This is one of the oldest questions when it comes to buying a SUV. Some people believe that AWD is the best way to go and others lean more towards FWD. In most areas, your normal FWD feature will get you most everywhere you need to go if you live in town and have a pretty flat short distance to go, or minor hills. If you live out in the country or travel up large hills or mountains like we have in our area, then the AWD feature might make a difference.
One of the most asked questions people have is do you get better fuel economy with a FWD over the AWD? Nowadays, the auto maker’s are making AWD and FWD systems to where they are very close in their over all mpg. Take for instance the 2010 Honda CR-V FWD, it gets a city rating of 21, 28 highway, with a combined mpg of 24. The 2010 CR-V 4WD, gets a city rating of 21, a highway rating of 28, and a combined rating of 23. So one would wonder, “Well if you’re getting the same fuel mileage either way, why not go for the 4WD feature just in case”.
Now, when making this decision, it is always best to look at what you are going to spend over the life time of the car. If you sit down and look at both cars and their maintenance schedule and what has to be done after the warranty expires, the AWD ends up costing you $500 more and that’s quite a difference. Some people might say that’s a small amount compared to the peace of mind you will have. This may be true but if you live in and work in downtown Huntington or downtown Ashland then you probably will never have to worry about getting stuck going up a hill or mountain. The weight that these vehicles’ possess over the two front wheels often gives you more then enough traction in the snow that we receive during the winter. Now, if you live on a large hill or maybe you live in Wayne County and have some pretty dangerous country roads that may not get plowed or salted, then you may need the added protection that the AWD feature allows you.
No matter if you have 2WD, 4WD, AWD, or FWD, nothing moves on ice. Keep this in the back of your mind when shopping for a new car or SUV, however in this day and age when we wake up and the roads have already been plowed and salted or you just work two miles down the road on the flat city streets, why not keep that extra $500 in your pocket for a rainy day, but if you’re an avid hunter or you live on a large hill or commute daily up hills and country roads, then the AWD system is best for you. You know your driving conditions the best, so helpfully this will help you make an educated decision when you are next in the market for a new vehicle.
Until next time happy holidays and a happy new year.
Friday, December 3, 2010
Thursday, August 12, 2010
History of the Monroney label or the sticker
Why are automobiles one of the few items sold in the United States that require a label telling you what the Manufacturers Suggest Retail Price is?
Most other goods have actual prices that are suggested by the manufacturer, but retailers are not required to post them.
I will try to give you a little history of what lead to dealers being required to have a sticker displayed.
During World War II, car companies were required to produce only things that would aid the war. Production of the personal automobile was completely halted in 1942.
New car production was restarted in 1946 shortly after the end of the war. As one might expect, demand was extremely high.
There were two primary reasons for this. One was that there had been no production for over 5 years, and secondly, returning veterans had some money that they had not been able to spend while overseas fighting the war, and they all seem to want a new car.
The number one law of economics has always been supply and demand.
There was definitely more demand than there was supply. Opportunistic car dealers who had struggled to make ends meet during the war saw an opportunity to make a lot of money. They had customers who would pay whatever they asked them to pay.
There was no consistency in pricing from one area to the next. Dealers would put people on waiting list for a car. Another customer would come in and offer more money, and they would take it. Customers would buy a car and turn around and sell it for substantially more than they paid for. Price gouging was going in all areas of the car business. At the same time manufacturers were not treating their dealers or prospective dealers fairly; they were taking bribes for additional allocations of cars and money to secure a franchise.
So guess what happens. The government decided they needed to be involved and played “Big Brother”.
In 1955 the Senate’s Interstate and Foreign Commerce Committee formed the automobile marketing practices subcommittee in response to dealer complaints of abusive treatment by automakers, particularly in the awarding of franchises.
Congress passed Dealers’ Day in Court in 1956.
In the course of the investigation, Congress began to investigate “deceptive” dealer practices. Hearings were held in 1958, and as a result, legislation was introduced to fight this abuse. Senator Almer Stillwell Monroney said as he introduced the bill, “The dealer who is honest about the so-called ‘list price’ cannot compete with the one who ‘packs’ several hundred dollars extra into it so he can pretend to give you more on your trade-in.”
The sticker then came to be called the Monroney label after him.
Now you know the rest of the story.
I have given you a history lesson because I believe history often times repeats itself.
While all dealerships are required to have an official sticker on it, some have started to have what is called an addendum label.
Basically it is car dealers adding a window sticker designed to look exactly like the federally mandated Monroney sticker.
Here dealers add accessories that they have installed and additional dealer markups over the manufacturer's suggested retail price. A lot of the add-ons are nothing but a way to increase the perceived sticker price of the vehicle. They are called by several different names: Adjusted Market Value, Additional dealer market up, and about anything you can imagine but what it actually is. Trying to deceive a customer into thinking the vehicle is more than the actual MSRP. Another way this is done is to add something that has very little value and over price it. A good example is adding nitrogen to the tires. Most manufactures do not recommend doing this as there is no real value to it. Dealers will charge as much as $1500 for this. If a customer truly wants to have nitrogen added to their tires, there are places that we can get it done for $30.
