Clearing Up Misconceptions About Flood Insurance
By Kimberley Edgar

  Lightening splits the sky. Thunder rumbles and roars in applause. And the heavens crack open and drench the Earth with buckets of rain.
  None can deny this awesome display of majesty and power beats any fireworks show man can produce.
  But severe storms and heavy summer rains also wreak havoc when they flood the region.
  Scientists predict it’s not a matter of “if” – but “when” – the next hurricane ravages this area and brings costly, damaging floods.
  One common misconception is homeowners’ insurance will cover flood damages.
  “In general, that’s not true,” said Frank Doyle, Senior Vice President of AAA Insurance. “Flood is a coverage people in most areas should consider whether they own a house or a condo or are a tenant.”
  Consider the flood damage resulting during storms other than hurricanes from 2002 through 2006: In Massachusetts alone, insured flood losses totaled more than $55.4 million, and Rhode Island saw tallies rise with the waters, above $12.8 million.
  Still, many people play Russian roulette and don’t carry flood coverage.
While 49,000 households in Massachusetts held flood-insurance policies as of June 2007, more than 2.5 million households in Massachusetts, or 98 percent, remained at financial risk.
  Rhode Island’s numbers were slightly better – 15,095 held flood insurance policies in June 2007. But 96 percent of the more than 408,400 households in the Ocean State remained at financial risk.
  “More people have had flooding in the last couple years than ever dreamed of having this problem, and it’s even affected people who live inland,” Mr. Doyle said. “New England has a number of ponds and lakes, and there are many areas with old, privately owned dams – some on old mill sites – that are not well-maintained.”
  And hurricanes and tropical storms can cause significant flooding well inland, hundreds of miles from where the storm makes landfall.
“If we end up with a tropical storm, it’s going to be a heavy rain event,” Mr. Doyle said.
  Policyholders should review their policies to ensure there’s enough coverage for the home structure and contents before annually renewing them.
  People without coverage should take immediate action, remembering it takes about 30 days for a new policy to take effect.
  Other advice includes moving important objects and papers to a safe place, storing valuables where they can’t be damaged and conducting a thorough home inventory to document belongings.
  Also, people can reduce flood risk through home improvements, though Mr. Doyle cautions members to think twice before finishing a basement.
“While flood insurance is helpful, even it doesn’t do everything people want it to do,” he said. “The insurance is good about the structure and belongings that are above the basement, at ground level, and necessary items in a basement such as a boiler and furnace.”
  For more information on how to reduce the risk of sewer backup, basement flooding and other flood-related issues, visit www.FloodSmart.gov.

Back to Index  

Credit More Important Than Ever in Securing a Mortgage
By Kimberley Edgar

The volatile market means more hoops for homebuyers.

  It’s an American dream: owning one’s own home. And with the inventory of homes available coupled with interest rates that remain relatively low, it’s a buyers’ market.
  But as anyone who’s been following the financial news knows, the mortgage market has been volatile, resulting in tightened guidelines and more hoops to go through for homebuyers.
  “Credit is going to be even more important in ensuring you can find financing,” said Deborah Imondi, Vice President of AAA Southern New England Bank. “We believe educating yourself about the credit process is one of the most important things a person can do in preparation.”
  One of the first steps prospective homebuyers should take is to check their credit; it’s key to knowing eligibility for programs and to make sure you’re not a victim of identity theft.
  Credit scores are based on statistical analysis of a person’s credit report and demonstrate the likelihood to pay debts. Instituted by the publicly traded Fair Isaac Corp., FICO is the best known and most widely used credit score model in the United States.
  Banks and other institutions use these scores in lending decisions and may deny credit, charge higher interest rates, demand more collateral or require extensive income and asset verification if the applicant’s FICO credit score is low.
  As recently as eight months ago, creditors would accept a 620 FICO score (out of 850) for eligibility for the best rates. Now creditors are looking for a minimum of 720 and may even require a 740. Some programs like the Federal Housing Administration’s are more liberal with delinquent credit histories and will accept lower scores, but most FHA lenders are requiring at least a 580 score, though borrowers may pay a higher rate.
  AAA’s Mortgage Consultants are available at Homebuyers Seminars to discuss the credit process and offer a certificate for preapproval, which provides prospective homebuyers with their credit reports and scores.
  If a score is low, a consultant can offer advice on how to raise it. “We try to ensure they have a copy of their credit report and understand that derogatory information can stay on it for seven years from the date of last activity,” Ms. Imondi said. “If there’s a Chapter 7 bankruptcy, where debts were discharged, that stays on a credit report for 10 years, as opposed to a Chapter 13, where debt was reorganized and repaid.”
  Anyone looking to buy a home should avoid major purchases and opening new lines of credit — it can affect a credit score, so it is best to speak with a consultant first; “what-if” scenarios can be run for them.
  Ms. Imondi also recommends future home­buyers begin now to keep a good credit record by paying their bills and rent on time. She tells the story of a young man who attended a AAA Homebuyers Seminar. In college, he roomed with his buddies, and they skipped out on the utility bills, in his name, and he delayed paying.
  A credit-collection agency contacted him and he made a payment arrangement so he could keep his report at clean as possible. Had he waited to make payment arrangements until he sought to buy a home, and if that collection account was almost seven years old, a negative rating would have stayed on for another seven years.
  “Things a person does from 18 to 22 can have an impact on a credit record later,” Ms. Imondi said. “The things you do in your youth can come back to haunt you when you decide to go through this process.”
  AAA mortgage consultants help potential homebuyers work on their credit and obtain the proper financing.

