FAQ

This is probably the most frequent question when we are going to buy a car. The personal point of view is very important in this aspect. But in reality it is very similar: You acquire a debt for the total amount of the car only with different conditions and terms, here are some characteristics of both and you can draw your own conclusions:

Lease:

– Based on the calculation of depreciation (duration of the lease and miles per year) together with residual value of the car (which will be worth the car at the end of the lease). Monthly payments are structured for the amount of depreciation affected by a “money factor” or “rent rate” that translates into bank interest (APR) in the leases and is usually much lower than the interest acquired in conventional financing. Usually the best programs are in 36 months and 10 or 12 thousand miles a year. In this period the car will be covered with bumper to bumper guarantee and will have GAP included. In case you want to deliver the car at the end of the lease will be an inspection based mainly on the miles and cosmetic conditions of it. If you have passed the agreed miles (the car depreciated more than agreed) you will have an extra charge that ranges between 0.15c and 0.25c per mile.

Main advantages of the lease:

– the monthly payment in most cases is less than in a financing.
– The “money factor” (APR) in lease in most cases is less than in a financing.
– The car will be under warranty within the entire lease period at no additional cost.
– In case of having an accident, the car automatically loses its value in the market, when you deliver the lease you do not have any penalty for this, unlike in a financing because your debt is still intact and the car is worth less.
– You can change cars faster.
– You will not have to worry about repairs.
– Usually requires less initial money to pay the desired monthly payment.
– In the lease you pay the taxes month by month, unlike the financing that the total taxes go automatically added to your debt.

Financing:

– Based on the total price of the vehicle (OTD), an agreement is reached with the bank regarding terms (time) and interest (APR) based on your beacon credit score. You will have factory warranty and you can buy extended warranties. Unlike the lease you will not have the Gap included. Usually the conventional months car financing is in 60 months and 72 months. The interest varies in new cars from 0% (rare) to 16.78% (Florida state max) and in cars, 2% to more than 20%.

Main advantages of financing:

– You usually pay less for your auto insurance.
– You do not have miles limits, but eye does not mean that you are not depreciating your own debt.
– You can make alterations to the car.
– After 5 years you will usually have equity in your car depending on the type of business you did (price, downpayment, bank interest, etc.) of the use (miles), accident history and cosmetic conditions of the car.

Of course ! When you are the first buyer you are asked for a little more requirements: that you have a stable job, proof of income and residence, a strict amount is downpayment among others. But definitely to save the aggressive banking interests to the first buyers is the best option.

It is when the market value of your car is less than what is owed by it. Normally the upside down is greater when you do not give a high down payment, you have a high interest or you did a bad business. Other things influence the brand of the car (some maintain more value than others and the cosmetic state and miles it has).

Equity is when the market value of your car is greater than what is owed by it. It is rare but it usually happens more when you give a high down payment, you have a low interest and do a good business. Other things influence the brand of the car (some maintain more value than others and the cosmetic state and miles it has).

It is totally a myth that you can not take a car out of the dealer without giving a dollar. Of course it can! There are several factors that influence, such as the credit of the person, if the person is delivering a car that is very upsidown or if the car that is buying is above the market value.

There are two important points, all the cars have a sale value (retail) and an auction value (trade-in). There are sites that help to have an idea like Kelly blue book among others, but everything will depend on the conditions of the car, miles, accident history, number of owners. In the delaers, the value of the auction will always be offered for the car. The most important thing is to try to get a fair value for your car and in RAA we know how to get oriented to get it.