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The whole auto loan process can be very frustrating and confusing. They always want to sell you a car based on what payment you want. You shouldn’t buy a car based on what the payment will be. You should buy it based on what the total price of the car is. Compare that total price to what you find on websites like www.edmunds.com or Kelley Blue Book . If buying a new car, check out the annual auto buying guides at www.kiplinger.com/tools/autoguide/.  Is the dealer asking about what your research or the websites say the car is worth?

It gets even trickier when you are also dealing with a trade-in. It gets confusing as to what you are paying for the new car and what they are actually giving you for your trade-in. I think the car dealers like to keep you confused on this. We are stuck with a very upside-down car loan from our last purchase.  

My husband traded in his vehicle for a another used vehicle. He was upside down on the first loan – meaning he owed more than the car was worth. The dealer simply rolled over the amount into the new loan. So now we have a vehicle that is worth maybe $10,000 – $12,000 less than what we owe on it. We can’t sell the vehicle without paying off that money. One mistake he made on this purchase included buying on what the payment would be. To get the payment where you want it, the dealer usually stretches out the loan terms. Most financial advisors state not to get a auto loan that is longer than 3 years (36 months). In our case, the loan period ended up being 6 years, another mistake. Then we purchased an extended warranty for over $2000 which we thought was for 5 years or 100,000 miles from the date we purchased the used vehicle. But in reading over the literature later, it is actually from the time the vehicle was NEW, so we don\’t have 5 years or 100,000 but much less than that, yet another mistake. One good thing we did was purchasing a used car so we didn\’t have the immediate depreciation driving off the lot. BUT because of the upside down trade in and the warranty, we purchased a used car at probably a new car price. Another good thing we do have is gap insurance. This insurance will cover the difference if the car was in an accident as our auto insurance company would only pay what the value of the car is. The gap insurance will pick up the difference between the value of the car and what we owe on it. So that is a good thing in this situation.

And now my husband has a new job that comes with a company car so the car is parked and not used. We can\’t sell it unless we come up with the $10,000 – $12,000 we are upside down on it. We have tried to sell it but to no avail as of yet. 

What car buying nightmares have you had?

If you are drowning in debt in this economy, here are some steps you can take to dig yourself out.

Break debt into smaller pieces. Usually you should pay off credit card debt with the highest rate first. But if you are overwhelmed, you may try focusing on the smallest balances first. That is financial guru Dave Ramsey’s method. This may give you more incentive as you see your list of creditors get shorter faster. I’ve been working on doing my debt reduction with the lowest balance first but most of my credit is pretty low interest anyway.

Track every bit of your spending. Tighten your belt. Cancel the extras – premium TV channels, newspapers, cable, eating out. I love to use Quicken software to track everything and they now have a free online version.

Don’t miss any payments. Lenders are really looking at credit scores now. If you are late you will affect your scores in addition to the exorbitant late fees. Once your scores go down you no longer qualify for the good rates. Ask your lender to change your due date if the date doesn’t work well with your pay periods.

Boost your income. Work extra hours. Get a part time job.

When you see yourself in trouble get help. Seek out a good credit-counseling agency such as those at www.nfcc.org or www.aiccca.org. They can help negotiate with lenders to eliminate late fees, lower interest rates and set up a budget. They are out there to help you not to get your money. Don’t get caught up in other types of credit repair agencies. They are basically just letter writers. They write letters to the credit agencies disputing charges. The charges come off of your report for only a short time until the charges are verified and then the charges are back on your report again. Don’t waste your money to companies doing that for you.

These debt management steps can help you get back on the right track. Hope these steps help you succeed in your personal finance goals.

I have found that one of the best ways to better money management is to not go shopping.  I go to a mall maybe once a year and it is usually just to walk around and get exercise.  I also try to stay out of stores like Best Buy, Home Depot, Lowe’s unless I really need something.  If you go to stores to “browse” you end up seeing things you like and things you think you “need.”  I know when you don’t have a lot of money and are trying to raise a family or living paycheck to paycheck you don’t have money to spend on tickets to concerts, movies, museums, amusement parks, etc.  You may tend to think going to the mall is at least getting “out.”  This can be dangerous as you end up buying things you don’t really need.  They are “wants” rather than “needs”.  It is better to go to a park or a playground or some other “free area” where you aren’t lured into buying things.

Another technique I have used is lists.  I love lists.  Lists, lists, lists.  Make a list of things you need.  I always have a list for groceries on my kitchen counter.  When I am about to run out of something, I add it to the list.  When I go shopping I stick with what is on the list.  Again, I don’t go “browsing” and roaming as you tend to put things in the cart that you don’t really need.  I go in with a purpose, get what I need and get out.

I also love coupons.  It is worth paying a dollar or two for the Sunday paper if your local paper has coupon inserts in it.  I usually can find at least $5 to $10 of coupons for things I would buy anyway in the newspaper each week.  Don’t clip coupons for things you don’t normally buy or don’t really need.  That is defeating the purpose.  You also have to watch expiration dates as many of these coupons expire rather quickly.  If I do have coupons for things I don’t really need yet or won’t be using before they expire, I take them with me to the store and leave them on the shelf next to the item as a “gift” to someone else who will be purchasing the item.

You can also find coupons to help make dining out a little easier.  I purchase the passbooks from http://www.entertainment.com/ each year.  It is filled with coupons to use for eating out.  Also look for coupons in your local newspapers and city guides.  You can often buy one entrée get one free so it makes eating out much easier on the budget. 

I am also not afraid to shop for things I need at rummage sales, thrift stores or pawn shops.  You can get many very nice, almost new things for much less money.  What are your money saving ideas for personal financial management?