What to do if debt is in collections?

Collection agencies exist because businesses cannot let “bad” debt linger on their books for longer than ~180 days. By letting a bill go overdue for this long, you run the risk of your creditor either assigning or selling your debt to a collection agency/debt collector. Before jumping into it, it’s important to know that there is an important difference in how debt is handled if it is assigned or sold:

Assigned Debt – Debt that is transferred to a collection agent in order for them to work on getting you to pay. Your original creditor (OC) still owns the debt and the collection agency will receive a percentage of whatever they get you to pay.

Sold Debt – This is debt that has been sold to a debt collector who now legally owns your debt. You now owe nothing to the original creditor but you are still liable for the debt under the terms of the contract you had with the OC. Debt collectors usually buy debt at a deep discount and get to keep everything they get you to pay.

So let’s say you get a letter in the mail/phone call one day from a collection agency saying you owe them money. What’s your best course of action?

  1. Call the original creditor – Maybe you let your final utility bill from your old apartment/house go unpaid, which is a relatively common occurrence for debt collectors, you need to give that utility company a call immediately. Their representative can tell you whether or not the communication you received was legitimate (if they did sell or transfer the debt) and what needs to be done in regards to paying it. In most cases, they are going to tell you to pay the debt collector whether it was sold or transferred. Don’t acknowledge the debt is yours, just say you’d like information about who holds it. It doesn’t hurt to ask if they can pull the debt back from the collector if it has been assigned. It’s always best to pay your original creditor, preventing a collection agency from touching your credit report, and keeping the debt as being reported as “charged-off”.
  2. Collection agencies that call you before any other contact is made are required by the Fair Debt Collection Practices Act (FDCPA) to send you a letter within five days of that initial phone call. The letter needs to have some basic information regarding the debt and who owns it, as well as a notice about your rights as a consumer. Assuming the debt collector has your correct address, you should receive the letter within about a week. If they do not have your correct address, and your mail isn’t being forwarded, you may never get the letter. Collection agencies can send their notice to your last known address and be alright under the FDCPA. Living at the same address for a long time and not receiving the letter is a violation and you can claim up to $1,000 for it. (More on that later)
  3. When you do receive their notice in the mail, it should have information on it regarding what needs to be done if you dispute the validity of the debt (if it is just a letter saying how much you owe and giving you options to pay, with nothing else, that’s an FDCPA violation). Within 30 days of receiving the letter, you will need to write to them requiring them to validate your debt. These are some good examples of debt validation letter templateswhich cover all of your bases. It is best if you send your letter via certified mail with a return receipt requestedfrom the receiver. This acts as proof that they got your validation letter.
  4. When they get your validation letter they must immediately stop trying to collect from you until they send you validation paperwork. This means all phone calls must stop, lawsuits must stop, letters must stop, everything must stop EXCEPT they can still update your credit report (there is a caveat here as well). Receiving a letter that was already in the mail by the time they got your validation request does not go against the FDCPA but you don’t have to respond to it. A popular misconception about debt validation is that because you have 30 days to dispute the debt, they have 30 days to respond to it. This is untrue (except in Texas where state law DOES mandate they have 30 days to validate your debt), they can take as long as they want to validate it, provided they do not attempt to collect in the meantime.
  5. Perhaps you receive a letter in the mail validating the debt, this lets them restart their attempts to collect from you. They might try calling but if you want, you can withdraw your consent for them to call at anytime. The best way to do this is to either tell them all calls are inconvenient for you when you send the debt validation letter or in a separate letter after you receive validation. Calling you (more than once) after you revoke consent puts them in violation of the FDCPA and Telephone Consumer Protection Act (TCPA)
  6. They’ve validated the debt, you know where the debt is from, you just want it to be off of your credit report. Your first option is to obtain a Pay-for-Delete agreement with the debt collector. In order for this to work, you’ll usually have to make a payment in full, possibly that day but for sure within a short amount of time. This used to be a popular option if you owed money to a collection agency since they would normally be happy to get paid and remove the information. In the past couple of years, credit reporting agencies have clamped down on the practice since it makes their reports “less accurate”. Now, if a certain company starts putting in too many requests to remove an account, they will be flagged for a review. If the credit bureau finds that they are basically agreeing to everyone who wants to pay for a delete, the bureau will stop that company from reporting to them, depriving the collection agency of a very powerful tool to help them collect. Experian and Transunion are much more strict with collection agencies than Equifax, which is why you sometimes see a collection account on only one credit report (usually Equifax). At least you know if you only see the account on one bureau’s report, there is a good chance a Pay-for-Delete agreement will work.
  7. Collection agencies will usually let you setup a payment plan to let you pay off your debt over time. After you make the last payment, you will want to get something from them which shows that you have paid what you owed. You can also negotiate how much you’re willing to pay a collection agency, though this works better if you can afford to make a lump sum payment that day. Some agencies or creditors will forgive a certain amount of debt, but if it ends up forgiving more than $600, they will likely give you a 1099-C tax form for the amount that was forgiven. This will count as income for tax purposes.
  8. For debts deemed big enough, there is a chance that the debt collector will sue you. This usually only happens either with very large debts, or if a big debt collector holds your account and you live in an area with many other account owners. You’re probably safe from a lawsuit if you owe $300 and live in an extremely rural area, but you may be at a much higher risk of a suit if you owe $5,000 and live in Los Angeles. If you get served papers, SHOW UP TO COURT, do not let them get a default judgement against you. You can often talk with the attorney to work out a payment plan, or you can attempt to fight the lawsuit. (More on this later)
  9. Having a ton of debt and few assets may make bankruptcy your best bet. This is basically the nuclear option since it can wipe out all of your dischargeable debt (not student loans) but you are going to look super-risky to lenders for the next couple of years. If there are no major purchases (house or car) in the near future, it may be worth looking into. Forgiven debt under a bankruptcy is not counted against you as income under bankruptcy. Chapter 13 bankruptcy reorganizes your debt while and lets you keep most assets while Chapter 7 lets a trustee sell non-exempt assets but wipes debt away completely.
  10. After seven years (7 years, 6 months in practice, but it depends on the state) from the date of the first delinquency, credit reporting bureaus must remove bad information about you from their reports. At the same time, if you dispute a debt with a credit bureau and they receive no response from the business listed on the account for 30 days, they must remove it from your credit report. Some states have laws that get bad marks off of your credit faster but federal law says seven years. Shady collection agencies might try to tell the credit bureaus that you “made a payment” or “acknowledged the debt”, which will restart the ~7 year waiting period. This is a violation of the Fair Credit Reporting Act (FCRA) and you can collect awards from debt collectors and credit report bureaus breaking this, as well as the FDCPA and TCRA.

It’s sometimes best to wait out the statute of limitations, especially around the 5-6+ year mark if you don’t have any big purchases in the pipeline. What that isn’t feasible, after a couple of years, the impact that negative information has on your report does start to drop off by quite a bit. It’s why you won’t see your credit score rise much, if at all, by having a 7 year old collections debt fall off as opposed to getting a 6 month old collections account deleted.

End of Life Planning Basics

Often, it is clear that very little planning has been done and there is little to be done at that point. Rather than regretting the lost opportunity, these requests can serve as a wake up call for all of us to get our affairs in order.

There are many concerns to address at end of life, including your spiritual affairs, your personal relationships and wrapping up any unfinished business or goals. These are out of scope for a finance discussion; but being well positioned in your financial plans can permit use of remaining time for addressing these concerns.

