Category Archives: Car Buying, Auto Loans and Financing

Mind the GAP: Understanding the Value of GAP Coverage

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Picture the following scenario: After months of research and planning, you take the plunge and buy a new car. Once the financing is secured and your auto insurance is in place, you’re ready to hit the road. You’re so excited about your sparkling new ride that you’re not even worried about the fact that most new cars depreciate by as much as 10% the moment you drive them off the lot—and up to 20% in the first year.

Now, imagine that after just a few weeks, you’re involved in an accident that badly damages, or worse yet, totals your car. (Don’t worry—unlike your car, you emerge from this imaginary situation without a scratch). Fortunately, you did the responsible thing and secured good auto insurance. Once all the proper claims have been filed, you find out that insurance will only cover your car’s market value—which, due to the depreciation, is several thousand dollars less than the amount you actually owe on your auto loan. If only there were a type of loan protection that would help you make up that difference. Fortunately, there is. It’s called Guaranteed Asset Protection—or GAP, for short.

What is GAP?

GAP coverage is an optional protection plan offered with auto loans or leases, and depending on the plan coverage limits, it effectively waives most of, if not all, the remaining balance on your loan. While your auto insurance plan’s comprehensive and collision policies cover your vehicle’s value in the event that it is totaled or stolen, GAP coverage is designed to ensure you don’t get stuck making payments on a car you no longer own.

How do I know if I need GAP coverage?

While the product makes good financial sense for some, not everybody needs to get a GAP policy. According to the financial experts at NerdWallet, there are a few basic guidelines that will help you decide whether GAP coverage is right for you. You should strongly consider adding a GAP policy to your auto loan if you:

  • Made a small down payment on a new car, or none at all.
  • Agreed to a loan term longer than 48 months.
  • Drive a lot, which reduces a car’s value more quickly.
  • Lease your car.
  • Bought a car that depreciates faster than average.

Where do you get GAP coverage?

While a variety of companies provide GAP coverage for consumers, it often makes the most sense to obtain the protection plan from the same financial institution that will be financing your vehicle purchase in the first place (which is hopefully your local credit union). If you already financed your vehicle through a dealership, keep in mind that many GAP programs are refundable up to a certain number of days. This means that should you decide to refinance your auto loan through a credit union, they may be able to help you get a refund on your original GAP plan and secure a new plan at a lower cost.

Not only are credit union GAP plans traditionally less expensive than those available through finance companies, they can typically only be added to your loan at the time of closing (vehicle age and mileage limits also apply). Securing coverage through the financial institution that services your loan reduces the need to coordinate communication between multiple parties. It also increases the likelihood that you can put a frustrating accident experience behind you sooner rather than later—and that peace of mind is priceless.

If you have questions about Guaranteed Asset Protection or want to know how to add it to your auto loan before you close, contact a financial representative at First Financial. They can help you review your current financing situation and determine whether GAP coverage is right for you.*

*Enrollment in Loan Payment Protection is voluntary and not required to obtain a loan. Loan Payment Protection is a debt cancellation product available through CUNA Mutual Group. Please contact your First Financial loan representative, or refer to your Member Agreement for additional information on benefit maximums, eligibility, and limitations. Certain eligibility requirements, conditions, and exclusions may apply. You may cancel the protection at any time. If you cancel protection within 30 days you will receive a full refund of any fee paid. Loan Payment Protection can only be added on at the time of loan closing and coverage cannot be added to an existing loan.

How to Decide When It’s Time to Buy Another Car

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At a national average of $479 a month, car payments can take a big chunk out of the monthly budget. Even if you avoid car loans, the high cost of a vehicle can delay other savings goals. Either way, it’s rewarding when a vehicle costs nothing more than fuel and routine maintenance. In fact, it’s such a rewarding feeling that you might miss important signs it’s time to start car shopping again.

Being frugal is a great quality when it comes to vehicle purchases – while the average consumer purchases a new one every 3 to 5 years, today’s vehicles are designed to last 10 or more. Still, it’s possible to be too frugal and end up costing yourself more money in the long run. If you have any doubts about whether it’s time to buy a newer vehicle, consider these four signs.

1. Your Vehicle’s Safety is Questionable

Aesthetic qualities and luxury features are one thing, but safety is quite another. If there’s any question whether your vehicle can get you safely from Point A to Point B, it’s time to consider an upgrade. Here are a few examples of what might constitute a safety concern:

  • Your vehicle sometimes has mobility problems. If this happens on the road, it could cause an accident.
  • Your vehicle lacks important safety features. Newer vehicles are equipped with advanced safety features, but we’re talking about the basics — seatbelts, curtain air bags, traction control, etc.
  • Your vehicle has been in an accident or has extensive rust that could compromise its structural integrity. The appearance of rust might not bother you, but the damage it does to internal parts could.

If you have an older vehicle and you aren’t sure if it’s safe, check with a trusted mechanic or vehicle safety inspector.

2. Your Vehicle Needed a Major Repair in the Last Year

Ditto for cars that frequent the auto repair shop. Occasional out-of-pocket repairs are less costly than a car payment, but if repairs exceed that $479-per-month average car payment, you might want to consider a newer vehicle. It’s easy to lose track of expenses that spread out over time, so get out the receipts and do the math.

3. Your Vehicle is Costing You in Other Ways

Maybe you work further away from home now and that gas-guzzler is jacking up your fuel budget and eating into other categories. If your car frequently fails to start in the morning, it might be costing lost hours of work or putting your job in danger. Be sure to consider these and other hidden ways your vehicle is costing you that might be grounds for trading it in.

4. Your Vehicle No Longer Fits Your Lifestyle

We tend to choose the size and style of vehicle that best fits our lifestyle, but preferences and lifestyles can change. Maybe you’ve become a new parent, sent your last child to college, or spend more time in your vehicle than in the past. All these changes can affect which vehicle is best for your needs. Just because you haven’t run your vehicle into the ground, doesn’t mean it’s wrong to trade the car in for something else that’s a better fit for you and your family.

Figuring out when to change vehicles is tricky. Use these four tips, and make the decision that’s ultimately best for you. If you live, work, worship, volunteer, or attend school in Monmouth or Ocean Counties in NJ – First Financial has some of the best auto loan rates and incentives in town!* Let us help you buy your new ride.

*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.

Article Source: Jessica Sommerfield for moneyning.com

8 Things to Know Before Leasing a Car

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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

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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

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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.

 

5 Reasons Buying Out Your Lease Makes Good Sense

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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