Weigh several issues before buying a car

This was originally published on Monday, September 26 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Many of us purchase a vehicle revolving around the make, model, and style of a vehicle.  Whatever the reason that you need a new vehicle take some time and do  thorough research on the price, its reliability, and your finances.

  • Affordability.  Of course we shop with our eyes. That is why car manufactures constantly change the look of their vehicles.  Sit down and do a spending plan. Can you afford the monthly payments and insurance? The last thing you want is for your car to be repossessed because you could not afford to make the payments.
  • Test drive.  Take the car for a spin.  Be sure that you are comfortable in it.  If you are uncomfortable it could cause safety issues.  If you have a family, take them along and see if they too are comfortable.  If you plan on having the car around for a while and you have small kids remember that they will need space to grow into. Besides comfort, look for how the car idles.  It should be quiet and smooth. Are the car’s controls easily accessible? Can you read the dashboard gauges clearly? Do you have a clear view out of the car all around you? Does the car handle well?  It should be responsive to accelerating and braking.
  • Impulse buying.  No matter the reason for a new car take your time and research the make, model, and styling of the car. Do your research and be happy with your purchase.
  • Timing.  When looking for a new car, the time of year when you purchase it can result in savings. According to Consumer Reports the time of the year, month, day of the week and even the time of day can help you save money. When the new models arrive dealers are eager to make room.  To make room and sell those previous end-of-model-year cars, the dealers give the best discounts.  Do take into account that end of the year does not necessarily mean October through December.  Manufactures have different times of the year when they release their new models.  Contact the dealership to see just when their new models arrive.  One drawback to waiting is that you may not find the exact car you want because they sold out. End of the month or yearly quarter can increase your chances of saving money.  Managers and salespersons must meet a quota and get compensated when they meet that quota or exceed it.  This may be a good time to use your negotiating skills. Rebates are temporary offers to help clear out a model year during specific days of the year.

Of course, there are times when you don’t want to purchase a new vehicle:

  • When a car is in high demand.  That is usually at the beginning of a new model year.  Research what is new between the last year’s model and this year’s model.  Sometimes only minor things have changed and everything else remains the same.  It is best to also wait till car review websites have a chance to review the performance of the newer model.  There are websites with comparison tools that can assist you.
  • When financing your vehicle. The auto dealers or finance institutions will run a credit check.  Each dealer you visit will run a credit check if you apply.   Each time someone looks at your credit it counts as an inquiry which can have a negative impact on your score.  Know what vehicle you want, hold off until you are certain to purchase, and don’t agree to a dealer’s credit check until you are ready to purchase.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Tips for buying your first car

This was originally published on Monday, September 19 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Q:  I am about to buy my first car.  My credit score is good and I have money to make a down payment. Do you have any tips for a first-time buyer?

A:  Buying your first car is a huge event and a moment you will never forget.  It can be quite daunting with all the choices that are out in the market. Although you are eager to purchase a car, take some time to really make a sound decision and get the best deal.

  • Research. There are many choices in the market. Decide what is going to fit your lifestyle. If you are single, do you need a seven-passenger vehicle? Look for vehicles that are in your price range. There are many websites that you can go to research the type of vehicle you want. Find out how happy people are with past models. Does the company have a good safety record? Visit several different dealerships and test drive a few cars that you are interested in. Don’t be afraid to ask questions.
  • Prefinance. You can obtain financing from the car dealership but the interest rates are generally higher than most financial institutions. Start with your financial institution and see how much they are willing to lend you. It is best to find out what they think you can afford versus finding a vehicle you really want and not being able to be approved for the amount to purchase it.
  • Negotiate. Don’t be afraid to put a number out there. You may start off lower than what you want to pay and work your way up. Sometimes you can get a few extra amenities added for the same price. Purchasing a car is an investment you will be paying off for the next few years.  The less you have to pay, the better.  Negotiate on the base price of the car and not monthly payments. Review exactly what is being offered in the price. If you don’t need heated seats, don’t pay for them.  Know the full purchase price which may include processing fees, taxes, delivery fee and registration, just to name a few.
  • New or used. While you are at the dealership looking at new cars, take a look at some of the used vehicles. Ask the salesperson to see some of the cars they used for the showroom and test drive last year’s models. These gently used vehicles have low mileage and are still in excellent condition.
  • Insurance. Don’t forget to factor that you will have to pay insurance on your new vehicle. Go to your insurance company and ask them for a quote on the vehicle you have chosen. Add that into your purchase price and monthly payments. Don’t forget to ask if they have bundled packages with your other insurance. You may be able to get a discount.
  • Extended warranty. Generally, new cars come with a manufacturer’s warranty for a certain amount of time or miles. Dealerships offer an extended warranty. These warranties can be costly. Be sure to read through what is exactly covered in the extended warranty. If you do choose to purchase it, do not use your loan to pay for it. You do not want to be paying interest on your warranty. Start putting money aside to help with maintenance and repair costs.
  • Maintenance costs and fuel efficiency.  Estimate the maintenance costs, such as oil changes, and also factor in an estimate for fuel costs. These are things people tend to forget when they are looking for their first car.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com

