Yesterday, it was reported that General Motors would be brining back over 1,300 union workers. This increase is as a result of greatly improved new car sales, which had previously eluded GM.
This increase means adding shifts to GM plants in both Ohio and Canada, to help keep up with demand. This increase is expected to add over 50,000 new GM vehicles, which represents a 20% increase over last quarter. All told, GM estimates that it will produce 642,000 new vehicles in the fourth quarter of this year.
GM is not the only company to show increases in sales. Other car manufacturers, such as Ford, are also reporting greater sales. Ford, who did not accept bailout money and has instead been focusing on making more reliable fuel efficient vehicles, has been expanding its oversees market for some time, which is one reason it was able to avoid many of the problems that plagued GM and Chevrolet.
While some economists are siting this increase in car sales as an indication that the recession is over or drawing to an end, this is rather optimistic. Many of these new car sales are as a result of the Cash for Clunkers Program, which offers up to $4,500 for those who trade in an inefficient vehicle.
Since a great number, if not the overwhelming majority, of these new car sales come as part of the Cash for Clunkers Program, the question remains, will people continue buying cars when the program expires in November.
It is likely that many people who had been planning on purchasing a new vehicle in the future, decided to buy a new car earlier, so that they could take advantage of the economic stimulus program. The supply of those wanting to buy new cars is not finite, so it is possible that the Cash for Clunkers program generated a great number of sales early, but once the plan expires, sales will drop lower than they were before.
While it is certainly a very good sign that GM is adding more shifts and that our car companies have had a few very good months, it remains to be seen as to whether this will be enough to pull them out of the danger zone.
Last week, the Cash for Clunkers Program narrowly avoided being scrapped after its budget had been expended. However, congress and President Obama approved an additional $2 Billion dollars, so Cash for Clunkers could keep running until November.
This FAQ answers some of the frequently asked questions about the Cash for Clunkers Program, so you can take advantage of this incentive.
The Cash for Clunkers program is program offered by the government to provide an incentive to purchase a new car. The program provides up to $4,500 for traded in vehicles, providing they meet several requirements.
One of the main parts of the Cash for Clunkers Program is that the new vehicle purchased must have an improved gas mileage.
If there is a 4mpg increase $3,500 is offered for the trade in.
If there is a 10mpg increase, $4,500 is offered for the trade in.
No, participating dealers will do all the paper work and apply a credit towards the purchase of a new vehicle.
No, the car purchased must be a new vehicle.
The Trade In must have been manufactured within the last 25 years, have at most an 18mpg fuel rating, and be in running condition.
Yes, the trade in must have been insured and have held a valid registration for the last year.
Yes, you can trade in a car with a salvage title, providing it meets the other requirements.
Yes, work trucks can be traded in as part of the Cash for Clunkers Program. Work trucks do not have the same fuel efficency requirements, but must not be manufactured after 2001. Class 2 and Class 3 trucks are covered and must be traded in for a truck of similar size. $3,500 is offered for work trucks.
No, under the Cash for Clunkers Program, each household is only allowed one credit.
Yes, leased vehicles are covered.
No, if the dealer says you must sign an agreement repaying the credit if the Cash for Clunkers application is rejected, this is not true.
Vehicles that weigh over 8,500 pounds are classified as Class 3 vehicles and do not have a fuel rating set by the EPA. This is one way SUV Manufacturers managed to get around many of the fuel and emissions requirements set by the EPA.
As a result, a larger SUV, weighing over 8,500 pounds, is classified as a work vehicle and only eligible for a $3,500 credit. The SUV must also not have been manufactured after 2001.
The engine of the old car must be destroyed by the dealer, because the Cash for Clunkers Program is designed to take older innefficient vehicles off the road.
The other parts, however, are recycled and sold in scrap yards. This means that the transmission, body, and even mirrors can all be potentially reused. Of course, the engine is also recycled as scrap metal.
Purchasing a home is often the biggest investment a person will ever make, so it is not a decision that should be taken lightly. Most people do not have enough money saved up to purchase a home outright, so instead must rely upon a mortgage.
A mortgage is a type of loan, which uses the home as collateral. There are actually quite a few different types of mortgages, but the most common mortgages are Fixed-Rate Mortgages and Adjustable-Rate Mortgages.
The Fixed-Rate-Mortgage is sometimes referred to as a traditional mortgage. Fixed-Rate Mortgages are typically offered for durations of 15 or 30 years, although there are also some less standard durations including 10 and 20 years. Over the entire duration of a fixed rate mortgage, the interest rate does not change, so it is very easy to plan your monthly payments using an amortization table.
