Credit union informs: Shining a light on auto insurance

shutterstock 144040552 smallWhen it comes to protecting your car, you want to make smart choices - but researching and purchasing auto insurance can sometimes be a daunting task if you don't know much about it. To help make understanding auto insurance a little easier, we asked Liberty Mutual representatives what the most frequently asked questions were that they get about auto insurance policies every day - and how they would answer them:

Q: What is a deductible?
A: A deductible is the financial responsibility that you have if you are to file a claim. For example, if you were to get in an accident and you were at fault, the damage to your car may cost $2,000. If you selected a $500 deductible, you'd be responsible for paying that amount and the insurance company would pay the difference - the remaining $1,500.

Q: What is collision coverage?
A: Collision coverage protects you during an event where your car is damaged and you are somehow at fault. For example, if you hit a parking barrier in the parking lot and dented your car bumper, collision coverage would take care of the repair costs, minus your deductible. 

Q: What is comprehensive coverage?
A: Comprehensive coverage is sometimes known as 'other than collision' - it's comprehensive to damages that fall outside of collision coverage. Common examples of damage covered under comprehensive coverage are fire, theft, vandalism, less your deductible. 

Q: What does liability insurance cover?
A: If you're at fault for an accident and someone is injured or their property is damaged, liability insurance covers the other person to take care of their costs (for example: medical bills) and helps protect you and your assets by covering those expenses. Many states require a minimum amount of liability insurance in order to register your vehicle, so check your specific state's regulations for proper coverage.

Q: Does my driving record affect my premium?
A: Your driving record can affect your premium. Insurance companies try to predict what may happen in the future by looking at past behaviors. Your driving record - including speeding tickets, previous accidents - could indicate that you are a higher risk for having an accident, which may contribute to determining your rates. Maintaining safe driving habits is always a good idea.

insurance agent tracy mcneil  164x164Tracy McNeil, Liberty Mutual Sales Representative, will be at our Fort Worth branches during the month of May to help answer any more questions you may have about insurance. 

Contact Tracy

Credit union informs: Destroying the myths of leasing

shutterstock 194800994 smallYou probably have a good idea of the vehicle that you want to drive. Sometimes the hardest decision you have to make is which type of financing is right for you. Purchase or lease?

Our friends at Fairlease have provided the information below to help detroy the myths about leasing. 

Myth 1 - High mileage drivers should not lease. False! High mileage drivers can make great auto-leasing candidates! The number one way to depreciate the value of a vehicle is to drive high miles. That vehicle then becomes the most difficult vehicle to resell. Fairlease allows you to customize your lease agreement for over 15,000 miles a year so you won't have to worry about trading or reselling a high-mileage vehicle. 

Myth 2 - Wear, tear and mileage are penalties. False! Wear, tear and mileage expenses are an equalizer. When you agree to "lease" a vehicle from the the registered owner, the owner guarantees the residual value of the vehicle. If you drive more miles than agreed, you use more of the vehicle's worth, and therefore you will pay for those miles at lease end. If you own the car, you resell it for less and you still absorb the expense of the mileage and excess wear and tear. Whether you lease or own the vehicle, driving high miles or incurring excess wear and tear will affect the vehicle's value. 

Myth 3 - You don't own the car. True...but does that matter? In the lease relationship, the lessor owns the vehicle and you lease (or rent) the use of it. Therefore, at the end of your automobile lease term, the car is returned to the lessor who resells the vehicle. If you want to own the vehicle at the end of your finance term, you can continue to drive a used, depreciated vehicle or you can sell it yourself. You then own the depreciating asset and its value is worth far less than when you purchased the vehicle. 

Myth 4 - Automobile leasing is only for the wealthy. False! Automobile leasing is for anyone who has qualifying credit. You don't have to be wealthy to understand the value of leasing. Everyone has the same opportunity to minimize monthly expenses and maximize savings and investments. 

Myth 5 - Leasing requires more expensive insurance coverage. False! Many leasing companies may require higher limits of liability coverage causing your monthly insurance costs to rise. Not at Fairlease! We require the state minimums of liability, exactly like a conventional auto loan.

Ready to lease a new or used car?
Get a Quote! 

