Your financial health depends upon the length of your loan

Rose went to the dealership yesterday to buy a new car. She saw a few cars that she liked. She saw one car, that she could not afford, that she REALLY liked. She drove it, admired it, and fell in love with it.

The salesperson told her that she could have it. It could be parked in her driveway that afternoon. All she had to do was extend the payment term from 4 years to 7 years. That put the payments in her budget of what she could afford. She didn't even need a bigger down payment!

Rose didn't think twice. To own this beautiful car and have the same payment as those other ugly cars? Heck yeah!

Rose drove off the lot in her shiny new car with a 7 year loan - forever to regret her decision.

Why is rose going to regret her decision? Because although Rose loves her new car now, in a couple of years she'll be ready for a new car. And, she'll still owe way more money on this car than it is worth.

Rose's options will be limited at that point:

• Rose can trade the car in, and roll the difference between what it is worth and what the dealership buys it for into the next loan. Bad choice!
• Rose can drive the car until it's completely paid off. Bad bad bad. She will still be paying on the car when it is ugly, out-of-style, and broken down.
• Rose can save up her money to pay off the vehicle when she's ready to buy a new car. That's not good! She could use that money as a down payment on her next car!

Rose will be forever stuck in a cycle of owing more on her car than it is worth. She will be upside down and backwards - and the dealership will be laughing all the way to the bank.

Rose is my fictional character, but more than 50% of all new car loans in the United States are 5 years or longer. Many are up to 7 years. This long payment term allows you to buy a nicer can than you could otherwise afford, because the payments are spread out over a longer period of time.

And dealerships encourage the arrangement for several reasons:

• The salesperson gets a bigger commission for a higher priced car
• The finance person gets more commission for a longer length loan
• The dealership shows more revenue
• The dealership makes more money when you come back for a new car that's worth less than they'll buy it for

The last point is the one that's important for you: unless you make a large down-payment (and you probably won't) you will be upside down on your car. When it comes time to get a new car, you will still owe more than it's worth.

Then, you will be forced to roll the extra amount between what you owe on this car and what the dealership will buy it back for into the next loan. That will put you even further under water next time!

If you actually drive the car for 7 years, you'll be ok, but nobody wants to still be paying on an old, out-of-style, broken down car for years after it has lost it's shinyness and new car smell.

It's a vicious cycle that plays out every day all over the United States.

You can avoid this mess before you get started. You should never finance a car for more than 4 years. 42 months is even better. If you can't afford the payment on a 42 month loan, then you should buy a cheaper car.

It's hard to make the smart decision in the heat of the moment; after you've fallen in love with a car you can't afford, and a salesperson that's saying all the right things. You just have to go into the dealership with your financial health in mind, and be determined to make the decision for your bank account's safety.

Don't get stuck like Rose! Buy your next car the smart way...

Products for which warranties are worthwhile

JAMES SEBASTIAN:

Products for which warranties are worthwhile...

• Plasma TVs. These are expensive to replace and use advanced technology prone to need repair -- 30% of plasma television sets need service in the first three years.
• Laptop computers. They are more costly, more delicate and more expensive to fix than desktop computers -- and more likely to be dropped and damaged.
• Wristwatches. Standard warranties usually exclude the parts most likely to be broken, such as the face and the band. Extended warranties that do cover them often are inexpensive.

Keep your money rather than spend on warranties for...

• White goods, such as refrigerators and washing machines. These usually are reliable, and a warranty is liable to cost as much or more than any repairs you'll actually need.
• Desktop computers. Most failures occur early on, within the term of the original warranty.
• Digital cameras. Few need repairs, and those that do usually need them during the original warranty.

Ford recalling 1.2 million trucks and vans

Ford recalled 1,200,000 trucks and vans today because of a problem with cruise control. If you have a 1994-2002 Ford truck or van, this article should be of interest to you.

This recall is in addition to 3.8 million recalled last year for potential fire hazard.

NEW YORK (CNNMoney.com) -- Ford Motor Co. is recalling 1.2 million large pick-up trucks, SUVs and vans because of a problem with the vehicles' cruise control system that could lead to a fire.

This recall is in addition to a total of 4.6 million Ford vehicles that were recalled for the same problem last year.

The vehicles being recalled are: certain model year 1994 to 2002 F-250 through F-550 Super Duty trucks; 2000-2002 Excursion SUVs; 1994 to 1996 Econoline vans; 1996 to 2002 E-450 vans and 1998 Ford Explorer and Mercury Mountaineer SUVs.

Diesel-powered vehicles are not affected.

In rare cases, the company said in a letter to the National Highway Traffic Safety Administration, brake fluid can leak through the cruise control deactivation switch causing corrosion in the switch. This can cause the switch to overheat and possibly burn.

The switch shuts off the cruise control when the driver firmly steps on the brakes. The switch is located under the hood of the vehicle and is attached to the brake master cylinder on one end and wired to the cruise control on the other.

