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Auto Loan

11 Things to Know Before You Lease a Car

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

Nearly one quarter of new cars in America are sold under lease agreement, and low monthly payments entice buyers who want to drive new cars, but don’t want to deal with a large cash outlay.

Lessees don’t build equity in their vehicle, but for the right person, a lease can be a good option. These are things you need to know before you consider a lease.

1. The best way to think about a lease

It’s best to think of a lease as a pay for use contract. A lease allows you to pay for the depreciation you put onto a vehicle at a reasonable interest rate. You get to drive and depreciate a vehicle for a certain period of time then you can walk away.

Due to higher markups, higher interest rates and additional fees, leasing tends to be an unfavorable financing mechanism, but if you don’t care about owning the car, a lease may be a good option for you.

As a lessee, you will drive the car during its most rapid depreciation phase, so in the long run, continuously leasing a vehicle is the most expensive way to drive, but if you always want to drive a new car, leasing can be a low hassle way to make that happen.

2. Leasing affects your credit score

Taking on a lease affects your credit the same way that taking on a car loan affects your credit. Applying for a lease triggers a credit inquiry on your report, which has a small adverse effect on your credit score. Taking on a lease increases credit utilization which also adversely affects your credit score. Over time your credit utilization will fall, and timely payment history will cause your score to increase again.

Leases are considered installment loans, and having a high utilization rate on installment loans does not have as much of an adverse effect on your credit score as having high utilization on credit cards or other forms of revolving credit. As with any form of credit, late or skipped lease payments drag down your score

Further Reading: Credit Score Guide

3. Leasing terminology

Manufacturers and salespeople shroud leasing in complex jargon. To understand the terms of your lease, these are the definitions you need to know.

  • Capitalized Cost: The price of the vehicle. This could be MSRP (Manufacturer’s Suggested Retail Price), or it could be reduced based on your negotiations.
  • Capital Cost Reduction: This is a down payment. The most favorable leases (for those who don’t intend to purchase at the end of the lease) should not include a capital cost reduction unless it’s an incentive.
  • Residual Value: This is the estimated value of the car at the end of the lease. The higher this price is relative to the capitalized cost, the more favorable it is to lease a car. Cars.com keeps a database of residual values on file that you can use to understand if you’re getting a fair residual value.
  • Factor, Money Factor or Rate: This is the interest rate of your loan, but it’s not expressed as an annual percentage rate. The number expressed needs to be multiplied by 2.4 to get to an APR. For example a 1.35 money factor is a 3.24% interest rate. LeaseHackr.com keeps an up to date list of “official” factors (column entitled MF) that you can use in negotiations. Interest rates on leases range from 2-3 times as high as interest rates on traditional car loans, but it is possible to negotiate this rate.

4. You can negotiate a lease

Unlike car loans, leases come from car manufacturers rather than banks. However, this doesn’t mean that it’s impossible to negotiate a lease. Anyone who intends to lease should try to drive down the capitalized cost, and people with good credit should also look to reduce or even eliminate the money factor. Small fees like documents fees, tire fees and more can be waived completely if you take the time to negotiate.

Even if a dealership advertises a “Manufacturer’s Leasing Special”, you should negotiate the terms of the lease. Salespeople depend on getting you to drive away in a new car, so consumers hold upper hand in negotiations.

5. No money down

One advantage of leasing a vehicle is that it shifts depreciation risk from the customer to the manufacturer. A down payment (or a capital cost reduction) shifts the risk back onto the customer. In a lease, a down payment is a form of pre-payment. If you terminate the lease before the end of the lease period (if your car is totaled or stolen), you lose the benefit that the down payment purchased. Putting no money down is an important strategy for keeping the lease in the lessee’s favor.

6. Extra insurance costs

Leasing yields lower monthly payments compared to buying using traditional financing, but some of the monthly cash flow advantage is lost by increased insurance costs. To protect themselves financially, lessees should purchase “Gap Insurance” in addition to traditional car insurance.