Buying vs. leasing a car? A teen shares a her thoughts

No matter what age you are, deciding to get a new car can be tough. There are many aspects that have to go into place before you can make your final decision.
Buying vs. leasing
Just to name a few: 
  • What kind of car do you want - color, model, type, etc.?
  • Is it safe? 
  • And if you're a teenage girl, like me, is it pretty? 
  • But most importantly, will that "new" car fit your financial needs? 
That's when you ask yourself, should you buy a car or lease a car? Now, I'm an 18-year-old teenage girl with probably the knowledge of a rock when it comes to financing and cars, but I did my homework before I decided on what to do. I was given a budget, and with that, I was able to explore the world wide Web for my dream car. I compared models, colors, engines, everything you could possibly do with what information the Web site would give you on a specific car. I remember even comparing cup holders!

"This car might be better; it has eight cup holders while the other has only four!"

I would calculate how much the payment would be monthly and annually.

When I was at the dealership with my father doing some paperwork for the car, it felt like I was on foreign land. Mind you, my father didn't speak very much English; so, I was the one talking and translating. They asked me if I was leasing or buying the car. Of course I wanted to buy it (I'm keeping my baby forever)! The process was long and hard, especially for someone without knowledge like me.

I chose buying the car instead of leasing it because my mother always told me that you'd be at a disadvantage if you ever lease the car. It loses its value, and you don't get to keep the car! I don't know if that's really true or not, but she's my mother. She has to know what she's talking about, right? 
 
I guess the moral of my story is that if you make your payments, in 10 years, you may still have "Old Reliable" to call your own. Buying a car would be the best option in the long run (in my opinion). :)
 
Kelly Ly is a senior at Haltom High School. She sports a brand new sedan that  she takes very good care of (her parents hope).

Should you buy or lease a car?

There was a time when buying a car was almost always the way to go, especially in the long run. The problem with leasing a car is that you have to take the entire depreciation hit of the vehicle over the term of the lease, but you get none of the resale value of the car once you turn it back in.

Lease contracts have become more favorable for the consumer in recent years, and there are instances where leasing can make sense. The key is understanding the advantages and disadvantages of leasing a vehicle versus purchasing it outright.Buying vs. leasing

Why Buy a Car Outright?

• No mileage charges to worry about. Drive all you want!

• No worries if the kids spill Kool-Aid on the back seat.

• Your payments come to an end, eventually – but you can still keep the car.

By keeping an eye out for deals and selling once in a while, you may be able to drive nearly cost-free (but you still have to pay costs associated with repairs, fuel and upkeep). (If you do it too often, though, the IRS may classify you as a dealer.)

• Factory warrantees are getting bigger, better and longer. In the past, ongoing service was one of leasing’s primary advantages; but now that you can purchase cars with substantial warrantees for as long as seven years, that’s less of a factor.

Advantages of Leasing a Car

• You often have a lower monthly payment.

• Because your payment is lower, you can use that money productively. You can invest it, for example, or redirect that money to pay down high-interest credit card debt. If your credit card rates are high, and you have a lot of debt to pay off, this can be a good option. Just remember, though, if you lose your job, your car won’t be far behind.

• Leasing for business can help to maximize cash flow. Cash flow is the lifeblood of businesses. You can have all the paper profits in the world; but without operating cash flow, you’re stuck. Leasing, rather than purchasing a vehicle can preserve this precious resource for you small business owners and entrepreneurs.

• Use your car for work? You can deduct your entire lease payment as a business expense. If you buy, rather than lease, you have to spread your deduction out over a number of years, under MACRS rules. This isn’t as big a selling point as some car salespeople think it is, though because you can also get a substantial first year deduction by purchasing a vehicle under Section 179 of the U.S. Tax Code. Talk to your tax advisor for more details on how this might apply in your specific situation.

If you drive a car a lot for business, you can deduct mileage instead of your lease expenses. Currently, you can deduct .58 per mile for business miles driven – even if you’re an employee, provided your boss doesn’t reimburse you.  If you drive a lot, this is a much bigger deduction than taking the lease payment deduction.

Don’t Forget Insurance

If you wreck a car you lease rather than one you own, your reimbursement may be less than what you owe on the lease. You may want to get “gap” coverage to cover the difference. The price of “gap” coverage could wipe out a chunk of the monthly price advantage of leasing rather than buying, so bear this in mind.

Credit union auto loans: the credit union difference

Need a car but can’t pay cash? You have three choices: Borrow from the dealer or manufacturer’s financing company, borrow from a bank or borrow from a credit union (unless uncle Bob is willing to finance you, but who wants the “strings” that go along with that?). Each method has advantages and disadvantages – but if you can qualify, the way to go is usually credit union auto loanwith a credit union.

