8 Things to Know Before Leasing a Car

Should I lease? What is leasing anyway? Here’s what you need to know.

1. Leasing Is Paying For What You Use

Let’s imagine that a particular car costs $30,000 new and that it has an estimated value of $21,000 after three years of use. The amount of depreciation incurred is $9,000. Divide this amount by the number of months in the lease (in this case, 36 months) and you get your monthly lease payment: $250.

Now, there are also finance charges and taxes to include, but in essence, leasing is paying for the depreciation that occurs over time from your use of the vehicle. At the end of the lease, simply return the car or buy it outright by paying the remaining value of the car (in this example, $21,000).

2. Some Cars Lease Better Than Others

Cars of the same price and type can cost vastly different amounts of money to lease.

These variations mostly boil down to the details of each manufacturer’s lease program. Every month, automakers release new lease programs that establish the following:

  • Residual value: The car’s estimated value at the end of the lease.
  • Money factor: The interest rate expressed in a different way.
  • Cash incentives: If available, these lower the final selling price of the car.

3. Leases Can Be Negotiated

Advertised “lease specials” create the impression that lease prices are set by the manufacturer—as if they were promotional menu items from McDonald’s.

In truth, individual dealers determine the selling price of a car, who then apply the manufacturer’s lease program to arrive at the actual cost. A manufacturer’s lease special simply assumes a particular selling price that they expect dealers to honor. The selling price can most certainly be negotiated.

4. Watch Out For Marked Up Rates and Fees

Aside from setting the sales price, dealers can also mark up the money factor. This may result in hundreds or thousands of extra dollars paid over the course of a lease. Leasehackr.com posts the official money factor for hundreds of vehicles, so you can check if you’re being charged too much.

With a lease, you’ll also pay an acquisition fee and often a disposition fee. These are legit fees, but some dealers mark them up as well. In exchange for paying these fees, you benefit from certain inherent advantages of leasing—explained below.

5. Someone Else Takes On The Risk Of Depreciation

When an automaker sets the residual value of a particular model, they often overestimate the car’s actual lease-end value.

For example, Leasehackr leased a 2013 Mercedes-Benz E350 BlueTEC, which had a residual value of $44,036 after two years of use. In actuality, the car was worth about $34,000 on the open market when it came time to return the car.

By leasing, Leasehackr avoided $10,000 in depreciation that we would have otherwise incurred if purchased instead. This amounts to over $400 per month saved!

Some automakers are spot-on with their estimates. Others intentionally inflate their residual values to make their leases cheaper. And sometimes they just get it wrong. Regardless, when you lease, someone else takes on the risk and uncertainty of depreciation.

6. You Can Cash Out On Any Lease Equity You Have

Sometimes, the opposite scenario happens: your car is worth more at lease-end than its official residual value. This might occur if your car becomes highly desirable in the used car market.

With many automakers, you can actually arrange a third-party, such as CarMax or Beepi, to buy out the car. If CarMax offers you, say, $23,000 for the car, but the residual value is $21,000, then they will write you a check for the difference ($2,000).

7. You Only Pay Sales Tax On The Cost Of The Lease

When you purchase a car, you pay an amount of sales tax based on the selling price of the car. This can amount to thousands of dollars that you never get back, even if you end up selling the car a few years later.

In most states you pay sales tax only on the cost of the lease. These tax savings more than make up for the acquisition fee required on a lease.

8. Never Put A Down Payment On A Lease

If your car is ever totaled or stolen, you can always walk away from a lease without penalty (thanks to GAP insurance). However, you won’t always get your down payment back— so don’t pay one to begin with.

A down payment obscures the cost of the lease and makes it more difficult to compare deals. Any car can be leased for $199 per month if there’s a sufficient down payment.

Article Source: https://leasehackr.com/blog/2015/9/19/8-things-you-should-know-before-leasing-a-new-car

 

The Pros and Cons of Buying Out Your Car Lease

If you leased your car and really enjoy driving it, it’s tempting to consider buying it when the lease ends. Keeping your car has advantages and disadvantages you should consider before you sign on the dotted line.

