Frequently Asked Auto Finance Questions
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Stanley Subaru's Frequently Asked Finance Questions:Are Monthly Payments Necessary?
How Do Loans and Leases Differ?
When is Ownership Transferred?
How are Monthly Lease Rates Determined?
What Factors Determine Purchase Price at the End of a Lease?
How are Loan Rates Determined?
General Loan Specifications
Are Loans Available For Used Vehicles?
Can Extra Fees and Charges be Financed?
Lease vs Buy
What are the Restrictions of Driving a Leased Vehicle?
Stanley Subaru Tip
1. Are Monthly Payments Necessary? Unless you are in a position to pay cash for a new or pre-owned vehicle, you will need to establish a payment plan to obtain that vehicle. Two options exist--taking out a loan or leasing.
2. How Do Loans and Leases Differ? (See our Lease vs Buy Page for complete comparisons)
When you take out a loan, all of the money used to pay it off applies to your eventual ownership of the vehicle. The initial down payment and principal on the loan cover the total cost of the purchase. Lease payments, however, apply only to the use of the vehicle. The total sum of payments covers the vehicle's depreciation over the time you drive it and is usually less than the outright price of the vehicle.
3. When is Ownership Transferred?
When paid in full, a loan terminates and you assume ownership. The bank sends you the title that had been held while the loan maintained an outstanding balance. At the end of a lease, you have options. 1.) Return the vehicle and walk away; 2.) Complete the purchase; 3.) Trade for equity; or 4.) Sell for a profit.
4. How are Monthly Lease Rates Determined?
In formulating a monthly payment structure, a lessor is primarily concerned with the extent to which the vehicle will depreciate throughout the lease and cost of borrowing money to finance the car during that period.
Three Key Elements:
First, the cost is determined. This figure represents the real purchase price after elements such as the down payment, incentive discount, and trade-in credit are deducted from the capitalized (actual) cost, while any fees or charges (e.g. destination) are added.
Second, the residual value, or estimated value of the vehicle at the end of the lease, is determined and then subtracted from the adjusted capitalized cost to yield a depreciation figure. The residual value depends on the length of the agreement, expected mileage and make/model of the vehicle. This value is set by the bank.
Finally, a lessor assesses the money factor, a number that correlates with the cost of borrowing money during the lease period.
5. What Factors Determine the Purchase Price at the end of a Lease?
Most leases rely exclusively on the residual value in determining the end of term purchase price. These closed-end deals require you to pay the fixed residual amount, regardless of the actual market price.
6. How are Loan Rates Determined?
The size of monthly loan payments depends on the amount borrowed, the length of the loan, the interest rate and other factors such as your credit history. Paying more money initially lowers the principal of the loan, thus reducing individual payments. At any period during the loan, you may opt to pay off the principal in its entirety, at which point the title of the vehicle is transferred to you.
7. General Loan Specifications:
Down payment amounts generally range between 10-20 percent of the vehicle's total cost, although some purchases require no down payment. A typical loan period is 5 years with an annual percentage rate around 6%. Subaru does offer lower incentive rates to qualified buyers. See our Incentives page for current Subaru Incentives. See our Specials page for Stanley Subaru Finance Offers.
8. Are Loans Available for Used Vehicles?
Yes, although they function somewhat differently from new car loans. A down payment of 20 percent or more is often required and the interest rate can be a point or more higher than for a new vehicle.
9. Can Extra Fees and Charges be Financed?
Yes. Registration, taxes, extended service plans, and other supplemental charges may be included in the financing plan.
10. Should I Lease or Should I Buy a Vehicle?
Depending on your driving plans, lifestyle, and concerns, there are benefits of both options. See our Lease vs. Buy comparison chart for details.
11. What are the Restrictions of Driving a Leased Vehicle?
Annual mileage restrictions are a major limitation for customers who choose to lease. Lessors want their vehicles returned in sale-able low mileage conditions, so they place mileage caps on them. A typical yearly figure is between 10,000 to 15,000 miles, and can include up to 25,000 miles. Beyond this established limit, fees accrue on a per-mileage basis, usually in the range of $0.10 to $0.15 per mile. So if most of your driving is local, leasing makes sense. However, if you consistently tack on 500 or more miles a week, definitely look into a loan.
12. Why Lease?
Leasing ensures that you'll always drive a late-model vehicle, won't have to pay for warranty-covered repairs, and won't have to bother with re-selling at the end.
Stanley Subaru Tip
Lease agreements usually limit mileage from 10,000 -15,000 miles annually. Beyond these figures, fees in the range of $0.10 to $0.15 per mile begin to accumulate. It is also possible to pre-buy extra mileage into your lease agreement. Ask our Finance Department for more information!