Technologies have advanced in the past 15 years but that doesn't mean our fuel-efficiency has. A flashback to 1992 shows that fuel mileage has remained stagnant and even regressed in some cases.
One has to surmise that the advancement of computer-chipped electronics has had an impact on automotive ECUs. And it has. Today's engines are making more power from less displacement than ever before and doing so while generating minute traces of emissions.
Extrapolating that tuning success to fuel economy seems like a logical progression; but don't go all-in with this bet. Looking back 15 years reveals that the fuel mileage evolution has stagnated, even regressed to Neanderthal-esque standards in some cases.
The fuel mileage saga is spelled out in the MPG Super Stars chart. Five 1992-vintage cars outperform the best gasoline-powered offerings from 2007 while a sixth equals them in highway mileage.
The Geo Metro XFI and Honda Civic VX produce hybrid-challenging numbers. The Metro tops the chart at 53 city, 58 highway while the Civic VX is right on its heels at 48 city, 55 highway. Both Metro XFI and the Metro LSi (also offered as the Chevrolet Sprint in 1992) are small, lightweight vehicles motivated by a 1.0-liter, three-cylinder powerplant.
There is no doubt that these GM hatchbacks lack the creature comforts and build quality of modern econoboxes and at 49 horsepower, they are not inspiring performers. Conversely, the Civic VX was a new, fresh-sheet car in 1992 with highly rated ergonomics, excellent build quality and more than twice the pep of the XFI at 102 horsepower. Despite their shortcomings for the environmentally conscious, these misers are indeed super stars.
MPG Super Stars [city/hwy]
1992
2007
Geo Metro XFI ('93)
53 / 58
Toyota Yaris
34 / 40
Honda Civic VX
48 / 55
MINI Cooper
32 / 40
Geo Metro LSI
46 / 50
Suzuki Swift
39 / 43
Ford Festiva
35 / 42
Dodge Colt ('93)
32 / 40
Under the banner of, "the more things change the more they stay the same," we present the Super Suckers. The worst fuel mileage vehicles on the road have evolved little in the last decade and a half. The Lamborghini Diablo of 1993 and the present day Lamborghini Murcielago both have V12 power and the same woeful 9 city, 14 highway performance.
The Vector W8 was a low-volume specialty car that did not stay in the market very long but it did take the title of least fuel efficient. Granted buyers of these rides care little about their daily fuel consumption and these supercars are not driven all that much but you would expect Lamborghini could at least nudge the needle in right direction 15 years later.
MPG Super Suckers [city/hwy]
1992
2007
Vector W8
7 / 11
Lamborghini Murcielago ('06)
9 / 14
Lamborghini Diablo
9 / 14
Bentley Arnage
10 / 15
Mercedes-Benz 600SEL
11 / 15
Bentley Azure*
11 / 16
The meatiest comparisons focus on the same make and model of car in 1992 and 15 years later in 2007. The most shocking of the apples-to-apples showdowns is the Honda Civic. In the last 15 years the Civic has given up ground in a big, nearly unimaginable way; dropping 12 MPG city and 8 MPG highway. How is this possible? The four-cylinder engine has grown from 1.5-liters in '92 to 1.8-liters in 2007. But come on, engine displacement is not the issue, overall displacement, read curb weight, is.
Just as Americans have embraced obesity, the lowly Civic has gone from 2094 pounds in 1992 CX hatchback trim to 2751 pounds in 2007 sedan trim; the additional 657 pounds of girth in the '07 version will certainly make efficiency numbers plummet. Calculating a sedan versus sedan comparison reveals the 1992 edition to be 432 pounds lighter on the scales.
It should be noted that there were a wide variety of Civics offered in '92. In addition to the aforementioned VX, seven other Civic models delivered between 27 and 42 mpg in the city and 34 and 48 mpg on the highway.
The Nissan Sentra is even-up when looking at city mileage and minus three in highway performance. The 1992 car runs a 110-horsepower 1.6-liter while the 2007 version relies on a 140-horsepower 2.0-liter engine. And the current edition needs that thrust since it tips the scales 586 pounds heavier than its 1992 brethren.