Does this sound like the same practices of 1958? Trying to get someone to believe that the product they are selling actually has an MSRP higher than what the factory actually suggests.
Honda will not allow anyone to advertise a price higher than the MSRP even if there is value added options such as spoilers, radios, and things of that nature. Honda says that is deceptive.
They can’t or won’t monitor the sales lots of dealers to see if this is going on.
If you go to a dealer and see an “addendum” sticker on the vehicle, examine it carefully.
Why do they do it? They can make it appear that they are giving your more of a discount or showing you more for your trade or yes even make more money.
We believe in offering a great product at a fair price with all proper disclosures and no deceptive practices.
Stop in and check us out.
Until next time have a Happy Honda day.
Larry
Most other goods have actual prices that are suggested by the manufacturer, but retailers are not required to post them.
I will try to give you a little history of what lead to dealers being required to have a sticker displayed.
During World War II, car companies were required to produce only things that would aid the war. Production of the personal automobile was completely halted in 1942.
New car production was restarted in 1946 shortly after the end of the war. As one might expect, demand was extremely high.
There were two primary reasons for this. One was that there had been no production for over 5 years, and secondly, returning veterans had some money that they had not been able to spend while overseas fighting the war, and they all seem to want a new car.
The number one law of economics has always been supply and demand.
There was definitely more demand than there was supply. Opportunistic car dealers who had struggled to make ends meet during the war saw an opportunity to make a lot of money. They had customers who would pay whatever they asked them to pay.
There was no consistency in pricing from one area to the next. Dealers would put people on waiting list for a car. Another customer would come in and offer more money, and they would take it. Customers would buy a car and turn around and sell it for substantially more than they paid for. Price gouging was going in all areas of the car business. At the same time manufacturers were not treating their dealers or prospective dealers fairly; they were taking bribes for additional allocations of cars and money to secure a franchise.
So guess what happens. The government decided they needed to be involved and played “Big Brother”.
In 1955 the Senate’s Interstate and Foreign Commerce Committee formed the automobile marketing practices subcommittee in response to dealer complaints of abusive treatment by automakers, particularly in the awarding of franchises.
Congress passed Dealers’ Day in Court in 1956.
In the course of the investigation, Congress began to investigate “deceptive” dealer practices. Hearings were held in 1958, and as a result, legislation was introduced to fight this abuse. Senator Almer Stillwell Monroney said as he introduced the bill, “The dealer who is honest about the so-called ‘list price’ cannot compete with the one who ‘packs’ several hundred dollars extra into it so he can pretend to give you more on your trade-in.”
The sticker then came to be called the Monroney label after him.
Now you know the rest of the story.
I have given you a history lesson because I believe history often times repeats itself.
While all dealerships are required to have an official sticker on it, some have started to have what is called an addendum label.
Basically it is car dealers adding a window sticker designed to look exactly like the federally mandated Monroney sticker.
Here dealers add accessories that they have installed and additional dealer markups over the manufacturer's suggested retail price. A lot of the add-ons are nothing but a way to increase the perceived sticker price of the vehicle. They are called by several different names: Adjusted Market Value, Additional dealer market up, and about anything you can imagine but what it actually is. Trying to deceive a customer into thinking the vehicle is more than the actual MSRP. Another way this is done is to add something that has very little value and over price it. A good example is adding nitrogen to the tires. Most manufactures do not recommend doing this as there is no real value to it. Dealers will charge as much as $1500 for this. If a customer truly wants to have nitrogen added to their tires, there are places that we can get it done for $30.
Does this sound like the same practices of 1958? Trying to get someone to believe that the product they are selling actually has an MSRP higher than what the factory actually suggests.
Honda will not allow anyone to advertise a price higher than the MSRP even if there is value added options such as spoilers, radios, and things of that nature. Honda says that is deceptive.
They can’t or won’t monitor the sales lots of dealers to see if this is going on.
If you go to a dealer and see an “addendum” sticker on the vehicle, examine it carefully.
Why do they do it? They can make it appear that they are giving your more of a discount or showing you more for your trade or yes even make more money.
We believe in offering a great product at a fair price with all proper disclosures and no deceptive practices.
Stop in and check us out.
Until next time have a Happy Honda day.
Larry
Wednesday, August 4, 2010
Are low interest rates really a good deal??
Are low interest rates really a good deal?
How much do I really save?
I am sure everyone has asked these questions.
Back in the 1980’s, interest rates reached an all time high for automobile financing.
Banks were capped at 12% APR for part of that time, and it became next to impossible to get loans approved for customers as the prime rate, or cost of money, was over 20%.
General Motors pioneered the idea of what we now call sub vented rates. The manufacturer actually pays to the lender the difference in the special rate and the rate they would normally charge. In other words, they are taking the cash incentive and giving it to the lender to make up the difference in money costs.
