Franklin Sussex Auto Mall Blog

After our goulish, haunted halloween party … come back and join us on Saturday for our 2nd annual Midnight Madness Sale with 15 hours of incredible month end price slashing madness! With over 500 new and 250 pre-owned vehicles to choose from with 0% financing available … how can you refuse? If you have a car you want to get rid of, we’ll also give you $1,000 over book value on your trade-in! Hurry in … no application will be refused!

When you come into Franklin Sussex Auto Mall, purchase a new or used vehicle and begin filling out all of the paperwork, our finance department might present you with an option called GAP Insurance. The cost of GAP Insurance is added to your monthly payment and usually only costs a few extra dollars per month.

GAP is often used as an acronym: Guaranteed Asset Protection. This type of insurance promises to make up the difference between the amount you owe on the vehicle and the amount it is actually worth (the gap), in the event of a loss due to theft or an accident.

So what exactly is GAP Insurance and why should you buy it?
As most of you probably know, your vehicle will lose value the moment you drive it off the lot, especially in the case of a new vehicle. In fact, in most new vehicle finance scenarios, you will likely owe more than the vehicle is worth for many years. In the event of a total vehicle loss, most insurance policies will only pay the current value of the vehicle. Since the current value is likely less than the amount owed, the difference becomes the responsibility of the vehicle owner.

This is where GAP insurance comes into play. GAP insurance pays the difference between what you actually owe and what the vehicle is worth.

If you are leasing, every manufacturer’s captive finance company (along with most of the other major independent leasing companies) include GAP insurance in the lease. They want to be protected, since it is their vehicle, and not yours. However, it is always a good idea to read your lease contract to make sure GAP is included. The coverage is usually listed on the back side of the lease contract

What about if you are financing?
For a new vehicle, I would seriously consider it. The added cost is minimal and it gives you piece of mind in the event that something happens. Exceptions would be if you have put a large percentage down (40% or more) in the form of cash or trade-in. With that much down, you will likely not be upside-down, or if you are, not for very long.

For the used vehicle buyer, it becomes an even bigger value question. Since used vehicles loose value at a slower rate, relative to newer vehicles, you may not be as upside-down for as long of of a time. However, if you are financing for extended terms (60 months or longer) or have a high interest rate, then it might be a good idea to purchase GAP insurance.

Information Provided By: Edmunds.Com

When it comes time to select your next vehicle, you are presented with a multitude of decisions to make. What interior and exterior color? Sports package or Limited package? To lease or to buy?

Even though I am one of the top Finance Managers in the country, even I cannot help you with the first two questions … but I can help you when it comes to whether you should lease or buy your next vehicle!

The processes for each are very different and can often be very confusing because of the vast amount of terminology that is used. To help cut through everything and make things easier to understand, here are a few simple comparisons to help you decide which avenue is best for your situation.

Car Ownership
When you lease a vehicle, you do not own it. Instead, a leasing company lets you “borrow” it over a specified period of time. During this time, you get to use the vehicle as if it were your own but must return it at the end of the lease. If you really like the vehicle, most leasing companies also allow you to purchase it at the end of the lease. However, when you buy the car, you are the owner for the entire term and are not required to return the vehicle at the end of its term.

Up-Front Costs
Whether you purchase or lease a new vehicle, most of the time you will have to provide some money to the dealer to cover up-front costs. In both cases, these costs usually cover the first month’s payment, a refundable security deposit, taxes, registration or other fees. Since each program and company is different, make sure you inquire about what the up-front costs actually cover when the time comes for you.

Monthly Car Payments
When you lease a new vehicle, your monthly payments are often significantly lower than if you were to purchase the vehicle due to the fact that you are only making payments on the vehicle’s depreciation during the car lease term (plus interest, taxes and other fees). When you purchase the vehicle, your payments might be higher because you will be making payments on the entire purchase price of the vehicle over the term of the agreement (plus interest, taxes and other fees).

Vehicle Return
At the end of a lease, you can simply “walk away” after paying any end of lease fees (damage, over mileage, etc). When you purchase the vehicle, you will have to sell it on your own or trade it in when you decide to get another car.

Mileage Restrictions
Leases are calulated down to what the vehicle will be worth at the end of its term with you. This includes consideration for the wear and tear on the vehicle as well as the number of miles you drove. All leases give you the option to pick how many miles per year you would like to account for (often 12,000 or 15,000). The more miles you add, the higher the monthly cost due to its lower value at the end of the lease. Does it mean that you can only drive that amount of mileage per year? No. It gives you a threshold that you should not exceed, but in the event you do, the leasing company will charge you a few cents per mile over your overall threshold. When you purchase the vehicle, you can drive as many miles as you want … but keep in mind that the more miles your car had, the less its trade-in or sellable value.

Excess Wear And Tear
As I stated in the last paragraph, the leasing companies consider the wear and tear on a vehicle when they place and end value on it. When you turn in your vehicle, it will usually require an inspection by the dealer (or leasing company) to determine if you have had more than the average amount of wear and tear on the vehicle. If you have exceeded the average, you will have to pay extra charges when returning the vehicle. However, when you purchase the vehicle, there are no limits or charges for wear and tear … but keep in mind, the more wear and tear you have, the less its trade-in or sellable value.

Agreement Terms
Car leases usually last for two to four years and require you to either return the vehicle or puchase it at the end. Typical car loans last four to six years after which you will have no further payments and can keep or trade it in.

Hopefully this information will help you the next time you are in the market for a new vehicle!