When planning for end-of-life, make sure you’ve covered the following:

  1. Have The Conversation. Communicate your end of life wishes to people you trust.
  2. Get oriented to the checklist at the website Get your Shit Together. These include: a will, living will, life insurance, money, personal details & personal items.
  3. Review titles for assets & beneficiary designations – some assets can be passed directly to your designates without going through probate. For example, in states which permit Transfer on Death titles you can title your house, vehicle or financial accounts to pass directly to a designated person or organization without going through probate. Additionally, bank accounts, retirement and pension accounts, and securities can often be treated similarly. TOD does not change the disposition of these assets so long as you remain alive, so consider it for your assets.
  4. Having an inventory of all your assets is helpful (info on finding assets starts on p 15) At the least, catalog your financial life and write up a letter of instruction with info on which accounts you have, what your usual expenses are and where they are paid from, and how you would want things to operate if you are unavailable during, for example, a terminal illness. (see steps here.). Track down and claim assets that you may be entitled to via legitimate sources like USA.gov and NAUPA’s missing money site.
  5. Organize your financial affairs – a power of attorney document can be helpful in permitting a trusted person to manage your affairs during your life, especially at the end; but note that POAs cease upon death. POAs come in a few varieties: durable, general, financial and healthcare and combinations thereof. Know your options and set up one that is right for you. Consider who directs this and how you want your financial affairs handled if you are incapacitated. Since medical care costs can have significant impact on your financial affairs, consider also how you want your end of life care handled. Evaluate the benefits of a living will, advanced directive, and medical power of attorney. Assess details carefully, like who can access safe deposit boxes if you can’t physically get to a bank. Evaluate your survivor’s needs for replacement income if you provide support to them; life insurance can provide some financial security in the event of a financial supporter’s death. See /r/Insurance if you need more info.
  6. Funeral planning – there’s a variety of options specified by different cultural and spiritual traditions. Consider what would work for you and recognize that there’s no one right way to have a funeral. In the US the average funeral cost is between $8,000 and $10,000 but there are many other options which can either save money or make a funeral quite expensive. You have the option to provide funds and instruction to your survivors as part of your end of life planning. Be careful not to over-specify your plans, since meeting very specific criteria can increase costs. Economical options are available via military burials for qualified US service members and their spouses, body or organ donation for medical or scientific purposes, green or natural burial, and direct burial (without a service). Certain federal laws provide for consumer protection and state laws provide various additional protections. (p 25 has additional details)

How to Sell Your Car – Trade or sell privately?

When selling a car, you have several options on how to get the best price. You can trade a car in or sell a car privately? If you sell privately – you are likely to get more for your car. If you’re deciding whether to trade in your current car or sell, it can be a tough choice. Many buyers prefer the simplicity of trading in their current vehicle at the dealership even though they may not get as much money. Others choose to do the legwork and find an appropriate buyer and get a better price. Here are some tips to help you make the decision.

Trading in a Car at a Dealer vs. Selling Privately

If you trade your car at a dealer:

  • You don’t have to deal with talking and meeting with potential buyers
  • You don’t risk being robbed
  • You don’t need to deal with paying off your loan, if you have one
  • In some states – it will reduce your tax by the trade allowance amount


Tips on Selling Your Car Privately

  • Take photos. 80% would not look at a posting without photos.
  • As of March 2014 – Craigslist is the best tool to sell anything privately. It is free and simple. Other sites, like Autotrader and Cars.com are geared towards dealers, who can pay extra to appear on top of searches.
  • Be very careful. You are exposing yourself to everybody. You are a target to scammers, robbers, and plain weirdos. Meet people only in public places. Ask to see ID. Bring a friend. Make sure somebody know where you are.
  • Do not accept any type of payment other than cash or a cashier’s check cut in your presence at a bank.
  • It is reasonable for a buyer to ask for VIN, and to request an inspection by an independent mechanic.

Pricing Your Car Right for a Private Sale

How to Get People to Buy Your Car

  • Priced it slightly under Kelley Blue Book value for ‘good condition’, and had a slightly lower negotiated price in mind that I would accept (10% off)
  • Cleaned it really well inside and outside (carwash for the outside, then vacuumed and spent a LOT of time with method and windex cleaners on the interior) and then took a lot of photos with a good camera and posted the best of these, including a shot of the odometer.
  • Said in the post that I was showing it on a specific Saturday and Sunday between 10AM and 5PM, and asked those who were interested to email to make and appointment. This helps control the craigslist flake factor.
  • I posted it on Cars.com with carfax and VIN as well as craigslist with links to same. Gotta say, the responses from Cars.com were much more serious and sane, I recommend using them. Craigslist turned into a bit of a waste of time, with lots of flakes, random lowball offers, and strange text messages involved.
  • I was clear that I would sell it to the first person who had the cash for it.
  • When I showed the car, it was super clean, all the personal stuff was cleaned out of it, and the gas tank was full. I had the title, bills of sale, and mechanics’ reports all ready.
  • I read all the online stuff about how to sell your car, so I had at least thought about possible scams, what to do about license plates, etc. I did sell it alone, but only would schedule meetings during daylight hours in a fairly public parking lot.


Issues to Remember About Selling a Car Privately

  • People calling and making an appointment to come look at the car, then not showing up after you’ve rearranged your schedule to accommodate them
  • People saying they want to buy it, then never coming back with the money/returning your calls
  • People wasting your time with ridiculous offers (hey man, you still got the car on sale for $5000? Yeah I’ma give you $2000 for it, we got a deal?)
  • People nitpicking every blemish on the car and then making a ridiculous offer (hey man, your car is 13 years old with 150k miles, but the bumper is scuffed so you need to take $500 off)
  • Potential liability issues if the car breaks down. Protect yourself with signed documents stating it’s as-is and they won’t have any legal recourse, but it’s still a major pain in the ass when they call you asking for compensation.


Legal Documents to Sell a Car

Is there a standard document out there to use, or do I need to write my own legal-sounding document?

Really all you have to do is have a paper with the car info, VIN and mileage, names and signatures of both parties, and a statement saying the car has no warranty expressed or implied. It can be written in crayon for what it’s worth.

You can download some pretty nice templates for this on the internet though.


When payment has been completed, you’ll need to:

  • Complete the bill of sale.
  • Sign over the title.
  • Fill out the Release of Liability. …
  • Provide warranty documents, if applicable.
  • Provide copies of maintenance records. …
  • Include any additional transfer paperwork your state may require.
  • Hand over the keys!

This can change state from state. Be sure to check the DMV of your particular state for any special requirements.

Understand Your Car Insurance Policy

Your auto policy is broken down into different coverage types. The types are fairly standard company to company and across different states. There is some variation in exclusions and definitions between insurance companies. In addition, different states have different minimum requirements as well as some different coverage options and requirements.


What is Collision Car Insurance Coverage?

  • Collision: This is what most people think of when they picture car insurance. It covers damage to your car resulting from an accident (with another car or stationary object). Collision is usually required when you have a car loan. When you don’t have a loan, collision is usually an optional coverage. If you are driving a beater it may not be worth the money to insure, especially if you have an emergency fund to cover a new car in case of an accident. Deciding whether to drop collision is a personal decision. It is recommend talking to an agent. They can break down your quote and tell you what it costs to keep collision on your vehicle. This will help you decide if it’s worth it.


What is Comprehensive Car Insurance Coverage?

  • Comprehensive (Comp): Comp is similar to collision but this covers damage to your car caused by an ‘act of god’ (wind, hail, falling trees, deer, cracked windshield, etc.) Everything else said for collision applies here. However, note that you can have separate deductibles for comp and collision. Many people like having a lower comp deductible to cover the less severe cosmetic damage (hail, glass).


What is Property Damage Liability Car Insurance?

  • Property Damage Liability or Physical Damage (PDL or PD): If you’re deemed at fault in an accident, this covers the damage to the other car(s) and / or building / property you damage. This is a required coverage with the required limits varying state to state. I’d highly recommend getting at least $25,000 limits (if not more) even if your state requirements are lower. If the damage you cause exceeds your limits you will be legally obligated to pay the difference out of pocket.

What is Bodily Injury Liability  Car Insurance?

  • Bodily Injury Liability (BI): This is similar to Property Damage Liability but it covers the person you injure, not the car. BI pays for medical bills, pain and suffering, wage loss, and funeral service. It is primarily used for people in the car you hit but also covers pedestrians you hit and any passengers in your car. However, note that this coverage does not cover you (the at fault driver). The limits with this coverage get a little more complex. There are two limits. Per person and per occurrence. A common example would be 50/100. This means it will cover up to $100,000 for any given accident but each person is limited to $50,000. Like Property Damage Liability, you could be held liable for additional damages if your limits are insufficient. A minimum of 100/300 is recommended.

What is Medical Expense / Medical Payments Car Insurance?

  • Medical Expense / Medical Payments (Med Pay): This covers your (and your passengers’) medical bills. It is a no fault coverage so it applies regardless of who caused the accident. This is a great coverage, especially if you have no / limited health insurance. Even if you have health insurance this is nice because there are no deductibles / copays. In some PIP states (see below) med pay is not available.


What is Personal Injury Protection (PIP) Car Insurance?

  • Personal Injury Protection (PIP): This varies greatly from state to state and is not offered in some states yet required in other states. Like med pay, it’s a no fault coverage. It will cover your medical bills regardless of who is at fault. However, unlike med pay, there is sometimes a threshold; you must reach a certain amount of medical bills before this coverage kicks in. Another difference is that PIP also covers additional expenses such as wage loss.


What is Uninsured / Underinsured Motorist (UM/UIM) Car Insurance?

