Auto Finanicing

Context

The purchase of a vehicle is, or at least should be, a fun experience. When purchasing a vehicle, many decisions must be made Maybe a first time buyer is concerned with the stereo system, while a hockey mom must decide between the suburban and the Volvo station wagon,
and the middle age couple is looking for that "little red corvette." Whatever the case, a
vehicle is a big purchase and must meet family needs and lifestyles. After spending hours
at the dealership negotiating the best deal, you just want to get into your new car and drive home. However, you must now pay for the vehicle. Are you able to pay cash for the vehicle or will you finance the new car? If cash is paid there are fewer decisions to make. There will
however, still be some unavoidable fees involved.

What is Involved

If financing the vehicle, you will have to consider a lender and be careful to get the best deal available with the least amount of fees and cost to you.
If you are paying cash for the vehicle the following laws apply to you:

  • You have 20 days to license the vehicle in the county in which you reside.
  • You must immediatey get at least liability insurance coverage on the vehichle.
  • Sales tax must be paid if applicable.

Further Juridic Controls

If you are financing a vehicle, the above laws apply to you, plus the following:

  • You must choose a financial institution and complete an application. Some financial

institutions charge a non-refundable application fee to process the borrowers documents
disclosing his or her financial stability to qualify for the loan and also the credit report.

  • Once the loan is approved, the borrower will be quoted an APR (annual percentage rate).

The APR coud be based on the borrower's credit score and is the actual rate of interest
paid annually on the unpaid balance. The term or the length of the loan also increases or
decreases the total cost of the credit.

  • When financing a vehicle, the borrower is required to carry full coverage insurance with

minimum deductibles. If the borrower does no provide written proof of insurance within
a certain time frame (usually 30-45 days), the financial institution puts insurance on the
vehicle which is very expensive and only protects the financial institution with no benefits
to the borrower. The cost of the insurance is added to the borrower's loan balance and
then the borrower pays interest on top of the premium.

  • Some financial institutions may have prepaid penalty fees. If the borrower pays the loan off

early, a fee is assessed.

  • Late payment fees. Normally, if the loan is 20 or more days past due, a late fee is

charged on the account (normally, 5% of the payment with a minimum of $l0.00 and
a maximum of $30.00)

  • If the borrower fails to make loan payments and defaults on the loan, the vehicle will likely

be repossessed, which brings more fees. The borrower is responsible for any repossession
fees -the actual cost of the repossession and any storage. These amounts are added to
the borrower's loan balance. The financial institution can sell the vehicle and the borrower
is responsible for any balance owing after the sale. This can be set up on regular monthly
payments or the financial institution can take legal action to attach wages. which again
the borower is liable for any legal fees.

Explicit and Implied Purposes

For the protection of the borrower and the financial institution, upon signing loan documents,
the borrower gets a copy of all disclosures. These disclosures state the rights of both the
borrower and the financial institution, as well as, the APR and all fees.

Desired Outcome

For the purchaser of the vehicle, the desired outcome is simply to have a new and dependable
vehicle to get them where they need to go. However, as always, things are much more
complicated than that! The fees generated by the county for taxes and licensing are to go
towards street repair and income for the county. Financial institutions need loans to generate
income and insurance companies need premiums for operating expenses and to pay claims.
While some of the rules and laws seem good for society as a whole, it seems the purchaser
of the vehicle is getting the worst deal! It seems the more privileges we have the more rules
and laws there are to follow. We live in a day and age where everyone is going in different
directions at different times and we need a good means of transportation. Wards approach in the "direct action" sense would be to walk, take public transportation, or possible purchase a
vehicle for cash with minimum insurance coverage requirements. To follow this approach, our
society would have to slow down and make some serious changes. These changes, however,
might not be bad at all!

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