Questions About Financing

Financing: Understanding rates, co-signers, and down payments.

What rates do you offer?
BMW Of Austin works with several financing institutions, to bring you competitive rates and terms on loans and leases. BMW Of Austin offers flexible rates, terms and payments, so that you can obtain the loan or lease that fits you best.

The rate in your individual financing package is influenced by a number of factors, including your credit history, the term of your loan or lease, the amount financed, and the residual value of the vehicle you lease. Financing through BMW Of Austin lets you enjoy a quick, competitive and straightforward way for you to get your new car or truck.

Do I need a co-signer?
Not necessarily. If your application requires a co-signer, your BMW Of Austin salesperson will let you know.

How would you like for me to pay my down payment?
You can use a credit card (up to $1,000), money order, bank check, cashier's check (made out to BMW Of Austin), or cash.

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

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 one of our finance representatives to arrange that for you.

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 vehicle you choose. You then make a monthly payment to that financial institution (the lessor) in return for the right to use that vehicle for a specified period.

Although you're not the record owner, i.e. the title-holder, of your vehicle when you lease, you get the opportunity to enjoy it for the term of the lease. Oftentimes, leasing gives you the freedom to drive a more expensive vehicle 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 BMW Of Austin, you can arrange for a mileage allowance that's just right for you, so you don't have to pay for any morevehicle than you need to. Competitive rates and flexible terms are available.

How does a lease work?
Your monthly lease payment entitles you to use your vehicle for one month, and you choose in advance the number of months you'll be driving that vehicle. 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 vehicle is effectively yours. You have the responsibility to insure it, and the right to enjoy it within the limits that you've agreed to. Your vehicle 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 agreementallows, you will pay a pre-determined charge per mile. If the vehicle 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 vehicle when the lease expires, 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 vehicle.
    • This is determined by the vehicle'spurchase price (capitalized cost), minus any capitalized cost reductions (down payments, trade-in allowances, and any other applicable discounts).
  • Residual value represents the expected value of your vehicle to the lease owner at the end of the lease.
    • It may vary depending on several factors, including;
      • The rate at which your vehicle is expected to depreciate
      • The length of your lease
      • The number of miles accounted for in your lease agreement.
  • The money factor 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 vehicle 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 vehicle, 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 BMW Of Austin price of your vehicle.

What is an adjusted capitalized cost?
The adjusted capitalized cost represents the real cost of your vehicle to the lease owner when you take delivery. It is the price of your vehicle, 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 moneys you decided to pay in full up front, such as the amount of your down payment.

If I lower my adjusted capitalized cost, are my payments lower too?
Generally, yes. On any given vehicle, 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 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 vehicle's residual value at the end of the lease. It is possible for two vehicles to have the same adjusted capitalized cost, but for one vehicle'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 vehicle, a lender such as a bank, credit union, or other financial institution advances the money needed to buy the vehicle after considering your trade in or down payment. You make monthly payments to repay that loan in full over an agreed period of time.

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 vehicle 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.

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