In the mid 80’s, General Motors offered 3.9% Apr in lieu of close out incentives that they had given in the past. They believed that customer weren’t buying because the interest rates were too high. It was an instant success. General Motors had a record close out sale for that year. Manufacturers have adopted that philosophy to help sell more vehicles industry wide.
Presently, Honda is offering 0.9 % APR financing for up to 60 months with approved credit on its most popular models.
The Civic, the Accord, the Crosstour, the Ridgeline, the Fit, and the Insight all have 0.9% APR with approved credit. The CR-V, the 2011 Pilot, Odyssey, and Element all have 1.9% APR for up to 36 months and 2.9% APR for up to 60 months available with approved credit. They are offered in lieu of any cash incentives that may be available.
In other words, you either get the special rate or additional discounts on the car.
Let’s look at few situations and see what that would mean to you, the consumer. In other words, what’s in it for me, or WIIFM.
You have decided on a new vehicle and have got the dealer to agree to accept an offer of $25,000. Honda is offering 0.9 % for up to 60 months or $1200 cash to the dealer that he will pass on to you. If you choose the special rate, the payment would be $426. That means for the 60 months of the loan you would pay back $25,560 or just $560 interest.
One of the things to consider is that a dealership arranges a lot of financing on a monthly basis. As a result, we are generally able to get a bank to agree to a lower rate than an individual can get them to do. The volume of business coming in from a dealer means continued growth and new customers for the bank.
Let’s assume that we were able to find a bank that would offer 3.9% for 60 months. After deducting the cash incentive of $1200, your price would be $23,800. Your payments would be $437 for the 60 month period for a total of $26,220. Your interest would be $2420 for the 60 months. Therefore, you would be paying $1200 less for the car, but $660 more in total payments over the period of the loan. Obviously, the higher the price of the vehicle, the more you would save over all.
Let’s look at a less expensive car and see what the numbers come out to on it.
You are buying a car for $15,000. You have the choice of either $1000 in additional discount or 0.9 for 60 months. Financing $15,000 at 0.9% APR your payments would be around $256; that means you would be paying back $15,360 over the period of the loan and paying a total of $360 in interest charges.
Let’s do the same thing but this time take the $1000 cash incentive. That means your price would be $14,000. One of our banks is offering 3.9% APR for 60 months. Your payment would be $257 or $15,420 over the period of the loan. So the 0.9% Apr is still the better deal money wise on that amount.
The one variable that should be considered is how long you will keep the vehicle. In today’s market, people want to trade for a new vehicle after 3 yrs. If you trade then, your payoff will be higher if you took the financing rather than the cash. You would have been better served long term to have taken the dealer cash up front.
The dealership finance manager will always be willing to go over all of your options with you to insure that you get the best option possible for your circumstances.
If you have any questions, just email us at larrydavis@mosesautonet.com or simply comment on our blog.
Until next time, have a happy Honda day.
Larry
How much do I really save?
I am sure everyone has asked these questions.
Back in the 1980’s, interest rates reached an all time high for automobile financing.
Banks were capped at 12% APR for part of that time, and it became next to impossible to get loans approved for customers as the prime rate, or cost of money, was over 20%.
General Motors pioneered the idea of what we now call sub vented rates. The manufacturer actually pays to the lender the difference in the special rate and the rate they would normally charge. In other words, they are taking the cash incentive and giving it to the lender to make up the difference in money costs.
In the mid 80’s, General Motors offered 3.9% Apr in lieu of close out incentives that they had given in the past. They believed that customer weren’t buying because the interest rates were too high. It was an instant success. General Motors had a record close out sale for that year. Manufacturers have adopted that philosophy to help sell more vehicles industry wide.
Presently, Honda is offering 0.9 % APR financing for up to 60 months with approved credit on its most popular models.
The Civic, the Accord, the Crosstour, the Ridgeline, the Fit, and the Insight all have 0.9% APR with approved credit. The CR-V, the 2011 Pilot, Odyssey, and Element all have 1.9% APR for up to 36 months and 2.9% APR for up to 60 months available with approved credit. They are offered in lieu of any cash incentives that may be available.
In other words, you either get the special rate or additional discounts on the car.
Let’s look at few situations and see what that would mean to you, the consumer. In other words, what’s in it for me, or WIIFM.
You have decided on a new vehicle and have got the dealer to agree to accept an offer of $25,000. Honda is offering 0.9 % for up to 60 months or $1200 cash to the dealer that he will pass on to you. If you choose the special rate, the payment would be $426. That means for the 60 months of the loan you would pay back $25,560 or just $560 interest.
One of the things to consider is that a dealership arranges a lot of financing on a monthly basis. As a result, we are generally able to get a bank to agree to a lower rate than an individual can get them to do. The volume of business coming in from a dealer means continued growth and new customers for the bank.