The remainder of the comparisons, even the pickup trucks, show stagnation or mediocre improvement in fuel economy over the years. The Chevy C1500 has evolved into the present-day Chevrolet Silverado 1500.
15-Year Flashback, Same Model Comparison [city/hwy]
Vehicle
1992
2007
Difference
Honda Civic
42 / 48
30 / 40
-12 / -8
Honda Accord
24 / 30
26 / 34
+2 / +4
Nissan Sentra
29 / 39
29 / 36
0 / -3
Toyota Corolla
31 / 35
32 / 41
+1 / +6
Toyota Camry
22 / 29
24 / 34
+2 / +5
Chevrolet Corvette
17 / 25
18 / 28
+1 / +3
Ford Explorer 4WD
15 / 19
15 / 20
0 / +1
Vehicle
1992
2007
Difference
Dodge Dakota 4WD V8
5.2-L 13/17
4.7-L 15/20
+2 / +1
Chevrolet C1500 2WD V8
5.0-L 15/20
5.3-L 16/21
+1 / -1
5.7-L 14/18
6.0-L 14/19
0 / +1
With all the drum beating about oil reliance and fuel conservation as America watched crude prices soar past $72 a barrel in April, 2006 it is a bit sobering to see how little progress has been made in extending miles per gallon. There are variables at work against fuel economy today; increasing engine sizes and the expanding girth of the vehicles that are bigger and weighed down with more commuter-friendly accoutrements as well as advanced safety equipment. It is worth mentioning that equipment was added to meet buyer demand as well as government regulations. Also, the driving experience in a Metro XPI cannot compare in any way to that in a Toyota Yaris.
But in many ways the Yaris and its counterparts in the emerging B-Segment of vehicles are throwbacks to the misers of the early '90s. The B-Segment consists of the Yaris, Nissan Versa, Scion xA and xB, Honda Fit and Suzuki SX4. The all-new Japanese market Mazda Demio that will be rebadged as the Mazda2 for U.S. consumption and delivered our shores in 2008 may join the micro-car party. B-Segment cars are fuel-efficient, clean-burning and defy their diminutive proportions when comes to accommodating cargo and people.
If the main factor is fuel efficiency, the truth is things haven't come so far since '92 when Clint Eastwood's "Unforgiven" took the best picture Oscar and Eric Clapton won five Grammy Awards for his "Unplugged" album. With the government mandating higher CAFE standards, especially for trucks and SUVs, one has to think there are some frayed nerve endings in the product planning departments of all the automakers right about now. Whatever unfolds and whatever one's personal preference may be when it comes to fuel efficiency, knowing the history of the beast will ensure tomorrow's buyer makes an informed decision.
* indicates 2007 model year information is not yet available
From 1992 to 2005 Evan Griffey was an editor of Turbo & High Tech Performance magazine, a pioneering force in the creation of the import/sport compact tuning industry. Evan has vast experience in the technical, aftermarket quadrant of the automotive realm as well as the OE side where he has test driven scores of cars and trucks. Evan has covered drag racing, Bonneville Speed Week, drifting, road racing, car shows and shot numerous covers and features while at Turbo magazine. Today Evan is a freelance writer working for Import Tuner, Sport Compact Car, Honda Tuning, Turbo & High Tech Performance, Car Audio and Siphon magazines.
Note : Info through MSN Autos' New-Car Buying Service
Friday, April 6, 2007
How to End Your Lease Early
When leasing a vehicle, the buyer is agreeing to make regular payments, follow a scheduled maintenance plan, and keep the vehicle for the duration of the contract. A popular misconception is that it is impossible to end a lease early. In truth, all leases can be terminated early. However, since lease agreements are not designed to be broken, substantial penalties and fees are usually associated with early termination. It is, in the end, a question of cost.
In many cases, from unexpected lifestyle changes to just boredom with the vehicle, buyers may consider ending their automotive lease before the end of the term. With appropriate vehicle preparation and picking the right time to end the lease, it may be possible to terminate a lease early and do so with very little penalty.