Make smart driving choices to save on gas money

This article was originally published on Monday, 11 March 2013 as the Money Matters article in the Guam Pacific Daily News (PDN).  Click here to subscribe to the PDN.

The rise in our cost of living has forced us to be creative with how we save and spend our money. We once again have seen the price of fuel go up and down. Let’s face it. The price of fuel may never be back to $3 a gallon or less. We cannot control the price of gasoline or how it affects our cost of living but we can control our consumption and ultimately our spending.

Maintaining your vehicle and your driving performance can increase or decrease your vehicle’s fuel efficiency and gas costs. Consider some of these tips which can increase your savings:

•Speeding, rapid acceleration and braking increases your car’s fuel consumption. Guam’s stop-and-go traffic can make this difficult. But leaving earlier, giving room between you and the car ahead of you, and curbing road rage will put money back in your pocket. It can lower your gas mileage by as much as 5 percent. That’s equivalent to saving about 17 cents per gallon. In addition to that, following the speed limit is safer for you and others and decreases your chances of an accident, which in turn could keep your car insurance rates down.

•Plan ahead and think of the route you’ll be taking. Combine errands into one trip. Your car uses more fuel when it takes small trips and starts off cold versus when the engine is warmed up and efficient after one longer trip. Cut back on unnecessary travel.

•If you can, try carpooling with family, friends, or co-workers.

•Avoid having your car idle for long periods of time when parked. Guam is hot and we often leave the car running to keep it cool. Unfortunately that wastes gas.

•Speaking of keeping cool, turning your air conditioning to max also increase fuel consumption. Keep the air temperature at a comfortable level. Using your air conditioner’s re-circulate function also uses less fuel by re-circulating cool air from the cabin rather than having to constantly cool warmer air taken from outside of the car.

•Keep your tires properly inflated. This is a simple and inexpensive way to improve your car’s gas mileage. You can improve your gas mileage by up to 3.3 percent for an equivalent savings of 13 cents per gallon. Most vehicles today have the recommended tire pressure on a sticker on the inside of the driver’s door

•Take your vehicle in for regular maintenance. Clogged air filters, faulty oxygen sensor, or a car out of tune can greatly decrease your car’s performance and increase your car’s fuel consumption.

If you’re in the market for a vehicle, take into consideration how fuel efficient the vehicle is. If it’s a new car the mpg usually is displayed as a sticker on the windshield. Do note that highway mpg and city mpg are different. Because Guam doesn’t have highways, it’s best to look at the city mpg, which is most appropriate for Guam’s stop-and-go traffic.

If you are considering a used vehicle you still can find the mpg at www.fueleconomy.gov. This website also has tips from the U.S. Department of Energy on saving money and fuel.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog atwww.moneymattersguam.wordpress.com.

Tips to help beat the high cost of gas

On Guam, gasoline often plays a big role in our lives and our wallets, and there’s no way to predict how the cost of fuel will rise in the next few years. Here are a few tips for getting the most out of your money and lowering expenses in the Auto & Gas category on your budget.

Consolidate your trips. It makes sense to run several errands at a time and save gas, rather than making multiple trips to and from your home. It just takes some smart organization: keep a notebook nearby or start a list on your phone, and keep track of the errands that you need to run as they come up. This can also be a good reason start using a day planner, or to search for software that can help you organize your life.

Start a hobby based at home or in your village. Sticking close to home can help you save on gas and help you rediscover playgrounds, beaches, shops, and restaurants in or near your village. You may also be able to walk or ride a bike to these spots, rather than jumping in your car and using gas.

In earlier columns we discussed learning culinary skills at home, along with gardening and landscaping, which are both enjoyable and can help you save money on food expenses. You can also go for jogs around your village, use a nearby community center, learn an instrument, take up woodworking, or explore any other hobby that both interests you and can be practiced within your community.

