Loan Basics
What is APR?
Annual Percentage Rate expressed as a percentage and is the cost of total interest paid as a yearly rate.
What credit score factors affect approval?
Minimum FICO, Delinquent Obligations, Comparable Credit, Credit Utilization
Best Option for 20,000 miles/year
Finance, or high mileage lease
What is MSRP?
Manufacturer's Suggested Retail Price
First Time Buyer - Lease or Finance?
Either one is an option when leased through Affinity FCU/CULA!
What Determines your monthly payment?
What is debt-to-income?
The percentage of monthly total credit obligations in relation to monthly gross income
Best Option for wanting the most up to date technology?
Lease as it allows you the ability to get into a new car every 2-3 years.
What is Invoice Price?
The cost the dealer pays for the vehicle from the manufacturer before any added credits such as holdback
Self Employer Borrower - Lease or Finance?
Generally, a self-employed borrower may be permitted to deduct their lease payments. They should consult with a tax professional however leasing may not always be the best option and more questions are needed to determine the best option for the member.
The percentage of amount financed in comparison to the value of the financed collateral
Why might two people with the same score receive different rates?
Dealer Markup. Although AFCU does not currently allow rate markups on or indirect retail or leases, some lenders pay a "Dealer Reserve" as compensation to the dealer for arranging the financing of the vehicle.
What is residual value?
The projected value of the vehicle at the end of the lease term, which in turn is the price to buyout your leased vehicle, before any purchase option fees.
What does depreciation mean?
The difference between the loss of value that is incurred when you first acquire the vehicle, and the value at the time you "dispose" of the asset.
Both are options, and how much can be financed will depend on the applicants credit and new collateral value. If approved and on a leased vehicle, the member will start fresh after the lease has reached the end of its term and they can choose to re-lease a vehicle, buy it out, or simply return the vehicle and finance or lease another one.
What is Negative Equity?
Owing more on the loan or obligation than the vehicle is worth
Name three items lenders may verify before approval
Credit, Income, Collateral
What occurs if you exceed lease mileage and what are your options?
You incur a cost per mile, but have the ability to pay the excess mileage, or buyout the vehicle with no penalty.
Why do lenders use book values on Used Vehicles?
To obtain a fair market value on the vehicle to determine the level of risk associated with the credit request.
Buying a used vehicle with 180k miles?
Finance, if able. Some lender programs will not allow financing on this type of mileage and the customer may have to pay for the vehicle in cash.
Explain why a longer term usually costs more overall?
A borrower has a 780 credit score but a recent repossession. Would you recommend an approval or a decline
There is no clear cut answer. Every application needs its due diligence and every application scenario is different. Start with gathering a member interview, proof of income to verify affordability, and reviewing all the key aspects of the credit application and length of time since the delinquent credit.
Member drives 8k miles per year and invests any payment savings from their previous auto. Would you recommend lease or finance?
Lease
Why might a lender finance less than the purchase price?
Maximum LTVs based on the credit parameters for the applicants specific credit tier/scenario
A customer wants the lowest payment regardless of total cost - what options and trade offs are there?
Leasing generally will offer the lower payment option, but does come with some benefits and cons (mileage restrictions, repair costs, technology options)