Let’s assume that we were able to find a bank that would offer 3.9% for 60 months. After deducting the cash incentive of $1200, your price would be $23,800. Your payments would be $437 for the 60 month period for a total of $26,220. Your interest would be $2420 for the 60 months. Therefore, you would be paying $1200 less for the car, but $660 more in total payments over the period of the loan. Obviously, the higher the price of the vehicle, the more you would save over all.
Let’s look at a less expensive car and see what the numbers come out to on it.
You are buying a car for $15,000. You have the choice of either $1000 in additional discount or 0.9 for 60 months. Financing $15,000 at 0.9% APR your payments would be around $256; that means you would be paying back $15,360 over the period of the loan and paying a total of $360 in interest charges.
Let’s do the same thing but this time take the $1000 cash incentive. That means your price would be $14,000. One of our banks is offering 3.9% APR for 60 months. Your payment would be $257 or $15,420 over the period of the loan. So the 0.9% Apr is still the better deal money wise on that amount.
The one variable that should be considered is how long you will keep the vehicle. In today’s market, people want to trade for a new vehicle after 3 yrs. If you trade then, your payoff will be higher if you took the financing rather than the cash. You would have been better served long term to have taken the dealer cash up front.
The dealership finance manager will always be willing to go over all of your options with you to insure that you get the best option possible for your circumstances.
If you have any questions, just email us at larrydavis@mosesautonet.com or simply comment on our blog.
Until next time, have a happy Honda day.
Larry
Thursday, July 22, 2010
A B C's of Leasing and Financing
The A B C’s of leasing and financing.
I will give you some of the most common terminology used for both leasing and buying along with a definition of that term
I have found that knowledge of generally will relieve anxiety caused by the unknown. Hopefully, this will explain the mysteries of leasing and financing.
• Acquisition fee
A charge included in most lease transactions that is either paid up front or is included in the gross capitalized cost. It usually includes gap insurance.
• Additional insured
A party that is covered by another party's insurance policy. Since the title is in the leasing company’s name, they need to be named on the insurance policy.
• Adjusted capitalized cost
The amount capitalized at the beginning of the lease, equal to the gross capitalized cost minus the capitalized cost reduction.
• Amount due at lease signing or delivery
The total of any capitalized cost reduction, monthly payments paid at signing, security deposit, title and registration fees, and other amounts due before you take delivery of the vehicle.
• APR (annual percentage rate)
The annualized cost of credit expressed as a percentage in a finance agreement. In a lease, there is no annual percentage rate.
• Base monthly payment
The portion of the monthly payment that covers depreciation, any amortized amounts, and rent charges. It is calculated by adding the amount of depreciation, and rent charges and dividing the total by the number of months in the lease. In most states, sales/use taxes are added to this base monthly payment to determine the total monthly payment. In our area, Ohio adds the taxes to the base monthly payment.
• Capitalized cost
Shortened term for gross capitalized cost or adjusted capitalized cost, both required disclosures under federal law. Some states require that the term "capitalized cost" be used in state lease disclosures.
• Capitalized cost reduction (cap cost reduction)
The sum of any down payment, net trade-in allowance, and rebate used to reduce the gross capitalized cost. The cap cost reduction is subtracted from the gross cap cost to get the adjusted cap cost.
• Closed-end lease ("walk-away" lease)
A lease in which you are not responsible for the difference if the actual value of the vehicle at the scheduled end of the lease is less than the residual value, but you may be responsible for excess wear and excess mileage charges.
• Depreciation
The amount of the decrease of the vehicle's projected value through normal use during the lease term.
• Disposition fee or disposal fee
A fee charged by a leasing company if the vehicle is not purchased. Honda does not charge this fee.
• Early termination
Ending of the lease before the scheduled termination date for any reason. The reason may be voluntary or involuntary (for example, the vehicle is returned early, stolen, or totaled, or you default on the lease). In most cases, there will be a charge.
• Equity
In an installment sale or loan, the positive difference between the trade-in or market value of your vehicle and the loan payoff amount. When the loan is paid off, the equity is the market value of the vehicle.
• Excess mileage charge
A charge by the leasing company for miles driven in excess of the maximum specified in the lease agreement.
• Excessive wear-and-tear charge
Amount charged by a leasing company to cover wear and tear on a leased vehicle beyond what is considered normal. Honda will forgive up to $1500 in excess wear and tear.
• Fees and taxes (official fees and taxes)
The total amount you will pay for taxes, licenses, registration, title, and official (governmental) fees over the term of your lease. Because fees and taxes may change during the term of your lease, they may be stated as estimates.
• Fixed price purchase option
Your right to purchase the vehicle at scheduled termination for a fixed price specified in your lease agreement.
• Gap coverage (guaranteed auto protection, or GAP)
A plan that provides you financial protection in case your leased vehicle is stolen or totaled in an accident. It will generally pay the difference in the amount that an insurance company pays and the amount owed in excess of that figure. Basically, your obligation will be satisfied in the event of total loss.
