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Auto Loan

How to Finally Pay Off Your Car This Year

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.

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A car is the second-most expensive thing most of us will ever buy. And it’s getting pricier: The average loan amount for a new vehicle is $30,621 and U.S. residents owe more than $1 trillion in car debt, according to Experian’s 2017 “State of the Automotive Finance Market” report.

We’re also getting deeper into auto debt over longer periods of time. The number of people borrowing longer-term loans (73 to 84 months) increased by 10% since the previous year’s report. Not only do these extended loans mean more interest paid, they also eat up consumer income for too long.

“You can handle $400 a month today, but what happens if you lose your job or have to move?” said Sonya Smith-Valentine, a former consumer protection lawyer and accountant who now offers financial wellness training in the Washington, D.C. area.

“Seven years is too much time to be tied into a car loan.”

The obvious alternative to getting stuck with a big auto loan is to pay cash, but not everyone can afford that. Another option is to buy a reliable used car or a less-expensive new car, and finance those loans for shorter periods.

“The more that you end up paying in interest, the less you have in cash flow over your life. That cash flow is what’s going to build your wealth,” said Tara Falcone, a certified financial planner in Princeton, N.J. “If you’re in your 20s or 30s, that (interest) invested over time could be a significant amount of money in the future, when you need it to live off.”

How to finally pay off your auto loan

Paying a loan off early may sound impossible to those whose budgets already feel tight. The following information can reveal options you didn’t know you had.

To make an early payoff game plan, you need to know:

  • The term of your loan and its interest rate
  • Whether the loan agreement includes a prepayment penalty
  • How much you still owe (call the lender for this)
  • The current value of your vehicle (find it on sites like Kelley Blue Book)
  • Your credit score, which will greatly impact your ability to qualify for a loan with better terms

From there, there are a few ways to manage your loan:

Option 1: Refinancing

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If you’re stuck with a high-interest auto loan, you might consider refinancing for a new auto loan with better terms. Banks, credit unions and online financial institutions may be able to get you a new loan with terms more favorable than the original one.

Ideally, the new loan term will be shorter than the current one. The point is to pay off the car note as quickly as possible, in order to pay as little interest as possible.

Depending on your original rate, however, a longer-term loan might still mean less interest paid overall. Falcone knows of a Navy enlistee who financed a car at a dealer for a whopping 24%. Fortunately, she was able to refinance at 7%.

Run your own numbers through an auto loan refinance calculator like this one from LendingTree, the parent company of MagnifyMoney. If your original agreement includes a prepayment penalty or if the new loan would carry an origination fee, you’ll need to factor those into your calculation as well.

If you can refinance at a lower interest rate, early payoff will become easier.

Option 2: The rapid repayment route

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The faster you retire a loan, the less interest you’ll pay. One simple tactic to pay off a loan quickly is to make biweekly payments instead of monthly payments.

If you owe $430 per month, for example, you’d make half that payment every two weeks. Paying $215 every other week (or 26 times per year) rather than the full amount 12 times a year would add up to $5,590 instead of $5,160.

You could also continue to make monthly payments, but pay more than the required amount. An easy way to start is by rounding up. For example, if you owe $389 per month, you could make the payment $400 (or more, if you can).

Where to find the extra money? These tactics can help:

Sell stuff. A game system, designer purse, mountain bike or other rarely used items could bring in decent dollars through eBay, Craigslist or consignment websites.

Write down what you spend. Small, unnoticed expenses can add up fast, says Brian Hanks, a certified financial planner who practices in Salt Lake City. He advises clients to keep track of all expenditures for a month (on paper or with an app). Often, they’re startled to discover how much the things they “don’t get real value out of” are costing them each month – money that could be applied to their loans.

“Once they realize it, behavior can change,” said Hanks.

Get a side hustle. Petsitting, driving for Lyft, a weekend waitressing gig – whatever fits your ability and personality. Or use your professional skill set to become a consultant, looking for work you can do on weekends.

Contribute windfalls. You got a tax refund. Grandma sent you $50 for your birthday. Vacationing neighbors paid you to pick up their mail. Any time additional money shows up, throw it toward your payment.

Ask for a loan. A relative or friend might be willing to help. Draw up an agreement specifying how you’ll repay (weekly? monthly? by cash, check or PayPal?) and then keep to the terms.

