How Leases Work

Dear Miss Mota Mouth,

I am trying to understand how leases work. BMW Finance has told me that if I lease another BMW that he will knock 100 points off of my new lease with them. What are these points and why does it matter on an expensive car like a BMW? Should I roll into a lease with the same manufacturer?

Dani in Santa Clara

When you lease a car, you are making payments on the amount that the car is expected to depreciate during the time of the lease. The points are the fees that the dealer writes into the lease to cover acquisition fees, loan fees, etc. These are not always clear in the terms of the lease.

What it would save you is the total capitalized cost of the car that you are leasing so if a $50,000 car can be negotiated down to a total cost of $47,500 (much like negotiating the total cost of buying a new car) then your monthly lease payment will be based on the amount that the car is predicted to depreciate over the length of the lease you choose. So if the BMW is worth $37,500 (depreciated value) in 2 years, your monthly payments would be $10,000 (the depreciation) divided by 24 months (the length of the lease) = $417 x interest per month.

By telling you that they will knock 100 points off they are automatically telling you that they are willing to negotiate a good price for you because you are staying with them- they are implying that at another brand they will be less likely to give you as good of a discount because you will be a new customer. Every bit of negotiation on the cap cost will affect your monthly payment beneficially so take advantage of any offers they make and negotiate for more!

Taking out a lease is a bit of a gamble because you have to decide which make and model will depreciate the least. German cars typically hold their value well as do Japanese cars so sticking with BMW is probably your best bet.

Good luck!

M

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Why Is My Car Not Selling? How do I price It?

Dear Miss Mota,

Why won’t my car sell? I have had it on Autotrader for 5 months and I really need to get it gone because the payments are killing me! It is priced the same as cars just like it online.

Benji, Connecticut

Dear Benji,

First of all- if it has been on Auto Trader for 5 months, you are asking far too much for it. KBB is not the schnizz- it is a guide for the industry to set retail prices! Do a search on eBay's completed listings for your car's make, model and trim (and look at mileage too) and the prices in green mean it sold. Prices in red mean that it didn't.

Why would you do this? Think about antique stores- they have stuff for a ton of money that your mom cannot sell at a garage sale, right? Just because someone puts a price on something, it doesn't mean that is what it is worth! Value is actually whatever a buyer is willing to pay so Auto Trader and the other sites are the same way. Cars identical to yours may be on there with a price that you would like to see but you don't know what people are successfully paying for cars like yours. Trying going to this site to get prices of cars just like yours that have successfully sold online: Price My Car

If you need the money badly, putting an unrealistic price on a car and letting it sit there for months is losing you more money. Cars can depreciate for as much as 3% every month for that year of car. Get aggressive with your pricing and get that car out of your life and money in your pocket!

Good luck!
M

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Getting a Loan on Tricked Out Truck

Dear Miss Mota Mouth,

I want a loan for a tricked out truck. It has 174k on the whole vehicle and 55k on a new engine. KBB is $5300 when I put 174k in the mileage section and its $6800 when I put 55k on the engine. The truck is listed $6900 and the lowest they will go is $6500. The truck is in good condition and has a 4" lift with 3" body and 36" tires. A credit union will only loan you the amount the car is listed on KBB so will they accept the KBB price that has 55k on the engine or will they go with the amount of miles that are on the truck itself? Also, I know its hard without pictures but do you think this is a good price?

Jeff, Temecula, CA

Dear Jeff,

I think that your first problem with this is your last sentence:

"I know its hard without pictures but do you think this is a good price?"

It may be a sweet rig but at the end of the day, any lender is going to look at the mileage on that VIN number regardless of the engine, the lift or even if it has a $4000 system. Even if you showed the lender the pix of the lift, they would not care that it has a new engine. If you really want this one you may have to come up with the difference in cash and finance the KBB value through a lender.

Think of it like this- a ton of people put money into their high performance cars to customize them by adding tint, systems, wheels, trim, etc and that car is only worth what the base car is on the books. Someone may want an Audi A6 and not care at all that it sounds like a rock concert when it drives by- they just want the Audi for its speed and handling. Vehicles are really only worth what someone is willing to pay for them and lenders use the KBB as a guide to try to have some standards when doling out money for new rides.

Good luck!

M

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Why Register a Car?

Dear Miss Mota Mouth,

Why do I have to register a car that I bought to restore? I am not going to drive it until it is sweet.

Donovan, CA

Dear Donovan,

Generally, if you have a vehicle that is considered non-operational and therefore does not need to be registered or insured, it cannot be driven, towed, moved or left standing (parked) on any street.