Prepare your vehicle
Wash and detail. Whether you intend to sell your vehicle or return it to the leasing company, it needs to appear clean and maintained. At a minimum, completely wash the exterior and vacuum the interior. At best, pay to have the vehicle professionally detailed.
Check the tires. Tires show obvious wear and tear. Make sure the tires have plenty of tread remaining. If the tread is worn or uneven (check your lease contract for minimal acceptable tread depths), purchase new tires at a local tire shop before you return the vehicle to the dealership or attempt to sell it.
Take pictures. Once the vehicle is clean, take a few good photographs of the interior, exterior, engine, and odometer (for mileage). You may also want to take close-up pictures of the tire tread. You will need the pictures if you are selling the vehicle, and they will also be very helpful if the condition or mileage of your lease return is ever questioned.
What are my options to end my lease early?
Return the vehicle to the dealership. This is a traditional lease termination, and it is an expensive option. When you return the vehicle to the dealership, you will be required to pay all penalties. In some cases, you may be required to make all outstanding payments, and pay additional penalties on top of any other fees. This should be a last-resort option.
Trade in your vehicle for another vehicle. It may be possible to lease another vehicle at the same dealership. The penalties and fees from your original lease will be rolled in (included) with the new vehicle contract, making your payments higher. This option is also expensive, but it allows you to absorb the penalties from the old lease over an extended period.
Find someone to take over your lease. You may be able to find a family member, friend, or co-worker to assume the balance of your lease payments. Several online companies offer this type of service for customers looking to sell their leases. Each leasing company has its own set of requirements, which often include a credit check and transfer fees, and there may be out-of-state restrictions to consider. Use caution when exercising this option: though you are no longer responsible for monthly payments, many leasing companies hold the original lessee liable in the event of a default.
Purchase the vehicle from the leasing company. Every lease has a buyout or payoff. This is the amount due to the leasing company if you wish to purchase the vehicle outright at any point during the lease. Depending on the resale value of the vehicle, the payoff may be at or above market value, potentially requiring you to pay more for the vehicle than it is actually worth.
Sell the vehicle. Using the payoff amount from the leasing company as a guide, sell the vehicle to another private party. Again, if your vehicle has a high payoff it may be very difficult to sell without incurring a loss. Even if you are forced to take a financial loss, it may be a less expensive option than continuing the outstanding monthly payments on the lease contract. Selling the vehicle is also an excellent option if you want to avoid penalties for excess wear and tear and having exceeded the allocated lease mileage.
In many cases, from unexpected lifestyle changes to just boredom with the vehicle, buyers may consider ending their automotive lease before the end of the term. With appropriate vehicle preparation and picking the right time to end the lease, it may be possible to terminate a lease early and do so with very little penalty.
Prepare your vehicle
Wash and detail. Whether you intend to sell your vehicle or return it to the leasing company, it needs to appear clean and maintained. At a minimum, completely wash the exterior and vacuum the interior. At best, pay to have the vehicle professionally detailed.
Check the tires. Tires show obvious wear and tear. Make sure the tires have plenty of tread remaining. If the tread is worn or uneven (check your lease contract for minimal acceptable tread depths), purchase new tires at a local tire shop before you return the vehicle to the dealership or attempt to sell it.
Take pictures. Once the vehicle is clean, take a few good photographs of the interior, exterior, engine, and odometer (for mileage). You may also want to take close-up pictures of the tire tread. You will need the pictures if you are selling the vehicle, and they will also be very helpful if the condition or mileage of your lease return is ever questioned.
What are my options to end my lease early?
Return the vehicle to the dealership. This is a traditional lease termination, and it is an expensive option. When you return the vehicle to the dealership, you will be required to pay all penalties. In some cases, you may be required to make all outstanding payments, and pay additional penalties on top of any other fees. This should be a last-resort option.
Trade in your vehicle for another vehicle. It may be possible to lease another vehicle at the same dealership. The penalties and fees from your original lease will be rolled in (included) with the new vehicle contract, making your payments higher. This option is also expensive, but it allows you to absorb the penalties from the old lease over an extended period.