  • Uninsured / Underinsured Motorist (UM/UIM): This is an additional coverage and varies from state to state. It basically covers accidents where you’re not at fault but the other person doesn’t have any / enough insurance. You may be thinking that earlier this page mentioned under BI/PD that if you’re at fault you can be held personally liable if your insurance limits aren’t sufficient. So why would you need this coverage? If the other party is at fault either their insurance would cover it or they would pay out of pocket. But what if it’s a hit and run? Or an unemployed bum? The chances of you ever seeing a penny is slim. This coverage protects you when the liable party is unable to pay. The PD portion covers damage to your car and the BI portion reimburses you for medical bills, pain and suffering, and lost wages. So now you’re probably thinking well I have health insurance plus I already have med pay so why would I need this? Simple. This offers further protection. If you’re in the hospital, unable to work, after the accident this will cover your lost wages. If you require in home care, this will cover it.


What are other types of car insurance?

  • Other: Depending on the carrier, there may be other optional coverages such as emergency road side assistance. These are highly variable so they will not be covered here.


Ways to save money on car insurance

Here are a few tips on how to save on buying car insurance


Shop around for better car insurance.

  • Shop around. Talk to an agent. Get a quote online. There are dozens of factors that go into pricing and each company has a slightly different formula. Find the company whose formula works in your favor.


Pay Car Insurance Bill Upfront

  • Pay your bill upfront rather than monthly. Many companies give you a discount for paying right away rather than once a month. Additionally, if you’re able to use a rewards credit card to do this you could get additional cash back (just make sure to pay your statement in full to avoid paying interest).


Adjust Car Insurance Deductibles

  • Adjust your deductibles. Sometimes this makes sense, sometimes it doesn’t. It really comes down to how the company prices and how comfortable you are with risk. For example, if some cases, increasing the deductible from $500 to $1,000 would have only saved the driver $8 every 6 months or $1.33/month. In order for this to work out in that person’s favor, they would have to go 375 months without an accident. In this situation it wouldn’t be worth the extra risk and kept the lower deductible. However, if you feel you’re a safe driver and are unlikely to get in an accident, and also have an emergency fund big enough to cover a large deductible, go ahead and increase your deductible and save a few dollars.


Bundle Car Insurance with Other Insurance

  • Bundle. Try to get your homeowners / renters through the same company. Most places offer a large discount when you bundle. If you have children / dependents it could also be worth looking into term life as well.

Take a Defensive Driving Course to Lower Car Insurance Rates

  • See if you can get a discount for taking a defensive driving course. Just make sure the discount would offset the cost to complete the course.

Get Usage Based Car Insurance

  • Get usage based insurance (UBI), especially if you do not drive a lot. Many companies offer a discount for installing a device in your car that monitors your driving habits for a few months. On top of the discount offered for installing the device, most companies will then lower your premium further if you have safe driving results.


Ways not to save on car insurnace

We all try to save money, but there are some saving tips that could hurt you in the long run.

  • Do not lower your limits to save a few bucks. You can probably safely lower the collision / comprehensive if you have a large emergency fund but it is not advisable to lower any of the other coverages.
  • Make sure to check reviews before choosing a company. Going with a reputable, better rated company is worth a few extra bucks. When your car is totaled and you’re in the hospital, the last thing you want to deal with is an unresponsive insurance company.
  • Don’t lie about anything on your application (such as pre-existing damage, etc.). This is illegal can come back to hurt you.

Things to Check Out in A Used Car Before Buying

If you trust a mechanic. give the seller a deposit and take the car to him. Make sure he at least takes the wheels off.

Be suspicious of good deals if you are shopping for Toyotas, Hondas, VWs, etc and other cars that retain value well. These cars retain their value well because they are generally reliable and it’s OK if they don’t disappear overnight. If someone wants to get rid of one, they have an agenda, which means there’s probably something wrong with it.

I buy cars that have had collision repairs done and major engine work because I call the seller on their BS and get a deal. I’m not afraid to deal with the consequences because I know how to fix them. Don’t risk it. There are other cars out there that will cause you less headache later down the line.


What to look for when buying a used car

First thing’s first. Here are some inspection points. Take it to a dealership and pay $100 or whatever . They see a lot of those cars and know everything that commonly goes wrong with them. They want you to trust them if anything does go wrong with it because they want your future business.

If you’re going to do an inspection yourself (which I’d recommend anyways), do this on a bright day. Never buy a car when it’s overcast. Park it in the middle of a lot and walk around the car from about 8-10 meters away. Does everything look straight and symmetrical? If not, you’re looking at a collision repair. Open up all the doors, trunk and hood. Any evidence of a paint job? If so, rust/collision evidence.

Look inside the wheel wells and on the inside of the wheels for oil/grease. If you can get a good look under the car, inspect for things that look wet on a dry day. Some water will drip out the passenger side near the door hinge from the air conditioning, even if the AC hasn’t been turned on lately.

Inside the driver side door opening on the chassis, there’s a sticker with vehicle info. Does it match the one on the nose of the car under the hood opening? How about the VIN plate under the windshield (driver side corner) as well.

Inspect the paint job near where panels meet and look for inconsistency. This is indication of some repair which would be a yellow flag, but if the seller seems they might be trying to cover something up, I’d walk.

Look for rust around the fuel filler neck if you think it may have been flood damaged. These cars will have never ending electrical problems. Same thing goes with cars where some idiot installed an alarm or stereo and didn’t know what they were doing; stick your head under the steering column and look up in front of the pedals to see if there’s monkey business going on. If it looks “slapped on,” walk off.

Check the lower panels just in front of the rear wheels with your hand. This is a common area for rust to destroy a car.

Engine. Does it sound smooth? Does it look filthy or freshly detail-cleaned? A common trick is to put a new 3 chamber muffler on a little car before sale to make engine sounds quieter, so this is a yellow flag. If you watch the engine idle, it shouldn’t buck or shake. It should vibrate, but it isn’t supposed to jump around. There should be a light, even ticking at idle that disappears if you rev the engine slightly. You can rev the engine from inside the hood by moving the throttle plate directly. Follow the air tube from the filter to where it goes into the engine and there will be a lever there with a cable (like a bicycle brake cable) on it. Give it a twist. Usually, the main wiring harness comes into the engine bay by the rear passenger side corner. Follow every wire around the engine bay look for evidence of shitty repair work. Any sounds that appear only once your rev the engine in neutral are red flags.

On some cars you cannot rev the engine from under the hood because of how the electronic throttle control is hooked up. In that case, remove the air cleaner (they normally have a couple clips you just unhook) and rev the engine with the driver’s window down and the hood open. Opening the air cleaner allows you to hear any engine sounds muchbetter.

Look for yellow/white whiteout looking paint. That’s evidence of used parts from a wrecker – another yellow flag. Check all the fluid levels (the owner’s manual will describe this process). Never buy a car that has been neglected.

Feel the engine oil with your fingers. If it feels greasy or gritty they have put gear oil in the engine to cover up worn bearings. If it smells rank, same thing. If your paper towel takes on a pinkish hue hear the edges of where the oil wicks out, they have used transmission fluid to clear up carbon buildup and it may be about to have bearing failure.

Hopefully you parked the car on a clean surface and when you go for your test drive, you will be able to notice drips. AC condensate drilling off the evaporator core is fine., anything from the wheel area is not. A little engine oil is fine as long as it’s coming from the pan gasket itself. Coolant is not fine.

Bounce all four corners and listen for clicking sounds that indicate worn bushings and ball joints. Check all the lights and horn for function before you test drive.

*Edit: Some hipster below has pointed out that you should avoid buying cars with burned out lights, which I totally second. A seller should have taken the time to check that.

Take it for a rip and drive it hard. Take corners hard and nail some potholes or speed bumps. If something’s broken in the suspension, now’s the time to find out. Do that first with the windows down and then with the windows up. Clicks, Clunks, and other aberrant sounds mean repairs will be in order. Driving wide open throttle will trigger an emissions system check in the computer as well.

If you’ve never driven automatics, avoid automatics. That would mean you know how to hill start and you probably don’t have an idea how an automatic is supposed to shift. Or get a tranny shop to check it out for you. Manuals are hard to find in north america.

Here’s how to test an automatic transmission. Basically, it should never seem to slip. You need to test out low throttle, part throttle, medium throttle and full throttle shifting between all gears (up and down), as well as the lockout speeds for manual gear selection. The transmission should not downshift into a lower gear if the car is going too fast and itshould allow you to bounce off the rev limiter (this is hard on the engine and transmission if you do it too much). With the brakes to the floor, put the car in both drive and reverse and rev the engine make sure nothing slips. **Don’t do this for more than a couple seconds ** The engine should rev to about 1500-2500 RPM and hold there. The exact speed is specific to each car. If RPMs start climbing gradually, let off immediately; that’s bad.

