New car drives off the lot dragging old debt behind it

Q: I can't believe I actually signed the papers to lease a $33,000 car. I subsequently wanted to purchase the vehicle, so I called the bank to get the payoff amount so I could take it to a bank in town for a better interest rate. They said the payoff is $44,000. I asked how this could be if the sticker price was $33,000, and the man said it was because I had traded in a 2000 Astro minivan with 12,000 miles, in perfect condition, and the bank said I was paying for both. Can that be right?
Name withheld, via e-mail

A: The bank is right - you are indeed paying for both vehicles. Auto dealers are always eager to do business, and if you trade in a vehicle that isn't paid off, well, they won't let that gum up a deal. They'll figure out a way to put you into a shiny new car.

In your case, the dealer took the outstanding balance on the minivan and rolled it into the price of your auto lease. That jacked up the payoff amount.

Unless you pay for a car in full, you still face monthly payments, regardless of whether you lease or buy. Both arrangements carry a raft of small print, and while it may be boring to read, doing so could head off the kind of surprises and misunderstandings you encountered.

When in doubt, ask the finance manager to explain any item you don't understand.

Q: I have investments in retirement accounts, and heard that it is not a good idea to keep more than $100,000 in one account. Where should I move my money to have a balanced allocation? I have a money-market fund, but the sponsor doesn't guarantee that account, either. At least with insurance companies, the $100,000 is guaranteed. Can you help me?
M.R., via e-mail

A: The government-run Federal Deposit Insurance Corp. (FDIC) will insure money-market accounts for up to $100,000, as long as they are with an institution that offers FDIC coverage, such as a bank or thrift. Money-market funds offered by mutual funds aren't covered.

Once your account climbs above $100,000, financial planner Shashin Shah, based in Dallas, suggests that you consider using an additional institution or a brokerage account that would be insured by the Securities Investor Protection Corp. Its limit is $500,000. Check with the company handling your accounts to see whether it provides SIPC coverage.

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