General Questions About Financing

What is the difference between a loan and a lease?
When you obtain a loan, your down payment and monthly payments go toward the total purchase price of the vehicle. When the term of the loan is complete and the loan is paid in full, you own the vehicle. With a lease, you make monthly payments for the term of that lease. Once the term of the lease is complete, the vehicle is returned to the lessor.

How do I choose between a loan or a lease?
The correct financing option largely depends on three factors: what you want to drive, how much you plan to drive it, and how long you want to keep it. It might be preferable to lease rather than obtain a loan if:

• You want the better vehicle for your monthly payment.
• You drive less than 15,000 miles per year.
• You prefer to trade in your car every three years or less.
• Owning a car outright is not important to you.

If these considerations do not apply to you, it might be better for you to get a loan if:

• You want your monthly payment to apply to ownership.
• You plan to enjoy your vehicle for a long time.
• You want to customize your vehicle.
• You want the maximum flexibility regarding the number of miles you drive.
• You want control of the length of time the vehicle is in your possession.

Typically, monthly payments on a lease are significantly lower than if you obtain a loan while borrowers enjoy greater flexibility in terms of ownership.

About Leases

What is a lease?
A lease is an agreement between you and a lending institution where you make a monthly payment for use of a vehicle of which the lending institution retains ownership. The lending institution takes responsibility for the purchase of the vehicle, creating an agreement where you retain the right to use it for a specific length of time. Although you are not the actual owner of the vehicle, you are afforded the opportunity to enjoy it for the term of the lease. Frequently, leasing allows you to enjoy a more expensive vehicle for a lower monthly payment than if you were to purchase it. In addition, the hassle of the resale is mitigated, as you simply return the vehicle once the lease expires.

How does a lease work?
As leasing is technically different than buying or financing, different terminology is used to describe the transaction. The most important concepts are adjusted capitalized cost, residual value, and money factor.

• Adjusted capitalized cost is the actual purchase price of the vehicle. This is determined by the vehicle's actual price (capitalized cost) along with any applicable charges and fees (acquisition fees, takes, etc.) minus any cost reductions (down payments, trade-in allowances, and applicable discounts).
• Residual value represents the expected value of your vehicle to the lease owner at the end of the lease. This value is dependent on several factors, like the depreciation rate of the vehicle, the term of the lease, and the number of miles accounted for in the agreement.
• Money factor effectively acts as the interest rate and reflects the cost of money borrowed on your behalf at the beginning of your lease.

How does this differ from owning a vehicle?
The day-to-day experience of driving a leased vehicle is virtually the same as a financed one. The only major differences are restrictions on the degree to which your vehicle can be customized, the amount of total mileage you can travel, and the maintenance schedule.

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 is the advantage of a loan over a lease?
The greatest advantage of financing over leasing is the freedom to do with the vehicle what you wish. With no restrictions on mileage or customization, you are totally free to add premium audio equipment, customized paint, accessorize the powertrain, and fix (or not fix) any mechanical or body problems you encounter.

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?"

* Our Pre-Trade Plan offers an alternative.

Decisions on consumable expenses should be made on actual cost to consume. For an automobile on our Pre-Trade Plan, that cost is:

* Cost to Drive = Selling Price - Resale Value - Repairs

Our dealership packages new automobiles with content that gives you the best value relationship between selling price and future resale value with no repairs. You can then drive a higher priced vehicle for less cost. This is accomplished through "pre-trade." The vehicle's purchase option price at the end of the two year lease is guaranteed. The higher the resale, the less you pay now. With this type of expense management, we let the financial institutions assume the resale risk. Therefore, you make your vehicle decision based on the lowest actual cost to drive rather than on selling price.

What does "Additional Interest Insured" mean?
This is another person or company who may be liable for an accident involving an insured vehicle and who has been named as an Additional Interest Insured under the policy.

Can I get a discount for an Anti-Theft Device?
You can receive anti-theft device discounts if your policy includes comprehensive and collision coverage. Select "recovery device" if the system has a device that is capable of tracking and recovering the vehicle. These systems must automatically contact a response center where the process of vehicle recovery begins to be eligible. This does not include alarms that do not have contact with a center for vehicle tracking.

What is Bodily Injury Liability Coverage?
This coverage pays when an insured person is legally liable for bodily injury or death caused by your vehicle or your operation of most non-owned vehicles. This coverage also pays for legal defense if an insured person is sued. Common exclusions include: No coverage for (1) bodily injury/death when you are using your vehicle to carry persons or property (including magazines, newspapers, food) for compensation or a fee; (2) liability assumed under a contract; (3) bodily injury/death to an employee; (4) bodily injury/death caused by an intentional act; (5) property owned by, rented to, or in the charge of an insured person; (6) bodily injury/death to you or a relative; (7) bodily injury/death or property damage resulting from a relative's use of a vehicle, other than a covered vehicle, owned by a person who resides with you; or (8) bodily injury or property damage resulting from your operation or use of a vehicle owned by you, other than a covered vehicle.

What is Comprehensive Coverage?
This coverage pays for loss or damage to your insured vehicle caused by any event other than collision. This includes damages due to events such as fire, theft, windstorm, flood, and vandalism. This coverage will also pay transportation and loss of use expenses under this coverage if your insured vehicle is stolen.

