When you buy a new car, your warranty should see you through the term of your loan on most major repairs. But what about those of us who decide to buy a used car instead? Many used cars don’t come with warranties, meaning if the car breaks down you’re still on the hook to make the payments.
The vast majority of car loans are just that: loans. The bank, credit union, or consumer lender makes the loan in good faith, and you are expected to pay back the money on schedule – regardless of the condition of the vehicle. But if the vehicle is disabled while you still owe money on it, you may find yourself in a bind. Here are some things you can do to lessen your exposure.
Keep your insurance current. Depending on your insurance options, if you lose the use of your car due to theft or accident your insurance company will reimburse you to pay off your loan. In this situation you will be out only the deductible, and can potential qualify for a new loan on another car. Ask your insurance agent for more details. Liberty Savings requires insurance with every car loan, and we can share with you what type of options you have with your loan.
Don’t skimp on maintenance. Many breakdowns are preventable with routine maintenance. Here are a few of the standard maintenance things to note:
- Check the oil regularly.
- Change your oil and filter as scheduled.
- Use the correct transmission fluid, brake fluid and coolant.
- Keep your tires balanced: monitor their wear and rotate as needed. (Don’t neglect the spare!)
- Pay special attention to your tires as you transition from one season to another. Bad tires cause accidents.
Buy ‘gap’ coverage. Unless you come up with a large down payment, chances are you will, at some point, owe more on the loan than the car is worth. If you crash your car, your insurance company will reimburse you only up to the insured value of the car. But if you own ‘gap’ coverage, your insurance company will reimburse you enough after an insurable event to pay off the loan.
Consider adding a warranty. If a major engine, transmission or drive train issue is a risk you can’t afford to bear, then you might need to consider buying the warranty when available. Without it you run the risk of owing money on a car you can’t even drive. Don’t take risks you can’t afford to lose.