Back to Index  

Get to Know Your Insurance Policy
By Christine E. McDermott

  Massachusetts’ shift to the landscape of managed competition for auto insurance has given motorists the opportunity to shop around for the best deal.
  What some have quickly found, however, is that the best deal doesn’t always include the best coverage.
  Some have unwittingly opted for lower personal-injury protection – leaving them vulnerable in the event of a crash, particularly with an uninsured motorist – and others have discovered they suddenly have a deductible for windshield replacement that they never had before. Others have purchased the minimum amount of coverage required by the state and found themselves unprotected when driving out of Massachusetts.
  Having a greater range of insurance options is a good thing – but it also means motorists need to be more educated than ever on the intricacies of their insurance policy.
  If you’re in the market for a new policy, it’s important to familiarize yourself with some key terms. Moreover, it’s wise to spend some time with a knowledgeable insurance agent – whether on the phone or in person – who can walk you through each step of your policy so you understand clearly all of your options and coverage.
  “Many people have not reviewed their policy since they first started driving, and they don’t know what coverage they carry,” said AAA South Attleboro Insurance Agent Al DiNapoli. “If they’re now married and own property, they may not realize they’re underinsured.”
  If you’re looking at multiple agencies for the best price, it’s important to make sure the premium quotes you are getting from each company are for the same coverage. Some have purchased insurance online and not realized that they’re not covered as well as they used to be.
  When he’s reviewing a customer’s policy, Mr. DiNapoli will spend time explaining what each coverage is and how it works. He’ll recommend the appropriate amount of protection the person should have.
  He points out that the customer could save money now by opting for lower coverage – but he wants them to understand what their level of exposure would be if they were in a crash. Of course, he advises homeowners to carry higher limits, but notes that even young people need to consider that judges have considered “future earning potential” in motor-vehicle-crash settlements.
  “Some people come in wanting to save money on their insurance, but they end up spending a bit more,” Mr. DiNapoli said. “But, now their house isn’t as much at risk as when they walked in the door. A lot of people do realize that you can save a dollar on your policy, but it will cost you more in the long run.”
  When choosing an insurance agency, price is only one element to consider, according to the Massachusetts Division of Insurance’s “Your Consumer Guide: Ways to Save on Your 2008 Automobile Insurance.” Discounts, claims handling, the location of an agent, and the financial health of the company are all factors. If you are in a crash, the system can be difficult to navigate, and a local insurance agent can act as your advocate.   Mr. DiNapoli has helped customers fill out accident reports and file claims.
“Whether you’ve been a cus­tomer for 30 years or you just joined AAA this year, you will get the same personal, individualized service,” he said. “We’ll make sure you’re educated about your policy, and we’ll be here to help whenever you need it.”

Back to Index  

GAP Protects What Your Owe on Car
By Megan Weeden

GAP coverage is worth considering when you’re purchasing a car.