An Adjustable Rate Mortgage(ARM,) on the other hand, usually offers a low initial interest rate, but the interest rate is adjusted every few years.
Often, you will see Adjustable Rate Mortgages described using the format 5/1 ARM. The first number represents how often the rate of the ARM Increases. So, in the above example, the interest rate would be adjusted every 5 years. The second number represents the percent at which the interest rate can change, so in the above example, every five years, the interest rate would change by up to 1%.
While in most cases, the interest rate of an ARM will not decrease, it is possible. However, when considering going with an ARM, it is important to plan that the interest rate will increase each time. Another important consideration is what the maximum increase of the interest rate is over the course of the loan. Most lenders will provide a maximum of an 8% or 10% increase over the course of the mortgage, although this varies by lender.
Adjustable Rate Mortgages usually offer a lower initial interest rate, making them appear very attractive. However, as the rate increases, the monthly payment of the mortgage can quickly become very unfordable, so it is important to consider not just the initial rate, but how often the rate increases and what the monthly payment will be when the rate increases.
No matter what type of mortgage you go for, having at least 10% of the homes value for a down payment is very important. Traditionally, lenders had required a 20% down payment, but over the last 20 years, many lenders relaxed this requirement, with some even offering mortgages with 0% down.
However, due to our current economic situation, most lenders are returning to more traditional down payment requirements, so in many cases it will no longer be possible to get a mortgage without a down payment.
While having a down payment may now be a requirement for receiving a mortgage, this is not the only reason to save money for a down payment. This is because by having some money set aside, you will be able to get a lower interest rate and more favorable mortgage terms from your lender. With more options, you will be able to choose your lender, instead of having to go with a subprime mortgage lender. Not only will having money for a down payment mean there will be more options and more favorable terms, but it also means that you will have equity in your home as soon as you move in.
A Credit Score is a numerical value between 300 and 850 that is used by lenders to determine the risk offering someone a loan. Credit scores are based off of a number of factors, including the number of different lines of credit a person has, their payment history, and how long they have had credit. When applying for a mortgage, credit scores are one factor that are considered by mortgage lenders, so it is important to understand the relationship between credit scores and mortgages.
Credit scores are not exactly new and have been around for many years. The FICO credit score is the most common type used, but there are others as well, specifically those offered by the three credit reporting agencies. However, up until relatively recently, the average consumer was not able to see their credit score. This changed in 2003 with the passage of the Fair Credit Reporting Act, which required credit reporting agencies to provide consumers with their credit score for a reasonable fee.
There are many factors that goes into a credit score and a persons debt level is actually not what the credit score is predominantly based upon. Instead, only about 30% of the credit score is based off of a persons current debt, with more weight being placed upon how the person handles debt, as well as their credit history and payment history.
In times past, getting a home mortgage was a much more personal process. The loan officer took the time to get to know the person and made a subjective decision based upon the information available to them. Today, however, much of this personal touch has been lost, replaced by mathematical formulas that are processed by computers. These formulas take into account the persons credit history, their credit report, and their credit score, determining mathematically the risk of offering the prospective lender a home mortgage.
Since so much of the mortgage approval process has been automated, it is essential to have a good credit report and as high of a credit score as possible. Studies have been shown that the higher a credit score is, the lower the mortgage rate offered will be.
For example, according to myfico.com, in 2007, a person with a credit score between 760 and 850, which is considered to be very good, received an average interest rate of 6.3%. A person with a credit score between 500 and 579, on the other hand, received a interest rate of 9.9%. This shows the importance of having a high credit score before applying for a home mortgage.
Since having a high credit score is such an important factor when applying for a mortgage, it is a good idea to spend time fixing any areas and maintaining a healthy credit score before applying for a mortgage.
One of the most important steps of maintaining a healthy credit score is taking care of any errors on your credit report, which even though they may simply be a mistake, such as a creditor not reporting a payment. Even though the mistake is not your fault, it still affects your credit score the same, so finding and fixing errors on your credit report is essential.
Paying bills on time is also extremely important to help maintain a healthy credit score and is one of the main factors prospective mortgage lenders consider when considering a mortgage application. If you have missed a payment, always make sure all of your payments are up to date before applying for a mortgage or other type of loan.
It is also important to pay down your credit lines based upon the amount owed and interest rates of the credit line. For instance, it is important to pay down those credit lines with higher interest rates sooner, rather than later, which not only helps your credit score, but also helps you save money.
On Thursday, the US Senate approved a bill allocating an addition $2 Billion for the Cash for Clunkers program. President Obama is expected to quickly sign the bill into law, so the stimulus program can continue.
