What's the difference between a loan and a lease?
When you obtain a loan for a car, your down payment and your monthly payments go toward the total purchase price of your car. When you have paid off the financing, you own your car.

When you lease a car, you make payments to use that car over the term of your lease. However, at the end of your lease, you don't own your car, rather you return it to the lessor.

How do I choose between financing with a lease or a loan?
That depends on what you want to drive, how much you plan to drive it, and how long you expect to keep it.

It may be worthwhile to lease rather than obtain a loan if...

• you want the most car for your monthly payment
• you drive less than 15,000 miles a year
• you like to trade in your car every three years or less
• owning your car outright is not important to you.
  

It may be preferable to get a loan if...

• owning your car outright is important to you
• you plan to enjoy your car for a long time
• you want to customize your car
• you want the maximum flexibility regarding the number of miles you drive and how long you keep your car.

Typically, the monthly payments on a lease are significantly lower than if you obtain a loan for your car, while having a loan gives you more flexibility in terms of ownership.

We are working on offering financing in every market we serve. If you reside in a state where we do not yet offer it, we will assist you in your search to find financing that meets your needs.

 Financing: Understanding rates, co-signers, and down payment

Do I need a co-signer?
Not necessarily. If your application requires a co-signer, your car Specialist will let you know.

If you believe that you need a co-signer, please include their information when you complete the online application. This will allow us to process your application more quickly.

After I get approved, what's next?
Your car Specialist will work with you to confirm your car request and finalize the details of your financing. Then, within seven days of your scheduled car delivery date, you will receive a UPS package from CarsDirect.com. This package will contain an easy-to-use checklist to guide you through the delivery process, along with your loan or lease contract and additional papers. Just let us know where you'd like your papers delivered, and we'll take care of the rest.

After I receive my papers, what's the next step?
You can complete the financing papers at your convenience. Any time you have a question, feel free to call your car Specialist.

Just have your completed papers with you when you accept delivery, along with any other necessary materials such as your driver's license, proof of insurance and down payment, and we'll handle everything else for you.

How would you like me to pay my down payment?
You can use a credit card, money order, personal check, cashier's check (made out to CarsDirect.com), or cash.

Can I finance taxes, registration fees, and other transaction expenses?
Absolutely.

Can I include the cost of other products, such as extended service contracts, credit insurance and add-ons 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 your car Specialist to arrange that for you.

Can I pay off the balance of my loan ahead of schedule?
Yes. However, a nominal fee may be charged if you pay off your loan during the first three quarters of the life of the term. For example, if you have a 48-month loan and pay it off on or before the 36th month, you may be required to pay this fee. You can get more details from your car Specialist when you discuss the specific terms of your package.

 Leases: Tell me more

What is a lease?
When you lease, a bank, credit union, or other financial institution takes responsibility for the purchase and ownership of the car you choose. You then make a monthly payment to that financial institution (the lessor) in return for the right to use that car for a specified period.

Although you're not the record owner, i.e. the title-holder, of your car when you lease, you get the opportunity to enjoy it for the term of the lease. Leasing gives you the freedom to drive a more expensive car and have lower monthly payments than if you bought it. In addition, you don't have to worry about selling your car when the lease expires.

By leasing through CarsDirect.com, you can arrange for a mileage allowance that's just right for you, so you don't have to pay for any more car than you need to. Competitive rates, flexible terms and, depending on your credit history, zero drive-off, are all available.

How does a lease work?
Your monthly lease payment entitles you to use your car for one month, and you choose in advance the number of months you'll be driving that car. The monthly payment is determined based on the cost of the money factor and the amount of depreciation that will occur during the term of the lease. Many things affect depreciation, including the term of the lease, the number of miles you drive and the car's condition at the end of the lease.

While the lease is in effect, the car is effectively yours. You have the responsibility to insure it, and the right to enjoy it within the limits that you've agreed to. You will, however, be limited in your ability to customize it, and your car must be returned to the lease owner in good condition when the lease expires. If you return it with more miles on it than your agreement allows, you will pay a service charge of $0.18 per mile. If the car has excessive wear and tear, you could be responsible for that, too. (There is insurance available to cover this.)

If you decide you want to keep your car when the lease expires, in many states, you can purchase it.

