The Smart Buyer's Guide to Trading Cars and Reducing Taxes

According to Kelley Blue Book, the average price of a new car in the U.S. was $47,244 in February 2024, about one-tenth of 1% lower than January. Although the prices are decreasing steadily from the peak in December of 2022, cars are still a significant financial commitment for an American buyer.

In the United States, purchasing a new or used vehicle can be staggering, with expenses ranging from the sticker price to taxes, fees, and insurance. However, for those willing to navigate the complexities of the trade-in process, one can unlock significant savings – particularly when reducing sales tax obligations.

Trade-Ins: A Key to Reducing Your Financial Burden

Trade-ins offer a unique opportunity to offset a portion of the purchase price, potentially lowering the overall financial responsibility. In addition to the reduced cost of buying a car, it also affects your tax burden. Depending on whether your state allows for tax credits, you can reduce your sales tax expenses and begin your journey to financial victory.

How does a Trade-in Reduce Sales Tax? Explained with an Example.

Several states in the U.S. allow you to deduct the value of your trade-in from the final price of the new vehicle. So, if the new car price is $45,000 and your dealer is willing to give you $15,000 for trading in your old car, your tax liabilities will be based on $30,000. If your state levies a sales tax of 5 percent on new car purchases, you will pay $1500 instead of $2250.

Now, how much you pay will depend on the state you decide to make the purchase. For example, California’s vehicle taxes are levied on the new car’s full price before the dealer calculates trade-ins. To offset the extra burden of paying the tax and encouraging shoppers to sign the dotted line, many CA dealers offer credits from their pockets.

Another state that doesn’t consider the value of trade-in is Virginia. When you buy a new car from a dealer in VA, the state collects a 4.15% Sales and Use Tax (SUT). The amount is calculated on the vehicle’s gross sales price or $75 whichever is higher. The State of Virginia also requires you to pay SUT on a private party sale.

1. What are your Options when you possess an Old Car with Positive Equity?

Positive equity scenarios, where the trade-in value exceeds the remaining loan balance, can provide a valuable cushion against sales tax and other car related expenses.

If your car has positive equity, begin by finding out the actual cost of buying a new car after talking to the dealer about the trade-in value of your old car. Does your state levy a sales tax on the gross sales amount or the net price after deductions? Also, consider the old car's price when you sell it privately instead of trading it at the dealer.

Do a thorough analysis after visiting several dealers in the area. Find out what price they are willing to pay for your car. Understand whether you will get more money for the vehicle when selling it privately.

When you are doing calculations, focus on the big picture. Instead of just emphasizing the sales tax savings, consider how much money your old car can earn you and how it will impact your overall expenditure.

If you live in a state where the sales tax is levied on the trade-in value and not on transactions between private individuals, consider opting for a private party sale.

2. Can you Trade-In a Car with Negative Equity?

In negative equity situations, where the loan balance exceeds the trade-in value, you require careful strategizing to minimize the tax impact. Often referred to as being "upside-down" or "underwater" on your loan, a negative equity can significantly impact your ability to negotiate a favorable deal and may result in a higher overall cost for your new car purchase.

While not an ideal scenario, many dealerships will allow you to roll over the negative equity into your new car loan. But, if you want to mitigate the impact of negative equity and potentially reduce your financial burden, you can make a down payment before trading in your vehicle. It will neutralize the negative equity amount and improve your bargaining position during negotiations.

Another strategy is to thoroughly research your vehicle's market value and be prepared to negotiate aggressively with the dealership. Even a slight increase in the trade-in value can help offset a portion of the negative equity. You can also consider selling your car privately because it may yield a higher sale price than a trade-in, allowing you to pay off more of the outstanding loan balance before purchasing a new vehicle.

As always, improving your credit score can qualify you for lower interest rates, potentially counterbalancing the negative equity impact over the life of the loan.