Find someone to take over your lease. You may be able to find a family member, friend, or co-worker to assume the balance of your lease payments. Several online companies offer this type of service for customers looking to sell their leases. Each leasing company has its own set of requirements, which often include a credit check and transfer fees, and there may be out-of-state restrictions to consider. Use caution when exercising this option: though you are no longer responsible for monthly payments, many leasing companies hold the original lessee liable in the event of a default.
Purchase the vehicle from the leasing company. Every lease has a buyout or payoff. This is the amount due to the leasing company if you wish to purchase the vehicle outright at any point during the lease. Depending on the resale value of the vehicle, the payoff may be at or above market value, potentially requiring you to pay more for the vehicle than it is actually worth.
Sell the vehicle. Using the payoff amount from the leasing company as a guide, sell the vehicle to another private party. Again, if your vehicle has a high payoff it may be very difficult to sell without incurring a loss. Even if you are forced to take a financial loss, it may be a less expensive option than continuing the outstanding monthly payments on the lease contract. Selling the vehicle is also an excellent option if you want to avoid penalties for excess wear and tear and having exceeded the allocated lease mileage.
CAR : Understanding the lease payment
The first question many people ask when leasing a vehicle is, "How much is my monthly payment going to be?” But there’s more to it than that.
What really needs to be assessed is the total amount being charged over the lease term including fees, taxes, security deposits, and any lease-end payments. Often, there are fees associated with the number of miles driven and the condition of the vehicle at lease end.
Leasing can be done through a variety of companies, including captive lessors (those associated with vehicle manufacturers), banks, credit unions, and independent leasing companies. Finance companies that are associated with vehicle manufacturers often subsidize leases in order to make their models more financially attractive.
Understanding the lease payment
All monthly lease payments are comprised of two basic elements, a depreciation fee and a rental fee. When you lease a vehicle, you are paying for both the cost to operate the vehicle as well as an amount that represents the vehicle's depreciation while it is in your possession. To determine your depreciation component, the lessor (the company leasing the vehicle to you) looks at the cost of the vehicle, including fees and any negative equity you have, as well as destination and other charges. This amount is called the adjusted capitalization cost or adjusted cap cost.
The adjusted cap cost is subtracted from the amount that the vehicle is estimated to be worth at the end of the lease period (this amount is called the residual value). This amount is then divided by the number of payments you will make during your lease period. The depreciation component is usually the largest portion of your monthly lease payment.
To arrive at the rental portion of your lease payment, simply add the adjusted cap cost and the residual value, which equals the lease balance multiplier. Then multiply this number by the money factor, which is similar to the interest rate on a loan. This figure represents the money component of the lease—the amount required to basically rent the vehicle for an agreed upon length of time.
While all lease payments include these two components, taxes can also be rolled into the monthly payment if they are not paid up front. Be sure to find out what the taxes are for the vehicle you are leasing, including the amount of luxury tax, if applicable.
When you are negotiating the deal, be sure to think about it in terms of the total financial cost, not only your monthly payment cost. Many consumers forget to include items such as security deposits, down payments, dealer prep fees, or lease-end charges, all of which can substantially increase the total cost of the lease.
Leasing Tips
Here are some tips to consider before leasing a new vehicle:
• Research your options thoroughly. Remember, it is not a requirement to use a captive lessor (those associated with a vehicle manufacturer) to lease any vehicle, so check with your bank, credit union or an independent company to ensure you are getting the ideal arrangement for your particular circumstances.
• Choose a vehicle with a high residual value. The residual value is the amount that the vehicle is estimated to be worth at the end of the lease, assuming it does not have excessive wear and tear. By choosing a vehicle with a high residual value, your payments are likely to be lower than they would be if the residual value was lower.
• Stay within the annual mileage limits. All lease contracts have limits on the amount of miles the vehicle can be driven during the lease term. Typically, there is a per-mile charge for vehicles that exceed the mileage agreed upon in the lease contract. If you think you will drive over the mileage limit of your contract, ask about purchasing extra miles up front at a discounted rate, or better yet, negotiate a lease that includes higher mileage limits.