You usually have to get a certificate from the state regarding non-operational vehicles until they are returned to service.

So, work on that ride off the curb and when it is tight, go to your DMV and register the VIN.

Good luck!

M

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Registering a Car and the DMV

Dear Miss Mota Mouth,

How do I put a car title in my name?
Where do I go and what do I need?
Kelley, Austin, TX

Dear Kelley,

Don’t be baffled by this process! A lot of people think that it is complicated but it isn’t at all and you need to do it within 10 days of taking possession of the car.

1. The previous owner of the car has to sign the title over to you and then you take the signed title to the DMV to register the car in your name.
2. You will have to pay state sales tax on the purchase price except in Alaska, Delaware, Montana, New Hampshire, and Oregon.
3. You will need to provide proof of financial responsibility or insurance. To get the insurance in advance just drop by your insurance agent's office with your VIN and they will give you a card or letter showing that it is covered.

Many states now rely on the insurance agents to upload their client’s info to the state so your insurance address must match the address where you register the car or the state will assume that you are not insured if they can't match them up. It takes about 3 days for the agent's upload to be seen by the state. If the car is not insured for over 30 days then the DMV will suspend your registration.

Many DMVs will require smog tests but you can easily find more information on that and even how to make an appointment so that you don’t have to wait in line by going here.

Good luck!

M

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eBay Motors Updates for Buyers

What is it about change that just freaks everyone out? eBay is no longer just an auction site where buyers and sellers can meet across the miles and haggle in a gigantic garage sale. It is a venue that has more similarities to a clubhouse where loyalties get struck in stone and emotions can run high. Every time there is a change made in the site, you would think that someone walked in the house with a disrespectful machete swinging.

The new eBay Motors look and feel (aka, M2 in eBay-speak) is no different. In an attempt to bring in more buyers and make their user experience easier, the developers at eBay have raised the ire of the old school members.

What the angry protesters do not mention are the cool things that have been added to the new site that will help them get more eyeballs to their auctions. Being able to jump right in and begin browsing inventory by type or model and then drill down to that perfect ride is intuitive and interesting!

Probably the best of the additions is a salute to the competitor Craigslist. In the old eBay Motors, it was a pain to wade through the endless stream of over-priced dealer offerings to find the little gems from private party sellers. Now, while browsing, you can set the search to show Dealers or Private Sellers. Buying For Sale By Owner actually stretches your dollars to get more of a car for less than the retail prices of dealers. Training sellers to use this feature will be the challenge however, because there is still an option for “Unspecified” that will not help the buyers at all.

Of course, there are some hiccups in the brand new system which I would imagine the eBay folks refer to as undocumented features instead of bugs but those will slowly get ironed out. There is just some downright odd “marketing speak” –isms. For example, there is no longer a completed auction search because someone thought it was clever to call it “Just Sold listings” whether they sold or not.

Despite it detractors, I prefer poking around the new eBay Motors to going into any of the other major online car sites. Between the guides, reviews, statistics and the inventory, M2 has become a portal to the world of vehicles that is easier to get lost in than YouTube on a rainy day.

Test drive the new eBay Motors.

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Sales Tax: Trading In, Selling and Buying a Car

Taxes are a very funny thing sometimes. We all complain about having to pay them but as a general rule of thumb, if you pay income taxes, it probably means that you made money and that is not a bad thing. Likewise, paying taxes when you buy a new car, at least in some states, could indicate that you made more money on your old car by selling it yourself!

Here is how it works if you sell your old car:

Step 1: You sell your old car and get more than you would at the dealer’s for trade in.

Step 2: You buy a newer/better car from a dealer or a private seller.

Step 3: You register your car and pay sales tax on that purchase in every state except Alaska, Delaware, Montana, New Hampshire, and Oregon.

Here is how it works if you do a trade in:

Step 1: You trade you old car into a dealer and get less than you would if you had sold it yourself.

Step 2: You pick out your newer and/or better car at the dealership.

Step 3: You pay the registration to the dealer and in every state except California, the District of Columbia, Hawaii, Maryland and Michigan, you will get a deduction for the sales tax on the purchase but you will be taxed on the title transfer fees that the dealer charges you.

So, in every state except California, the District of Columbia, Hawaii, Maryland and Michigan if you sell your car yourself and then buy a car, you will pay sales tax but you actually got a lot more for your car that you sold! Does it balance out? Yep- it actually still means that you are putting money in your pocket to go towards that next purchase.