• Gross capitalized cost (gross cap cost)
The agreed-upon value of the vehicle, which generally may be negotiated, plus any items you agree to pay for over the lease term such as taxes, fees, service contracts, etc.
• Lease
A contract between you the lease company for the use of a vehicle or other property, subject to stated terms and limitations, for a specified period and at a specified payment.
• Lease term
The period of time for which a lease agreement is written.
• Lessee
The party to whom the vehicle is leased. In a consumer lease, the lessee is you, the consumer. The lessee is required to make payments and to meet other obligations specified in the lease agreement.
• Mileage allowance or mileage limitation
The fixed mileage limit for the lease term. If you exceed this limit, you may have to pay an excess mileage charge.
• Monthly sales/use tax
The state and local taxes that you must pay monthly when you lease a vehicle. These payments, if any, are added to your base monthly payment and paid as part of your total monthly payment.
• Personal property tax
A tax on personal property. Generally the responsibility of the person leasing the car. Either included in the monthly payment or billed by the leasing company.
• Purchase option
Your right to buy the vehicle you have leased, at the end of the lease term, according to terms specified in the lease agreement.
• Rent or rent charge
The portion of your base monthly payment that is not depreciation or any amortized amounts. This charge is similar to interest on a loan
• Residual value
The end-of-term value of the vehicle established at the beginning of the lease and used in calculating your base monthly payment.
• Sales/use taxes
Sales/use taxes, which vary from state to state, are assessed on both leased and purchased vehicles. There are often differences in what amounts are taxed and when the taxes are assessed. In a lease, sales/use taxes may be assessed on (1) the base monthly payment; (2) any capitalized cost reduction; and (3) in a few states, the adjusted capitalized cost. In most states, the sales/use tax on the base monthly payment is paid monthly; in some states, however, the tax is due at lease inception. Sales/use taxes on the capitalized cost reduction and the adjusted capitalized cost are usually due at lease inception. If you exercise any purchase option, separate taxes may apply.
• Security deposit
An amount you may be required to pay, usually at the beginning of the lease that may be used by the leasing in the event of default or at the end of the lease to offset any amounts you owe under the lease agreement. Any remaining amount may be refunded to you.
• Single-payment lease
A lease that requires a single payment made in advance rather than periodic payments made over the term of the lease. This lump-sum payment should be less than the total amount you would pay were you to make periodic payments over the term of the lease.
• Title
The legal document that identifies the owner of the vehicle. The leasing company owns the vehicle and keeps the title. In a purchase, the title is in your name and held by the lender until it is paid for.
• Total monthly payment
The base monthly payment plus monthly sales or use taxes and any other monthly charges.
• Total of payments
The sum total of the monthly payments over the period of the lease or contract.
• Trade-in
The net value after your pay off is subtracted of your vehicle that is credited toward the purchase or lease of another vehicle.
This is in no way a complete list. If you have a question on anything that I don’t have listed, you can email me at larrydavis@mosesautonet.com and I will get you an anwer.
Thanks for reading and until next time have a Happy Honda day.
Larry
I will give you some of the most common terminology used for both leasing and buying along with a definition of that term
I have found that knowledge of generally will relieve anxiety caused by the unknown. Hopefully, this will explain the mysteries of leasing and financing.
• Acquisition fee
A charge included in most lease transactions that is either paid up front or is included in the gross capitalized cost. It usually includes gap insurance.
• Additional insured
A party that is covered by another party's insurance policy. Since the title is in the leasing company’s name, they need to be named on the insurance policy.
• Adjusted capitalized cost
The amount capitalized at the beginning of the lease, equal to the gross capitalized cost minus the capitalized cost reduction.
• Amount due at lease signing or delivery
The total of any capitalized cost reduction, monthly payments paid at signing, security deposit, title and registration fees, and other amounts due before you take delivery of the vehicle.
• APR (annual percentage rate)
The annualized cost of credit expressed as a percentage in a finance agreement. In a lease, there is no annual percentage rate.
• Base monthly payment
The portion of the monthly payment that covers depreciation, any amortized amounts, and rent charges. It is calculated by adding the amount of depreciation, and rent charges and dividing the total by the number of months in the lease. In most states, sales/use taxes are added to this base monthly payment to determine the total monthly payment. In our area, Ohio adds the taxes to the base monthly payment.
• Capitalized cost
Shortened term for gross capitalized cost or adjusted capitalized cost, both required disclosures under federal law. Some states require that the term "capitalized cost" be used in state lease disclosures.
• Capitalized cost reduction (cap cost reduction)
The sum of any down payment, net trade-in allowance, and rebate used to reduce the gross capitalized cost. The cap cost reduction is subtracted from the gross cap cost to get the adjusted cap cost.
• Closed-end lease ("walk-away" lease)
A lease in which you are not responsible for the difference if the actual value of the vehicle at the scheduled end of the lease is less than the residual value, but you may be responsible for excess wear and excess mileage charges.
