CONSUMER ALERT!

What you should know about financing a vehicle with a credit line

The interest on a credit line is a "variable" (floating) rate. This means that when the prime rate changes, so does the interest charged on your credit line. You have no protection from increasing interest rates. The advantage of financing with a "fixed" interest rate from the dealership's Dealer Plan is that the interest rate is "locked in". This protects you from climbing interest rates. In the event that you finance with the Dealer Plan when interest rates are high, you would have the option of using your credit line to pay out your Dealer Plan loan if the rates began to dramatically decrease. This is made possible by the fact your Dealer Plan loan is an open agreement that can be paid into or paid off at anytime without monetary penalties.

SPECIAL NOTE: Many people are attracted to credit lines because of their low interest rates. Rates on an unsecured (no cullateral) credit line can be as low as one or two points over the prime rate. However, credit line interest rates can be substantially increased by the branch. If, for example, you were slow repaying your monthly credit line obligation for 2 or 3 months (because of some unforeseen difficult circumstances), your credit line interest rate could be more than DOUBLED! Credit line rates can increases even if the prime rate doesn't!

FURTHERMORE: In many cases, Dealer Plan "fixed" interest rates will be less than 2 percentage points higher than credit lines. With the "fixed rate" you always know what your interest rate will be, how much your payment will be, and exactly when it will be paid off!

If you have an outstanding balance of $30,000 on your credit line because you have used it to pay for your vehicle, this means that your monthly payment would be 3% of $30,000, which equals $900 a month. This is much more than what a monthly payment would be over a normal 60 month term on a Dealer Plan Loan (approximately $600).
You may also be given the option of making "interest-only" payments. In this case, you are only paying the interest charge for a single month and not paying down the principal amount of the outstanding balance. Although this may seem convenient and affordable, for many people this becomes a TRAP where they become comfortable paying the lower amount each month, yet never pay down the balance.

Many credit lines for businesses have fees such as a $15 per month usage fee and a charge to certify cheques (even "secured" credit lines). Even if you are able to obtain a very low "variable" interest rate with your credit line, these extra charges end up costing you more per month than a higher "fixed" interest rate through the Dealerships Dealer Plan.

Disability insurance on a credit line does not usually cover the entire payment; rather it covers the payment on the "average balance" over the previous twelve month period. You may be in a situation where you are unable to cover the minimum required payment on your "current" balance even if you have the disability coverage.
Unlike Dealer Plan disability insurance, credit line coverage often requires the completion of a medical questionnaire at time of credit line application to qualify for the coverage. You can even be denied coverage based on your answers to the questionnaire. Further, disability coverage on credit lines are referred to as "elimination" pulicies. This means that there is normally a "wait period"; a period of time where no benefits are paid. Ninety day wait periods are common with credit lines. Credit lines coverage may have other restrictions before benefits are paid.
Disability insurance on a Dealer Plan loan makes your loan/lease payments in the event that you are ill or injured and cannot work at your job and chosen profession. There are no medical questionnaires, blood or urine tests or physical examinations required for acceptance into the program and all customers are accepted into the program regardless of occupation and current health. All customers in the insurable age group (e.g. ages 18-65) also pay the same premiums. There are no limits to the number of claims during the life of the loan/lease agreement, confinement to the home or hospital is not required for payment of benefits, the coverage pays in addition to any other insurance benefits or salary continuations being received and there is no income tax payable on the benefits. You can even choose various "retroactive" plans that pay benefits from the first of the recorded illness or injury.

A credit line is like a credit card in that it can be utilized on an on-going basis. This is referred to as "revulving credit". The "trap" that many credit line customers fall into is that they never pay off their vehicle or they pay if off very slowly over a long period of time. Many also pay off "some" of the balance and then run it up again with other purchases. The interest charges become extremely expensive when they are tacked onto large dullar balances over long periods of time.
Dealer Plan loads are referred to as "installment credit". You make equal monthly payments based on the initial amount financed over a chosen "fixed" term (e.g. 60 months).