Interest rates are still near historic lows. If you are going to borrow money for a car, there’s never been a better time, especially at Unity One Credit Union. Click here for the current rates and disclosures.

Structural Advantages of Credit Unions

Credit unions are known for having lower fees and interest rates than banks and other finance companies. The advantage is in the ownership structure: The owners of banks and the majority of consumer finance companies are stockholders – not you. That means every product or service they provide has but one real objective: to make money for their shareholders, while not alienating you so much that you take your deposits and future business somewhere else.

The owners of credit unions, on the other hand, are members, not shareholders. That means profits are distributed among its members in the form of dividends, and in the form of lower fees. Every dime that would have gone to Wall Street, in the case of a credit union car loan, stays with credit union members. And you, as the borrower, get to keep a chunk of it, in the form of lower interest rates and fees.

Advantage to the Consumer

With traditional stock ownership, there is always an adversarial relationship between the bank and the customer. Banks serve the stockholders. The credit union exists, however, to serve members. Think of it: If the credit union didn’t serve member interests, the members could simply replace the management team until they found managers who are more responsive to the needs of the membership.

Advantages of Banks

Credit unions tend to be smaller than banks, with a limited membership. Credit unions also have to make do with smaller pools of capital, when structuring their loan portfolios. As a result, they are frequently more conservative with their loan underwriting than banks are. If you have spotty credit, then, a bank may give you a loan where a credit union might not. So try a credit union first. The catch, of course, is you have to be a member to get a car loan with a credit union. Membership at Unity One is a mere $5, to open a savings account.

Disadvantages of Banks

As mentioned, banks have a substantial cost of overhead, in the form of their many branches, expansive operations, and of course, investor profits. Some very large banks have good economies of scale and can minimize the impact of their overhead on consumer fees. But no bank is going to want to cut into shareholder profits if they can help it.

Dealer Financing

The last option is, of course, dealer financing. These deals can be excellent on new cars (0 percent or 1 percent financing is tough to beat), but the picture isn’t as rosy for older cars, or for those who have less-than-stellar credit.

If you go the dealer financing route, take a look at the fine print: You need a car loan with no prepayment penalty. This means you are free to pay off the loan balance at any time, without any added fees or interest tacked on. The higher the interest rate, the more important this is.

The Lease Option

The final option, of course, is leasing rather than buying. A lease is essentially a contract to rent the car for a period of time, and to turn the car back in at the end of that contract (the lease). Lease payments tend to be lower than loan payments, because when a loan is paid, you keep the car! The loan is buying the whole car, and not just the depreciation it has during its the first few years.

In the long run, the consumer is almost always better off buying a car outright, rather than leasing. With a car loan, the pain of payments is over in 1 to 4 years, but you can be driving the car for ten years or more! With a car lease, though, your payments never stop, and you never own the car.

I would like to speak with a loan officer.
 

Expense of Hybrid Cars

Hybrid

Q: How much do I need to drive to make the extra expense of a fuel-efficient car worth it?

A: If you’re talking about a new hybrid vehicle, the answer is quite a bit. Hybrid cars haven’t quite reached the level of popularity to see huge economies of scale benefits yet. This means they don’t make enough of them to make them cheap. Perhaps they will become less expensive in future years.

For now, however, hybrid cars are still selling for anywhere from $2,000 to $10,000 more than comparable conventional models from the same manufacturer.

That’s a lot of gas you’re going to have to save to pay for the difference!

Example: The Lexus RX hybrid will cost you $6,400 more than the gasoline version – and net you 26 mpg, according to Consumer Reports, compared to 21 mpg for the cheaper gas version.

Doing the Math

So how do you figure the savings? The short answer: Divide the $6,400 difference in purchase price by the price of gas. Assuming gas prices average $3.40 per gallon, you will have to save 1,882 gallons in gasoline before you reach the break-even point. This is somewhat more if you financed the purchase and have to pay interest on the price difference.

How Long will it Take to Break Even?

How many miles do you drive each year? Divide the answer by the number of gallons you have to save to pay for the price difference, and that’s how long it will take for the hybrid to pay for itself.

In this example, if you drive 12,000 miles per year, it will take 6.37 years to make up the difference in price. The more you drive, the faster the hybrid will pay for itself.

Tip

A word of warning: Eventually you’ll have to replace those hybrid batteries! The cost ranges from $1,000 to $6,000, according to auto.howstuffworks.com. That will add another few years to your break even analysis. Be sure to look at all the factors involved in owning a hybrid.

Auto loans are available at Unity One Credit Union. Click here for rates.

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