• Depreciation
The amount of the decrease of the vehicle's projected value through normal use during the lease term.
• Disposition fee or disposal fee
A fee charged by a leasing company if the vehicle is not purchased. Honda does not charge this fee.
• Early termination
Ending of the lease before the scheduled termination date for any reason. The reason may be voluntary or involuntary (for example, the vehicle is returned early, stolen, or totaled, or you default on the lease). In most cases, there will be a charge.
• Equity
In an installment sale or loan, the positive difference between the trade-in or market value of your vehicle and the loan payoff amount. When the loan is paid off, the equity is the market value of the vehicle.
• Excess mileage charge
A charge by the leasing company for miles driven in excess of the maximum specified in the lease agreement.
• Excessive wear-and-tear charge
Amount charged by a leasing company to cover wear and tear on a leased vehicle beyond what is considered normal. Honda will forgive up to $1500 in excess wear and tear.
• Fees and taxes (official fees and taxes)
The total amount you will pay for taxes, licenses, registration, title, and official (governmental) fees over the term of your lease. Because fees and taxes may change during the term of your lease, they may be stated as estimates.
• Fixed price purchase option
Your right to purchase the vehicle at scheduled termination for a fixed price specified in your lease agreement.
• Gap coverage (guaranteed auto protection, or GAP)
A plan that provides you financial protection in case your leased vehicle is stolen or totaled in an accident. It will generally pay the difference in the amount that an insurance company pays and the amount owed in excess of that figure. Basically, your obligation will be satisfied in the event of total loss.
• Gross capitalized cost (gross cap cost)
The agreed-upon value of the vehicle, which generally may be negotiated, plus any items you agree to pay for over the lease term such as taxes, fees, service contracts, etc.
• Lease
A contract between you the lease company for the use of a vehicle or other property, subject to stated terms and limitations, for a specified period and at a specified payment.
• Lease term
The period of time for which a lease agreement is written.
• Lessee
The party to whom the vehicle is leased. In a consumer lease, the lessee is you, the consumer. The lessee is required to make payments and to meet other obligations specified in the lease agreement.
• Mileage allowance or mileage limitation
The fixed mileage limit for the lease term. If you exceed this limit, you may have to pay an excess mileage charge.
• Monthly sales/use tax
The state and local taxes that you must pay monthly when you lease a vehicle. These payments, if any, are added to your base monthly payment and paid as part of your total monthly payment.
• Personal property tax
A tax on personal property. Generally the responsibility of the person leasing the car. Either included in the monthly payment or billed by the leasing company.
• Purchase option
Your right to buy the vehicle you have leased, at the end of the lease term, according to terms specified in the lease agreement.
• Rent or rent charge
The portion of your base monthly payment that is not depreciation or any amortized amounts. This charge is similar to interest on a loan
• Residual value
The end-of-term value of the vehicle established at the beginning of the lease and used in calculating your base monthly payment.
• Sales/use taxes
Sales/use taxes, which vary from state to state, are assessed on both leased and purchased vehicles. There are often differences in what amounts are taxed and when the taxes are assessed. In a lease, sales/use taxes may be assessed on (1) the base monthly payment; (2) any capitalized cost reduction; and (3) in a few states, the adjusted capitalized cost. In most states, the sales/use tax on the base monthly payment is paid monthly; in some states, however, the tax is due at lease inception. Sales/use taxes on the capitalized cost reduction and the adjusted capitalized cost are usually due at lease inception. If you exercise any purchase option, separate taxes may apply.
• Security deposit
An amount you may be required to pay, usually at the beginning of the lease that may be used by the leasing in the event of default or at the end of the lease to offset any amounts you owe under the lease agreement. Any remaining amount may be refunded to you.
• Single-payment lease
A lease that requires a single payment made in advance rather than periodic payments made over the term of the lease. This lump-sum payment should be less than the total amount you would pay were you to make periodic payments over the term of the lease.
• Title
The legal document that identifies the owner of the vehicle. The leasing company owns the vehicle and keeps the title. In a purchase, the title is in your name and held by the lender until it is paid for.
• Total monthly payment
The base monthly payment plus monthly sales or use taxes and any other monthly charges.
• Total of payments
The sum total of the monthly payments over the period of the lease or contract.
• Trade-in
The net value after your pay off is subtracted of your vehicle that is credited toward the purchase or lease of another vehicle.
This is in no way a complete list. If you have a question on anything that I don’t have listed, you can email me at larrydavis@mosesautonet.com and I will get you an anwer.
Thanks for reading and until next time have a Happy Honda day.
Larry
Wednesday, July 14, 2010
Lease or Finance
In my first article on leasing, I explained some common misconceptions about leasing. Now that you understand those let’s see which option, financing or leasing, best suits your circumstance.