Gap insurance covers the difference between the actual cash value and the amount owed on a lease. As soon as a lessee drives the car off the lot, the car is worth less than the lessee owes on their lease. If a car is totaled or stolen during a lease period, you need to be able to buyout the lease early, and gap insurance allows you to do that. Gap insurance should be purchased through a traditional insurer, and adds anywhere from 3-10% to the traditional cost of insurance.

7. Fees, fees, fees

Every lessee runs into at least three substantial fees during the course of their lease. The first fee is an acquisition fee (alternatively called a financing fee). This fee is not a down payment, but it runs anywhere from $500 for basic compact cars to nearly $1,000 for luxury vehicles.

Dealerships also charge a $300-$900 Delivery Charge which covers the cost of the vehicle being delivered to the dealership lot. Lessees need to be prepared to pay this fee upfront, but some companies try to sneak a second delivery fee into the contracts. The second delivery fee can be negotiated to zero.

The last fee every lessee will encounter is either a disposition fee or a purchase option fee. These fees run between $300-$400 depending on which option you choose. When a lease ends, you will pay a fee to the dealership unless you negotiate it away at the outset.

In addition to these larger fees, many lessees will run into mileage overage fees which range from $.15 per mile for basic vehicles to $.30 for luxury vehicles. Most people drive more than their lease allows, and these extra miles cause additional depreciation on the vehicle. Since a lease is a “pay for what you use agreement”, it’s fair to pay for those extra miles. Of course you can avoid overage fees by limiting the amount you drive or by purchasing the car at the end of the lease.

You should negotiate smaller fees like advertising fees, tire fees, document fees, vehicle preparation fees down to zero.

8. Repairs required

Lessees bear the financial burden of repairs and maintenance on their leased vehicles. Some dealerships offer free tire rotation and oil changes, but the lessee has to pay for other maintenance. New cars shouldn’t require much maintenance, but accidents, chipped paint and broken windshields need to be paid for, and longer lessees may need to buy new tires while they own the vehicles

9. Exit options

Turning in a leased vehicle early is akin to defaulting on a car loan. Your credit will take a hit, and you will still owe money. However, it is possible to “sublet” your car through websites like SwapALease and LeaseTrader.

If your lease is about to end, you’ll have to decide whether or not to purchase the car or return it. If you want to buy the vehicle, you may be able to negotiate the buyout price. If you have the cash on hand to pay for the vehicle, and the purchase price is lower than an equivalent used car, you can purchase the vehicle outright and sell it for instant equity. If you have to obtain financing, the additional fees may erase any favorable pricing you obtained.

If the vehicle is worth less than the purchase price at the end of your lease, you should probably walk away from the vehicle or attempt some strong negotiations. Of course, the beauty of a lease is that the termination of the lease means that you can hand the keys back to the dealer and move on. 

10. Consider leasing if…

Anyone with midterm vehicle needs (only needing a vehicle for a few years) may find that a lease is a good value and a good fit for their lifestyle. Likewise, anyone who loves driving new cars and doesn’t mind having a monthly payment may enjoy leasing long term.

Continuously leasing vehicles is more expensive than “driving a vehicle into the ground,” but many people don’t mind that they get what they pay for.  People who enjoy driving newer, fancier cars may find that leasing can be a reasonable lifestyle, especially if they can easily afford the payment.

11. Avoid leasing if… 

Avoid leasing if you’re trying to drive as inexpensively as possible. The low monthly payments are enticing, but leasing is the most expensive way to drive in the long run. Leasing has high interest rates and high fees. If you can’t afford the monthly payments associated with owning a new car, consider buying used or choosing a basic model. Both of these methods end up being cheaper than leasing.