Advantages of Buying Your Leased Car

There are a few reasons to buy your car:

  • Unlike another used car, you know this vehicle’s history. You are the only one who has owned it, so you are aware of past accidents and maintenance.
  • In theory, you have already paid for the depreciation of this vehicle as part of your lease. Purchasing it may be more cost effective than leasing a new one.
  • After you’ve paid off your car, you’ll own the vehicle.
  • If you love your car, this option allows you to continue driving it after your lease is up.

Disadvantages of Buying Your Leased Car

A few reasons this might not be the best choice for you:

  • You have limited room to negotiate on the price of the vehicle and may not get as good a deal as you would on another used car.
  • You may have to pay a lease purchase option fee if your contract specifies it. This fee can be a few hundred dollars, depending on the terms of your lease.
  • The cost to buy out the lease may be more than your car is actually worth.

Deciding If You Should Buy Out Your Lease

Like any major financial decision, it’s important to think carefully about buying your leased vehicle. Follow this process to help you make the choice that’s right for you.

1. Find the Residual Value in Your Lease Agreement

When you lease a car, you are paying the car company for the predicted depreciation of that vehicle. Your monthly lease payment includes this depreciation and a fee that goes to the leasing company and covers administrative costs. At the end of your lease, you will have paid the car down to its “residual value.” This residual value is the car company’s prediction about what the car will be worth at the end of your lease term, and it’s usually the starting point for price negotiations when you buy out your lease.

According to Bankrate, car companies are generally accurate when predicting residual value. However, knowing this residual value is an essential part of deciding whether to buy out your lease. Look for the residual value in your original lease contract.

2. Learn the Market Value of Your Car

Now that you know the residual value, you need to compare that figure to your car’s market value. There are several sites that can help you find used car values. Simply input your car’s make, model, and year and provide additional information about mileage and condition. Be sure to specify that you want the market value, rather than a trade-in estimate. It’s a good idea to get value estimates from multiple sources so you have an accurate idea of how much your car is worth.

3. Compare the Market and Residual Values

If the car company was correct in its prediction, your car’s residual value will be very close to its market value. However, there’s sometimes a significant difference in these two numbers. This comparison can help you decide whether to buy your car.

  • If the residual value is greater than the market value, your car is not worth as much money as it would cost to buy out your lease. Unless you love your car, you should walk away.
  • If the residual value is less than the market value, buying out your lease may represent a great deal. You should consider this option.
  • If the residual value and market value are fairly similar, you’ll need to take other factors into account when making your decision.

4. Take Other Factors into Consideration

Now that you have a pretty good idea of the financial situation regarding your lease buyout, you’ll need to consider a few more things:

  • Factor in the purchase option fee if there is one. Check your lease agreement to see if you have this fee and how much it will add to the cost of your car.
  • Think about the condition of your vehicle. Have you maintained it regularly? Has it been in any accidents? If it isn’t in great condition, you may be better off shopping around.
  • Consider reliability. Have you had any trouble with the car? Does it have a good reputation? When buying any used car, reliability is a very important factor.
  • Think about mileage. Have you gone over the mileage limits in your lease? If you have, this may reduce the market value of your car without changing the residual value. In addition, you’ll need to pay the fees specified in your lease for going over the mileage limits.
  • Figure out the average annual cost to own your car. This figure will change as the car ages, and if you’re comparing a lease buyout with a new lease, it will be important information for you to consider.
  • Give some thought to the emotional aspects of the decision. Do you really love your current car? If so, you may be willing to pay slightly more than market value for the privilege of continuing to drive it.

5. Do the Math

Finally, sit down with a car payment calculator and figure out exactly how much you’ll need to pay each month if you buyout your lease. Talk to your local credit union to see if they can help you find the best interest rate on a car loan or lease buyout loan. Think about the purchase option fee, the residual value, your down payment, and your interest rate. Compare this figure to leasing a new car or buying a different used vehicle.

