, and an individual or dealership should give you close to the clean retail value of your car when you are selling or trading it in to them. If they won't give you something close to that value, you can tell them you are going to walk away from the deal.

Another good site for pricing out cars is Showroom.carbook.com, which will show you what a new car should cost. The dealership gets a car at the invoice price, and they try to sell it to you at the MSRP price. However, the salesman should be able to offer you a price that is between the invoice price and the MSRP price if he really wants to make the sell.

A lot of dealerships will try to offer you GAP insurance. This is insurance that will help you pay off your loan if your car is totaled or stolen and not recovered for two months (or some time period like that). However, dealerships usually charge too much for GAP insurance (and extended warranties). You can check with your credit union or your auto-insurance provider to see if they can offer you GAP insurance at a lower price. My credit union offers it at a one time fee of $175.00, which is pretty cheap compared to what dealerships will charge for it. Also, you can sometimes get a discount on your loan rate if you purchase GAP insurance.

However, if your loan amount is a lot less than what your car is worth, you should not need GAP insurance. Your insurance company will probably give you enough money to pay off your car loan if you car is totaled, as long as your loan balance is below the value of your car. OK, that sentence was awkward.

OK, that's my car loan tips of the day. ;)