I'm looking at a lease agreement, and there are a lot of terms that I don't recognize...
Since leasing is legally different from buying or financing, it involves slightly different terminology, although the concepts are quite similar. The most important concepts are "adjusted capitalized cost," "residual value" and "money factor."

• Adjusted capitalized cost represents the actual purchase price of your car.
  • This is determined by the car's purchase price (capitalized cost), plus any applicable charges and fees (acquisition fees, taxes, etc.), minus any capitalized cost reductions (down payments, trade-in allowances, and any other applicable discounts).
• Residual value represents the expected value of your car to the lease owner at the end of the lease.
  • It may vary depending on several factors, including;
    • The rate at which your car is expected to depreciate
    • The length of your lease
    • The number of miles accounted for in your lease agreement.
• The money factor effectively acts as an interest rate, and reflects the cost of the money "borrowed on your behalf" at the beginning of your lease.
  

Once I take delivery, is leasing any different from owning?
The day-to-day experience of driving a leased car is virtually the same as if you financed it. The only major differences are that leasing does restrict the degree to which you can customize your car, restricts "free mileage" to the amount agreed at the beginning and you need to keep it well maintained.

 Leases: Understanding capitalized costs, residual values, and the money factor

What is the capitalized cost?
The capitalized cost is the CarsDirect.com price of your car.

What is an adjusted capitalized cost?
The adjusted capitalized cost represents the real cost of your car to the lease owner when you take delivery. It is the price of your car, plus any charges that you choose to have financed rather than pay up front (like taxes, acquisition fees, warranties and insurance), minus any capitalized cost reductions (like down payments).

Then, what is a capitalized cost reduction?
The capitalized cost reduction includes any fees you decided to pay in full up front, such as the amount of your down payment, license, tax and registration.

If I lower my adjusted capitalized cost, are my payments lower too?
Generally, yes. On any given car, the more money you initially put down, the less you'll have to pay each month.

If your primary concern is to minimize your monthly payment, you can select a longer term lease or increase your capitalized cost reduction (by increasing the down payment, or by paying your taxes, fees, etc., up front). You may want to keep the amount due at lease signing as low as possible, though, so you can use that money elsewhere.

Are there any other factors that will affect my lease payments?
Yes. The second major factor that determines your lease payment is your car's residual value at the end of the lease. It is possible for two cars to have the same adjusted capitalized cost, but for one car's payments to be lower because it holds its value for a longer period. To put it another way, sometimes a more expensive car that holds its value longer, costs no more to lease than a less expensive car. Which is why we say that leasing is an easy way to get more car for your money.

How is the residual value determined?
Financial institutions set residual values based on their own experience and standard industry guides. The most commonly used are those published in the American Lease Guide (ALG).

 Loans: Tell me more

What is a loan?
When you obtain a loan for a car, a lender such as a bank, credit union, or other financial institution advances the money needed to buy the car after considering your trade in or down payment. You make monthly payments to repay that loan in full over an agreed period of time. CarsDirect.com's affiliate, CD1 Financial, Inc., makes available competitive rates on loans that you can apply for directly online.

How does a loan work?
The amount that you borrow, and the remaining balance during the life of the loan, is called the "principal." The principal can be paid off at any time prior to maturity, but as long as it is outstanding, it will incur interest, which is included in your monthly payment.

Until the loan is paid-in-full, the lender holds the title to your car as security for the loan. When you pay off the loan, the title is sent to you, the car is yours and you owe no further payments.

The advantage to getting a loan for your car is that you can do whatever you want with it. This means you can paint it, raise it, lower it, pinstripe it, make it hop, put in a new stereo, fix the dings and dents or not, sell it, or drive it forever - as long as you've made your loan payments. However, as with any car loan, if you fail to make your payments, the financial institution could repossess your car.

How do I obtain financing from CarsDirect.com?
It's quick and easy. In markets where financing is available through CD1 Financial, Inc., you'll be asked if you want to apply for financing after you select your car. If you do, just fill out our online credit application and click submit. That's it.

You'll get an e-mail informing you of your application status, and your personal CarsDirect.com car Specialist will get in touch with you when they have located your car to confirm your exact monthly payment, term and rate. A variety of finance packages are available at CarDirect.com, so you can obtain the loan or lease that's just right for you.