• Don’t terminate the lease early. In addition to penalties charged for early termination, lessees who turn their vehicles in early may find they owe more money for this privilege. This is because the depreciation rate has been calculated for the term of the lease, so the lessor recalculates the depreciation, which results in an additional charge to you.
• Read the fine print. There can be many hidden costs written into a lease, such as dealer fees for additional services and lease-end payments. Read your lease contract carefully and make sure that the numbers (adjusted cap cost, residual value, and monthly payment) are all included and are the terms that you agreed to.
You’re a good candidate for leasing if…• You enjoy driving a brand new vehicle every few years• You don’t have much money for a down payment• You drive less than 15,000 miles annually• You’d like to drive a more expensive car than you could otherwise afford to buy under traditional financing terms• You take proper care of your car, servicing and washing it regularly
What really needs to be assessed is the total amount being charged over the lease term including fees, taxes, security deposits, and any lease-end payments. Often, there are fees associated with the number of miles driven and the condition of the vehicle at lease end.
Leasing can be done through a variety of companies, including captive lessors (those associated with vehicle manufacturers), banks, credit unions, and independent leasing companies. Finance companies that are associated with vehicle manufacturers often subsidize leases in order to make their models more financially attractive.
Understanding the lease payment
All monthly lease payments are comprised of two basic elements, a depreciation fee and a rental fee. When you lease a vehicle, you are paying for both the cost to operate the vehicle as well as an amount that represents the vehicle's depreciation while it is in your possession. To determine your depreciation component, the lessor (the company leasing the vehicle to you) looks at the cost of the vehicle, including fees and any negative equity you have, as well as destination and other charges. This amount is called the adjusted capitalization cost or adjusted cap cost.
The adjusted cap cost is subtracted from the amount that the vehicle is estimated to be worth at the end of the lease period (this amount is called the residual value). This amount is then divided by the number of payments you will make during your lease period. The depreciation component is usually the largest portion of your monthly lease payment.
To arrive at the rental portion of your lease payment, simply add the adjusted cap cost and the residual value, which equals the lease balance multiplier. Then multiply this number by the money factor, which is similar to the interest rate on a loan. This figure represents the money component of the lease—the amount required to basically rent the vehicle for an agreed upon length of time.
While all lease payments include these two components, taxes can also be rolled into the monthly payment if they are not paid up front. Be sure to find out what the taxes are for the vehicle you are leasing, including the amount of luxury tax, if applicable.
When you are negotiating the deal, be sure to think about it in terms of the total financial cost, not only your monthly payment cost. Many consumers forget to include items such as security deposits, down payments, dealer prep fees, or lease-end charges, all of which can substantially increase the total cost of the lease.
Leasing Tips
Here are some tips to consider before leasing a new vehicle:
• Research your options thoroughly. Remember, it is not a requirement to use a captive lessor (those associated with a vehicle manufacturer) to lease any vehicle, so check with your bank, credit union or an independent company to ensure you are getting the ideal arrangement for your particular circumstances.
• Choose a vehicle with a high residual value. The residual value is the amount that the vehicle is estimated to be worth at the end of the lease, assuming it does not have excessive wear and tear. By choosing a vehicle with a high residual value, your payments are likely to be lower than they would be if the residual value was lower.
• Stay within the annual mileage limits. All lease contracts have limits on the amount of miles the vehicle can be driven during the lease term. Typically, there is a per-mile charge for vehicles that exceed the mileage agreed upon in the lease contract. If you think you will drive over the mileage limit of your contract, ask about purchasing extra miles up front at a discounted rate, or better yet, negotiate a lease that includes higher mileage limits.
• Don’t terminate the lease early. In addition to penalties charged for early termination, lessees who turn their vehicles in early may find they owe more money for this privilege. This is because the depreciation rate has been calculated for the term of the lease, so the lessor recalculates the depreciation, which results in an additional charge to you.