Navigating negative equity can be challenging, but being proactive and exploring all available options can help minimize its impact on your overall car-buying experience. Consult with financial advisors and dealerships to develop a strategy that aligns with your specific circumstances and long-term financial goals.

Your Car is your Asset

Your car is more than just a mode of transportation; it's a valuable asset that can be leveraged to your financial advantage, particularly when it comes to trade-ins and sales tax savings. By approaching the trade-in process strategically, you can effectively reduce your overall expenses and maximize the value of your vehicle.

When trading in your car, savvy consumers can exploit state-specific regulations and tax laws to potentially qualify for sales tax reductions or exemptions on their new purchase. By understanding the nuances of these laws and negotiating effectively, you can transform your old car into a powerful bargaining chip.

Make buying a new car affordable! Work with America’s best bad credit auto loan expert. Apply for no down payment car loan if looking to buy a car without down payment.

Essential FAQs for obtaining Bad Credit No Money Down Car Loans

A person can be credit-damaged due to many reasons. You may have missed certain payments or paid them later than the stipulated date. However, the most common question that arises when bad credit individuals go for auto loan shopping is: Is there a possibility of an auto loan with no money down?

The answer to the question is positive. If you have suffered from a bad credit history, obtaining an auto loan with zero down payment is a possibility. The process of getting auto loan approval becomes easier if you have started to improve your credit score. However, if you are still lurking in the waters of bad credit, you can avail car financing with no money down but you will have to work hard for it. To ensure success, take a look at the essential FAQs and understand how you can make the process simpler for you. 

Essential Car Buying FAQs to get Bad Credit No Money Down Car Loans

Is a Strong Source of Income Required for Bad Credit No Money Car Loans? 

Sub-prime lenders are a shining beacon for individuals with bad credit. Usually, sub-prime lenders do not put unnecessary focus on the credit score of the applicant. Bad credit applicants who turn to sub-prime lenders can get auto loan approval within two business days. However, a strong source of income is a necessity for getting bad credit auto loans, especially when there is no possibility of making an upfront payment. Lenders can only judge your creditworthiness on the basis of your income. Therefore, make sure you have proof of stable employment and a strong source of monthly income in order to qualify for the loan.

How Will a Co-Signer Help in Getting Auto Loan Approval?

A co-signer with a stellar credit score can immediately give you a boost in credit approval. A lender assumes less risk while approving car financing when you have a co-signer. A co-signer is bound to repay the auto loan in case you miss a few payments. So, make sure you have a co-signer who has been consistent in maintaining a good credit score and who has a substantial income to support you.

Should I Go for a New Car or a Used Car?

A used car will be inexpensive as compared to a new car and will help you to gain car financing with no money down. Alternatively, you can choose old car models that are lying with the dealer at a lower price. You can also choose demo cars. Remember that when you buy a demo car from the dealer, you stand in a great position to negotiate as the dealer essentially wants to create extra shelf space for the new cars. Thus, make sure you purchase a car model after thorough consideration of the consequences.

Will the Interest Rates be affected when I do not make a Down Payment?

Yes. Compared to a traditional auto loan where you are paying money down, an auto loan with zero down payment will attract high interest rates. However, if you are regular with your payments, your credit score will increase. This will lead to lower interest rates in the future. If you want to reduce the total interest amount, you can make early payments and pay off the loan before the loan term ends.

Does avoiding a Down Payment put me in an Upside-Down Car Loan Situation?

Most car buyers are in an upside-down car loan situation during the first few years of the purchase. It is because of the depreciation rate. Your car depreciates in value as soon as you drive it off the lot. Do not worry about it. If you want to sell your car early, make sure you make extra payments so that the loan amount decreases significantly. This way, avoiding down payments won't have a major impact on the loan amount. It will help you to manage the situation in a better way.

Will bad Credit No Money Down Auto Loans improve my Credit Score?

Bad credit and no money down auto loans can only improve your credit score if you make regular payments and the lender reports your income to the credit bureau. Do not delay any payments. A co-signer will help you to maintain a good credit score and support you in the approval of car financing as well.