Here’s how to check a manual transmission. Get going about 20mph and hold in the clutch. Hold the clutch to the boards and engage and disengage every gear several times and feel for looseness and inconsistency. For each gear in turn, get up to the lower speed range for that gear, let out the clutch in gear. The car should begin decellerating (engine braking) apply a little pressure on the gear shifter (your thumb on the base of the stick works well) and apply just enough throttle to pop the transmission back into neutral. None should stick.

Anyway, there’s some stuff to consider. There’s a lot more you can get just by interacting with the owner. I’d suggest bringing an american friend with you if you can, since you’re new. If the seller seems like a cheapskate or appears to be nervous or hiding something, just don’t buy his car. If he’s having to make up excuse after excuse, it’s probably also not worth sticking around. Same thing goes if the guy is seems like a car salesman or mechanic. Used car dealerships sometimes sell their problem cars under the table.

Questions to Ask When Buying a Used Car

Determine Your Used Car Buying Budget

First of all you need to land on a budget. Not just the car, but insurance, gas, maintenance and repairs. That determines what you can consider – new or used and what types of cars. Don’t stretch out your budget too much in monthly payments or get temped by older luxury cars that are selling for cheap (because they usually have high maintenance requirements).

Here is one way to figure out the sale price you should be considering once you’ve deducted all the other expenses of owning a car from your monthly budget:


Edmunds true cost to own (TCO) can also help with that. Pick a year and model of car to get an idea of what the next 5 years will cost.



You can look for used cars on dealer lots, or you can find them private party. Private party offers better bang for buck, but you’ll do more legwork finding a car and sorting out the duds from the gems. Make sure to have your own mechanic lined up to inspect any car – dealer or private party, before making an offer.


Questions to Ask When Buying a Used Car

Here’s my canned list of questions to try and weed out the good ones from the duds before spending money on a pre-purchase inspection. If the seller doesn’t answer, then consider it your sign to move on:

  • Are there any options you didn’t mention in your ad?
  • Has the car ever been in an accident?
  • Does it have a clean title?
  • Are there any mechanical issues with the car?
  • Are there any pending services I should know about – such as oil changes, tires, brake pads, timing belt, clutch, exhaust, etc?
  • Does the air conditioning work?
  • Do you have all the service records?
  • Why are you selling the car?
  • Understandably this isn’t a new car, but on a scale of 1 to 10, with 10 being the closest to new, how would you rate;
  • The paint and body?
  • Headlights/tailights/foglights?
  • Do the windows have any scratches, fading or cracking?
  • Interior?
  • Wheels and tires?

Test Driving a Used Car and Inspecting a Used Car

When I go to see and test drive a car, I prefer to meet at the seller’s house. How does the yard look? A nice neat yard is usually a good sign. If they are reluctant to do that (and some may be), meet at a coffee shop nearest their home (often well attended).

Take your time to inspect the car carefully before the drive. Inside, underneath, trunk and engine bay. Touch each flaw to draw attention to it (helps when negotiating). Are there any leaks under the car? Check for even tire wear as this can indicate alignment or worn suspension parts.

When test driving, have the owner drive it first. See how they drive it. Especially if the car is cold. Someone who jumps on the gas when the car is cold has probably given the car a hard life. Do they fly over curbs or ease gently off them? Suspensions last longer when you’re nice to them. Do they jam on the brakes or saw at the wheel? Bushings and steering gear take a beating.

Test Driving a Used Car

When it’s your turn to drive, pay attention to everything. Does the engine respond smoothly? Transmission shift crisply but not harshly? Brakes aren’t grabby or weak? Does the steering pull either way? Any odd noises or smells? When you come back from the test drive, check again for leaks under the car.

If it all seems good, arrange a time to have your mechanic check it out. Every used car will have issues. The trick is to avoid the big ones.


Things to Check on Used Car Test Drive

  • Test drive on a quiet road with the windows down and the radio turned off. Tire/road noise at ~35mph is a good sign of alignment issues, or lack of tire rotations. Vibration at highway speeds may be wheel balance-related, wheel bearing-related, hub related (lack of hubcentric rings on the wheels). Vibration when braking at highway speeds means you may want to replace the brake rotors / pads due to uneven deposits (colloquially known as “warped rotors” which is usually a misnomer). Brake squeal, while annoying, can be totally normal and you may just need to grease the back of the pads.
  • This only applies once you’re already committed to a price, and ready to take delivery of the vehicle. Before this happens, give the car a very thorough inspection. Never buy a car unless you or a mechanic you trust has looked at the vehicle on a lift. Using a flashlight, inspect for rust, exhaust leaks or any evidence of rework/welding jobs, condition of O2 sensors / wires, transmission, differential, anything missing, damaged bolts, frame damage / bent frame, condition of flexible brake lines, suspension bushings, bent suspension / alignment parts, tire tread wear pattern, and anything else you or your mechanic can think of. Most original body parts/panels have the vehicle’s VIN number somewhere on them. Replacement body panels don’t


Other Tips When Buying a Used Car

  1. Never look at a car in the rain. If it is wet you can’t see paintwork well and if the ground is wet you can’t hear it when test driving.
  2. When test driving, roll the windows up, turn off the AC and the radio. Then drive on highway and listen.
  3. Nowadays, I take a code reader and look for anything pending.
  4. Check the labels on the glass to ensure it all matches. If it has all matching factory glass, that is an indicator that it hasn’t ever been hit too hard. If something doesn’t match, look deeper for other indicators of previous damage.
  5. Flood cars are common, so always check around seat brackets and under the dash for signs of previous water marks.
  6. Be skeptical of cars that are “over detailed”. A car that looks brand new is not one that has a shiny interior or engine bay. New cars’ interiors and engine bays DO NOT SHINE.
  7. If the price seems too good to be true, it is. There could be something the seller is not telling you. They may claim they priced it for a quick sale, but use your instincts when the price is low. It could be salvaged, have a bent frame, need an engine / transmission rebuild, whatever.
  8. Always demand a bill of sale that lays out all terms of the sale in writing (what exactly you’re buying, what is the actual mileage, is the odometer accurate, what is the method of payment, how much you are paying, and under what conditions you will take delivery of the car). Some of this may seem redundant in light of the transfer of title form, but in small claims court written documents like a bill of sale are key to protecting yourself, anything that’s not written down becomes complete hearsay and puts you in a difficult position should you find yourself in court. You don’t need to be a contracts attorney, just use common sense. Put in your contract that you will not pay for or take delivery of the vehicle until the vehicle passes inspection at your expense.
  9. Before you fully commit to buying a vehicle, it makes sense to be familiar with how the particular car drives. If you can, test drive at least one other vehicle of a comparable vintage, so you know how the car feels and sounds, in general


Buying a Used Card from a Car Dealership

If you buy a used car from a dealership, find everything you can that’s wrong with it in under 3 months and call your salesman immediately. 9 out of 10 times they will fix almost everything under the standard 90 day limited warranty. Check all wear items such as tires, brakes, suspension components, etc. You would be amazed what they will do for free to keep you happy.

If you’re at all interested in modifying the car you’re looking at, there are forums dedicated to your car. Google knows. Go check out the forums, read those FAQs. Those places will tell you what breaks first, when it’s most likely to break, etc.

If you’re looking for best value / highest economic utility, gravitate towards the cheaper marque of the family of brands, and upgrade your lower-marque with parts from the higher-marque. ie upgrade your vw mkiv gti using audi tt or (a/s)4 bits. Commonality between platforms across brands is more prevalent than those buying the flagship marques want to believe.

If you buy used, and you don’t have a warranty, ignore the dealership. Find a reputable independant shop (using the forums you’ve already found / subreddits). The shop will be super happy to check out your prospective purchase if you work the deal a little bit – I test-drove my car to the nearest shop from the dealer and said “Hey, I called yesterday, here’s the $50 I promised to do a good once over. Show me what you find that needs to be fixed and explain why, and you’ll be my shop.”

If the car you buy was made before 2000 (or as late as 2005 in some models) CHANGE YOUR TIMING BELT. It’ll save you a lot of unnecessary money and repairs in the future.

