UNDERSTANDING CREDIT

An Important Number

Your credit score is a three-digit number credit bureaus develop by evaluating the information in your credit file. Along with your credit history, it has an impact on whether or not you are approved for a mortgage, car loan or credit card and what interest rate you’ll pay.

Lending Industry Standard

A borrower’s credit score has been proven to be the best predictor of the borrower’s repayment performance. The three major credit bureaus generally use a formula developed by the Fair Isaac Corporation (FICO) to analyze the credit information they have on file for you. Your FICO score is what most lenders use to determine the interest rate you’ll be offered. Borrowers with high credit scores are usually offered lower interest rates; while those with lower scores may still get credit by will have a higher interest rate.

Figuring Your Score

The three major credit reporting agencies may each assign you a different score, based on the specific information each has on file. But they follow a similar method to come up with that number, which ranges from 300 to 850. The median score in the United States is 723. Knowing your FICO score and understanding how it is calculated can help you improve your credit profile and have a clear understanding of what you should expect to pay for financing.

Refinancing

Today’s interest rates are still low, so if you feel your rate is too high on your current auto, boat, or RV please give us a call at 1-866-263-9150 to see if Toyota of Cleveland can help you save money. Contact one of or finance experts today for low rates and refinancing options on automobiles, boats, and RV’s.

Call 1-866-263-9150 or email internet@toyotaofcleveland.com

LEASING

As the costs of vehicles continue to escalate, Toyota of Cleveland has found a way to give you the monthly payment you desire and still drive a new vehicle of your choice. Lease it!

Advantage to Leasing:

• Lower monthly payments and low down payment. Payments on a lease are less expensive than financing because you are only paying for the depreciation, which is the difference between the price of the vehicle and the residual value.

• Upside down. Never have to worry about being upside down where the value of the vehicle is less than the amount owed.

• Always have a payment. For most people, a car payment is like a house payment. You will always have one so why not be driving a new vehicle of your choice every 3 years.

• Asset sense. You should buy items that appreciate and lease items that depreciate. For example, most people would not be too excited about buying stock for $30,000 if they knew that it would only be worth $15,000 in 4 years.

• Low Risk. A bank or lease company is assuming the total risk of what the vehicle will be worth in the future.

• Flexibility. You do not give up the option of owning the vehicle, you just postpone it. This gives you the time to make sure this is the vehicle for you. This makes great sense with advances in technology that have the potential to make your vehicle outdated.

• High mileage drivers can benefit by applying for extra miles up front on a reduced price. The auto industry deducts 23 – 30 cents per mile over your mileage limit when trading in a vehicle.

• Win! Win! In many instances, the residual value is projected to be high resulting in lower monthly payments. At the end of the lease, the lease company absorbs the loss, not you.

• Warranty. The short-term lease leaves you covered under your factory warranty, allowing you to be worry-free about unexpected repair bills.

• Get a nicer vehicle. High residuals allow you to lease a $5000 - $10,000 more expensive vehicle for about the same payment as financing.

• Tax savings. In states with sales tax, you only pay tax on your monthly payment, not the whole vehicle. And in some cases, the entire lease payment may be tax deductible. Consult your accountant for more information.

Your Options at the End of Your Lease:

• Return it to the bank and pay only a small disposition fee.

• Sell the vehicle and keep any amount over the residual.

• Trade it in on a new vehicle.

• Buy the vehicle for the residual amount.

Lease Terminology:

• Cap Cost – the purchase price of the vehicle plus the acquisition fee

• Acquisition Fee – a fee charged by the lender for doing the lease

• Cap Cost Reductions – any trade equity, cash or rebates used as a down payment to reduce the cost of the vehicle

• Residual – a predetermined estimate of the market value of the vehicle at the end of the lease term