If you drive a lot, or if you frequently drive in poor conditions, you’re a bad candidate for leasing. The additional depreciation may mean that you’re left paying extra fees at the end of your lease. Additionally, anyone seeking to own a vehicle should pursue paying cash or taking out a traditional loan rather than leasing.

If you decide to purchase your vehicle instead of leasing it, it is best practice to get pre-approved for your auto loan before heading over to the dealership. [Disclosure: LendingTree is the parent company of MagnifyMoney.]We recommend starting with LendingTree. There are hundreds of lenders on this platform. After filling out your application, you will be able to see real interest rates and approval information at once.

Keep in mind, some lenders will do a hard pull on your credit and this is normal within the auto lending space. Multiple hard pulls only count as one pull, so it is smart to have all your hard pulls done at once, which LendingTree’s tool can do for you.

LendingTree
APR

As low as
3.99%

Terms

24 To 84

months

Fees

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple, auto loan offers within minutes. Everything is done online. LendingTree is not a lender, but their service connects you with up to five offers from auto loan lenders based on your creditworthiness.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah here

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Auto Loan, Reviews

The Best Auto Loans: 2019 New & Used Car Loan Rates

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

The best auto loan for you depends on your priorities, but two common goals are to get the most competitive rate and the lowest monthly payment. That’s why longer-term loans are so popular right now, with more people stretching out new and used car loans over 60 months or more. Despite that, new and used car payments hit an all-time high in 2017, meaning that people are spending more than ever on their vehicle purchases. That’s why MagnifyMoney has compiled a list of the best auto loans in 2019. We know that with rising rates, you need as much help as you can get finding the best rates to secure the vehicle you want and need.

Overview of the best auto loans in 2019

Company name

Best for

Loan types offered

 

LendingTree

Comparison shopping auto loan rates - LendingTree is not a lender.

New, used, refinance, lease-buyout

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

LightStream

Car buyers with good or excellent credit

New, used, refinance, lease-buyout

APPLY NOW Secured

on Lightstream’s secure website

Capital One

Car buyers with fair or poor credit

New, used, refinance

SEE OFFERS Secured

on LendingTree’s secure website

Carvana Auto Loan

Buying a used car online

Used

SEE OFFERS Secured

on LendingTree’s secure website

How we picked the best auto loan rates

Using information from LendingTree, we compiled auto loan data over a six month period spanning across 22 auto lenders. We analyzed the loan data by applicant credit tier, and whether the loans were to purchase a used or new car to determine 1) the lenders consumers chose most often, and 2) the lowest average APR offered by the lender.

A closer look at the best new and used auto loans

Start with LendingTree

With LendingTree, you can fill out one short online form, and there are dozens of lenders ready to compete for your business. Upon completing the form, you can see real interest rates and approval information instantly. Some auto lenders will do a hard pull on your credit and this is common with auto lending. It’s important to remember, multiple hard pulls will only count as one pull, so the best strategy is to have all your hard pulls done at one time.

LendingTree
APR

As low as
3.99%

Terms

24 To 84

months

Fees

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple, auto loan offers within minutes. Everything is done online. LendingTree is not a lender, but their service connects you with up to five offers from auto loan lenders based on your creditworthiness.

 

Where people with good credit (680+) get the lowest rates

LightStream

LightStream is the online consumer lending division of SunTrust Bank. LightStream seeks to make the online lending process easy, so you may apply, be approved, sign your loan agreement and receive your funds all through your computer or mobile device — no papers to fill out or sign.

Why we chose Lightstream
Out of the lenders compared, borrowers with good and excellent credit were most likely to choose a loan with LightStream and receive the lowest APR. You can read our full LightStream review here.

