Sunday, February 21, 2010

Colorado's New Registration Laws Could Cost You - Learn From My Mistake

Last week I posted to facebook while I was getting a ticket for expired tags. My tags were expired, so I did deserve the ticket (in my defense, I moved twice while my home was being built and did not get the renewal in the mail). That added $100 to my overall cost of renewing my registration. Fine, I can deal with that, but what happened when I got to the DMV to renew my tags caught me completely off guard.

Apparently a new law passed recently in the state of Colorado that charges a fine of $25 per month - 4 month maximum - for every month you wait to renew your tags past your normal renewal date. For me it was exactly 4 months. So, that added ANOTHER $100 to the overall cost of renewing my registration.

I tried the argument that I'm paying my extra $100 fee through the court system...but obviously that's NOT a valid argument. Instead, it seems that's just a bonus (for the state, not for me). Be careful out there and double check your license plate stickers for the renewal dates. Get them renewed on time, or face an extra $200 in costs. Oh, by the way, let's not forget that the cost to renew ALSO went up this year.

Glad I could do my part to support the great state of Colorado!

Tuesday, February 16, 2010

Do You Need GAP Insurance?

If you're ever going to buy a new car again and finance the purchase, you've got a GAP that you need to think about as you're pulling out of the lot. Everyone knows what happens when you buy a new car; by the time you get it home it's already worth 25% less. After a about 18 months it's lost about 50% of its value, but how much do you still owe? If you owe more than your new car is worth, that's your GAP. If you crash that car you could be faced with a large sum of money to cover the GAP that your insurance policy does not pay for.
Here's how it works: If you crash and your vehicle is a total loss, your insurance company will pay you what the car is WORTH, which may be very different than what you OWE.
Example: Joe trades in his 2005 Dodge for a 2010 Chevy. He still owes a little more on his Dodge than what it's worth, so the dealership adds the difference ($1,000) into the purchase price of the new loan. Joe's new car is going to cost him $25,000 + $1,000 from the Dodge, for a total of $26,000 + tax = $27,976. Joe pays $2,500 for his down payment, leaving him a balance of $25,476 to pay off the car. Twelve months later, Joe owes $21,655 when he has an accident and completely destroys his beloved Chevy. The insurance company does their job and writes Joe (the finance company, actually, since they still hold the title) a check for every penny the car is worth - $14,500 - deductible ($500) = $14,000. Who's responsible for the $7,000+ difference? You guessed it, Joe is.
The above example happens every single day. The insurance company has done their job and paid all they're required to pay - what the car is worth. Unfortunately, YOU are required to pay more than it's worth. YOU are required to pay what you owe!
How GAP insurance works: If you could picture yourself in Joe's situation, you need GAP insurance. As the name implies, it insures against any GAP you may have between what your car is worth and what you owe. So, in the above example, Joe's insurance company would have paid Joe the amount the car was worth PLUS the additional $7,000+ that he still owed. There are two places you can buy GAP insurance, through the dealership that sells you your new car, or though your insurance agent. BUT, one of the two will cost you 300% more!
Through the dealership: One of the biggest up sales at the dealership is GAP insurance. They charge a fortune for it (usually around $400) and then add it into your financing. Financing $400 over 5 years at 5.5% ends up costing you $470. That's not bad compared to paying the extra $7000 that Joe got stuck with, BUT it's a heck of a lot more than you need to pay. Instead of getting your GAP insurance through the dealership, get it from your local, professional insurance agent for a fraction of the cost.
Through your insurance company: GAP insurance can be added directly to your car insurance policy for around $12 per 6 months. It's the same coverage and the same protection, but the total cost over 5 years is $120. That's a savings of $350 just because of where you bought your GAP insurance. Make sure your insurance company knows if you are buying or leasing, as that can have an effect on the GAP protection.
Any time you can save $350 AND get the same protection, you've made a wise financial decision. Make sure you buy GAP insurance if you need it, but DON'T buy it from the dealerships or you'll be paying too much!

Tell us what you think. Have you bought GAP insurance through the dealership? Have you ever had to use it?