A great resource for finding out how much other people have spent on the car you are looking is Truecar.com

It tells you how much the same car was purchased for and will give you a dollar amount that the dealer will sell the car. It is a good benchmark and Gives you a big edge in finding a new or used car

Also you can go to clearbook.com and get a trade in value that is based on actual data and trade ins. Kbb is a made up value and is just a corporation pulling some subjective number out of their ass


Tips for Selling a Used Car

When selling a car though, I like to try to receive payment in the safest way and place possible. For me, that means exchanging cash (paper money) inside a bank. My local bank has often been very accommodating of these kinds of transactions, and have even offered to make copies of the bill of sale, transfer of title forms, etc. A wire transfer is also acceptable. As the seller, I only like dealing in cash (paper money) because many other methods of changing money have the potential for scamming. Paypal can freeze money or reverse transactions depending on their whim/terms and conditions/claims by the buyer. Cashier’s checks are a favorite of scammers because they look official, and many people consider them to be perfectly safe, but fake/fraudulent/stolen cashier’s checks exist. Same goes for money orders. If you deposit a fraudulent cashier’s check, your bank will not help you sort things out. They will just remove the money from your account and that will be the end of it while you go to the authorities to help track down the scammer.

What is Better: Buying or Leasing a Car

One of the biggest questions a car buyer faces when shopping for new car is whether to buy or lease. Most people you ask WILL have a strong opinion on the subject, and they will defend their opinion in this debate as if the future of the nation depended on it. If you visit Craigslist Auto forum, and ask whether you should lease or buy – within 5 minutes your mental abilities will be questioned for even considering leasing, because according to the frequent posters of that forum – everybody should buy only 10 year-old cars and pay cash, the only disagreement will be whether you should buy Japanese or American, which will trigger another wave of heated discussion and name-calling. The reality is that millions of people lease cars every year, a lot of them are very smart and successful, and leasing is something you should consider when shopping for a new car, the least you can do is keep an open mind.


What is a car lease?

When you lease a car – you get the right to use the car for limited time, in return you pay for its depreciation, interest and fees. At the end of the lease you have the option of buying out the car for a predetermined amount or return it in a reasonable condition (or pay for excessive usage, such as body damage and high mileage). Basically, it is very similar to renting.


Common questions people have about car leasing

What about car lease mileage?

Yes, a car lease has restriction on miles, but it is not as bad as most people imagine. First of all, mileage matters only if you returning the car to the bank after the lease, in which case they will charge you for excess miles, between $0.10 and $0.25. If you going to buy out the car – you buy it as is, and the mileage will not matter. Also, you can trade the car in right until the end of the lease, in which case miles will affect the trade-in value just as they would if you were trading a car you own. Another misconception is that you cannot lease if you drive a lot, and you cannot get more than 15,000 miles per year. In fact – you can get as many miles as you want (within reason – up to about 35K miles per year, depending on the car), you just have to pay for it. Most auto leasing companies will even offer you to purchase more miles at a discount, if you do it before your lease is up.


What about excess damage on a car lease?

Same thing as miles – only matters if you were to return the car to the bank, and they will charge you the going rate for fixing the damage, so it will cost you the same as if you owned a car and wanted to trade it in, or same as what you would have to pay to fix it. Also, you can always buy insurance for the excess wear. What about insurance? In California you must have same coverage whether you finance or lease.


What if I need to get out of my car lease early?

Again, you can do it in the same way you would get out of a car loan: there is a payoff to the bank, which changes every month, and you need to pay it to get out of a lease. You can either sell the car privately, or sell it to a dealer. If you sell the car for the same amount as what you owe – you are free and clear. If you sell it for less – you have to come up with the difference, if you sell it for more – you make profit.


Is car leasing the right way to own a car?

The answer is: It depends. Here is what you have to consider:

Your history:how long do you usually keep a car? Do you get attached to a car, and a thought of replacing it brings tears to your eyes? (I actually had people cry when trading a car) Or do you drool over new cars a month after you just bought one? If you get a new car every 2-3 years – you are throwing money away, but at least with a lease – you will throw much less of it.

Your future: are you going to live where you live right now for the next 6 years? Any expected changes in your family? You might move to a city where you can’t or don’t need to have a car, or you might need a bigger/smaller vehicle in a couple of years.

Specific lease vs. purchase analysis for a specific car – some cars have better lease programs than others, and if you are on a fence – check the numbers. For example, BMW Financial Services are known to offer high residual values for their leased cars, which keeps your lease payments low, while some other manufacturers either don’t support leasing as much, or their brand doesn’t hold value as well.

Your tax situation: are you going to use the car for business purposes? If yes – you should be able to use the lease payment as a write-off.


How to make a car lease analysis?

Now, how do we check these numbers? How do we know if a lease is good or bad? As I mentioned earlier, when you lease – you are paying for depreciation and interest. Depreciation is determined by the residual value, or lease-end value of the car. This is a projection made by the bank as to how much this car will be worth at the time of lease expiration. If you want to have lower payments, and have no intention of keeping the car at the end – you want this number to be higher, so you will pay less depreciation. Interest is determined also by the bank, and it is called money factor. While the residual value of the car has to be disclosed, and cannot be changed by the dealer – money factor can be raised for some banks, while some (like Mazda Chase) don’t allow rate mark-up. Banks also adjust these numbers monthly to make sure that their lease programs are attractive and competitive. As residual value of a specific model goes down as it gets closer to the year-end – the bank will also lower the rate, so the lease payment will stay in the same range. And the last piece of the puzzle will be the selling price of the car, or “Cap cost”. Selling price in a lease can be negotiated in the same way as purchase price, so if the selling price is lower – you have less depreciation to pay, since depreciation is always a percentage of MSRP.

Complicated? Kind of… Does it have to be? Absolutely not. All you have to know is the total drive-off, monthly payment, and if you are planning to keep the car after the lease – the residual value. Here is an easy rule of thumb: for every $10K of MSRP you should not pay more than $150 a month with $0 down and minimal drive-off, or you can simply multiply the MSRP by 0.015.Let’s take two cars as an example: Jetta has MSRP of $20,344, and it will lease for $265 a month with minimum drive-off. According to the rule – your payment should be less than $300 for a car in this price range, so the verdict – this lease is good. Now let’s look at a base Jetta TDI with MSRP of $24,004. This car will lease for 338 a month, which is still lower than $360 (the limit according to our calculations), but it is getting close. So the first car is definitely a great lease, while the second one will be a personal judgement call.


Why Should You Not Lease a Car?

Now I will address the main objection to leasing: “But I want to own it!” My response is that in general ownership is overrated. Here is why: Cars are one of the worst investments ever. Why would you want to own something that will lose half its value in 3 years? And the more expensive the car is – the faster it will depreciate. One of the main reasons I recommend leasing to my clients is that I hate seeing them discovering the car they bought 2 years ago for $30,000 total out the door is worth $18,000 today. I like my clients, I don’t like seeing them in pain.

Risk: remember when gas prices doubled? Remember what it did to SUV resale value? People could not give them away. As you are reading this – car manufacturers are working on new technologies, what if in 3 years they will come up with cars that get 100 MPG, how easy do you think it will be to get out of your car?

Risk again: what if you get into an accident, and it gets recorded in your car’s history? Even after you fix the car – it will follow you everywhere, and most people who shop for used cars would not touch a car that has been in an accident – unless you will give it away. The myth of not having monthly payments – once the car warranty runs out you are vulnerable to unforseen expenses – tires, brakes, urgent repairs, timing belt – there is no way of knowing how much you will have to spend on your car, while a leased car has a fixed expense – monthly payment.


Car Lease Sales Tax

Sales tax: in California you pay sales tax on your monthly payment only when you lease, but you do pay the full sales tax when you purchase.

13 Tips to Save Money When Buying a New Car

Step by step guide on how to buy a car.