New auto loan product details

  • APR: See table below
  • Terms offered: 24 – 84months
  • Loan amounts: $5,000 - $100,000

Lightstream New Auto Loan APRs

Loan Amount

Loan Term (months) *

24 - 36

37 - 48

49 - 60

61 - 72

73 - 84

$5,000 to $9,999

5.24% - 6.79%

5.84% - 7.39%

6.29% - 7.84%

6.59% - 8.14%

6.79% - 8.34%

$10,000 to $24,999

3.99% - 5.99%

4.44% - 6.24%

4.69% - 6.49%

4.94% - 6.74%

5.14% - 6.94%

$25,000 to $49,999

4.44% - 5.99%

4.69% - 6.24%

4.94% - 6.49%

5.19% - 6.74%

5.39% - 6.94%

$50,000 to $100,000

4.44% - 5.99%

4.69% - 6.24%

4.94% - 6.49%

5.14% - 6.69%

5.29% - 6.84%

As of 4/01/19. Includes a 0.50 point discount for autopay. Exact rates depend on your credit profile.

Used auto loan product details

  • APR: See table below.
  • Terms offered: 24 – 72 months
  • Loan Amounts: $5,000 - $100,000

LightStream Used Auto Loan APRs

Loan Amount

Loan Term (months) *

24 - 36

37 - 48

49 - 60

61 - 72

73 - 84

$5,000 to $9,999

5.24% - 6.79%

5.84% - 7.39%

6.29% - 7.84%

6.59% - 8.14%

6.79% - 8.34%

$10,000 to $24,999

3.99% - 5.99%

4.44% - 6.24%

4.69% - 6.49%

4.94% - 6.74%

5.14% - 6.94%

$25,000 to $49,999

4.44% - 5.99%

4.69% - 6.24%

4.94% - 6.49%

5.19% - 6.74%

5.39% - 6.94%

$50,000 to $100,000

4.44% - 5.99%

4.69% - 6.24%

4.94% - 6.49%

5.14% - 6.49%

5.29% - 6.84%

As of 4/01/19. Includes a 0.50 point discount for autopay. Exact rates are dependent on your credit profile and for purchases made from dealer. 

What we like

  • Fixed rate, simple interest fully amortizing installment loans. This means you won’t pay interest on your interest, and if you follow the payment schedule, your loan will be fully paid off at the end of the term.
  • No fees or prepayment penalties
  • No restrictions on the vehicles year, make, model or mileage
  • If you’re not 100% satisfied, Lightstream will pay you $100 (conditions apply)

Where it may fall short

  • Loans may not be used for a cash-out refinance
  • Secured loans may not be used for commercial vehicles
  • Vehicle must be classified as automobile, sport-utility vehicle (SUV), light-duty truck, passenger or conversion van
  • No phone support for customer service. Everything is handled by email

How to apply
Before you apply, keep in mind that you’ll need to:

  • Have good credit
  • Have sufficient income and assets
  • Agree to electronic records and signatures

Applying is done entirely online. You’ll provide:

  • Personal information. Name, address, phone, Social Security number, driver’s license, etc.
  • Employment information. Employer name and address, income and other financial assets
  • Loan information. Loan purpose, loan amount and term
  • Security information. Create a username and password
LightStream

APPLY NOW Secured

on Lightstream’s secure website

Where people with fair (620-679) & bad credit (500-619) get the lowest rates

Capital One Auto Finance

Capital One is a Fortune 500 company and a trusted name in banking and other financial services. In the fourth quarter of 2017, Capital One originated $6.215 billion worth of auto loans, making it one of the top five U.S. banks offering auto loans.

Why we chose Capital One
The most borrowers with fair and bad credit chose a loan with Capital One, and it came in second in terms of lowest average APR.