Making money after taxes is what it is all about!

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Keep Clunking or Buy a Used Car?

Dear Miss Mota Mouth,

We have a 94 Explorer that is about ready to die. It can’t be worth more than $1,500 and needs about $2,000 works immediately to be safe. Is it worth it to fix up this car or should we look for something else.

We have been looking at 2004 Corollas and for under $15,00 online and can buy one with around 40K miles for cash. On the other hand, we own a home and could use the $15k to pay down the 5.8% mortgage.

Ben and Beth in Alabama

Dear B & B,

If you have such a good rate, don't pay down your mortgage! You can afford to pay cash for the new car and (by the sounds of it) you need it.

Paying cash when you are buying online also means that you will be able to buy from a private seller and that translates into your buying dollars having a lot more oomph because private party will be below any dealer’s retail cost!

You can always write off the interest paid on the house and not so much on car repairs. Glad to see that you are considering a car that will have some staying power with its maintenance because I suspect that you will drive this car until it bites the bucket.

Onward!

M

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Getting a Dealer's License and Why it Should be Difficult

Dear Miss Mota Mouth,

How can I get a dealer’s license easily? I want to start buying and selling cars.

Phil, Corona, CA

Dear Phil,

Usually you will have to complete a course taught by a licensed dealer who is approved to teach the license. In California it is a 1 day, 6 hour course. On that day you take an exam and if you pass you go to the local DMV and take a test there. If you pass then you can apply to have a retail location approved by the DMV and the local zoning board. Usually it needs a certain number of spots to park cars, a certain amount of total square feet, an office that is occupied and open a certain number of hours a week, has electricity, has a sign of a certain size that states the business name and license number and some other requirements. Usually only one license is allowed per approved address. Then you have to file a DBA with the state under the name that you will be doing business as and apply for a state sales tax number and business license. You will also need a commercial bank account.

Once all of that is in place you will have to obtain a bond, usually for $50K or more and the bond company will do a background check and credit history and charge you according to your risk. (if your bond ever has a claim against it for even .25 cents, you will lose your license)

Once you open you will have to use what you learned in the dealer school which is to do title transfers, pay the state taxes, etc. You will also need a dealer account with an agency like Carfax to get car history reports. You might need an ongoing relationship with a lender who can finance your venture and they will do a background check and credit history as well.

It isn't easy nor should it be to get a dealer's license because you have to be responsible for filing taxes properly, dealing with lenders, selling safe vehicles and protecting both your investment and you buyer’s investment legally.

Good luck!

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Brenda Priddy Charity Auction for Gearheads

Just wanted to share a link to a charity auction on eBay hosted by spy photographer of the auto industry and concept car espionage specialist Brenda Priddy (featured here in MotorTrend).

Brenda has secured a Dodge Crew badge (a brief name for a crossover SUV that is now known as the Dodge Journey) and is offering it up along with a discarded piece of camouflage from the concept car, a Dodge Rubik’s cube that was given out on press day at the recent LA Auto Show and best of all, a 12” x 18” Brenda Priddy Co. photo of the Dodge Journey test vehicle.

Are these collectible items? Heck yeh! The emblem is a limited production item and piece of short history from Dodge that will never be reproduced and the photo is something that gearheads and Jalopnik geeks will swoon over.

Without further ado, jump to the auction HERE.

Bid well and enjoy a lot!

M

PS- If you win, you can choose the charity you want or choose from the following: Make A Wish Foundation,
American Heart Association, March of Dimes, American Cancer Society, Fisher House, Shriners Hospitals for Children

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Selling a Car and Getting Better than Trade-In

Dear Miss Mota Mouth,

How can I sell my car easily without doing a lot of work and still get more than trade-in?

Jake in DC

Dear Distinctly Curious,

Good question! There are some hidden facts about trade-in that most people do not realize and selling it yourself is the better option.

The reality of the trade-in: The prices on Kelley Blue Book and Edmunds are not entirely true. Most people will never actually be offered that amount by a dealer. The first thing the dealer does is look up Manheim Auction numbers (an industry only resource) in order to give you a quote on your trade-in. They don't even look at the guidebooks or KBB and Edmunds. The reality is you are highly likely to do worse than guidebook published trade-in numbers when going to a dealer.

Doing your research: Go to Price My Car
and you will get a better idea of the real value of your car because that is data pulled from actual recent and successful sales of cars just like yours. Yes, it will be less than KBB but those are industry speculative numbers and not always real.

