Are you paying too much for your car loan?

In a recent feature on auto debt, Consumer Reports made the case that many car buyers, even those with good credit ratings, pay very high interest rates for their car loans.

According to a study conducted by the magazine analyzing 858,000 loans, 21,000 car buyers who had a credit score of 660 or higher were paying 10% or more APR on their car loans; the average interest rate for those car buyers with such a high credit score ranged from 3.73% to 5.94%.

There is no good reason why a car buyer with a good credit score should be paying 10% interest or more for a new car. Unfortunately, car dealers are under no obligation to offer the lowest interest rate available for a loan. Dealers can solicit multiple offers for a car loan, but it is possible they will not offer the best rate to their customers. Their profit margin can increase if they offer their customer a loan with a higher interest rate.

There are many things that a car buyer can do to get the lowest interest rate. Whenever I purchase a car, whether it is new or used, I obtain an agreement, in advance, from my bank or credit union regarding the interest rate and time frame for the car loan.

For example, I have found that my credit union, Penn Fed, generally offers me the best interest rate, whether it is for a new car or a used car. When I make my final vehicle selection, I let the dealer know the interest rate I have already negotiated in advance. I indicate that if they can offer me a better interest rate, I would use their lender; otherwise I would not. The dealer then has no incentive to offer me a rate that is higher than the rate I have already negotiated in advance.

Too many car buyers don’t do their homework regarding interest rates before selecting a car. That is a mistake. If you are in the market for a car, new or used, you should first verify that your credit rating is up to date. At no cost, every year you can request the latest credit report to ensure there are no mistakes in it. Visit AnnualCreditReport. com for your report. You can obtain a credit report from the three major credit agencies. If there are any errors, have them corrected as soon as possible. Any errors you identify must be corrected within 30 days. Most errors can be corrected within 10 to 14 days.

There are steps you can take to improve your credit score before you apply for a loan. For example, you should pay off any accounts that are late in payments; you should also consider paying off any loans that have small balances, especially if the interest rates are high. You could also cancel any accounts you are not using that you don’t intend to use in the near future. These steps should improve your credit rating and result in the best interest rates for your subsequent loan.

Making a large down payment will reduce the total amount of interest you will pay over the life of the loan. A good rule of thumb is that your car debt should not exceed 10% of your net income. CR reported that one in eight cars are repossessed because of late payments. Naturally, you should not agree to a loan in which you can’t afford the payments based on your other regular budget expenses.

Again, the best way to get a car loan is to get a commitment in advance from your bank or credit union based on your up-to-date credit rating. Then, when you discuss financing with your car dealer, you will be sure to get the best credit terms for your loan.

Elliot Raphaelson welcomes questions and comments at raphelliot@gmail.com.

In addition to the retroactive change in taxation of unemployment benefits, the IRS had to cross-check the eligibility for stimulus payments. All that bogged the

IRS down and delayed refunds to millions still waiting.

The good news is that if you filed by May 17 last year, you will receive 3% interest on the amount the IRS owes you. (If you filed later, perhaps because of an extension, the formula on interest is a bit more complicated.) But your eventual refund check (or direct deposit) will include interest.

Smith warns against filing an amended return if you haven’t yet received your refund. That will only slow the process exponentially.

The IRS will be sending out a letter in January, letting you know how much it sent you in stimulus payments last year. This is NOT taxable income but will remind you of what you received, and help you file for the stimulus or for more money, if deserved, when you file your 2021 return.

The big change this past year in the amount of the credit and how it was distributed will likely cause huge hassles. The credit was increased and paid monthly — in advance — starting for most people last July, with up to 6 months of the credit sent out.

In January, the IRS will mail a letter informing recipients of the child tax credit how much money they received, so they can file for the remainder of the credit by filing a 2021 tax return (even if they didn’t earn enough money to be required to file). I’m betting the IRS (or Congress) will come up with a simpler solution in the coming months, likely continuing the monthly credit payments.

Again, the child tax credit is not considered income for tax purposes.

You need to make estimated payments if you expect to owe at least $1,000 in income tax after withholding and refundable credits; or if you expect your withholding and refundable credits to be less than the 100% of the taxes you paid the prior year, or 90% of the taxes owed the current year. If you don’t make estimated payments, you could be in for a penalty. This is the time to carefully review your tax situation and make a quarterly estimated tax payment by this year’s Jan. 18 deadline. Consult your tax adviser.

All those who have reached age 72 will be required to take a required minimum distribution from traditional retirement accounts. The amount will be based on the value of your IRAs at the end of 2021 — a few days ago! Keep the year-end balances online or on statements you are receiving now.

Then immediately calculate your RMD, which must be taken by year-end 2022 — either in a lump sum before year end, or as an automatic monthly check to spread out the withdrawals. Be sure to have your custodian withhold income taxes.

Finally, this spring is the time to finally file electronically and request direct deposit of refunds. Starting tax filing season now for 2021 — and planning for 2022 — can save a lot of tax hassles. And that’s The Savage Truth.

Terry Savage is a registered investment adviser and the author of four best-selling books.

She responds to questions on her blog at TerrySavage.com.