• Read the fine print. There can be many hidden costs written into a lease, such as dealer fees for additional services and lease-end payments. Read your lease contract carefully and make sure that the numbers (adjusted cap cost, residual value, and monthly payment) are all included and are the terms that you agreed to.
You’re a good candidate for leasing if…• You enjoy driving a brand new vehicle every few years• You don’t have much money for a down payment• You drive less than 15,000 miles annually• You’d like to drive a more expensive car than you could otherwise afford to buy under traditional financing terms• You take proper care of your car, servicing and washing it regularly
Buying a New Car
Each year, millions of consumers venture into automotive showrooms in search of a new vehicle. As dealerships focus on improving customer satisfaction, they have become more consumer-oriented in an effort to make the buying process more enjoyable and informative.
While today’s showrooms are brighter and more inviting, the buying process has changed very little in decades. The transaction process is less confusing when you understand the roles of key individuals at the dealership, and some basic terminology used during the sales process.
Key Individuals at the Dealership:
Salesperson—As a customer, your primary interaction will most likely be with a Salesperson. As an expert on the operation and features of the vehicle, a Salesperson will accompany you during the test drive, negotiate with you during the sale, and assist the Finance Manager with the required paperwork. Customer service is their goal, so ask the Salesperson if you have any questions during or after the sales process.
Sales Manager—The role of the Sales Manager is to oversee all new- and used-vehicle sales at the dealership. The Sales Manager has the authority to adjust pricing and make all sales-related decisions. During the sales process, the Salesperson will often consult with their Sales Manager many times as the terms of the transaction are negotiated. Larger dealerships will have many Sales Managers, each having a team of Salespeople reporting to them.
Finance Manager—The Finance Manager is responsible for new- and used-vehicle financing, warranty sales, and sales of aftermarket products. An expert in finance for automotive sales and leasing, the Finance Manager often has business relationships with several banks and leasing companies, which gives them the ability to offer numerous financing options. After the vehicle negotiation is complete, the Finance Manager will draft the sales or leasing contract.
Common Terms:
Down Payment—The amount of money paid at the beginning of the sales transaction is often called the Down Payment. Many times, especially in advertising, it is referred to as “total money out of pocket” or “total drive-off.” As the Down Payment increases, the loan or lease amount will decrease, reducing monthly payments and interest charges.
Monthly Payment—The amount due each month on an installment loan is called the monthly payment. On a lease, the monthly payment will include the base lease amount as well as the sales tax for the full price of the vehicle.
APR—The Annual Percentage Rate (APR) refers to the interest rate on the vehicle loan. A lower APR means the monthly payments and the total cost of the vehicle will be lower.
Factory-to-Dealer Incentives—These financial incentives are offered from the factory (manufacturer) to the dealer as a reward or bonus to sell more vehicles. The dealership is not obligated to share or provide this money to the customer, but many choose to offer this incentive to potential buyers.
Factory-to-Consumer Incentives—These financial incentives are offered from the factory (manufacturer) directly to the customer. The incentive is often offered as cash, special financing rates, or other tangible benefits.
Special Financing—This type of offer, often from the manufacturer or a preferred bank, will include a very low interest rate or extended terms for the loan. Special Financing offers may be given in lieu of other incentives. Sometimes these offers require that you finance your vehicle through the manufacturer’s captive finance company (i.e., GMAC or Ford Credit).
Trade-In—After carefully inspecting the vehicle to be traded in, the dealership will assign it a monetary value. This value, which can be negotiated, may be used to pay off the existing vehicle loan, applied as a down payment on the new-vehicle purchase, or kept by the consumer.
Trade-In Value (Wholesale Value) —This is the value assigned to the vehicle by an auction house. As the wholesale value must allow room for other costs (such as vehicle re-conditioning), it is often thousands of dollars less than the retail value of the vehicle to a private party.
Payoff—An installment loan with monthly payments will have a balance, or payoff, which must be satisfied before the loan is considered closed. The loan payoff will generally decrease each month a payment is made.
Rebate—This is another name for factory-to-consumer incentives. Unlike financing incentives, which include special interest rates, Rebates are often cash incentives that may be used toward the down payment, to pay off a previous loan, or taken as cash by the customer.
