 |
General Questions about Financing |
| What is the difference between a loan and a lease? |
| When you obtain a loan, your down
payment and monthly payment go toward the total purchase price. When the term of the loan is complete and the loan is paid in full, you own the vehicle. A lease is similar to a balloon finance agreement where you pay interest on the entire purchase price of the vehicle but you are only paying a portion of the principal balance. At the end of the term of the lease you may return the vehicle, buy the vehicle, sell the vehicle or trade in the vehicle |
| How do I choose between a loan or a lease? |
The key question to answer is how long
you want to keep the vehicle. If you want to keep it six
years or longer then financing will likely make more
economic sense.
To make a more informed decision you should also do a finance vs. lease cost analysis as follows:
Finance: Add the sum of your money down, sales tax,
monthly payments X number of months financed and
anticipated cost of maintenance and repairs for the term
the vehicle will be out of warranty.
Lease: Add the sum of your money down, sales tax on the
money down, monthly payments X the number of months of
the lease.
Now, compare the two figures. If the finance
calculation is twice the sum of the lease calculation
you will be able to drive two different vehicles on a lease
for what it would cost you to own just one on a finance
agreement.
|
|
|
Understanding Rates, Co-Signers, and Down Payments |
| What rates do you offer? |
| Luxury Motors works with several financing
(or lending) institutions to bring you the most
competitive rates and terms on vehicle financing. We offers flexible rates, terms, and payments so that you can obtain the loan or lease that fits
your unique needs. The rate in your individual financing package is influenced by a number of factors including your credit history, the term of your loan or lease, the amount financed, and the residual value of the vehicle you lease. Financing through our dealership lets you enjoy a quick, competitive, and straightforward way of getting your new vehicle. |
| Do I need a co-signer? |
| Not necessarily. If your application requires a
co-signer, we will inform you during your application
process. |
| How do I make my down payment? |
| You can use a money order, bank check or cashier's check (made out to our dealership), or cash. |
| Can I finance taxes, registration, and other transaction expenses? |
| Absolutely. |
| Can I include the cost of other products, such as extended service contracts, credit insurance and accessories in the amount that I finance or lease? |
Yes, again. If you are interested in any
of our protection plans and would like to include their costs in your finance option, just ask one of our finance representatives to arrange that for you.
Click here for a list of all available products.
- Back To List - |
|
|
Tell Me
More About Leases |
| What is a lease? |
A lease is exactly like a balloon finance contract where you pay interest on the entire amount borrowed but pay down only a portion of the amount borrowed (the principal) as a result you will have lower monthly payments or, put another way, you can drive a better car for less money.
The differences between a lease and a balloon finance contract are: 1) with a lease, title is held in the name of the funding source 2) the “balloon” or in lease language the “residual value” is established by the funding source based upon the anticipated depreciation of that particular vehicle over the term of the lease, assuming a certain number of miles to be driven and reasonable wear and tear and 3) unlike a balloon finance where you are responsible to pay off the balloon amount at the end of the term, in a lease the funding institution assumes the responsibility
if you choose not to buy the vehicle at the end of the
term. Typically, they will recover that amount by reselling the vehicle at auction. |
| Explain the leasing terminology! |
As leasing is technically different than buying or financing, different terminology is used to describe the transaction. The most important concepts are capitalized cost, residual value, and money factor.
Capitalized cost
This is the price you
paid for the vehicle plus an acquisition fee charged
by the funding institution less and money or trade
equity put down hence capitalized cost reduction
Residual value
This is the amount that the
funding source believes that the vehicle will be
worth at the end of the term based upon the year,
make, model of the vehicle, reasonable wear and tear
and a certain number of miles driven.
Money factor
The money factor is simply
another way of calculating interest. It is arrived
at by taking the average amount borrowed during the
term of the lease and converting the annual
percentage rate into a monthly percentage rate
expressed as a decimal. To determine the actual
rate of interest you are paying on a lease multiply
the money factor by 2400.
- Back To List -
|
|
|
Tell Me More About Loans |
| What is a loan? |
| A loan is a specific amount of money that you borrow from a lending institution in order to purchase a vehicle. You then make a commitment to make monthly payments for a specific period of time (called a "term") until the full amount borrowed is repaid. |
| How does a loan work? |
| The amount that you borrow and the remaining balance during the life of the loan are referred to as the principal. The principal can be paid off at any time prior to maturity, but as long as it is outstanding the lending institution can charge a prearranged interest rate that is included in your monthly payment. Until the principal is paid in full, the lending institution retains the title to the vehicle as security on the loan. When the principal is paid, the title is returned to you, and the vehicle is yours. |
| What if I drive a lot of miles, should I still lease? |
Perhaps one of the greatest myths about leasing is that it doesn’t make financial sense to lease if you drive a lot of miles. The reality is that you pay for miles regardless of whether you lease or finance or purchase outright and you pay for miles in the same way, i.e. the depreciation of the vehicle.
The real cost of a vehicle when purchased or finance is
what you pay for it up front plus its operating cost
over time less what you sell it or trade it for at the
end. Many times, the cost per mile is less if you lease
than the cost impact on the trade or resale value on a
finance or outright purchase.
There are other considerations as well. People who
drive a
lot of miles need to get into new vehicles sooner. A
lease will allow them to do just that. What is going to
be the cost of service and repairs on a high-mileage vehicle? How much lower will your payment be
on a lease versus a finance contract? If your vehicle
gets into an accident on a purchased or finance vehicle
it will result in increased depreciation even if you
have it repaired properly. This is not true when you
lease. There is no additional cost impact. Many times
high mileage drivers have “business use” of the vehicle
as defined by the IRS. If you have “business use” you
should be able to reduce your taxable income by a much
higher percentage of your actual out of pocket expense
if you lease rather than if you finance or purchase outright.
If you are a high mileage driver, have one of our Sales
Consultants do a financial comparison for you. We think
you’ll be surprised. - Back To List - |
|
|
The Worst Investment You Can Make... |
is to borrow money to purchase a
depreciating asset.
Occasionally, one of our customers will say, "I'm
seriously thinking about purchasing a car from your
dealership, but frankly I'm confused. I've always been
taught that the smart way to buy a new car is to pay
cash and then keep the car for a number of years to make
that investment pay off. But your sales consultant is
now telling me something different. I just don't
understand!"
The fact is, conventional wisdom is partially correct; the worst way to buy a new vehicle is take out a conventional loan. Borrowing money on a depreciating asset is not an actual investment at all. Investments provide returns while an automobile is, truthfully, a consumable expense. You purchase a car to use it, not to resell it at a higher value. This makes a car paid for in cash just a large prepaid expense - not an investment at all! The question, then, for the knowledgeable vehicle buyer to ask is, "How do I minimize this expense?" J. Paul Getty, the famous oil industrialist, put it best. He said, “Buy what appreciates, lease what depreciates.”
- Back To List - |
