What does Finance Rate for car mean?

Question

I plan on leasing a car within the next 2 months, and I'm looking on carmax.com trying to estimate my monthly payments, I'm not going to borrow any money from a bank, so does finance rate apply to me? could you help me out?

Answer 1

If your planning to lease a car, the first is first. Don't lease a used car. It not worth it. Lease a new car via a new dealer. Lease a new model as soon as it comes out. This way you pay even less for the car and at the end of the lease, just walk away. Then do it all over again, just remember don't do it for More than 24 mos. add miles to the lease if you know your going to drive 15k miles a year just make sure its on the lease. you will not need extended warranties or any mayor service plan. you may consider a plan that cover the normal wear and tear. then you should be fine and have fun till the next lease. New cars only.

Answer 2

No only if you plan on borrowing money to purchase the car. I would strongly reconsider about leasing because there are too many loop holes and some make it almost impossible for you to get out of.If you do not use your vehicle for a business or a tax write off leasing would not be a good idea.

Answer 3

If the car was $20,000.00 with 2% financing it simply means you pay an extra 2% on the principal amount owing each year. The principal amount is the amount you not yet paid off. Basically, they are acting as a bank by letting you have ownership of the car without yet having the money available so in fact you are paying the car company to act as a bank. You are paying for that service with the financing interest rate.

Answer 4

Yes, it does.  When you borrow money from a bank or any lender you have to pay them back with interest.  That's how they make a profit.

Let's say you borrow $10,000 and the finance rate is 10%.   That means by the time you've paid them back you've paid them $11,000.  In other words, they charge you to borrow the money.  Its a bit more complicated than I'm making it but that's it in a nutshell.

And, it will be much more than 10%.   The trick is to always pay more than the minimum monthly payment, otherwise you just end up never paying down the debt.

Answer 5

fyi...

even with leasing there is a "money factor" (roughly the same as an interest rate in a buy scenario)...you do pay interest in a lease!!! you just might not realize it!!

also, if your credit sucks you may not qualify for the "attractive" lease deal you may have seen on tv!!!

and MAKE SURE leasing is really right for you! remember, life might change...driving habits might change...if you do a 12k miles per year lease but end up going over that limit you WILL pay dearly at the end of the lease!!!

good luck!!

Answer 6

Carmax.com has a payment calculator for purchasing, not leasing. In addition not all leases have a "Money Factor", however most do. GMAC leases for instance do not have a money factor where as Ford Motor Credit does.

It is complicating for a consumer to figure a lease payment because of all the different rules involved, such as taxes. Some states require you to pay tax on the whole vehicle (Illinois), where some only tax money down and the monthly payment (Indiana). This can change a lease payment by over $100 per month depending on the vehicle. Also, there are Open End leases as well as Closed End leases, so you will need clarification.

There is a residual value involved, which is used to calculate the estimated value of the vehicle at lease turn in. The MSRP multiplied by the residual percent will give you the residual value, as well as the amount you can purchase the car for at the end of the lease.

Basically the only way to get a valid lease payment is to go to the dealership and have them figure you a payment on a specific vehicle. Good luck and I hope this helps.