Zero Money Down Auto Loans: The Best Resort for Bad Credit Buyers

People who do not have a great credit score can avail auto loans where no money upfront is required. With bad credit no money down auto loans, you stand a solid chance to re-build your credit score. If you are unable to find a lender offering you the required auto loan option, go online. Many online auto financing companies deal with bad credit car buyers and will help you buy a car without a down payment.

Buying a car with bad credit can get frustrating, especially when you do not have a down payment. Luckily, help is available. You can get bad credit no money down auto loans and make a quick car purchase. Apply now for pre-approved auto loans today.

Short-Term Vs Long-Term: Determine the Length of your Auto Loan in a Financially Beneficial Way

One of the important things that will define your car buying journey will be the length of your auto loan. An auto loan term is the time period in which you will repay the loan. Short-term auto loans vary between 12 to 60 months and long-term auto loans range between 72 to 84 months or above. Before you decide on the period of the loan, understand the implications of making a decision. 

Which Auto Loan Term Is More Advantageous to You?

1) Short-Term Auto Loan

Advantages: One of the biggest advantages of choosing a short-term auto loan is that the loan is paid off earlier as compared to a longer term. It will make you less debt-ridden tomorrow. It attracts lower interest rates which means you are eventually paying less towards obtaining an auto loan. A short-term auto loan will also decrease your chances of being upside down and help you to build your equity at a faster pace compared to the other options. 

Disadvantages: It has a high monthly payment. A certain part of your monthly income will be tied up towards making payments for the auto loan. It can be comfortable only if you have put a good amount of money down. Down payment can help you to attain a successful completion of a short-term auto loan. 

2) Long-Term Auto Loan

Advantages: As a long-term auto loan is stretched for more than 5 years, the monthly payment is relatively lower compared to a loan that can be paid off quickly. Another advantage of choosing it is the flexibility to make payments, i.e., you can refinance your auto loan and increase the monthly payment amount to pay off your auto loan early. 

Disadvantages: A long-term auto loan is not ideal as you risk being upside down for a long time. Usually refinancing is possible when your car does not have any negative equity, which is rare when you spend several years making low payments. Therefore, it becomes a task to refinance, sell or trade in a car with a long-term auto loan. Also, once your warranty runs out, it can become difficult to make expensive repairs to the car. Additionally, it will attract high interest rates, thereby increasing the cost of the auto loan. 

Being Far Sighted: How do you choose an Auto Loan? 

Comparing the points above, a long-term auto loan is suitable for someone who can risk a high interest rate in order to receive flexible payment options. Short-term auto loans are the ideal option only if you can manage the payments. Early repayment of the loan means that you will require a good down payment and the ability to make big payments every month. A loan period spread over several months makes sense for you if you want to make payments that are easy on your wallet. The auto loan option that you choose depends on your current financial circumstances and your ability to successfully make payments in the future. 

Whether you want to go for a short-term auto loan or a long-term option, the choice is yours! Discuss your loan requirements beforehand. It’s time to find low rate car financing with just a click of a mouse. Apply now for bad credit auto loan approval.

Can you buy a car with No Credit? And Other Questions

Usually, first-time car buyers, young college students or recent immigrants will have no credit score. But, what does it mean? Does it mean your score is zero? Can you build your score? Can you still buy a car when you have no credit history? Don’t get overwhelmed. We have all the answers for you.

Buying a Car with No Credit: Let’s End Your Curiosity

Buying a car is an overwhelming experience. When you come to know that you have zero credit score, it becomes all the more daunting. But, understand your situation in detail so that you can make the right choice and make a car purchase. 