What is Collision Coverage?
This coverage pays for loss to your covered vehicle when it collides with another object or overturns. It will also pay for a collision loss to any non-owned vehicle, or to a vehicle you have rented other than a vehicle rented for use in connection with your business or employment, while that vehicle is in your custody, or while you are operating it. Common exclusions include: No coverage for damages or loss (1) to a vehicle while being used to carry persons or property for compensation or a fee; (2) resulting from intentional acts, racing, or preparing for a race or stunting activity; (3) custom parts or equipment, including electronic equipment, in excess of the value declared in the application; or (4) to tapes, compact discs, other media or their carrying cases.

What is the Continuously Insured discount?
Discounts are often available to those policy holders who are continuously insured. This means insurance coverage was in effect from an insurer or more than one insurer at all times, without a break or lapse in coverage for any reason.

What is the Declarations Page and what should be listed on it?
This is the report that you received from your insurance company. It should generally include: The types of coverage you have elected. The limit for each type of coverage. The cost for each type of coverage. The specified vehicles covered by the policy. The type(s) of coverage for each vehicle covered under the policy and other information applicable to the policy.

What is a Deductible?
The amount of each loss you agree to pay. Generally, choosing a higher deductible will lower your premium.

What is a Premium?
The amount each month you agree to pay for your insurance policy. This amount is dictated primarily by the types of coverage selected, the limit of coverage, and the deductible.

What is the Driver Improvement Course discount?
The driver improvement course is a voluntary refresher course available for drivers age fifty-five (55) and older to enhance their driving skills. Participants are eligible for a discount if they can provide a certificate to your insurance company as proof of completion. Usually, the course must have been completed within three (3) years of the date the policy is to begin to be valid for discount.

What is Driver Status?
This provides information concerning whether the driver has been rated or listed on the policy.

What is the Garaging Location?
This is the ZIP code where your vehicle is parked when not in use which usually corresponds to your primary residence.

What is a Coverage Limit?
The most your insurance company will pay for a specific insurance coverage. You may choose a limit that meets your needs. Most states have laws that specify the minimum limits you must purchase.

What is the Named Insured?
The first person in whose name the insurance policy is issued.

What is an Occasional Driver?
The person(s) who is not the primary or principal driver of the vehicle.

What is the Policy Expiration Date?
This is date when your current insurance policy expires. This date can be found on your current policy, Declaration (or "DEC") page, insurance identification card, or recent cancellation notice. This date is not to be confused with the date of your next payment or when your renewal payment is due.

What is the Policy Term?
This is the length of time that the policy is in force. In most states, insurance companies offer annual and semi-annual policies.

What is the Primary Residence?
This is location where you will reside for the majority of your policy term. If you are a homeowner who does not reside in the home you own, you will choose the "rent" or "other" option.

What is the Second Named Insured?
The named insured or listed agent on a policy may request to designate any other person listed on the policy as a "second named insured". The second named insured has the same coverage under the policy as the named insured.

Should I provide my Social Security Number to an insurance company?
Most insurance companies request detailed information about you to provide you with the most accurate rate. Many order consumer reports to determine the correct rate for you. They need several pieces of information to match the report to the customer appropriately. If they don't collect this information, the chance of error increases and we might not calculate your rate correctly.

What is an SR-22?
A document required by the court for persons convicted of certain traffic violations that demonstrates proof of financial responsibility.

What is Uninsured Motorist Coverage?
This coverage protects you, your resident relatives, and occupants of a covered vehicle if any of these insured sustain bodily injury, including any resulting death, in an accident in which the owner or operator of a motor vehicle who is legally liable does not have insurance. Common exclusions include: No coverage for bodily injury/death sustained by any person while using or occupying (1) a covered vehicle while being used to carry persons or property for compensation or a fee; (2) a covered vehicle without the permission of you or a relative; or (3) a non-owned vehicle without the permission of the owner.

What is Underinsured Motorist Coverage?
This coverage protects you, your resident relatives, and occupants of a covered vehicle if any of these insured sustain bodily injury, including any resulting death, in an accident in which the owner or operator of a motor vehicle who is legally liable does not have enough insurance. Common exclusions include: No coverage for bodily injury/death sustained by any person while using or occupying (1) a covered vehicle while being used to carry persons or property for compensation or a fee; (2) a covered vehicle without the permission of you or a relative; or (3) a non-owned vehicle without the permission of the owner.

What is Uninsured Motorist Property Damage Coverage?
This is available in some states as an alternative to Collision Coverage. This coverage pays you for damage to the covered vehicle that has been sustained in an accident in which the owner or operator of a motor vehicle who is legally liable does not have insurance. Common exclusions include: No coverage for property damage sustained by a covered vehicle while (1) being used to carry persons or property for compensation or a fee; or (2) a covered vehicle is in use without the permission of you or a relative.

What is Underinsured Motorist Property Damage Coverage?
Protects your resident relatives, occupants and yourself of a covered vehicle if any of us sustain bodily injury, including any resulting death, in an accident in which the owner or operator of a motor vehicle who is legally liable does not have enough insurance. Common exclusions include: No coverage for bodily injury/death sustained by any person while using or occupying (1) a covered vehicle while being used to carry persons or property for compensation or a fee; (2) a covered vehicle without the permission of you or a relative; or (3) a non-owned vehicle without the permission of the owner.

What is a Vehicle Identification Number (VIN)?
This is the vehicle identification number (VIN) of your vehicle. This number is usually found on the dashboard of your vehicle on the driver's side, and is usually listed on the vehicle registration and title. The VIN number is a combination of letters and numbers 17 characters in length that can be used to identify the make, model, and year of your car.

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