  1. Establish monthly budget. To establish a monthly budget you will need:
    a. Your income
  2. Get your credit score. Use free the services provided online
  3. Research APRs for auto loans online
    a. Go to a few websites from big banks and a few smaller banks and research. You will be able to see the advertised APRs for new cars and used cars. These APRs tend to be for people with great credit and your APR might be higher or lower, but it will give you a general idea of what banks are offering at the moment. If you have great (730+) credit, then they will be pretty accurate.
  4. Use online car payment calculator to calculate what price range you can afford. For the online car payment calculator, you will typically need the price of the car, down payment, tax, APR, length of the loan.
    a. Price of the car: Use the advertised MSRP, it’s a good estimate for now
    b. Down payment: You know this number
    c. Tax: you know this number
    d. APR: you can estimate very well this number because you did the research in step 2.
    e. Length of the loan: it’s up to you to decide. Usually between 36 and 72 months At this point, you have a great (nearly perfect) idea of the price of the car you can afford.
  5. Call several insurance companies and get quotes for the car models that you are considering at this point. Remember that the insurance may vary and it should be part of your monthly car budget.
  6. Apply for auto loans online, or at the bank and get approved for a loan amount that fits your budget. You can apply and get approved at several banks, as far as I know there is no penalty if you get accepted for a loan and never use it because you got a better APR somewhere else. At this point, you can go back to step 4 and get a nearly perfect idea of what car you can actually buy.
  7. Find the exact car, model and trim that fit your budget. The goal here is to figure out what car you want and not let a salesman tell you what you want. Since you have figured out your budget, the pool of cars should be small (less than 15). You test drive some cars, do online research and ask around. Keep in mind that good dealerships will let you test drive without any pressure to buy.
  8. Once you KNOW what car, trim and options you like/can afford. Email all the dealerships in your area that have the car. Let them know exactly what you are looking for and that you have financing already. Make sure you get a response in which they explicitly states the OUT THE DOOR price of the car. Ask them to include ALL fees in the price they are giving you. They will typically give you an exact number plus tag (they can’t tell you this number, but it won’t be more than 300 dollars). Note: when I did this, I emailed all the dealerships in my half of the state. Why? Because I was willing to drive if the price justified the drive and because I wanted more prices to negotiate a lower out the door price.
  9. Since you have emailed several dealerships and received written OUT THE DOOR prices. You can email them back and negotiate a better price, just pick the top three and let them know you have better offer. Continue to negotiate until they tell you that they can’t go any lower. You will notice that the top 3 prices from the top 3 dealers will be within a few hundred dollars of each other and that is how you will know they are giving you the car for the lowest price.
  10. At this point, you know exactly how much your monthly payment will be and the cost of you insurance.
  11. Now you have the out the car, the out the door price and your APR from the bank. All that is left to do is to go to the dealership, make sure they honor the out the door price the quoted via email, and sign some papers. Make sure you go in the morning because you might have to call the bank to get the check, you might have to call the insurance to get coverage and a few other things. The dealer might realize you’re very well prepared and they might try to convince you to use their finance company (This happened to me and I took their finance because it was LOWER than the one I already had)
  12. Make sure the terms of the sale are exactly as you expected in step 10. There should be no surprises and if the dealer backs out from the offer or tries to upsell you something you didn’t want, just walk away and go to the dealership with the second best price.
  13. Congratulations, you have just bought a car with minimal negotiations, minimal human contact and you have the BEST possible price!


Tips on How-To Negotiate With A Live Car Salesman

  1. Determine the car you want, and the car you can afford.
  2. Do figure out financing ahead of time (it’s better to not make this decision at the dealership)
  3. If you have trade-in, try to sell it on your own first. You’ll make more money for it, and it won’t add an extra variable to an already large, potentially complicated, transaction. Just remember to get your car smogged 90 days before sale (CA), and to alert the DMV immediately after selling it (get your liability off of it).
  4. If you have to trade in your car at the dealer, that’s fine, but go to Kelly Blue Book and find the value of your trade in at “fair” value. Read the fine print, your 5yr old car with only a couple polished out scratches is NOT in excellent condition. Be realistic. If you transported pets or are a smoker in your car, then instantly take 10% off the fair value price, or use the “poor” price on KBB. Get over it, would you pay “fair” price for a car someone treated as their house?
  5. Research the prices that others are paying for the car you’re now looking to buy. Admit that the average is usually around $1k off sticker, but it’s ok to push for $2K off, or more, if you’re planning on financing through the dealer (as they’ll make up their money on the interest).
  6. Come up with the realistic number you want to buy the car for. In this scenario, let’s say it’s $20K MSRP, but you are willing to pay $18.5K.
  7. Go do your test drive and sit down with the salesperson. Do not say the words “final offer” at any point in the first 30min. Instead, make a “fair” offer for negotiation purposes. My rule is to always start $2K below your final desired purchase price. So in this case, offer $16.5K.
  8. Begin negotiations using the 50% rule. They won’t take your lowball $16.5k offer, but if you keep talking with them and don’t get all “final offer!” on anyone, they won’t want to lose someone who may actually be serious about buying a car today (and not just sending emails asking for the lowest price). So, using the 50% rule—act like you’re relenting a bit, and offer $1k more (50% of the $2k difference to your final price). $17.5k
  9. They’ll be happy you “bumped” and they’ll go get another “pencil” from management. Their new compromised offer will be something stupid like including an extra 6 months of warranty. Just say thank you, but that price is what you want to discuss, not add ons–because the car is already the way you like it. They’ll eventually drop their price to $19.5K.
  10. Keep this up, for as long as it takes. Just remember to bump each time only 50% of your last bump, and only when they take cuts off their end. So your next bump would be $500 more, and you’re now at $18K.
  11. When they counter, bump $250
  12. When they counter again, bump $125
  13. When they counter again, bump $60
  14. Etc, until it’s literally stupid $10 bumps.
  15. By this point they will be convinced that you’re serious, and that they cannot get anymore money out of you. They’ll shake your hand on $18,450. Done, and under budget. You just successfully negotiated the price of your car without having to be afraid or go over budget. “Negotiation” in this case meant you kept the conversation going, showed sincere interest, and never committed to anything above your previous “bump.”
  16. Go into the finance room, turn down all add-ons. It can all be bought cheaper, and better, 3rd party.
  17. Don’t be surprised that tax, title, and license are going to add 12%. That’s not their fault, and it can’t be finnanced. You factored this into your overall budget, right?

How to Save Money on Car Insurance and Home Insurance

Renters Insurance Can Save Lots of Money

Getting a renter’s insurance policy can save you money on many different things. Renters insurance covers quite a few things, including:

  • Coverage for your personal content, even if it’s not in your home (eg: items in your car. Certain limits apply for traveling and storage).
  • Coverage if you are temporarily displaced,( eg: you need to stay at a hotel while your house is being repaired for smoke damage, money to replace lost clothes, increased food expenses because you’re eating out every day since you don’t have a stove, etc.)
  • Coverage for liability (eg: someone falls in your apartment and breaks their leg, sues you for negligence). I typically see this at 300k
  • Coverage for your defense costs (eg: lawyer fees, small allowance if you need to miss work to attend court hearings, etc.) This is included.

And how much does this coverage cost (including the numbers I used above)? Usually under $200 annually. Further  if you bundle your renters and auto, sometimes the discount on auto will cover the renters (eg:$200 savings on auto, renters cost 150, net savings: 50.) Call your auto insurance, ask if they have renters insurance as well.


Why should you get renters insurance?

Why should you get renters insurance? What would a worst case scenario look like? For the lazy, imagine you accidentally start a small house fire while cooking. It damages a few thousand dollars’ worth of your stuff, plus you have to live in a hotel while it’s being repaired, and your landlord is going after you for damages because he has to pay for the repairs. If you don’t have renters insurance, you’ll be paying all of that out of pocket. Oh, but if you DO have renters insurance? You’re paying the deductible (typically 250 or 500), and then letting your claims adjuster deal with everything else. Have to take time off work to go to court to prove you’re not negligent? They have you covered.


Higher Insurance Deductibles Will Save You More Money

General rule: Get at least $500 deductible on your auto insurance, preferably $1k. For homeowners insurance, it’s best to go with at LEAST $1k, preferably 2.5k or even 5k. Renters can get away with 250 or 500, honestly.

The difference is usually several hundred a year, and you pay the deductible before the insurance pays anything. For example, let’s say your insurance is $1,500 a year with a $1k deductible, and $900 a year with a$ 2.5k. After 4 years, with a $1k deductible, you’ve paid $6,000 to the insurance company, and then you’ll have to pay another 1k in the event of a claim. After 4 years with a $2.5k deductible, you’ve paid $3,600 to the insurance company, and put aside $2,400 that would have gone to the insurance company, so basically covered your deductible. One more year, you can use the $600 you’ve saved to cover the deductible with $500 additional savings to do whatever you’d like.


Insurance should only be used in an emergency/making claims will increase your rates

This is the one that gets people the most. You pay $1,500 a year for insurance, you’ve been paying the last ten years, so why shouldn’t you make a claim when you’ve already paid then $15k? Because it’s going to raise your rates.

Why do insurance rates go up if you make a claim? If you don’t make any insurance claims, the insurance actuaries put in a group, “unlikely to make a claim”. Because you’re in that group, you get more favorable rates. If you make a claim, you automatically switch to a different group, “likely to make a claim.” Because you’re in this group, you’ll get less favorable rates. On auto, it will last for 3 years; on home, five. It doesn’t matter if you haven’t made a claim in your entire life up until this point; as far as the insurance company can see if, you’ve made a claim and will be much more likely to make another.