Examples to Consider:

Each situation is unique, and it’s important to go through the process of making this important decision for yourself. However, it can help to consider examples of situations where a lease buyout is clearly a good idea or a bad idea.

Highly Desirable Car

Some cars are especially in demand due to factors the car company didn’t predict. For instance, if gas prices go up and your car is extremely fuel efficient, it may be worth more money as a used vehicle. This means the market value for your car will be extra high compared to the residual value, and buying out this lease is a good idea.

Vehicle With Low Miles

Perhaps you have a car you didn’t drive often. You were allowed 36,000 miles as part of your three-year lease, but you only drove 10,000 miles. The residual value for this car was based on it being driven 36,000 miles, but a car with low mileage like this may be worth considerably more than its residual value. Provided all other factors are in agreement, buying out this lease would be a great decision.

Car Prone to Break-Downs

Generally, your car will be under warranty during the lease period, which means that if it breaks down, you don’t have to pay for major repairs. However, once the lease period ends, your factory warranty may too. If the car has been breaking down while it’s still fairly new, it’s likely to cost you a great deal of money in future repairs. Even if the residual value is lower than the market value, buying this car is probably a bad choice.

Make the Best Choice for Your Situation

Deciding whether you should buyout your car lease involves doing your research and carefully examining your lease contract. If you give appropriate thought to this decision, do the math, and take emotional factors into account, you’ll make a choice that is financially and practically best for your unique situation.

Article Source: Kate Miller-Wilson for cars.lovetoknow.com

The 4 Best Months to Buy a Car

From Mondays when business is slow to right before closing when salespeople are in a hurry, there’s no shortage of theories about the best time to negotiate the best price on a new car. But what if you’re not a Monday person or you work the swing shift? Here are the four best months to negotiate a new car deal.

May

Memorial Day weekend kicks off the “big sales event” season for car dealers from coast to coast. And of course, the typical Memorial Day sale runs longer than just those three days. If you want to head into summer in a new ride, this is the time to do it.

Also, according to data compiled by TrueCar, Memorial Day weekend is an especially good time to shop for a mid-size SUV.

October, November, and December

Yes, all three of these are good months to go car shopping, but each month for a different reason – and a different type of car.

October is the first month that dealers really become aggressive about clearing out the previous model year. According to TrueCar’s data, buyers in October average nearly 8% savings off MSRP.

October is also a slow month for full-size pickups. With supply high and demand low, it’s an especially good time to deal on that F-150 or Ram 1500. Most pickups don’t change much from year to year, so if you’re willing to accept a truck from the previous model year, you may find yourself with a screaming deal.

Black Friday is supposed to be all about retail. However, in recent years, car dealers have jumped on the Black Friday bandwagon, too. TrueCar data suggests that November is an especially good month to buy midsize and compact cars. However, you’re well-advised to avoid SUVs and crossovers in November. Sure, supply is ample, but so is demand. Dealers are less likely to deal on whatever’s hot at the moment.

By the time December rolls around, car dealers aren’t thinking only about clearing out the previous year’s models; they’re thinking about hitting their annual sales goals, too. The big push is on to close deals. If you’re in the market for an SUV, TrueCar’s data indicates that waiting until December will pay off. Regardless of what vehicle you’re looking for, keep this in mind: While you may get a great deal on the previous model year, by December your choices will likely be very limited.

Bonus: New Year’s Day

Why would you go car shopping after the end of the year? Isn’t it already too late? Haven’t the dealers already reset for the start of the new year? It may surprise you to learn that the car dealer year actually ends on January 2. This gives dealers one final holiday to clear out inventory and make sales quotas. It’s literally their last chance to sell you a vehicle during the current year, so you’re really in the driver’s seat, so to speak.

Limit your car shopping to the months (and holiday) described here, and you’re sure to save some serious dollars!