Remove extra weight from your car. According to the U.S. Department of Energy, heavy items in your car can reduce your car’s fuel efficiency. Try to empty your car of heavy objects unless you need them specifically for your trip, and remove the racks and objects attached to the outside of your vehicle if you don’t intend to use them. By increasing your vehicle’s fuel efficiency, you save gas and money.

Keep your tires inflated to your vehicle’s recommended tire pressure. Another tip from the Department of Energy: keeping your tires inflated properly will give you better fuel efficiency. Just as you need to work harder to pedal an under-inflated bicycle, your engine works harder to keep your car moving with under-inflated tires. Prevent this from happening by keeping your tires inflated to the recommended amount.

Buy a fuel-efficient car. The best way to save on gas is to use a car that was designed with fuel efficiency in mind. On ww.fueleconomy.gov, you can compare cars in terms of fuel efficiency, using your current gas price.

The savings are clear: comparing a 33-combined MPG (miles per gallon) vehicle to a 20-combined MPG vehicle, a driver could save $1,250 annually on gas expenses using the vehicle with the higher MPG. (This assumes 15,000 miles driven per year, with 45% highway driving and 55% city driving, and a price of $4.28 per gallon.)

You can also consider a hybrid vehicle for fuel efficiency. Compared with the previous vehicles, a 50-combined MPG hybrid vehicle under the same conditions saved $650 in annual fuel costs compared to the 33-MPG vehicle; compared with the 20-MPG vehicle, the hybrid saved $1,900. Hybrids can be more expensive than some traditional cars, but you should also factor in fuel savings when comparing your options.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com.

Get ready for year-end car sales

Year-end car sales are up ahead on the calendar, so now is a great time to get your finances ready and do the research to purchase a car. Here’s what you can do over the next few months to prepare:

Fix mistakes on your credit report. Mistakes on your credit report take time to correct, and you want to approach financial institutions and dealerships for financing when you have a clear, accurate record. A negative mistake can result in a higher interest rate, so if you check your reports now and resolve mistakes, you’ll be able to get the best rates available to you.

Ramp up your savings. Put away as much as you can for the down payment. You should also set aside funds for car insurance, registration fees, and future maintenance costs. Try to keep enough savings to cover your future car insurance deductible, so that you can cover out-of-pocket costs if your vehicle is damaged.

Pay down your revolving credit balances. High credit card balances will affect your credit score, which in turn will affect your loan application. If you have the funds to spare, try to pay them down in the months before you visit financial institutions about financing.

Compile a list of institutions to visit. When the time comes, you will want to visit several financial institutions to ask about car loan rates. When you visit several lenders in a short period of time to inquire about a car loan, your multiple credit inquiries are collectively considered as a single inquiry. This single inquiry is better for your credit score. Keep your eye out and talk to friends and family members about the service they’ve received.

Know your budget limits. Study your budget and settle on maximum amount that you can use toward your new car. Settling on a sustainable amount now will help you from feeling squeezed in your budget throughout your loan term. Don’t forget about the cost of insurance. This could affect your budget as well.

Focus on what you need. Different cars serve different purposes. Defining what you need from your car, before you start shopping, will help you stick to your budget. What will you be using your car for and how many people will you be transporting?

Start your research online. Year-end sales are intended to clear old inventory, in order to make room for new models for the upcoming year. You can gain a general sense of the inventory available on Guam by visiting websites for local car dealerships. When you’re familiar with the inventory, you can search manufacturer websites for more information, and you can also check car review websites and magazines to read more about your options.

Think about safety and fuel efficiency. Fuel efficiency will save you money throughout the year, while safety features will protect your family in an accident. In your research, you can check www.fueleconomy.gov and www.safercar.gov to find ratings and compare different vehicles.

Be open to different options. You can get the most out of your money by being open to the different options that become available during sales. Research several car models that you might be interested in purchasing. Some models may come with better deals than other vehicles with similar features, so some flexibility can help you when the time comes.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com.

Helping your teen buy their first car

Throughout National Financial Literacy Month, we’ve been going over financial advice that parents and teens can discuss, as those teens prepare for financial independence.

A car is a major expense, and often, a necessary one. Even if a car purchase will take place a few years into the future, early savings and positive credit behavior established beforehand can make things easier for your teen.

Knowledge about budgeting, financing and repayment can help your son or daughter avoid credit rating damage and save money over the life of the loan.

If you plan to purchase a car for the family soon, take your teen with you through the process. Here is some basic conversation points:

Save for a down payment. With a down payment, you will pay less in overall interest on your car, because you’ve lowered the principal amount that you need to borrow. A down payment can shorten the amount of time that you repay the loan or lower your monthly payments, so that you don’t over strain your budget.

