I wanted to post this in the ask the hackrs section, but decided that being a purchase/finance question might be offtopic hence why this is here. Was going to assist on leasing a new Lexus for a family member, but they seem more inclined on a purchase.
I have read leasing 101, but what are the 101s on purchasing?
In reviewing their terms I made a list of things I have gone through so far:
Finance or lease: Finance
Captive or non Captive financing: Captive (better rate with 0/60 and no rebates). Are their any origination fees or other fees associated, like Vendor Service Insurance that may be passed on from Lexus to the customer?
Taxable dealer fees list (All I see is the doc fee thats added on)
Pre-incentive Discount, after subtracting all of the taxable fees.
I would say this isn’t always the case, especially if there are cash incentives or special financing. Need to do the math.
Great thread
I’m not aware of any GAP insurance if you purchase or finance, someone will correct me if I’m wrong. That’s a risk you take when purchasing (bank doesn’t share or assume that risk, like a lease).
Depending on the vehicle, if I’m buying:
extended warranty (if I’m planning to keep a modern car 5+ years, I would not roll the dice on any electrical component, especially a hybrid/PHEV/EV). I would research like the car, in some cases I want the first-party (eg ToyotaCare), but sometimes the JM&A or a third party is fine. But I will get a claim during the expected life of that vehicle that will make that worthwhile.
Always do the math on wheel & tire or maintenance.
Etch, LoJack, paint/interior protection, tint, key replacement, dent, accessories etc are a no. Anything I want I can do elsewhere, outside the deal, when I have time to research and shop.
The captive financing decision was decided upon after doing the math as you said. The customer rebates on MY21s are not as strong as they were for the MY20 unfortunately.
If you absolutely must have GAP, get it from a credit union (standalone, or with financing) or see if you can add an endorsement on your auto policy for the same coverage. Worst place to buy it is from the dealer when you pick up the car.
Depends where you live.
IIRC, there are two states, including Ohio, where a loan fee may be charged.
We paid one to Bank of America ($250, if memory serves) on the vehicle we bought after suffering a catastrophic lapse in judgment and moving to Ohio.
(I also noticed a loan-fee disclaimer mentioning this fact on the finance docs I signed in California recently, but of course now I cannot find it back.)
I was today years old when I learned this - very cool. It was not an option the last time I purchased or assisted in a purchase, and I know my auto insurance provides my lease GAP, but they specifically told me they didn’t offer for purchases (chit chat with the rep).
I’m going to equivocate on whether you can get GAP on a purchase from an insurance company; that may be a poor assumption on my part, but you can definitely get it from other sources.
In addition to being offered GAP on my recent finance transaction, it was also offered to us by a CU in California when the Prius was new (speaking of catastrophic lapses in judgment, but at least that one is long behind us).
I’m not 100% sure that we would have had to pay this fee if I’d been more patient and had Bank of America originate the loan directly, but the dealer was able to get us a better rate through B of A than we were able to secure ourselves (even after relationship discount on the APR by going directly).
Looking at the entire agreement, the Loan Processing Fee is the only dollar amount that is pre-printed on the bank’s form.
Make sure you differentiate between purchase and lease incentives. Also, captive financing at a lower rate (sometimes 0%) may make the deal ineligible for cash purchase deals, which can usually be had on a deal financed through non-captive.
A Lexus doesn’t depreciate very quickly. With a down payment, the likelihood of being upside down is diminished (or eliminated, depending on how much they put down).
In order to get anything back on GAP, you’d have to total the car (or have it stolen) and have the reimbursement from the insurance company be less than the payoff. The maximum benefit of the coverage is the dollar difference between those two numbers.
Statistically speaking, just totaling a car is an extremely remote outcome. I have a personal bias against insuring risks this small where the potential loss isn’t catastrophic, because it’s an emotional decision and not a financial one. And I’m generally not much of a risk taker.
All I am going to say is read the fine print. The GAP dealers generally offer covers 125% of the value of the car including taxes/fees while most being offered outside of the dealer cover 110% and do no include taxes/fees. Not all GAP is equal and some might be better than others. Also if you are putting down a large down payment or trade equity, GAP is not something you will need.
Maybe I am misunderstanding the product, but I don’t believe GAP would ever pay 125% of the value of the car plus taxes/fees, because auto insurance pays out first.
And then if the auto insurance payout exceeds the loan balance, GAP pays nothing.
While they want to put down nothing (never personally heard of any dealership, let alone a luxury dealer using captive financing agree to that), I suggested a standard 10% of sale price. Don’t know if that counts as large enough to axe the GAP recommendation.
get a claim during the expected life of that vehicle that will make that worthwhile.