Spending freeze. Colorado-based certified financial planner Dan Andrews suggests clients drop one expensive habit (shopping, eating meals out) for 30 days.

“Prove that you have the savings gusto in you for a month,” he said. Then, put the money saved toward the next payment. Often, the spending freeze “reframes what they thought was a ‘need’ into a ‘want,’” said Andrews, who specializes in working with millennials. This means more money for the loan every month.

Before you start making extra payments, talk to the lender. You need to make absolutely sure that the additional money goes against the principal of the loan.

Option 3: Selling and starting over

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Want to get out from under a loan entirely? Let someone else pay it off.

Compare the Kelley Blue Book value to the amount you still owe. If there’s a positive balance – say, you owe $10,000 and it’s worth $11,000 – then put the car up for sale.

Once you have a buyer, ask the lender for the payoff amount: What it will take to pay in full and get the vehicle’s lien released. Smith-Valentine suggests creating a written agreement stating that the third-party buyer will pay the lender directly, and you will sign over the title once you receive it.

You’ll want to have another mode of transportation lined up, of course. Having to carpool or take public transit for a while might be preferable to being deeply in debt. Continue to make your “car payment,” though: Set aside that amount every month for a replacement vehicle. Figure out what you’re not paying for car insurance and add to the car fund, too.

If the agreed-upon sale price doesn’t cover the payoff amount, be prepared to make up the difference. Should you be lucky enough to sell the car for more than it’s worth, use the balance as seed money for a replacement car.

A word of caution about auto trade-ins: You may have seen ads for auto dealers who offer to pay off your previous loan if you’ll trade in the vehicle for a new one. The Federal Trade Commission advises consumers to be cautious about such deals, especially if they have negative equity (aka they’re “underwater” on their loans).

Some of those dealers find ways to include the money owed that in the new agreement – which means you would be financing that negative equity along with the cost of the replacement vehicle. Read the contract very carefully, and ask for an explanation of how any negative equity was handled.

What if you’re underwater on your auto loan?

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Owing more than a vehicle is worth makes it tougher to sell but not necessarily impossible.

If you have savings, make up the difference between what a buyer will pay for the car and what will be left on the auto loan afterward. No ready cash? Look into taking out a small personal loan to pay off the remaining balance. It may be better to owe some money than to be stuck with a large loan for a vehicle that continues to depreciate.

Another possibility: Make extra payments against the principal until the loan balance matches the car’s value, and then put it up for sale. Before you do, check to see if at that point you’ll be eligible for refinancing at a better rate – if you want to keep the car, that is – and if you’ll be able to swing the lower payments.

Should you give back the car?

Suppose you’re underwater, can’t refinance, have no savings and are disgusted with the thought of making payments for years. It can be tempting to just give the car back to the dealer.

Don’t do it. A “voluntary repossession” reduces costs only for the creditor, and will hurt you in the long run.

The now-used car will probably sell for less than the loan balance, and you are required to pay the difference. For example, if you still owe $12,000 and the vehicle sells for $9,000, then you’ll have to come up with the “deficiency” of $3,000. You’ll also be on the hook for other funds, such as fees associated with the repossession, including storage and legal fees.

The lender can sue you for a “deficiency judgment,” which shows up on your credit report. If the account gets turned over to a collections agency, you’ll be hounded nonstop – and the judgment will remain on your credit report until it’s paid. The repossession will also stay on your report for up to seven years, which wreaks havoc on your credit score.

Instead of giving the car back, use the rapid repayment tactics noted above to bring the loan balance closer to the vehicle’s current value. At that point, try selling or refinancing. If you’re financially stressed, Smith-Valentine suggests a longer finance term in order to get a lower monthly payment. That will mean more interest in the long run, but will give you some breathing room right now.

“I’m not a proponent of long car loans. But that’s still better than a repossession,” she said.

Bottom line

Ideally, you’ll be able to pay off your loan quickly, or at least refinance it at a more favorable rate that allows you to put more money toward the principal balance.

Imagine not having a car payment. What could that extra few hundred dollars a month do for the bottom line? Make this the year that it happens.

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.

Donna Freedman
Donna Freedman |

Donna Freedman is a writer at MagnifyMoney. You can email Donna 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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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
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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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