If you need help financing, First Financial has you covered with low rates, personalized service, same-day approval decisions and electronic closings! Learn more here, and apply online 24/7.*

Article Source: CUInsight.com

*APR = Annual Percentage Rate. Not all applicants will qualify, subject to credit approval. Additional terms & conditions may apply. Actual rate may vary based on credit worthiness and term. A First Financial membership is required to obtain a First Financial auto loan and is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. See credit union for details. A $5 deposit in a base savings account is required for credit union membership prior to opening any other account/loan. Federally insured by NCUA.

 

Could Your New Vehicle Have Been Impacted By Flood Damage?

Can regional floods impact car owners across the country?

In August 2017, Hurricane Harvey unleased a wave of historic destruction on Houston, Texas and surrounding areas. Just weeks later in September, Hurricane Irma tore through the Caribbean islands before zeroing in on the state of Florida, leaving a statewide path of destruction in its wake. All in all, the damage of these two storms is estimated at more than $290 billion, according to Money.com.

After the flood waters receded and the magnitude of the loss became apparent—so did the shady tactics of opportunists. Across the country, a growing number of flood-damaged cars are being listed for sale as pre-owned vehicles in other states, and all too often, signs of that damage can be difficult to spot with a quick visual inspection.

Flood damage should show up on the car title, right?

In conventional situations, flood damage would be listed on an automobile’s state title, and the red flag would be waving. However, as a result of the staggering number of cars impacted by the hurricanes, many state offices are encountering a gridlock-inducing backlog of work. What does this mean to an average consumer? Unfortunately, it means some flood-damaged cars are being auctioned off and shipped all over the country before the title reflects the defects—leaving the new owner holding a “flood title” when the records are finally updated.

Short of becoming an expert in the mechanical and cosmetic indicators of flood damage, how can prospective buyers safeguard themselves? Obtaining a thorough vehicle history report is a solid start that offers a quick and easy way to spot trouble.

An ounce of prevention is worth a pound of cure.

To apply the old proverb to the car-buying process, spending a few dollars on a vehicle history report can save hours of headaches and thousands of dollars in the long run. With the National Insurance Crime Bureau (NCIB) providing free VIN checks and reputable companies like Carfax and AutoCheck offering reliable reports for reasonable prices, buying a used vehicle without gathering all the facts is an unnecessarily risky proposition. And with the recent catastrophes that swept across the South, it’s more important than ever for consumers to have all the facts possible before making a purchase decision.

If you’re looking to buy a used vehicle and need assistance doing your research, contact our Loan Department today at 732.312.1500, Option 4. We can help make sure your new-to-you ride wasn’t involved in any of this year’s hurricanes and also provide you with low rate financing on it!* Get started here.

*APR = Annual Percentage Rate. Not all applicants will qualify, subject to credit approval. Additional terms & conditions may apply. Actual rate may vary based on credit worthiness and term. A First Financial membership is required to obtain a First Financial auto loan and is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. See credit union for details. A $5 deposit in a base savings account is required for credit union membership prior to opening any other account/loan. Federally insured by NCUA.

 

 

5 Reasons Buying Out Your Lease Makes Good Sense

With the end of your auto lease just around the corner, you’ve got some decisions to make. But before you start stressing about your current mileage or scratches on the bumper, you may want to think about buying out your lease. Would it make more sense to keep your car instead of turning it back in like you originally planned? In many cases, yes.

There are numerous benefits to buying out your lease—but first, a word of caution: Traditionally, dealerships have taken a hands-off approach to the buyout process, allowing consumers to deal directly with the corporate finance department or the leasing company. However, optional insurance and warranty products have given dealers an opportunity to increase their profits by facilitating the buyout process and including add-ons. These extras can come with a steep markup, making the final price more expensive than it should be.

Before agreeing to any buyout terms, it’s important to remember a credit union can routinely offer lease buyouts with lower rates and convenient payment terms. It’s worth your time—and potentially a lot of money—to get details on the financing options available.