1. Why is my credit score zero? Or why don’t I have a credit score? 

No one has the digit “zero” listed as their credit score. FICO score is the most common formula that credit bureaus (Transunion, Experian, Equifax, etc.) use for calculating your credit worthiness. It has a range of 300 to 850. Now, when you are told that your credit score is zero, it simply means that your credit history is non-existent. You have never applied for any kind of loan or mortgage in your life. The credit bureaus cannot calculate your credit worthiness in terms of FICO scores because you have no history of making payments or missing them. 

In rare situations, you may have applied for a loan in the past, but your credit score may still be non-existent. Closed accounts stay on your credit report for 10 years after the last date of the activity. And, negative accounts such as unpaid loans can stay up to seven years. If you have no recent credit activity, you will most likely not have a credit score. 

2. Does everyone start out with the same credit score? 

Not everyone starts with the same baseline credit score. You cannot have a minimum score of 300 and build it up after a series of credit accounts. It is also not possible to begin with a score of 850. 

Usually, it requires six months of credit history to generate a more accurate credit score. When you apply for a credit card or open any other credit account, the credit bureaus will consider your payment history and provide you with a mid-range score. If you have multiple credit accounts with a regular payment history, the number will be higher. The number reduces if there are missed payments on your credit report. 

3. Do I have to wait for six months to buy a car? 

If you are in the market to buy a car, you can either wait for half a year (and may be more) to build a solid credit score. It will definitely get you easy auto loan approval. 

You can also opt-in for UltraFICO scores. By allowing the data analytics company to link your UltraFICO score with your checking, savings and money market accounts, you will be able to increase the ratings. If you have a positive balance in your bank account with consistent cash in hand, your UltraFICO score will be higher than the traditional one. 

Another option is to try and link your utility bills to your credit score. Typically, your traditional FICO score will not include your utility bills because they are not credit accounts. So, opt for the newest credit score boosting tool from Experian called Experian Boost. Once you allow the company to access your bank account to identify utility payments, the payments will be added to your credit report and thus, increase your credit score. 

4. Are No Credit Auto Loans helpful? 

UltraFICO scores and Experian Boost are good tools to increase your credit score. However, not every lender uses them. Both the services are still in their nascent stage. If you want to buy a car and you want to buy it now, you can seek no credit auto financing. It is a loan program specially designed for car buyers who have no credit score. 

It is easy to get an auto loan with a zero credit score because lenders believe that a no credit history is always better than a bad credit history. When you do not have a credit score, lenders just don’t know enough about your financial habits. But if your credit score is bad, the lender’s risk increases phenomenally. 

Get in touch with an auto financing company that has tons of experience in helping out people with credit issues. Do not get too fixated with the credit score number. Prove yourself as a worthy borrower by providing proof of stable employment and regular income. 

So, there you have it! Now you know all there is to no credit history and how to buy a car with a no credit score. Zero credit score doesn’t mean NO auto loans. Go ahead and buy your favorite car today. 

If you want to buy a car with zero credit history, you need to work with America’s top auto financing company that has wide experience in no credit auto loans. If you do not have a cosigner, consider applying for no credit no cosigner auto loans and expedite the loan process.

What are the Risks of Cosigning a Car Loan?

My son needs a car for his daily commute. Is it wise to cosign a car loan for my son? Will it affect my credit score? - A Doting Father

Are you someone like Doting Father? Are you thinking about cosigning a loan for your son, daughter, brother, cousin or any other member of the family? You are not alone. Approximately 1 in 6 U.S. adults have cosigned a mortgage, loan, credit card or more. According to a poll by CreditCards.com, car loans accounted for a major chunk of total cosigning in USA. 51 percent of respondents have cosigned a car loan to a family member or a friend. A majority of parents will cosign for their children so that they can qualify for a loan. 

For many car buyers, cosigning is the difference between buying a car and facing loan rejection. Having a cosigner can ensure quick auto loan approval and it can lower the cost of the loan for your son. However, it can be a risky proposition for your financial health. In order to make a well-thought decision, please ask yourself the following questions before you sign on the dotted line. 

Why is your Son unable to get a Car Loan on his own? 