For example: Let’s say you have a $1k deductible. Someone breaks into your car, steals your purse worth $1,500. Personal property is covered by your home/renters, so if you make a claim your home will pay out $500 (cost of loss-deductible). They now see you as riskier, so they will increase your rates. Maybe $300 a year for the next 5 years; you’ll pay $1500 over the next five years, plus you’ve already paid the $1000 deductible, so now you’ve paid $2500 for a $1500 purse. In this case, it will cost you less to just buy a new purse out of pocket.On the other hand, if you have a kitchen fire that does $30k in damage? Yeah, make a claim on that one.


Most vehicles don’t need full insurance coverage

Unless A) Your vehicle is financed, then it’s required by your financing company, or B) Your vehicle is less than 10 years old, then your vehicle will pay out more.


Why don’t you need full insurance coverage?

  • Full coverage isn’t an industry regulated term. Professionally, it means nothing. It usually includes collision and comprehensive coverage; some companies will also throw in towing, glass, and rental. If you ask for full coverage, you could be getting anything.
  • Your policy will typically only pay out collision if you’re at fault. If the other driver is at fault, their insurance will pay out. Comprehensive does cover more, so you can get away with having comprehensive (vandalism, theft, tree falls, hit deer) but no collision (you hit object)
  • We will only pay out what the vehicle is worth. Not what it costs to get a new vehicle of this type, not what it costs to get a used vehicle of this type. Doesn’t matter if you paid $35k for the vehicle 10 years ago, doesn’t matter if it costs $15k ro replace it today, we’re only going to pay out the Actual Cash Value, and it typically isn’t 15/35k on a 10 year old vehicle (Much more common is less than 5k)
  • You actually end up paying the company more than it would pay you in the event of a claim, because “full coverage” costs more than liability only.


Example of Getting Less Than Full Coverage on Auto Insurance

Let’s say you have a buy a vehicle in 2001 for $20k. ACV is 3k. Your insurance is 1000 liability only, 1500 with collision and comprehensive, with a 1k deductible. Over the course of 4 years here’s what your insurance totals will look like:


Liability only coverageFull insurance coverage
1$1,000$1,500 ($500 extra)
2$2,000$3,000 ($1k extra)
3$3,000$4,500 ($1.5k extra)
4$4,000$7,000 ($2k extra).


Liability is what you have to pay anyways, so unfortunately there’s not a lot you can do to get around that. For the collision and comp, you’ve paid out 2k extra over the years. If you have an accident right now, the ACV is 3k, minus deductible (in this case 1k). So the most they’ll pay out is 2k, which is the amount you’ve paid them, so you break even. Ever year after that that you don’t have an accident, you’re paying them money that you will never get.

The exact amounts vary, which is why I have the general rules A and B above. If you’re not entirely sure, find out the rough value of what your vehicle is worth. Price liability only coverage (that’s coverage if you hit someone), and liability+ collision and comprehensive coverage (coverage if you hit someone, and also for your own vehicle). Take the rough value of your vehicle, subtract your deductible, this is X. Then take (the price of your quote with collision and comprehensive) and subtract (the price of your quote with liability only). This is Y. X divided by Y is how long it will take you to “break even” if you were to have an accident (although this is obviously not the goal).

Best Garage Sale Strategies to Save Money

Getting deals a garage sales can be tough. However, there are certain strategies what will help you get the best price for something at a garage sale. Below is a list of several garage sale strategies to try out next time you are shopping or selling at a garage sale.


Tips to Save Money at Garage Sales

Buy in bulk: You’re more likely to get a price break if you buy the entire box. Do a quick calculation of the worth of the box of things before you approach them with a deal offer. Get them to name a price first then bargain down from there.

Know that nearly everything is negotiable. Some sellers price items knowing that buyers will haggle. Remember, get them to name a price then bargain down. Either arrive early enough to scout out the best products or late enough to snatch up what didn’t sell at lower prices. If you can’t make a deal at the time leave your number with the seller so they can call you if it doesn’t sell.

Make a shopping list. You won’t find everything, but have an idea of what you need. Yard sales are great for: 1.Candles- Everyone has half burnt candles usually for 25c or less. 2.Books- very heavy when moving. 25c for paperbacks and 50c is acceptable except textbooks etc. 3.Tools- just the basics, power tools are another story. 4. Children/baby anything. Do you remember where your clothes/toys came from at age 4? I don’t have them, but kids seem expensive enough.

Go to the rich neighborhoods at the end of the day, a lot of the times they give stuff away just to be rid of it when its clear it wont be sold

Middle class neighborhoods have the best garage sales. Rich folks too often don’t know the value of things; they often price things at 75% of retail and expect people to consider that a bargain; too often they are a waste of time. I think they just never bargain shop so they don’t have a clue “I paid $1500 at Ethan Allen for that sofa just 4 years ago, so $1200 is a steal!”. Sometimes they are OK though. Whenever you see high prices as their standard; just move on. Poor folks tend to buy cheap stuff and they wear it out.

Plan first. Craigslist is the easiest way. Select the map view to see what’s close to you. I look for moving, estate, or neighborhood sales. The host of a moving sale wants stuff gone and is more likely to negotiate. Estate sales can be uncomfortable. Often someone has died or moving to assisted living. It may feel weird to haggle with the grieving, but they also want the stuff gone. Neighborhood garage sales save you the trouble of driving around.

Best types of neighborhoods for garage sales. Need baby things? Go to neighborhood garage sales in new construction neighborhoods. Don’t expect to find much else though. Want antiques or something like a boat? Go to older established neighborhoods; look for the big older trees. Upscale condos can be OK; those people are getting rid of good things because they don’t have room.

Figure 10% of retail pricing for most used items. New in the box items can be worth more, worn things less. Some things really hold their value, esp. quality name brand items. Even though I could get many of the things I buy for less if I were to haggle, I think it’s fair to pay asking price if it is reasonable. I generally only offer a lower price if I think the thing is priced too high. At the end of the day or second day of a garage sale, most people are very willing to bargain, however. Some things very often are over priced: I don’t care how well your Windows 95 PC works, it’s not worth $100. Why does everyone think their old $45 retail price shop vac is still worth $20?

Bring enough money to buy that big ticket item that you’ve been looking for. Practice self control but recognize it’s not too often that you will find that pristine $500 bicycle for $100 and the next person who walks up might buy it. Then you are stuck paying retail; your kid has been waiting long enough.

Again, don’t be afraid to negotiate at a garage sale. I was uncomfortable doing this a first, but gets easier with practice. Keep quarters and singles. If you are only buying one item just ask, “would you take X for this?” and present the money. Seldom does anyone say no or they return with a different but still lower price. If you are buying several items, offer an even dollar amount for everything. “Would you take 5 bucks for all of these?” Sellers hate making change. If you present the cash and are fairly reasonable, the seller will take it.

Be cautious of some items. 1.Furniture-huge savings, but bed bugs are a thing. 2.Electronics/Appliances- try it out. Most garages have outlets. 3.Disc media-I’ve bought video games that appear scratch free, but were still unreadable. 4. Valuables/antiques/collectibles- be familiar or just use your phone. Fakes and reproductions exist even if the seller thinks it’s legit.

When to Haggle at a Garage sale?

Gaggling is annoying, especially when the other guy refuses to name a price but just wants to ignore low prices and force you to give higher ones. However this is not always true at garage sales.

And set prices are certainly not how it works in most places. Most countries actually have deeply ingrained haggling cultures and even in the U.S. cars, furniture, cable/satellite services, and real estate are always negotiable.

You say the price you want. They say what they want. You meet somewhere in the middle. Or not. It’s just a conversation. Usually all you have to do to start is say “are you negotiable?” and that gets the ball rolling in a friendly way. You can also just say “can I have this for $x?” It doesn’t really matter what price they want. You make your offer and they can accept or not. If your price is way different than theirs, no big deal. It’s like fishing. Maybe you catch something. Maybe you don’t. The best way to catch something good is to go fishing a lot.


Getting the Best Deals at Garage Sales

Look for city-wide garage sales in your area. Allows you to hit the most amount of sales with the least amount of driving. I’ve also been known to plot a route based on Craigslist and newspaper ad postings. Get there early. In my area most people hold a garage sale on Friday and Saturday. Friday morning has the best selection; Saturday around 11:00 things start winding down and deals can be made. Strike up friendly conversations – I don’t always do this but if I’m buying a lot it helps in negotiating. If you see something you really want, get it because you might not see it again. I often find myself passing over something that is a fair deal in the hopes of finding it later at an amazing deal. Finally, I skip over sales in newer subdivisions. Not only do you end up getting lost in curvy side streets, the goods are usually subpar. Usually a lot of cheap plastic stuff for whatever reason. Your mileage will vary of course.

