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 and a lease? 
The correct financing option largely depends on three factors:

  • What you want to drive?
  • How much you plan to drive it?
  • 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. 

How competitive are your financing rates?
N.J. Auto Credit Store.com deals with several financing institutions to bring you competitive rates and terms on vehicle financing. We offer flexible rates, terms, and payments so that you can obtain the loan or lease that fits you best.

What rates do you offer?
The rate in your individual financing package is influenced by a number of factors including your credit history, the term of your loan or lease, the amount financed, and the residual value of the vehicle you lease. Financing through N.J. Auto Credit Store.com lets you enjoy a quick, competitive, and straightforward way for you to get the low rate you want and the new vehicle you desire.  We work with the top dealerships in the country to get you the best car, truck or SUV at the best price. 

Do I need a co-signer? 
Not necessarily. If your application requires a co-signer, we will inform you once the initial application is submitted. 

How do I arrange a down payment on my vehicle once I’m approved? 
Once your loan is approved and you’ve worked with our select dealerships in choosing your vehicle, you can use a credit card, money order, bank check or cashier's check (made out to the dealership), or cash. 

Can I finance taxes, registration, and other transaction expenses? 

Can I include the cost of other products, such as extended service contracts, credit insurance, and accessories in the amount that I finance or lease? 
Yes, again. If you are interested in one of our products and would like to include its cost in your finance option, just ask one of our finance representatives to arrange that for you. 

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? 
Since leasing is technically different from 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 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 is this different 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. 

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 is 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 the advantage of a loan as opposed to a lease?
 The greatest advantage of financing over leasing is the freedom to do with the vehicle as 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. 

Why is the worst investment I can make borrowing money to purchase a depreciating asset?
Occasionally, one of our customers will say, "I'm seriously thinking about purchasing a car from the dealership you’ve suggested, but frankly I'm confused. I've always been taught 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 paying 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?"

How does a Pre-Trade Plan offer me alternatives?
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 dealerships package 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 so 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.

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