If your son is young and doesn’t have a credit history, it is obvious that you want to help him get a car loan and build a credit score. Helping your college-going kid secure a car loan can inculcate the right financial values in him. If your son has a full-time job and still cannot find an auto loan on his own, it is time to dig deeper. Learn why his credit report is bad. If he has been a victim of identity theft, it is understandable. But if he has missed a few payments in the past and has a history of making dubious financial decisions, consider them red flags. 

2. Are you ready for the Financial Responsibility? 

28 percent of the total 2003 poll respondents saw a decline in their credit score. Cosigning a car loan or any other loan/mortgage puts a big responsibility on your shoulders. 38 percent of cosigners had to pay a part of the loan or the total amount because the primary borrower couldn’t repay the loan. From the numbers, we can infer that when you open doors for someone (and cosign his loan), you may be left out in the open. 

If you want to cosign for your son, make sure you can take over the debt in case he fails to make payments. You can work with your financial planner and make contingency plans to absorb the debt, if and when the situation arises. If the numbers say you cannot manage the payments, it is best to avoid it. 

3. What are the Risks of being a Cosigner for Someone Else? 

The explicit risk is to your credit score and financial stability however there are many hidden risks that you should be wary of. If you are going to apply for a loan in the near future, cosigning can impact your debt-to-income ratio and keep you from buying your dream retirement home, car, holiday or anything else. Becoming a cosigner means assuming 100 percent responsibility for your son’s car loan. It will affect your credit worthiness and make borrowing money harder for you. 

Your credit score will be tied to your son’s financial habits as long as the loan term continues. If he doesn’t make a payment, it is your credit score that will be affected. When you want to help your child in getting a car loan, monitor the loan closely. Ensure he makes regular payments by checking the monthly statements on a regular basis. 

4. Is there a way out? 

If you do not want to be a cosigner, that’s okay. If you are not comfortable putting your financial well-being on the line, it is fine because there are many other options other than being a cosigner. If the goal is to help your son buy a car, you can seek no cosigner car loans. You will find many online auto financing companies that offer auto loan approval without a cosigner. There is a special first-time car buyers’ program designed for college students who want to buy a car on their own. 

You can choose a reliable auto financing company that will enable your son to get a car loan without familial help. You can also make a down payment on his behalf and help him buy a car without putting your credit score in danger. 

Cosigning a car loan is definitely ways of helping your son buy a car but it can take a toll on your financial health. Make a decision after understanding the different solutions available to you. 

Want to apply for a car loan without a cosigner? Choose a bad credit auto loan expert who will help you get a no cosigner car loan in no time. Get in touch today for guaranteed approval.

How to Budget Your Bad Credit Auto Loan in the Right Way?

A less than perfect credit score cannot dismiss your need to own a car. A car is an essential transportation medium for work or errands. However, you can still obtain financing for your car with the help of a bad credit auto loan. The primary thing when buying a car and arranging auto finance is to understand your budget. Numerous factors will shape what your budget will look like. Understanding the factors in length will give you a greater understanding of setting a budget and choosing the best bad credit auto loan for you.

Set a Car Budget: Factors to make a Successful Car Purchase

Look into the following factors before you start shopping for your car and a bad credit auto loan. 

1. Understanding Numbers

Bad credit auto loans are going to largely be estimated on your current income status. The expenses against your income with regards to the bad credit auto loan are your auto loan payment and the car insurance. Usually, a lender calculates your ability to make a monthly payment based on the calculation of your income against all your current monthly bills, i.e. mortgage payment, installments or other loans. A great way to calculate ratios or your down payment for the auto loan is to use online calculators. Online calculators will make the process easy to comprehend and calculate difficult rations in a way that you can readily put to use. The following two ratios will help you to set your budget right. 