Still wondering whether a lease buyout is right for you? Here are five points to consider:

  • Ownership has its advantages.
    Let’s be honest—the peace of mind that comes from not worrying about mileage overages and wear-and-tear penalties is a big deal. When you own the car outright, you no longer have to feel that growing sense of dread commonly associated with the end of a lease term.
  • Car shopping is a hassle.
    You’ve already gone through the frustrating highs and lows of car shopping. Why do it again? You probably selected your car after a thorough process of weighing pros and cons. If it was the right car for you then, there’s a good chance it’s still the right car for you now.
  • Better the used car you know (than the used car you don’t).
    This may seem obvious, but you’re already familiar with your car. If you had to start shopping for a different used car, there would be questions about how the previous owner cared for it. If you buy out your lease, you ARE the car’s previous owner. There are no unanswered questions about the car’s maintenance history or other people’s driving habits.
  • No more guessing games.
    At their core, auto leases are all about variables. A car’s market value ebbs and flows based on supply and demand. Lease rates may be higher the next time you come to the end of a term. By opting for lease buyout loan, you can lock in a great interest rate and a convenient payment plan for the life of your loan.
  • You have more leverage than you realize.
    Have you ever thought about what happens when you turn your car back in at the end of your lease? The leasing company is left with a used car, and they’re not in the used car sales business. In many instances, they would rather negotiate a good buyout price with you than go through the trouble of selling the car at auction or to a dealer.

Ready to look into a lease buyout?

You can fill out an online application here, learn more on our website, or call the Loan Department at 732.312.1500, Option 4.

*APR = Annual Percentage Rate. Not all applicants will qualify, subject to credit approval. Additional terms & conditions may apply. Actual rate may vary based on credit worthiness and term. A First Financial membership is required to obtain a First Financial auto loan and is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. See credit union for details. A $5 deposit in a base savings account is required for credit union membership prior to opening any other account/loan. Federally insured by NCUA

Don’t Get Scammed into Paying for Vehicle VIN Etching

Several weeks after purchasing a pre-owned car, the buyer noticed a charge of $398 that he didn’t recognize. It was labeled as Protection Plus Etch in his sales agreement. He made a quick call to the car dealership and confirmed that he’d been charged for glass etching. Wait, what? “Etching” is a security add-on where a unique code or vehicle identification number (VIN), is etched into the vehicle’s windows.

“The add-on will help identify the car if it was ever stolen and could even lead to discounts on auto-insurance,” the dealer assured him. The gentleman was certain he’d not been told about this service at the time of sale. Worse, when he checked with his insurance company they said that they offered no such discount.

To be clear, etching vehicle windows is not an outright scam, but the practice is of questionable value. There’s a good chance that your insurance company does not offer discounts for window etching on your vehicle, or if they do – that it’s not a substantial amount.

Still think there’s some value in this procedure? Don’t pay a few hundred dollars to the dealership for something that you can do with an $18 kit from Amazon.

If you recently purchased a vehicle, go back and check your sales receipt. Did you unknowingly pay for such a service? The dealer will claim that their etching comes with an insurance policy that will cover a certain amount should your car be stolen and not recovered within a certain amount of time (usually 30 days). Ask to see the details of this policy. If the dealer cannot produce the policy details, demand a refund.

Wondering what else you might have paid too much for? First Financial offers a free review of your deal to see if you are eligible to receive a lower interest rate or lower monthly payment. Some members have saved hundreds, even thousands of dollars in interest by taking a few moments to do this.* Fill out the form below to schedule a free in-person or over-the-phone appointment, to see how much you may be able to save!

Fill out this form to see if we can save you money!

Learn more about First Financial Auto Loans, our Lease Buyout Program, or apply online 24/7.

*Not all applicants will qualify, subject to credit approval. First Financial FCU maintains the right to not extend credit, after you respond, if we determine you do not meet our guidelines for creditworthiness. Current loans financed with First Financial FCU are not eligible for review or refinance. A First Financial membership is required to obtain an auto loan and is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. A $5 deposit in a Base Savings Account is required to establish membership. Federally insured by NCUA.