  When one man looking to buy a set of wheels heard about Guaranteed Asset Protection, he knew it was for him.
  “I got it because it sounded like a good fallback plan,” said Jesse Alexandre, a North Providence, R.I., resident.
And when Mr. Alexandre was involved in a crash that totaled his 2002 Honda, it was.
  Guaranteed Asset Protection – better known as GAP protection – ensured he could replace his vehicle with a 2002 Toyota Camry without worrying about hav­ing to dip into his pockets or repay a hefty loan first.
  “I basically didn’t feel the financial effects of the crash at all,” Mr. Alexandre said.
  He isn’t the only one who’s discovered the benefits of GAP protection.
  More and more people looking to take advantage of significantly lower auto loan interest rates this year are including GAP in their financing and refinancing packages.
  “AAA Southern New England Bank’s GAP protection is one of the most affordable and valuable products a member can purchase and include in his or her auto loan. For only pennies per day, it protects the member from unforeseen out-of-pocket expenses,” said Gerry Zeoli, AAA Financial Services Director.
  GAP protection goes into effect when a vehicle is involved in a major accident beyond repair or is stolen, and the insurance settlement (less any deductions) falls short of the amount the borrower owes on the loan.
  Without this protection, having to pay out of pocket the loan deficiency balance, better known as the “gap,” may result in unexpected financial hardship for the borrower. If the borrower does not have the resources to pay the deficiency, both their ability to replace the vehicle and their individual credit rating could be jeopardized.
  Take a vehicle with an actual cash value of $11,000 and an insurance deductible of $1,000. The insurance settlement representing the vehicle loss will be $10,000.
But if the outstanding loan balance is $12,500, the borrower will be liable for the difference, or $2,500, unless the person has GAP, which would cover that balance.
  Unfortunately, the above example is occurring more frequently. In comparison, the cost for GAP on a 60-month loan is under $5 per month, or under 20 cents per day – well worth the investment.
At just $299, members financing or refinancing their vehicles through AAA are eligible to buy GAP protection, a substantial savings as a member benefit in comparison to other offers, Mr. DerManouelian, AAA Financial Services Team Leader said.
  And members can purchase GAP up to six months after taking out a loan through AAA, Mr. Zeoli said.
  Auto loan rates are at historic lows as consumers look to refinance vehicles purchased at higher rates in the last several years.
  “Increasing fuel costs, coupled with auto loan rates going down dramatically over the last few months, have led members to refinance their vehicles and reduce their payments,” Mr. DerManouelian said.

Back to Index  

How to Save On Insurance After Adding a Teen Driver
By Megan Weeden

Teens who drive safely will save money on auto insurance.

  One of the biggest moments in a teenager’s life can be one of the most nerve-wracking for parents – getting a driver’s license.
For teenagers, it’s a sign of freedom.
  For parents, it comes with a hefty price tag: Adding a teen driver to your policy will substantially increase your premium.
  While there’s not much you can do to avoid adding your teen to your policy, there are some ways your teen’s behavior can save you money.
  Obeying the Rules. The rules and penalties for teen drivers have changed in Rhode Island.
  Ocean State teens must have their permits for a year, and then they begin driving under a limited provisional license for the next year.
  Unsupervised night driving is banned between the hours of 1 and 5 a.m., and no more than one person under age 21 may be in the car unless it’s a family member.
  Failure to comply is a criminal violation and requires an appearance in Rhode Island Family Court.
  Drivers under age 18 are not allowed to use a cell phone while driving. Penalties could include fines, higher insurance premiums, and a loss of driving privileges.
  In Massachusetts, drivers under age 18 operate under a Junior Operators License that comes with its own set of rules.
  In addition to the requirement that parents attend two hours of classroom instruction and supervise up to 40 hours of their teens’ on-the-road training prior to getting their licenses, junior operators can’t have passengers in the car without an adult present for the first six months.
  They also cannot drive between the hours of 12:30 and 5 a.m., unless they are with a parent.
  The first time they get caught disobeying the law, they lose their driving privileges for 60 days and must pay $100 reinstatement fee.
  Speeding comes with even stricter penalties — a 90-day suspension, $500 reinstatement fee, and attendance at a driver-retraining course. Insurance premiums also increase.
  “The primary reason for these laws is so kids get supervised driving longer, while gaining experience,” said David Raposa, AAA Southern New England’s Director of Public Affairs. “If they’re safe drivers starting out, it will carry over and positively impact insurance rates.”
  Take a Driver’s Education Course. Once your teen has a permit, enroll him or her in driving lessons from a commercial driving school such as AAA’s. The laws require additional practice anyway, and many insurance companies offer discounts for those who take professional lessons.
  Buy a Conservative Car. The type of car your teenager drives can also impact your cost. Francis Doyle, Senior Vice President of AAA Insurance, recommends a safe sedan and not a high-powered sports car.
In any state, if your teen gets in a crash early on, your insurance rates increase dramatically.
  “Mom’s or dad’s SUV may not be the best option,” Mr. Doyle said. “These can be hard to maneuver and expensive to repair. Boring is better.”
Study. Some insurance companies give discounts to teenagers who maintain a B average or better.
  “We urge everyone to talk to their insurance agent and take advantage of any savings they can,” Mr. Doyle said.