a) Debt-to-Income Ratio: Basically, debt-to-income ratio is the sum total of your existing monthly debt payments against your gross monthly income. The percentage of the debt-to-income ratio determines how much of your monthly income goes into making payments. A ratio of 1:2 or a 50% or lower debt to income ratio is ideal for auto loans. However, if you are seeking to buy a car that requires good financing, work towards eliminating your past loans and make room for more income and less debt. 

b) Payment-to-Income Ratio: The ratio is similar to a debt-to-income ratio; except that while calculating the PTI ratio, you divide the combined monthly car and insurance payment by your monthly income. Your payments should not make up more than 20% of your income. For instance, if your income is $2400, your combined car and insurance payment should not exceed $480, i.e. 20% of your income. A monthly estimation of your car and insurance expense will help you to figure out the range of the cars that you can afford. 

2. Terms & Trade-In

A question that will arise in your mind when you set out to budget your car is whether you will be trading in your current car or not. Consider the value of the trade-in when you set out to apply for a bad credit auto loan. Additionally, be mindful of the term length of the auto loan. The ideal auto loan term period is 60 months or less. You can pay off your loan early if you are certain of a future life event that you know might need more ready finance.

Building a Good Budget for Bad Credit Auto Loans

Lastly, when you get down to making a budget for your bad credit auto loan, think about miscellaneous costs such as fuel costs, licensing and registration fees. A down payment is another cost that will take up a part of your budget while you take out an auto loan. Consider the holistic expenses of a bad credit auto loan before you go car shopping. 

When you have a bad credit score, you need help of a subprime lender with years of experience. Work with the trusted bad credit auto loans expert. Apply online and get ready for guaranteed auto loan approval.

Increase Down Payment: An Effective Auto Loan tool to go from Rejection to Approval

Buying a car involves numerous things. Selecting the make, model, color and the financing options entail the process of buying a car. During the process of applying for an auto loan, the biggest question you will face would be if you should make a down payment or not. Putting your money down for an auto loan has more benefits than one. Once you get an idea of the advantages of down payment, your auto loan status is likely to go from rejection to approval.

A down payment is an effective tool that you can use to speed the car buying process. Understand the benefits of a down payment so you can make the most of your car purchase. 

1) Possibility of a Low Interest Rate

A large down payment means less risk for the lender. Out of the entire amount of the auto loan, a considerable amount is paid up front. A heavy down payment instills the trust in the lender and there are higher chances that your auto loan will get approved. A down payment will result in a lower APR on your auto loan. Effectively, putting good money down also puts you in a better position to negotiate a lower interest rate. Additionally, you will save money on the auto loan as you will be paying monthly payments at a low interest rate. 

2) Reduction in Negative Equity 

The value of your car will decrease the moment you drive it off the dealership lot. The equity of your car is the difference between what your car is worth and the amount that is due on your auto loan. Negative equity arises when the value of your car decreases as compared to the auto loan amount. A down payment will help you to reduce the effect of negative equity as it will generate positive equity for your auto loan. A down payment of 20% of the auto loan amount will help you avoid an upside-down car loan situation. 

3) Important for First Time Car Buyers

First time car buyers find it difficult to get approval for auto loans because they have a zero-credit history. Hence, it is essential that a 1st time car buyer must research before applying for a loan. A heavy down payment will play an important role in getting the approvals in motion. A down payment will provide the required creditworthiness to the lender. Additionally, individuals suffering from bad credit should also put money down of more than 20% in order to get a positive response for the auto loan. In many cases, the presence of a co-signer is also beneficial. 

Make Down Payment: Get Approved

Undoubtedly, a down payment will act as a catalyst in your car financing process. Make sure you decide on the car before you decide how much money you want to put down. Think of down payment as a means of getting rid of your future financial burden, today. Act in a wise manner and change the status of your auto loan from rejection to approval with the help of down payment. 

Down payments may be beneficial for getting a good auto loan deal. But sometimes it is not possible to manage a large down payment amount. If you want to buy a car without making a down payment, apply for no money down auto loans and make a quick car purchase. Get in touch today for guaranteed auto loan approval.