Choosing between leasing and financing is as important as choosing the right model. Below are some benefits of both leasing and financing. The following should help you decide how to purchase a new Honda:
LEASING
In a lease, you do not purchase an automobile. You contract to use it for the first, and best, period of its life. Following are some additional benefits to leasing a Honda.
Lower Monthly Payment - If the finance period is the same, your monthly payments will be lower when leasing (vs. financing) because your payments will be based on the vehicle's estimated depreciation. (You are contracting to use a portion of the car's value, rather than paying for the entire car.)
A New Car More Often - Your taste and preference may change, and a short-term lease makes it easy to drive a new car more frequently. Additionally, you may have needs for a larger or smaller car in a few years, and a lease makes it easy to plan for such changes.
Guaranteed Future Value - You don't have to worry about resale value. If your car depreciates more than the estimated residual value in your lease contract at full term, you can turn it in at the end of your lease term. But if it's worth more, you can buy it and keep it or resell it. A lease gives you an option.
Less Cash Up Front - One of the biggest advantages of a lease is that it does not usually require a substantial down payment. In many states, you can even pay the sales taxes as part of your monthly lease payment, rather than in a lump sum.
FINANCING
If you typically keep your vehicle for five to ten years, then financing may be your best option. Here are some of the reasons financing might be the best option for you.
Pride of Ownership - Ownership can instill a sense of pride. It can also build equity. Payment by payment, an owner's equity may increase.
No Restrictions on Mileage - This is important to consider if you drive more than 12,000 to 15,000 miles per year.
Make Changes to Car's Appearance - You can alter the interior or exterior to suit your taste (though your choices may affect the resale value.)
These are just a few of the reason to choose either to lease or finance.
All of our sales consultants are trained to assist you in making the best possible choice for you.
Next time we will deal with all the mumbo jumbo of the different terms for both leasing and financing.
Until then have a happy Honda day.
Larry
Choosing between leasing and financing is as important as choosing the right model. Below are some benefits of both leasing and financing. The following should help you decide how to purchase a new Honda:
LEASING
In a lease, you do not purchase an automobile. You contract to use it for the first, and best, period of its life. Following are some additional benefits to leasing a Honda.
Lower Monthly Payment - If the finance period is the same, your monthly payments will be lower when leasing (vs. financing) because your payments will be based on the vehicle's estimated depreciation. (You are contracting to use a portion of the car's value, rather than paying for the entire car.)
A New Car More Often - Your taste and preference may change, and a short-term lease makes it easy to drive a new car more frequently. Additionally, you may have needs for a larger or smaller car in a few years, and a lease makes it easy to plan for such changes.
Guaranteed Future Value - You don't have to worry about resale value. If your car depreciates more than the estimated residual value in your lease contract at full term, you can turn it in at the end of your lease term. But if it's worth more, you can buy it and keep it or resell it. A lease gives you an option.
Less Cash Up Front - One of the biggest advantages of a lease is that it does not usually require a substantial down payment. In many states, you can even pay the sales taxes as part of your monthly lease payment, rather than in a lump sum.
FINANCING
If you typically keep your vehicle for five to ten years, then financing may be your best option. Here are some of the reasons financing might be the best option for you.
Pride of Ownership - Ownership can instill a sense of pride. It can also build equity. Payment by payment, an owner's equity may increase.
No Restrictions on Mileage - This is important to consider if you drive more than 12,000 to 15,000 miles per year.
Make Changes to Car's Appearance - You can alter the interior or exterior to suit your taste (though your choices may affect the resale value.)
These are just a few of the reason to choose either to lease or finance.
All of our sales consultants are trained to assist you in making the best possible choice for you.
Next time we will deal with all the mumbo jumbo of the different terms for both leasing and financing.
Until then have a happy Honda day.
Larry
Monday, May 17, 2010
Leasing Part No. 1
Probably one of the most misunderstood options in the automobile business is leasing.
Leasing is not for everyone, but there are people that are prime candidates but don’t have enough knowledge or have been a victim of misinformation.
We have done a poor job in general of explaining leasing to customers.
A lot of the misunderstanding comes from things that happened years back and resulted in government intervention to prevent future abuses.
Presently, there is only one type of lease available to a customer. It is a closed end lease. That means all the details are worked out for the period of the lease as well as at the end of the lease. Everything is already been closed, and nothing is said to be open.
The abuse came with a lease called an open end lease. An unscrupulous dealer would set the value of the vehicle at the end of a lease artificially high. When the customer turned the car back in, he would tell them the market had changed, and it was not worth as much as they had estimated it to be. The customer would have to make up the difference. The primary factor in figuring a lease is the value of the vehicle at the end of the lease. The price of the car minus the lease end value is the amount of depreciation. The lower the amount of depreciation, the lower the payment is. Everyone wants a low payment!! So if you went to an honest dealer and he quoted you what the car should actually be worth and the unscrupulous dealer artificially inflated that figure, the unscrupulous dealer’s payment would be a lot lower even at the same interest rates as there would be less depreciation. The only lease available from dealers today is a closed end lease.