New auto loan product details

  • APR: See table below
  • Terms offered: 36 – 72 months
  • Loan Amounts: $7,500 - $50,000

Capital One new auto loan APRs

Credit

Loan Term (months) *

36

48

60

72

Rebuilding

7.45%

7.99%

7.99%

10.55%

Average

4.76%

5.12%

5.12%

6.42%

Excellent

3.99%

3.99%

3.99%

3.99%

As of 4/01/19

Used auto loan product details

  • APR: See table below
  • Terms offered: 36 – 72 months
  • Loan Amounts: $7,500 - $50,000

Capital One used auto loan APRs

Credit

Loan Term (months) *

36

48

60

72

Rebuilding

10.60%

12.63%

12.63%

14.00%

Average

5.91%

7.45%

7.45%

9.08%

Excellent

4.62%

4.62%

4.62%

5.38%

As of 4/01/19

What we like

  • Easy to pre-qualify online without a hard inquiry on your credit
  • Minimum monthly income required is $1,500 or $1,800, depending on your credit
  • 12,000 auto dealers work with Capital One

Where it may fall short

  • The best rates require excellent credit with 20% down on the vehicle
  • Vehicles must be 2006 or newer
  • Vehicles must have less than 120,000 miles
  • Dealers may charge additional fees, including document fees, dealer preparation fees and delivery charges
  • Maximum loan amount may not cover the cost of the vehicle you desire

How to apply
Apply using Capital One’s Auto Navigator. Enter your personal information including your Social Security number to get pre-qualified for an auto loan without affecting your credit. Then take your financing certificate to the dealership to shop for cars and make a selection. Once you’ve selected a vehicle, the dealer will have you fill out a credit application and you’ll finalize the paperwork for your vehicle purchase with the dealer.

Capital One

SEE OFFERS Secured

on LendingTree’s secure website

Carvana

Carvana specializes in helping you shop for a car online. It uses things such as 360-degree photos, free vehicle history reports, details and specs, ratings and reviews to provide you with the maximum amount of information.

Why we chose them
We looked at the three used auto lenders chosen most often in each credit tier, and Carvana was the only lender in the top three in every tier. That’s why we chose Carvana, even though other lenders offered lower average APRs on used auto loans.

Product details – Used auto loans only

  • APR: APR depends on credit history, vehicle type and down payment.
  • Terms offered: Up to 72 months.
  • Minimum loan amount: None
  • Maximum loan amount: Any amount, as long as it’s a vehicle listed on the Carvana website.

What we like

  • High level of detail on vehicles makes online shopping easy
  • Online application personalizes your shopping experience and doesn’t require a hard pull on your credit
  • You can return the vehicle within seven days and get your money back (Make sure you’re familiar with the limits on this policy before you buy)
  • All vehicles are certified with a 150-point inspection

Where it may fall short

  • Only available for used vehicles
  • Carvana is a car dealership, and you must select a vehicle through their website

Online experience
Carvana provides a lot of information about each vehicle. You won’t have to visit other sites to find specs or read reviews

When you fill out the online application, you’ll see a breakdown of your monthly payment, minimum required down payment and your APR, making your shopping experience truly personalized.
How to apply
You may get pre-qualified with Carvana without a hard pull on your credit by filling out the online application. After you complete it, you may start shopping for a used vehicle, and your payment, down payment and APR will be displayed for each vehicle. Keep in mind, with Carvana, you must purchase a vehicle in their inventory.

Carvana

SEE OFFERS Secured

on LendingTree’s secure website

Understanding the auto loans process

How do auto loans work?

For the lenders we detailed above, you may apply for a loan online and receive personalized loan rates without a hard pull to your credit. So while you don’t see rate tables on certain lender websites, don’t be discouraged. If you’re serious, just fill out an application to see what you may qualify for.

Once you’ve completed the initial application, you’ll be able to shop for a vehicle knowing which type of financing you’ll likely qualify for.

Once you’ve selected a vehicle, you’ll need to submit a full application for the loan. This can be done online or with a dealer, if you’re working with one. Once again, most lenders are streamlining this process online, so for the lenders we discussed on this page, you may upload your documents using a computer or mobile device.

Once you’ve purchased the vehicle and completed your loan documents, you’ll just need to make payments. Making payments has moved online as well, and many lenders offer apps to help you manage your payments and loan information using your mobile device.