Back to Index  

Long-Term Care Insurance Protects Your Family and Lifestyle
By Kimberley Edgar

  With his 50th birthday approaching, the head of AAA Southern New England’s Insurance Agency weighed what to do to celebrate: outfit the porch on his house with surround-sound or invest in long-term care insurance?
  Prudence prevailed, and AAA Insurance Senior Vice President Frank Doyle took out a long-term care policy.
“It’s not as much fun as buying a new surround-sound system, but it’s something people should consider,” he said. “It’s smart to make it a part of your retirement plan.”
  Independence is king for Americans, and long-term care insurance can help people maintain some freedom should they find themselves unable to perform basic activities of daily living such as dressing, bathing or eating.
Long-term care insurance covers the gap of care expenses generally not covered by health insurance, Medicare or Medicaid.
  The federal/state health-insurance program Medicaid pays for long-term care only after an individual has drained savings and other assets, and long-term care insurance can help protect these along with families and lifestyles.
“It’s common for a nursing home to cost $300 a day,” Mr. Doyle said. “This is a way to protect your home if you want to pass it along to your family.”
  This insurance has a growing need as Baby Boomers enjoy increased life expectancy but face soaring healthcare costs for the serious health problems that may come with old age.
  The best time to buy long-term care insurance is in one’s middle age. Mr. Doyle recommends evaluating need at a life milestone such as a 50th birthday.
  If someone waits until his or her 70s or 80s, when health begins to fail, it may be too late: Either the risk factors might be too high to get insurance, or the premiums might be higher.
  While long-term care insurance isn’t for everyone, AAA.com has several resources to help members consider whether this is for them.

Back to Index  

Used Cautiously, a Reverse Mortgage Can Be a Life Saver
By Megan R. Weeden

A reverse mortgage can lead to new opportunities.

  When 82-year-old Jean Brown began receiving foreclosure notices in the mail, she was scared of losing the Marstons Mills, Mass., home where she’s lived for almost 30 years.     She didn’t know where to turn for help.
Family member Meg Chaffee made a few phone calls and began exploring options. Eventually, she was led to Paul Rubin, AAA Southern New England’s Reverse Mortgage Consultant.
  Mr. Rubin told Ms. Chaffee about reverse mortgages, loans available to homeowners age 62 or older. The loans permit owners to borrow against their houses, but do not require repayment until the borrower moves out of the home or dies. The loan is repaid with the proceeds from selling the house.
  “As we looked further into the situation, it seemed like we were going to be short in stopping the foreclosure and it might not work after all,” Mr. Rubin said. “We worked with Meg to raise the money Jean needed to stop the foreclosure. We hand delivered the check to the bank less than 24 hours before the foreclosure.”
  The loan money can be used in a number of ways, including supplementing Social Security, travel, purchasing a new car or second home, paying for a grandchild’s college education, or to make necessary home repairs.
  “The reverse mortgage allowed Jean to stay in her house,” Ms. Chafee said. “We were so relieved when Paul called us to tell us the loan was all set. We didn’t know where else she would go.”
  Reverse mortgages are not for everyone, cautions Deborah Imondi, Vice President of AAA Southern New England Bank. “We encourage people to talk to someone they know and trust about the program and to look at their own individual circumstances. For those who can use it, it gives them a new way to live their life.”
  Things to consider include the cost of the loan, since the fees associated with a reverse mortgage can be expensive.
  “The costs, which are rolled into the loan, are mitigated over time. If the person is planning on selling their home in the near future, or health concerns may cause the need to move into a nursing home soon, this loan probably isn’t for them,” Ms. Imondi said.
  All loan recipients are required to go through independent counseling prior to the closing to ensure they understand the program.
  “Reverse mortgages have helped a lot of people age in place and stay in their homes,” Ms. Imondi said. “We try to make people very comfortable by letting them know what reverse mortgages are designed for and informing them of the pros and cons.”

