Financing simply means taking out a loan to help make a purchase. Whether it’s through a lender, or bank, or our finance department, you will borrow a lump sum of money with the understanding that you will pay it back over a period of time, plus interest. Financing can help build your credit, and allows you the opportunity to use the vehicle in the meantime, with the promise of ownership in the future.

Leasing, or long-term renting, gives you flexibility without burdening you with added financial commitment. You’ll simply make a down payment, followed by monthly payments until the end of your lease. Once your lease expires, you’ll have the option to return the vehicle to the dealership or buy it outright. The benefit of leasing is that you’ll enjoy the features of a new model while it’s still under warranty, and you’ll be able to return the vehicle in exchange for another one without the hassle.

Your loan term is the period of time agreed upon to repay the loan. Ranging anywhere from 36 months to around 60, the term of your loan determines the amount of your monthly payments, so making sure that your term matches your budget is important.

Principal is the initial value that you’ll need to pay off. If you finance a vehicle that costs $36,000 and make a $3,500 down payment, you’ll have $32,500 as the principal left to repay. Your loan’s interest is always charged to the principal amount.

The more you put down up front, the easier the financing process will be. Also known as a down payment, your money down is the initial amount that you place on the loan as collateral. For example, if you buy a car listed at $50,000 and place $10,000 as your down payment, that $10K won’t be charged interest, and knocks down your principal to $40,000. A bigger down payment gives the lender more confidence in your ability to finance, so it’ll likely shrink the interest rate for the loan, too.

When you borrow money, your lender will apply an interest rate to the principal amount to protect their “investment” in you as a borrower. Because, as with any investment, the guarantee of getting their money back isn’t solid. Your interest amount will show up as a monthly fee in the payment schedule. Also known as APR, or annual percentage rate, your interest rate is calculated according to your credit score and history, the age of the vehicle being financed, the loan term and other relevant factors.

Cash back is a nice incentive that can take hundreds of dollars off of the vehicle’s ticket price before you buy. Alternatively, the dealer can write a check for the amount of cash back advertised. Basically, a dealer could be asking $55,000 for a specific model, offering $2,000 cash back. If you decide to buy this vehicle, you can use that $2,000 as a down payment to reduce the original price to $53,000, or you can drive home with a $2,000 check and a full-priced car.

Rebates are similar to cash back in that they offer a financial incentive for your purchase, but only once the purchase has been completed. When you get the keys to your new car, the dealer will then write a check or give you cash for the amount advertised. Rebates differ from cash back in that they take more time to arrive and most likely won’t be applied to the car’s original selling price.

A trade-in is when you trade your old vehicle to the dealership in exchange for cash or credit towards the new or used vehicle you plan on buying. Depending on the value of your vehicle, it could save you up to thousands of dollars on the purchase.

Depreciation is the decline in your car’s value over time. It isn’t dependent on the condition of the car, but rather reflects the “newness” of your vehicle, as the value decreases slightly with each year. A new vehicle typically loses about 10-20% of its original value as soon as you drive it off the lot. In five years, that shiny new Genesis priced at $44,000 could decrease by 60% of its original price tag, a loss of $26,400.

Equity is calculated by subtracting the total due on your loan from what the car is currently worth. For example, if your vehicle was $15,000 in 2020, but the principal amount is still $10,000, you have $5,000 in equity. Try to stay ahead of depreciation by keeping this ratio balanced.

Negative equity, or an “upside down” car means that you owe more on your car loan than what your car is worth. This can also make it difficult to sell, since you’ll almost certainly be doing so at a sizable net loss. Here at Genesis of Kennesaw, our experts will do their best to keep you informed so that you don’t make any financial decisions that could lead to an imbalanced ratio.