A sustainable monthly payment is important, because it can help you avoid late payments and a potential default.

Start saving as soon as you anticipate your need for a car. It doesn’t have to be a very large amount, because those savings will add up over time.

Build a positive credit history. If you are thinking about buying your first car, you also should be thinking about your credit history.

Financial institutions are more likely to approve a loan if they can see that you have a history of consistently paying your credit obligations on time.

Once you have a credit card, always pay before the due date, and keep your balance as low as possible. If you want to build your credit history but are having trouble obtaining a credit card, you can look into a secured card.

With a secured credit card, you deposit savings to the credit card issuer, and that amount of savings becomes your “credit limit.” Just check to be sure that the issuer will report your credit card activity to the credit bureaus, so that your positive behavior will be recorded on your credit report.

Choose according to your needs. When you’re young, and you have many goals to fulfill, it’s crucial to consider your financial needs first. Before you shop for a car, create a budget and see what you can afford. Think about your most basic needs and do your research before you step into a dealership.

Compare loans from different financial institutions. You can find the best values by comparing products, and loans are no different. Compare financing available from different institutions, and choose the loan with the best rates and terms. Just try to keep your inquiries to a limited period of two weeks, to protect your credit score.

Get help if you run into trouble. If you experience financial hardship, talk to your financial institution. They may be able to lower your monthly payments temporarily, which can help you avoid late fees, damage to your credit rating, and repossession of the vehicle. It’s always best to discuss financial hardship early, so that you can immediately start working on a solution with the financial institution.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii.  You can email him at  moneymattersguam@yahoo.com.

Planning for your car insurance costs

Slick roads, sharp turns, sheer physics: a car accident can happen at any time, regardless of how careful you are. The Guam Code Annotated and lending institutions require car owners to purchase insurance to protect against the risk of an accident, by setting minimum limits for required coverage. It’s important to understand these limits and the role they play in your overall financial plan.

Liability Insurance: Bodily Injury

In order to register your vehicle, Guam law requires that you purchase at least $25,000 per person and $50,000 per accident bodily injury liability insurance.

If you are in an accident, and you are at fault, this insurance will cover hospital bills for a third party: the driver of the other car you hit, or a bystander injured in the accident. The $25,000 figure is the limit of funds that your insurance company will pay out per person. If multiple third-party individuals were hurt, the maximum that this policy pays out is $50,000 for the entire accident.

If you have room in your budget, you may want to consider adding coverage for this component of your insurance. If you’re involved in a catastrophic accident, those hospital costs can be immense. If you have assets to protect, additional coverage will prevent you from having to liquidate those assets to cover the difference.

Liability Insurance: Property Damage

Guam law mandates that you retain at least $20,000 worth of property damage liability insurance. If you’re involved in an at-fault accident, and the other car is totaled, $20,000 is the maximum that the insurance company will pay to the other driver.

Just keep in mind: there are cars on Guam’s roads that cost more than $20,000 to replace, in the event of a major collision.

Comprehensive and Collision Coverage

While Guam law doesn’t mandate comprehensive and collision insurance coverage for your own vehicle, financial institutions often set minimum limits before they finance your car loan. Even if you purchased your car with cash, you should still consider protecting yourself from hefty replacement costs.

Your Vehicle: Comprehensive Coverage

Comprehensive coverage covers any non-moving damage to your vehicle. As long as the car is parked, theft, fire, falling objects, or any other damage would be covered by this policy. If you installed any anti-theft features, check for discounts

On Guam, comprehensive coverage usually doesn’t include typhoon coverage. Check with your insurance company to see if you are covered, and if not, ask for a quote. Typhoons are unpredictable, and a typhoon that lingers and intensifies can end up flooding your car or flinging debris into your car’s windshield.

Your Vehicle: Collision Coverage

If you get into an at-fault accident while your car is in motion, collision coverage will pay for damages to your car.

Both comprehensive and collision coverage will probably involve deductibles, which you’ll need to pay before your insurance policies pay out. If you have a $200-$200 policy, you’ll need to spend $200 out-of-pocket in order to fully repair your car.

The higher your deductible, the lower the cost of your monthly premiums, and vice versa. You can adjust your deductible based on what you can pay, but be sure to have that deductible amount saved up for a potential accident.

Optional Coverage

Insurance companies also offer separate policies for medical payments and protection against uninsured motorists. Just be sure that your policies don’t overlap, and that your overall coverage is set at a limit that you feel comfortable with.

Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.