Tricks Car Salesmen Use to Take Your Money When Buying a Car


Purchasing a new or used card from a dealership is often an anxiety inducing experience. Dealing with car salesman tactics and car salesman pressure is tough. Car dealers and their employees are often very familiar with what tricks work get people to buy cars. Unfortunately, for buyers, auto salesmen do this hundreds of times a year and most people only do it a few times in their lifetime. The following tips are designed to prevent you from being pushed around by the salesman and to ease your mind of worries in regards to overpaying.


Tricks Car Salesmen Use to Take Your Money Buying Car

Know your market and Know the Car

Know your market. There are many companies like Edmunds.com and KBB.com that have accurate pricing other than internal dealer incentives and pricing. These car pricing websites tell you what your average consumer is paying, not that the car salesman wants you to pay. Your ultimate goal should be to aim for below invoice on any new car purchase. Your walk away price should always be invoice. If you can’t get close, walk away and call the next dealer. You can get enough car dealers working against each other that they’ll undercut each other.  This will avoid many car salesman tricks they may be trying to use to get you to pay more for a car.

When you finally find the car you like, you need to ask the dealer what their best price is, and then you tell them that was more than you budgeted and make a counter offer. You go back and forth a few times until you either buy the car or say no thank you and leave. If you leave the care dealer will often call you later that day or sometime in the next few days to ask you to reconsider, or to offer a better deal.


Know the Car Invoice Price: Avoid Car Dealer Tricks

Know the invoice price of the (which is what the car dealer “paid” before all kick-backs and incentives given by the car manufactured), and the market prices based on what others actually pay. Again, this is a good time to reference internet site in the car buying process. There are sites like truecar.com will give you an idea if you are already getting the best offers, or if you should wait them out a little longer (or contact more dealers in your area before proceeding). At the very least this will give you confidence that your number is fair and not leave you wondering if the price you paid was “too much”.


Don’t tell the car dealer you are paying in cash

Don’t tell the car dealer you are paying in cash! Refuse additional services from the dealer! A dealer might cut the price closer to break even if they have the hope that you will finance with them or buy a warranty, etc. I wouldn’t engage about those other things, but give them some hope: “I just want to see where I can find the best price before I look into financing, send me your best price for this configuration out the door and we can talk about the other stuff if you’ve got the best deal.” This might not be the most stress free option and you might have to “fight” to get that price once you turn down the other services though.


Avoid Car Payments When Negotiating: Old Car Salesman Trick

Car salesmen are taught to negotiate the payment with a car buyer instead of the final purchase price of the vehicle. Making the car buyer think about car payments has two benefits for them.

1) Making an affordable payment is relatable and gets your mind off of the actual car price. Car buyers end up paying more this way. Dealers know this and tend to exploit this psychological tendency.

2) The interest rate and the length of the loan can quickly fall into the background with this payment focused presentation. The payments method works because we are more likely to digest the affordability of a a monthly payments versus the 5 figure sticker price. Over six years, a $100 dollar increase is not that much, but by doing the math it will add on $6K to the total price. This is the car dealer trick used to get you to pay for more car than you want.


To avoid getting sucked into a higher monthly payments and higher overall car price be firm. Tell the salesman up front “I am not interested in going over payments right now, let’s stick to the price of the car out the door.” You must be proactive here and make sure the car salesman is listening. You want to know the individual price of the car and that is what you want to negotiate. You have now indirectly saved yourself hundreds if not thousands of dollars by directing the negotiations down this road. Also, the out the door price is the price of the car plus all of the fees that the dealer adds on.


Keep Negotiating with the Car Dealer For A Long Time!

When buying a new or used card, hold the negotiations open for awhile with the car salesperson. A month would even be reasonable. Remember that Car dealers have sales quotas and that they need to attain to get certain kickbacks from the automakers. If one of the dealerships is under “quota” near their deadline during the negotiations period, you might just get a screaming deal in order to bump their numbers over the line.


Consider Buying a Car Online

Internet sales is the big thing these days with almost all car dealers. Internet car sales can be good for the car buyer. The dealer already knows what each car must sell for to make money on them, so its much easier to haggle down to the lowest price doing it through email/internet/phone.

In addition, when buying a car online, the dealers already assume you’ve done at least the pricing end of your homework. A good idea might be to send out a blanket email saying “I’m asking every dealership in the area, I want to buy car X for Y amount of money, who can help me out?”


Practicing Negotiating a Car Sale

Go negotiate to buy a car you really don’t want, so you get comfortable with the process. When it comes time to decide, say that it’s not your decision, you have to ask your wife/boss/accountant etc. Ask for a printout of the financing.

Again, always negotiate on price, not payments. Stick to interest rates you’ve already been quoted. After you’ve been there long enough, they will bring up the extended warranty. This is where they make most of their profits in my estimation. Use this to your advantage! Ask if you can get a lower total purchase price if you get the extended warranty. This has worked for me 5 times.


Watch out of Emotion Manipulation

Car salesman use many subliminal tactics to get customers interested in vehicles that they are selling. One of the best ones is emotional manipulation. The reason salesmen often insist on test driving is to get you to create a sense of ownership in your mind. You are unknowingly getting excited and your mind is taking mental ownership of this nice new vehicle.

As the car buyer excitement builds, the emotional part of our brains begins to take over. When this happens, we are much more likely to make a choice based on emotions. The budget we set and the price we wanted are now more likely to be negotiable.

Be mindful of your emotions when buying a new car. Simply being aware of this tactic beforehand and how our mind/bodies will respond is a half of the battle in not making a poor emotional based decision. Never make a large purchase the same day. Be smart, go home, sleep, and revisit it the next day when your mind has had a chance to tend to other matters.


Emotional Car Negotiating Tactics to Used by Dealers

Offering a trial period where the buyer can unwind the deal without penalty is a common successful tactic used. “Why not take it home and talk it over with the wife?” – if the salesperson succeeds here, not only does he transfer ownership, but he also gets you to defend your decision to your SO, effectively making YOU the salesperson. It’s also important to note that there often isn’t a no strings attached policy, and if you do choose to return it, you’ll be paying to unwind the deal.

“Don’t waste my time” – This is less a sales tactic and more a method to make you go away, but surprisingly, it actually also works as a sales tactic. Customers hate to be dismissed. And some will insist on purchasing just to prove it. It’s also a lead in for more aggressive tactics outlined below.

“Who wears the pants?” – This is literally a dare to buy. Commonly directed at men, since we tend to get our panties in a bunch when our manhood is questioned. Don’t think you’re immune to this if you’re a woman – salespeople love to play on the inferiority that women often feel in these engagements, and can get women to buy by being dismissive about their abilities/knowledge.


Always Get Pre-approved Credit for a Car Loan

Always go in with a preapproval from a bank or credit union and negotiate from there. Car dealers will always come back with a rate better than your preapproval as they make money on the loan so they’ll want to push you to their lender. Having your preapproval in hand will make sure you get the best possible rate. Because if they don’t get you a better rate you will just use the check you have in hand. All of the money you save negotiating a car purchase can be washed away in the finance office. Customers let their guard down when a price has been reached with the salesman. Don’t let this happen to you. Being aware of yourself and the situation is half the battle.

If you walk on the lot with a loan ready to go. It’s the same as walking in with a suitcase full of cash. You can pretty much dictate terms (within reason). The best part is, the terms are ONLY the total value of the car. Get a rate quote before going into the dealership. That way you know what to expect on interest rates and can see through their b.s. You can even get a pre-approval and bring your own financing. Generally I’ve learned that they can’t do any better.

If you are feeling generous, let them put forward a financing plan. You can compare to what you already have. Most likely a bank will do much better than whatever they have. Credit Unions are the best. So if you have CU, call them first and see if they can give you a loan. Best part is, CU’s have a special clause, and if they check your credit score it doesn’t count as a point against you on your credit report


Call Your Insurance Provider for Gap Insurance

Call your insurance provider if you want Gap insurance. The dealership wanted $1,800 for gap insurance. I went into his office knowing that my auto insurance provider could add it to my policy for $3 a month. Also, if you bank at a big bank, please please please dont get your auto loan through one. Your local credit union will have way better rates.


Cancel Extended Warranties

Once the deal has really closed – usually when the bank sends you a statement – go down to the dealership and cancel the warranty. This will piss them off big time. Anyway, stick to your guns and do it. One of two things happens: a) the money comes out of the principle but it doesn’t affect your monthly payment, just the number of them or b) your number of payments will stay the same but will go down each month.