Tips when shopping for car loans

Here are some tips to help you avoid common mistakes and shop confidently for a car loan.

  • Set a budget. Everyone says it, but it’s not always easy to do. If you aren’t keeping a budget, here’s how to start in four easy steps.
  • Know how much you can afford. MagnifyMoney suggests you keep your total car expense less than 10% of your monthly budget. This is part of the 20/4/10 rule, which also says you should put down at least 20% and choose a maximum loan term of four years.
  • Save for a down payment. The amount of your down payment is likely to affect the interest rate you receive when financing your vehicle. So saving for a larger payment will help save you money and putting more down will lower your monthly payment, too.
  • Check your credit. You’re entitled to a free copy of your credit report from each of the three major credit bureaus every 12 months, and it’s easy to get your free credit score from a variety of sources.
  • Consider a co-signer. If your credit score is low or you have a limited credit history that needs improvement, having a co-signer with good credit on your auto loan could significantly lower your interest rate.
  • Shop around. It’s smart to get multiple rate quotes, so you may compare loans.
  • Get pre-approved. Shopping for a vehicle doesn’t make a lot of sense if you don’t know how much money you’ll have to work with. Shoppers have many options for getting auto loan quotes without a hard inquiry on their credit, but if you’re serious about buying a car, doing all your loan shopping in a short period of time will minimize the potential impact on your credit score, if loan applications result in a hard pull.
  • Talk to local credit unions. While banks and online auto loan companies offer easy-to-use online tools, don’t forget to talk to your local credit union to see if it has a more competitive rate.
  • Beware of extra fees. Keep in mind you’ll need to pay state taxes and title fees. In addition, dealers may charge fees, including document fees, dealer preparation fees and delivery charges. These fees will affect your APR if you finance them into your loan.
  • Check your paperwork. Everyone makes mistakes. When you get the final copy of your auto loan, check to make sure you got everything you were promised and there are no extra fees.

How to apply for an auto loan

From choosing the right car to getting approved for financing, this article will walk you through the complete online car buying process.

When you apply for an auto loan, it will help to have your documentation ready. This will include proof of identity, proof of income, credit and banking history and proof of residence. If you’ve selected a vehicle, you also want that information, including VIN, mileage, year, make and model.

While many online lenders advertise the loan process as being quick, be prepared for roadblocks. Sometimes a lender may request additional information or take time to verify information, and that may delay the process.

Be proactive! Once you’ve started the auto loan process, the lender will walk you through what’s needed. But that doesn’t mean you have to wait for your lender to get back to you. If the loan process has stalled, make a call or send an email to your lender asking what’s needed. In many cases, you’ll have an online login that will allow you to see your loan status, or take the next step online.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Ralph Miller
Ralph Miller |

Ralph Miller is a writer at MagnifyMoney. You can email Ralph here

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Advertiser Disclosure

Auto Loan

Your Car Data Could Sell You Out

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

car data
iStock

While cars can’t fly or do your taxes — yet — they can be pretty smart. Navigation and “infotainment” systems on newer vehicles can store your address, open your garage and access your cell phone. IHS Markit predicts that by 2023, 69% of passenger vehicles sold will be connected ones, with onboard sensors and computers. So what happens to all of that data when you get rid of your car? It could wind up in the hands of strangers. The next person who has the car could have a creepy-level amount of information about you and your family.

Of course, if your car has only roll-down windows and an AM/FM radio, this doesn’t apply to you. If your car has more technology, however, read on to find out what is at risk and how to protect yourself.

The type of car data at risk

Your previous and saved locations

Andrea Amico has spent most of his career involved in the wholesale of used cars. What he learned in the business inspired him to found Privacy4Cars, a mobile app that guides users with photos and instructions on how to delete their car data. One day during a car inspection, what he found surprised him. “I was literally two clicks away from getting inside someone’s house,” he said. “I had her home address, the garage code, [addresses for] her doctor’s office, her kid’s school, and after-school activities.” It even showed the saved address for a cancer treatment center.