Another common problem has been what kind of condition the car is in when it is turned in.
A customer would return a car and think it was in great condition only to have the leasing company look at it and determine that there was a lot of damage that the customer would have to pay for.
A lot of times this was probably due to a lease where the leasing company inflated the value of the vehicle at lease end and was trying to make up for their losses by charging the customer for any possible damages.
Honda now has a policy of forgiving up to $1500 in damages to the vehicle.
We usually tell our customers that the car they are turning back in should look like a three year old car with the mileage agreed to, and not like a 5 yr old car or a 3 yr old car with high mileage. On the other hand, it does not need to look like a new vehicle either.
These are the primary misunderstandings that customers have.
If you have any questions, please let me know by emailing me at larrydavis@mosesautonet.com and I will be glad to address them for you.
Our next blog will get down to some reasons that make sense for a customer to lease a car instead of buying one.
Until next time, have a Honda good day.
Larry
Leasing is not for everyone, but there are people that are prime candidates but don’t have enough knowledge or have been a victim of misinformation.
We have done a poor job in general of explaining leasing to customers.
A lot of the misunderstanding comes from things that happened years back and resulted in government intervention to prevent future abuses.
Presently, there is only one type of lease available to a customer. It is a closed end lease. That means all the details are worked out for the period of the lease as well as at the end of the lease. Everything is already been closed, and nothing is said to be open.
The abuse came with a lease called an open end lease. An unscrupulous dealer would set the value of the vehicle at the end of a lease artificially high. When the customer turned the car back in, he would tell them the market had changed, and it was not worth as much as they had estimated it to be. The customer would have to make up the difference. The primary factor in figuring a lease is the value of the vehicle at the end of the lease. The price of the car minus the lease end value is the amount of depreciation. The lower the amount of depreciation, the lower the payment is. Everyone wants a low payment!! So if you went to an honest dealer and he quoted you what the car should actually be worth and the unscrupulous dealer artificially inflated that figure, the unscrupulous dealer’s payment would be a lot lower even at the same interest rates as there would be less depreciation. The only lease available from dealers today is a closed end lease.
Another common problem has been what kind of condition the car is in when it is turned in.
A customer would return a car and think it was in great condition only to have the leasing company look at it and determine that there was a lot of damage that the customer would have to pay for.
A lot of times this was probably due to a lease where the leasing company inflated the value of the vehicle at lease end and was trying to make up for their losses by charging the customer for any possible damages.
Honda now has a policy of forgiving up to $1500 in damages to the vehicle.
We usually tell our customers that the car they are turning back in should look like a three year old car with the mileage agreed to, and not like a 5 yr old car or a 3 yr old car with high mileage. On the other hand, it does not need to look like a new vehicle either.
These are the primary misunderstandings that customers have.
If you have any questions, please let me know by emailing me at larrydavis@mosesautonet.com and I will be glad to address them for you.
Our next blog will get down to some reasons that make sense for a customer to lease a car instead of buying one.
Until next time, have a Honda good day.
Larry
Thursday, April 8, 2010
Moses Honda Dispatch 1st edtion
This is our first attempt at the exciting world of blogs.
Our goal will be to provide you with latest and most up to date information on Honda products, to explain various different aspects of the automobile business, and to explain latest technology and what it means to you the consumer.
We invite questions and will try to answer any and all of them.
We are the Honda dealer in the Huntington/Barboursville WV area. We have been in the automobile business for over 64 years and pride ourselves for having a reputation of the highest integrity and customer satisfaction. We put you the consumer number ONE.
We became a Honda dealer in 1995 with the purchase of the franchise from Fonduk Honda.
We are presently located at 6018 US Route 60, East Barboursville WV 25504 where we have been since the purchase of the franchise.
The Moses family has been searching for a nicer, larger, and more suitable location for the Honda store several years. We are excited to say that we have found a place and are starting to do renovations for the move.
We will let you know more as we get closer to having everything come to fruition.
Stop by and say hello and we will get ya a cup of coffee and chat a spell.
Thanks,
Larry
Our goal will be to provide you with latest and most up to date information on Honda products, to explain various different aspects of the automobile business, and to explain latest technology and what it means to you the consumer.
We invite questions and will try to answer any and all of them.
We are the Honda dealer in the Huntington/Barboursville WV area. We have been in the automobile business for over 64 years and pride ourselves for having a reputation of the highest integrity and customer satisfaction. We put you the consumer number ONE.
We became a Honda dealer in 1995 with the purchase of the franchise from Fonduk Honda.
We are presently located at 6018 US Route 60, East Barboursville WV 25504 where we have been since the purchase of the franchise.
The Moses family has been searching for a nicer, larger, and more suitable location for the Honda store several years. We are excited to say that we have found a place and are starting to do renovations for the move.
We will let you know more as we get closer to having everything come to fruition.
Stop by and say hello and we will get ya a cup of coffee and chat a spell.
Thanks,
Larry
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