The Cash for Clunkers program is designed to provide an incentive for Americans to trade in their older car for a new more fuel efficient vehicle. The incentive program offers $3,500 or $4,500 for vehicles that have a 4mpg or 10mpg increase in fuel efficiency respectively. As part of the Cash for Clunkers incentive program, the trade in vehicle must be destroyed.
The bill that was passed in the Senate yesterday comes a week after announcements that the budget for the Cash for Clunkers program had been expended. The US House of Representatives quickly passed a bill the following day, allocating an additional $2 Billion. This bill was passed by the Senate a week later, with a vote of 60 to 37.
While there are some legislators that are very critical of the Cash for Clunkers program, it is hard to say that it has not stimulated the economy. It is estimated that more than 250,000 new cars have been bought so far as part of the stimulus program. This has a very big impact on new car dealers, but it also helps out many other industries, including scrap yards and metal recyclers.
The scrap yards are not able to use the engine of a car traded in as part of the Cash for Clunkers program, because the engine must be destroyed. However, they can recycle the other parts on the car to sell them used. The rest of the vehicle is subsequently recycled for scrap metal.
While the Cash for Clunkers program does offer a number of real time benefits, both for new car owners and for new car dealers, it also will have a very big long term effect.
Each of the new cars purchased as part of the incentive program must at least have a 4mpg increase in fuel efficiency. Since the trade in vehicles are essentially decommissioned and taken off the road, this means that this program significantly increases our overall fuel efficiency. Over the course of five or ten years, this will account for greatly reduced gas consumption.
When considering vehicle gas consumption and fuel efficiency, it might be easy to think that 4mpg is an insignificant number, but this is not necessarily the case.
To put this in perspective, take a car that gets 15mpg and a car that gets 30mpg. If each of these cars are driven 10,000 miles they will use approximately 667 and 333 gallons of gas respectively.
An increase of only 4mpg to 19mpg and 34mpg, will have a much larger effect on the low gas millage car than the less fuel efficient car. The 19mpg car will use almost 141 fewer gallons of gas every year, while the 34mpg will only use 39 fewer gallons of gas.
As a result, increasing fuel efficiency by 4mpg in our less fuel efficient vehicles will have a very big impact on our gas consumption as a country.
Today, there are many incentives to purchase a new home, namely historically low interest rates and a surplus in empty homes, which has reduced the overall cost of a new home. Together, these incentives can make it much more affordable to own a new home and it is possible to end up paying much less than you would in rent. The government is also currently offering an incentive for first time home buyers in the form of a tax credit of up to $8,000 towards the purchase price of the home. While this tax credit can be applied to either your 2008 or 2009 tax return, it is probably in your best interest to file an amended 2008 tax return, so the first time home buyers credit can be received sooner rather than later.
The 2009 First Time Home Buyers Tax Credit is part of the American Recovery and Reinvestment Act, which is designed to help stimulate the economy. President Obama signed this bill into law in February and it includes a number of tax incentives for both consumers and corporations. All told, the American Recovery and Reinvestment Act includes $288 Billion in tax relief, which represents about a third of the American Recovery and Reinvestment Act’s budget.
Of the $288 Billion in tax relief, $6.6 Billion has been set aside for first time home buyers. There are several requirements to receive the first time home buyers credit, including that the individual has not owned a home in the last three years and that their income is less than $75,000. For those that meet the requirements up to $8,000 is offered in the form of a tax credit that does not need to be repaid.
Obama’s First Time Homebuyers tax credit can be claimed on either ones 2008 or 2009 tax return, but rather than waiting, it is generally in your best interest to file an amended tax return, so that the funds can be received right away. Filing an amended tax return is very easy and it is only necessary to resubmit a 1040X IRS Form and include a form 5405, which is required as part of the First Time Home Buyers Tax Credit. After the amended tax return has been submitted and received by the IRS, it usually takes between 8 and 12 weeks to process.
By filing an amended tax return, it is possible to get your stimulus check much quicker than if you were to wait until 2009. This means you get the money right away and can reinvest it in your home, simultaneously increasing equity and reducing mortgage rates. It can also be spent on home improvements or to help with bills.
Those that decide to file for the 2009 First Time Homebuyers tax credit return on their 2009 taxes will have to wait much longer to receive their stimulus check. It also could mean that the budget could be expended, which has already happened with the Cash for Clunkers incentive program. However, in order for the first time Homebuyers tax credit’s budget to be expended, 825,000 people would have to submit an application.
While it is possible to file an amended tax return to receive your funds right away, it is also possible to change your number of deductions, so that you pay less, or even nothing, towards your federal taxes in your paychecks. At the end of the year, the First Time Home Buyers Tax Credit will be applied to what you owe to the IRS and the difference will be refunded.