Tax and License Fee—These are standard sales tax and licensing fees that are payable to the federal government and to the state Department of Motor Vehicles (DMV) or similar agency.
Documentation Fee—A sales or lease transaction requires extensive paperwork. It is common for a dealership to charge a documentation fee to process the transaction through their business office.
While today’s showrooms are brighter and more inviting, the buying process has changed very little in decades. The transaction process is less confusing when you understand the roles of key individuals at the dealership, and some basic terminology used during the sales process.
Key Individuals at the Dealership:
Salesperson—As a customer, your primary interaction will most likely be with a Salesperson. As an expert on the operation and features of the vehicle, a Salesperson will accompany you during the test drive, negotiate with you during the sale, and assist the Finance Manager with the required paperwork. Customer service is their goal, so ask the Salesperson if you have any questions during or after the sales process.
Sales Manager—The role of the Sales Manager is to oversee all new- and used-vehicle sales at the dealership. The Sales Manager has the authority to adjust pricing and make all sales-related decisions. During the sales process, the Salesperson will often consult with their Sales Manager many times as the terms of the transaction are negotiated. Larger dealerships will have many Sales Managers, each having a team of Salespeople reporting to them.
Finance Manager—The Finance Manager is responsible for new- and used-vehicle financing, warranty sales, and sales of aftermarket products. An expert in finance for automotive sales and leasing, the Finance Manager often has business relationships with several banks and leasing companies, which gives them the ability to offer numerous financing options. After the vehicle negotiation is complete, the Finance Manager will draft the sales or leasing contract.
Common Terms:
Down Payment—The amount of money paid at the beginning of the sales transaction is often called the Down Payment. Many times, especially in advertising, it is referred to as “total money out of pocket” or “total drive-off.” As the Down Payment increases, the loan or lease amount will decrease, reducing monthly payments and interest charges.
Monthly Payment—The amount due each month on an installment loan is called the monthly payment. On a lease, the monthly payment will include the base lease amount as well as the sales tax for the full price of the vehicle.
APR—The Annual Percentage Rate (APR) refers to the interest rate on the vehicle loan. A lower APR means the monthly payments and the total cost of the vehicle will be lower.
Factory-to-Dealer Incentives—These financial incentives are offered from the factory (manufacturer) to the dealer as a reward or bonus to sell more vehicles. The dealership is not obligated to share or provide this money to the customer, but many choose to offer this incentive to potential buyers.
Factory-to-Consumer Incentives—These financial incentives are offered from the factory (manufacturer) directly to the customer. The incentive is often offered as cash, special financing rates, or other tangible benefits.
Special Financing—This type of offer, often from the manufacturer or a preferred bank, will include a very low interest rate or extended terms for the loan. Special Financing offers may be given in lieu of other incentives. Sometimes these offers require that you finance your vehicle through the manufacturer’s captive finance company (i.e., GMAC or Ford Credit).
Trade-In—After carefully inspecting the vehicle to be traded in, the dealership will assign it a monetary value. This value, which can be negotiated, may be used to pay off the existing vehicle loan, applied as a down payment on the new-vehicle purchase, or kept by the consumer.
Trade-In Value (Wholesale Value) —This is the value assigned to the vehicle by an auction house. As the wholesale value must allow room for other costs (such as vehicle re-conditioning), it is often thousands of dollars less than the retail value of the vehicle to a private party.
Payoff—An installment loan with monthly payments will have a balance, or payoff, which must be satisfied before the loan is considered closed. The loan payoff will generally decrease each month a payment is made.
Rebate—This is another name for factory-to-consumer incentives. Unlike financing incentives, which include special interest rates, Rebates are often cash incentives that may be used toward the down payment, to pay off a previous loan, or taken as cash by the customer.
Tax and License Fee—These are standard sales tax and licensing fees that are payable to the federal government and to the state Department of Motor Vehicles (DMV) or similar agency.
Documentation Fee—A sales or lease transaction requires extensive paperwork. It is common for a dealership to charge a documentation fee to process the transaction through their business office.
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