Back to Index  

To Maximize Homeowners Policy, Keep Record of Valuables
By Kimberley Edgar

  One insurance executive has this advice for anyone looking to keep track of his or her valuables: Make a production of it.
  Touring one’s home with video camera in hand to document details about construction, furniture, decorations, technology and other belongings is the best way to inventory a home, said Frank Doyle, Senior Vice President, AAA Insurance Agency.
  “A homeowners policy includes a lot, and you’ll want to get your money’s worth,” Mr. Doyle said. “This is a great and simple way to document what you have in your home and avoid disagreements with adjusters over what it’s worth.”
  Even the tiniest apartment can contain thousands of dollars worth of personal property. Insurance companies recommend you keep an inventory of your belongings.
  Insurance companies often supply customers with a chart to guide them in documenting their possessions. The most effective inventories combine this detailed written list with a videotape with audio narration, photographs of valuable items, or an audiotape with photographs of valuable items.
  Mr. Doyle prefers the video­tape. “A video also shows the condition of the home, what’s on the windows, what’s on the walls, what’s on the floors,” Mr. Doyle said. “I don’t know a lot about drapes, but I do know how much they cost. And if there are oriental rugs, they can be expensive to replace.”
  Having an index such as The Commerce Insurance Company’s Home Inventory List can provide a valuable springboard for the narrative.
  Instead of memorizing the information, you can use the list as a script for the tour. Then, it’s lights, camera, action! Here’s a checklist of items to consider for the tour:
  • Begin in one room, and cover its contents thoroughly. Remember hallways, the attic and basement, and go outside to capture the garage, porch, pool, patio and garden – and exterior views of the home.
  • Treat this production like a documentary: Open doors and drawers to capture hidden treasures such as sterling silver, jewelry and china.
  • Group similar items together when possible, and note anything of special value. Document distinctive information about valuables – model, age, where purchased and unusual quantities. It’s important to record serial numbers of major appliances and electronic equipment.
  • Attach any sales receipts, appraisals and photocopies of important documents to the inventory, keeping originals in a safety-deposit box. Often insured separately, collections and specialty items such as jewelry, antiques and art should be appraised to establish value. Photograph or videotape these valuable items against a plain back­ground, next to a ruler.
  Once you’ve finished, keep the list and video off premises in safety-deposit box or with a relative or friend, and update it with new items. Software is available to help organize and store these lists.

Back to Index  

In the Market for a Hybrid? Tax Credits Can Offset the Cost
By Megan R. Weeden

Chevrolet’s Malibu Hybrid qualifies for an IRS tax credit.

  With the environment being top of mind these days, consumers are looking for ways they can do their part to help reduce their carbon footprint — and that’s one reason more and more hybrids are popping up on our roadways.
Combining the benefits of gasoline engines and electric motors, hybrids can be configured to obtain different objectives, such as improving fuel economy or boosting performance.
  Hybrids have the ability to switch between internal combustion engines and electric motors to power themselves, with batteries that recharge themselves during driving.
  Hybrids also convert energy normally wasted during coasting and braking into electricity, which is stored in a battery until needed by the electric motor — eliminating the need to be plugged into an external source of electricity.
These fuel-efficient, environmentally friendly alternatives to the gas-guzzling, high-emission models are increasing in popularity. Demand is strong as new models are constantly being introduced into the market.
But for consumers who think hybrids also will save them money, it can be confusing. While they are more fuel-efficient and pro­duce lower emissions than conventional, gasoline-only vehicles, hybrids are typically priced thousands of dollars higher than similar all-gas models. Factors including acceleration, idle time, and driving habits impact results.
Federal tax credits and financing incentives for hybrids can eliminate some of the financial burden, and many models qualify.
  As part of the Energy Policy Act of 2005, hybrids purchased after Dec. 31, 2005, may be eligible for a federal income tax credit of up to $3,400. However, credit amounts begin to phase out for a given manufacturer once it has sold over 60,000 eligible vehicles. Consumers seeking the credit are encouraged to buy early, since the full credit is only available for a limited time. Also, the tax credit can only be claimed by the original purchaser of the vehicle and does not apply to used or leased hybrids.
  The credit can be obtained by filling out the Alternative Motor Vehicle Credit tax form 8910.
  Five new hybrids available this year qualify for the IRS credit: Chevrolet’s Malibu Hybrid, a mid-size car equipped with a four-cylinder engine and a 4-speed automatic transmission; Chevrolet’s Tahoe Hybrid and GMC’s Yukon 1500 Hybrid, sport-utility vehicles with an electronic variable transmission (available in two-wheel and four-wheel drive); Lexus’ LS 600h L, a luxury car equipped with an electronically controlled, continuously variable transmission; and Mazda’s Tribute Hybrid, an SUV equipped with a four-cylinder engine and a continuously variable transmission available in two- and four-wheel drive.
  For more information about tax credits for hybrid cars, visit www.irs.gov.
“In addition to the tax credits offered for hybrids, some lenders we work with are currently offering financing discounts on hybrid vehicles as well,” said Gerald Zeoli, Director of AAA Southern New England Financial Services.   “AAA members looking to finance a new hybrid car loan may be eligible for a discount on their interest rate, ranging from a quarter- to a half-percent.”