On most of its models, Ford designed the switch to be powered -- or "hot" -- at all times, even when the vehicle is off. Inside the switch, a thin film barrier separates brake fluid from the switch's electrical components.

In January, 2005, Ford recalled approximately 800,000 F-150 pick-ups for the problem.

Later that year, after numerous Ford owners complained that their vehicles caught fire when their engines were off and the keys weren't in the ignition, CNN launched an investigation into fires in Ford vehicles that had not been recalled .

In September, 2005, Ford recalled certain Bronco, Expedition, Lincoln Blackwood and Lincoln Navigator SUVs as well well as some Ford Ford F-150 and F-250 pick-ups for the same problem. A total of 3.8 million vehicles were recalled at that time.

Ford stopped using the switch in 2004.

Owners who have questions or concerns about the recall can contact Ford at 866-436-7332 or NHTSA's Vehicle Safety Hotline at 888-327-4236.

830,000 Jeeps recalled for steering issue

Vehicle recall alert! If you own a 2002-2006 Jeep Liberty sport utility vehicle, take it to the dealership immediately to avoid an issue with the steering.

DETROIT (Reuters) -- Chrysler Group said on Wednesday it would recall an estimated 832,500 Jeep Liberty vehicles because of a potential steering problem.

Chrysler, the U.S. operating unit of DaimlerChrysler AG, said that, in some of the vehicles, a ball joint in the front suspension was prone to excessive wear and coming loose.

The automaker said that, in some cases, that joint could separate entirely causing drivers to lose steering control.

The voluntary recall covers 2002 to 2006 models of the Jeep Liberty sport utility vehicle, Chrysler said.

Owners of vehicles covered by the recall will be notified in September and work to repair the problem will be done at no cost to them, Chrysler said.

Don't just tear up your credit card apps - Buy a shredder today!

Need more proof that credit card applications are not good for you? Read this blog post on the torn up credit card application.

Your credit card is sucking your financial blood

Your credit card is sucking your financial blood directly from the jugular on your neck. The credit card companies are laughing all the way to the bank with cold hard cash in their hands.

Why Credit Cards Can Be Bad for Your Financial Health

Interest rates are pure profit for the credit card companies. That's why they do everything they can to make them as high as possible. All across the country consumers are stuck with credit cards with interest rates as high as the law allows.

They lure you in with low or no interest rate introductory periods. They convince you to create a very high balance very quickly with easy to use balance transfer checks. In the small print, on the back of the offer letter, is where they spring their trap. Miss a payment, even by a couple of days, and your interest rate shoots through the roof. If you receive a cash advance from the card, you also receive a different interest rate. The interest rate on balance transfers is usually very high. The highest interest rate on the card is usually the last one that your payments are applied to. In this way, the bank gets to collect the most amount of interest for the longest period of time.

High credit card balances are choking the financial well-being of Americans. The average credit card debt is more than $9,000 (Americans on average have $9,312 in credit card debt — according to cardweb.com), and many politicians, pundits and journalists say it's a sure sign of impending economic collapse. Here are a few things you can do to ensure your bank account doesn't get too lonely.

• Don't sign up for too many credit cards (if you haven't already)! Get a few of them, to maintain good credit scores, and throw the rest of the offers in the trash can - no matter how enticing.
  
• Spend wisely on the cards that you do have. If you can pay off the balance every month, that's the way to go.
  
• Educate your children about credit cards before they go to college. How many times have you heard this story? A new college student is wandering through the student center when they learn they can get a free t-shirt if they just fill out this application. The next week a shiny new credit card arrives in the mail. That night, the pizza delivery goes on it. The next week, the new pair of jeans go on it. The minimum payment on the card the next month isn't that high, so the student keeps spending until it's maxed out. Student gets another credit card and repeats. You know how the story goes from there - student is saddled with credit card debt for another 15 years! Unless, of course, Mom and Dad bail her out first. Don't let this happen to your kids just because you didn't teach them about their financial health!
  
• To pay off credit cards, use a strategy. Pay the minimum on all credit cards except one. Apply the most money you can to that one until it's paid off, then take that entire amount and apply it toward the next one. This method is much quicker than splitting the total amount and putting it toward all the cards equally.
  
• Beware of refinancing your house to pay off credit cards. Beware of consolidating credit cards into a separate loan. It's a recipe for disaster when you pay off your credit cards with another loan because it's tempting to put money right back on the empty balances. Then, you're left with a big consolidated loan payment, plus more credit card payments.
  

Your banker drives a Mercedes Benz, and you pay for it every time you put something on your credit card that you can't afford to pay off the same month. You're paying for it every month. You're paying for it year after year. Be smart with your money, and make that bum get HIS money somewhere else!

Philips Electronics Recalls Plasma TV's

Philips Electronics is recalling 42 and 50 inch flat-panel plasma televisions because of wiring that could cause fires. Read more at Consumer Reports by clicking here.