Making the sale easy: There are resources available such as Mota that can put your car in all the right places online and help you get the best return on your investment possible.

Best of luck,

M

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Car Loans, Trade-Ins and Getting A Less Expensive Car

Maybe it is the economy or maybe it is just that there were a lot of overly-ambitious people in the not so distant past, but I have been getting a ton, and I mean a TON of questions from people who need to get themselves out of a car loan and into a cheaper car.

When this happens, there are very few options but some decisions are much better than others and hopefully this will summarize the best steps that can be taken.

• Sell your car yourself- Don’t even think about trading the car in for the less expensive car! If you trade in the old car, a dealer will give you wholesale or below and will roll the balance owed on it into a new loan for you. They make money at all points on that! They re-sell the old car at a profit, make interest on the old loan by re-financing it and make profit on the newer/cheaper car and its loan. Check out how Price My Car for real sales data on cars just like yours.
• Don’t refinance if your rate is good- If you owe $9000 on a car that you sell for $6500, consider paying $4000 off the principal of the loan and then your car payment is reduced and you can pay the extra $2500 for a less expensive car.
• Check out loan options- Car loans are falling all the time right now so refinancing the balance that you owe on the old car could lower your APR by a couple of points or more! See this recent report about falling rates: bankrate.com Don’t forget to check into loans from the banks, credit unions and even insurance agents (for example, State Farm does loans).

Learn more:

Selling A Car I Can’t Afford!

Upside Down in a Car

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What is Mota: An Explanation For My Father

What is Mota?

My father always said that if it takes you more than 5 words to explain what you do then you are unemployed. I get the question a lot: “What is mota.net?” Can I describe it in 5 words or under? Let’s see.

We are the simple, safe and smart way to sell your car.

I think that I can create an argument for that statement to be considered just 5 words. Follow me here.

1. Simple- The website is designed for ease of use. You sign up, put some details in about your car. An inspection appointment is set up at your convenience and a few days later, your car is live on eBay, cars.com, autotrader, craigslist with great photos and details. I don’t even like putting stuff on eBay myself! Its like having a concierge service.
2. Safe- With fully managed service, once your car is online, a call center takes all of the calls and emails about your car. You don’t have to meet strangers or worry about having to know about DOHC or SOHC. (If you don’t know what that is try Yahoo Answers.)
3. Smart- Now you have time again without having to be strapped to a phone 7 days a week waiting for buyers to call. Negotiations are handled by professionals who represent you and your best interest. You have the best research and most realistic pricing to back up your sale with our Price My Car feature. You do want your car to sell, don’t you?

4. Your Car- Yes, this is your car (37% of us give our cars names) and you deserve to get the best return on your investment. Above wholesale. Above trade-in. You get more to put towards your next car. We don't get a bit of that money so you score more.
   

So, in a nutshell and within the standards of my father’s test, that is what we do in addition to providing consumer content about the realities of the used car business in the Motapedia and this fun little Q&A that I do.

Back to our normal programming…….

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Selling a Car I Can't Afford!

Dear Miss Mota Mouth,

I have a 2005 Mustang that I purchased on a 5-year loan. A year and a half in, and I'm just tired of paying nearly $500 a month for this car. As much as I love it, I just want something cheaper. Can I trade in my car for something that's going to have a lower monthly payment? Do I have to sell it myself? What are my options? And how does it work trading a car in like this. Any advice would be great.
Sincerely,
Terry in Tennessee

Dear Cheap in Chattanooga,

Going car shopping with a new paycheck sometimes is like going to the grocery store when you are hungry: you end up with way too much in your basket and end up having to toss half of what you bought because it goes rotten in your fridge.

With a car, when you sign a 5-year loan, it pretty much means that for 60 months, like it or not, you have to make that payment unless you are able to pay it off in advance. Short of having a big windfall of cash coming in, you will probably have to sell the car and in most cases, you will still owe a balance on the loan because the loan balance is for more than the car is worth. Estimate your new used car payment here but remember this isn’t all that you will have to pay.

If you went back to a dealer and used the car as a trade-in they would give you wholesale value credit for the car and roll the balance that into yet another. You could end up paying as much to drive a car that isn’t as nice as your ‘Stang.

A better option is to sell the car yourself and get more than wholesale which will lower the amount that you will owe to the lender and then start afresh with a new used car. You can get your For Sale By Owner value at www.mota.net.

Don’t forget to try your credit union or bank for your next loan. Very often they will have better rates than any dealer will want to give you. And, when you find you more humble car, count it as a lesson learned.

Encouragingly,

M

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