Back to Index  

Refinancing a Car Loan Can Save You Hundreds of Dollars

  Car loans work just like mortgage loans — if your rate is too high, you can refinance.
  Whether rates have come down since you purchased your vehicle or you’ve just left the showroom and aren’t sure if you got the best interest rate, refinancing presents a great opportunity to save money.
  Inching down a loan’s interest rate even a percentage point or two, say from 8.9 percent to 6.9 percent, can lower your monthly payments and save hundreds of dollars in interest over the life of the loan.
  Unlike home mortgage refinancing, a vehicle refinance can lower your loan cost without incurring a trunk-load of fees or closing costs.
  However, you need to make certain your existing loan has no prepayment penalties. Vehicle refinancing carries the most benefit when a simple-interest loan with no prepayment penalties is refinanced into a simple-interest loan with a lower rate. Unless otherwise stated in your loan, you may be able to refinance prior to making even one payment.
  Here are examples of how vehicle refinancing works. Let’s say you bought a new car last year and financed $30,000 for five years at 7.99 percent; it would result in a monthly payment of $608. If after one year, you refinance at 6.15 percent, your payment would drop to $587 a month — saving more than $1,000 over the life of your loan.
  Even refinancing a $16,000 loan after one year — dropping from a 7.99 percent APR to 6.15 percent APR — will save $540 over the life of your loan. The bottom line is if you find an interest rate that is lower than your current interest rate, you are going to save money by refinancing.
  Want to save even more money and pay off the loan early? After refinancing to reduce the payment, send in what you’ve been paying all along. By reducing the principal much more quickly, you multiply the benefits of refinancing.
  Refinancing a car can be a simple, money-saving process — even more so for consumers going online for their deal. According to Forrester Research, two-thirds of those who have applied for auto loans online say it’s more convenient than on the phone or in person. Plus, the savings online can be significant.
  AAA offers some of the lowest rate vehicle loans available. To apply or check today’s rates, simply visit AAA.com.

Back to Index  

Beware of Becoming Upside Down on Your Automotive Loan

  When auto makers unveil their newest models later this year, many car enthusiasts will be doing back flips. But if you’re in the market to buy a new set of wheels, you’ll want to make sure your car loan doesn’t leave you – and your wallet – turned upside down.
  In recent years, more consumers have become “upside down” on their auto loans – meaning they owe more on their vehicle than it’s worth in trade when it’s time to buy a new one. Studies show almost 40 percent of new car buyers were upside down on their loans in 2004 – up from 25 percent of buyers in 2001.
  What’s driving the trend? Among the biggest culprits are longer-term loans. The average length of a car loan in 2004 was 63 months – up from an average of 48 months just five years earlier.
  “When it comes to financing their purchase, car buyers tend to automatically focus on the affordability of monthly payments, but that should only be one part of the equation,” said Gerald Zeoli, Director of AAA Financial Services.
  “It might be tempting to stretch out your loan over a longer period of time, in order to help make your payments affordable. The problem is, that approach could get you into trouble down the road.”
  Consumers who trade in their new car sooner than originally planned set the stage for becoming upside down. Today, only about 20 percent of new car buyers say they are replacing their existing vehicle because they need to.
  Experts say consumers can take a few steps to guard against becoming upside down on their next car loan. Find a car within your budget. No more than 15 to 20 percent of your monthly budget should go to all your car-related expenses.
  Comparison shop for loans. Explore rates at your local credit union, bank, or even online. AAA.com offers members a no-hassle auto-lending program with nationally competitive rates. Secure your own no-obligation loan before you go to buy, to increase your leverage.
  Buy a car that retains value. Go online to see which makes and models best hold their value. By choosing a lower-depreciating vehicle, you’ll be protecting your equity when you go to sell.
  Match length of loan to length of ownership. Select your loan term based on how long you plan to own the vehicle – and stick to that term.
Review your loan checklist. Make sure you know the following before finalizing your loan: amount borrowed; length of loan; interest rate; and monthly payment.

Back to Index