Amico said it doesn’t take special skills to see this information, just basic knowledge about syncing a car’s computer to a phone.

Home access services, subscriptions

A car does not require a passcode or facial recognition once you’re in it. A new driver can simply press a button to open your garage. Services such as HomeLink are handy in that they can allow you to deactivate the home security system and turn on the lights before you walk in with an armful of groceries. But those probably aren’t things you’d want a stranger to be able to do. HomeLink recommends you delete the programming for security purposes before you sell or turn in the vehicle.

Other subscriptions may give a new driver access to your wallet. Alicia Garcia, a Kia salesperson in San Antonio, said a customer once forgot to cancel their satellite radio subscription. The next person who bought the car continued to use it, racking up charges. “If they do not call to cancel or transfer the service, it keeps going,” Garcia said.

Contacts, texts, media and call logs

Syncing your phone with your vehicle means the car may have access to your contact list, personal contact information, call log, digital media and more. So besides being able to call your mom and listen to your favorite playlist, a new driver could keep up with your daily life. In one instance, Amico said, a car was able to read aloud the former owner’s current text messages because the phone was still synced and the owner had not deleted the car’s data prior to reselling it.

What about the law?

Although the U.S. Supreme Court recently declined to hear two cases involving the Stored Wire and Electronic Communications Act, a federal law specifically governing car data privacy is in the works. The U.S. House of Representatives passed the SELF Drive Act, a bill that would require manufacturers of highly-automated vehicles to develop cybersecurity and privacy plans before selling those cars to consumers. It now sits with a Senate committee. California became the first state to enact cybersecurity laws for smart devices when it passed the California Consumer Privacy Act which could have an impact on connected cars when it goes into effect on Jan. 1, 2020. It remains to be seen if other states will follow suit.

The U.S. is not the first country to take note of this issue. The European Union has already passed regulation on data protection and consumer rights.

How to clear car data

The two best ways to clear your car data yourself may be to restore factory settings on the infotainment system and unpair the car from your phone’s Bluetooth. After this, you may want to double check that specific apps on your car have been digitally wiped. For example, check that the navigation app no longer has your addresses saved. And to cancel or transfer services like SiriusXM Satellite Radio and HomeLink, contact the provider.

If you don’t feel like clicking around on your car’s system to figure things out, you may be able to find a tutorial on YouTube, get instructions from the owner’s manual, get help from a car salesperson or use an app.

When you rent. Clearing your data is important when you sell or donate a car, but it’s a good idea to follow the same steps after renting a car.

An app for clearing car data

Privacy4Cars is an app that is free to download and offers two free “wipes,” step-by-step pictures and instructions on how to clear your car data, based on the car you have. If you need more than the two free wipes, there are paid options, too. On Google Play for Android, the app has a 4.4 star rating. Users of the Apple Store gave it a 4.9 star rating. Reviewers note that it is especially useful if one often rents vehicles.

What else does your car know about you?

As more and more cars become connected and offer more safety features and conveniences, the amount of data that cars — and thus carmakers — know about their drivers can reach levels previously unconsidered. Here are some examples of what else your car could know about you.

  • Safety systems that help the car to balance and keep traction may know how much you and any or all of your passengers weigh.
  • Systems such as Subaru’s DriverFocus can recognize up to five faces and remember their favorite seat positions, media and temperature preferences.
  • Chevrolet’s Teen Driver system can also know who is driving by recognizing a specific car key and apply limits to things such as maximum driving speed and maximum music volume when that key is in use.

While many of these advanced features keep us safer as drivers and passengers, it’s important to keep track of what your car might know about you and what information you wouldn’t want in the hands of the next owner or their passengers.

Looking to buy a car? Check out our top picks for the best auto loan companies in 2019.

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Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at [email protected]

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