There is no guaranteed re payment term attached to a credit line (e.g. like a 58 or 60 month term on a conventional loan). Since the term is not guaranteed by the financial institution, this means that the line can be "called" at any time. If the financial institutions has concerns about your ability to repay the balance owing on your line (because of an economic recession, a downturn in your career field, job loss, ect.) they can demand FULL repayment of the balance owning on thirty days notice. The financial institution may also become nervous about your ability to repay when your credit line is constantly at its maximum and you are making interest-only payments. In some cases the financial institution may force you to close your credit line and re-finance the balance on a high interest consulidation loan. In this situation, not only do suffer the high interest rate, but your credit rating is damaged as well. The credit line is reviewed each year by the financial institution to decide whether or not to allow it to continue.

Credit lines are offered to people like you that have established an excellent credit rating, a good relationship with your bank, career stability, residence stability and success. Credit lines are a "privilege"; the unmonitored use of the banks money for your own purposes. Personal credit lines were truly designed for things such as:
Home additions, improvements or remodeling
Home Landscaping or a poul
Home theatre
A vacation
A child's university fund
A child's wedding
Debt consulidation
Cash for an investment opportunity
Why waste the privilege of your credit line on a vehicle, when low, "fixed" rate interest financing is so easily available through your dealer. Have your new vehicle financed by a Dealer Plan loan and still have your credit line untouched and completely available for whatever you want!

What you should know about paying cash for vehicle

Many mutual funds suld ten or twenty years ago have significant monetary penalties if they are cashed out before their maturity. You may wish to leave your investment in tact and finance instead.

You are depleting a large sum of money from your savings or investments when they pay cash for a vehicle. This money could be needed for emergencies later. e.g.:

In the event that you become disabled and unable to work, you may have little money to draw upon from savings for income if you have paid cash for you vehicle. By financing the vehicle and insuring the loan with credit life and disability insurance, you can leave your cash in saving or investments. In the event that you were unable to work, you would have your saving or investments in tact and be paying for the vehicle with insurance benefits instead of your savings.
If you are over fifty years of age, you have the added benefit of being able to qualify for very inexpensive credit life and disability insurance premiums. This is due to the fact that the insurance is an "average premium", which means that all customers that qualify (generally between the ages of 18 and 65) pay the same premium. Customers over fifty would normally pay much more money for insurance than a younger person if it was purchased directly from an insurance company.

Paying cash for a vehicle depletes money from your saving. This limits your investment opportunities. At some time in the future if your still have your savings, they could be used for:

Most mortgages allow you to pay off up to 15% of the principal amount borrowed each year without a penalty. By paying down your mortgage instead of paying cash for your vehicle, this significantly reduces the interest charges and the amortization of your mortgages. The savings more than offsets the cost of interest on a vehicles loan.

When you pay cash, there is no establishment of a positive credit rating. A positive credit rating is essential for borrowing money from financial institutions for things such as mortgages, lines of credit, home improvement loans, credit cards, ect. Financing through your dealer plan establishes your credit rating.

Excellence is Worth Preserving

It's about peace of mind

Your Vehicle is a big investment, an investment that needs to be cared for. Statistics say that most major repairs will occur after the original factory warranty has expired. Protecting yourself against unexpected repair expenses, Enhancing the resale value of your vehicle, All repairs using Lexus quality parts and service, are just a few reasons to consider Lexus Extended Care Protection.

It's about making things a little easier

Valid in Canada and the US we make it easy to keep your repairs as stress free as possible and we can even include the cost of protection in the financing of your vehicle. It's easy.

It's About knowing what is Covered

Services Included:

Trip Interruption

In the event that a covered component fails while traveling (over 80 km away from home), Lexus Owner Protection will assist you with up to $100 per day for hotel, meals and alternative transportation expenses.

Vehicle Rental Assistance

Lexus Owner Protection provides you with a $60 per day substitute transportation up to 5 days, in addition to the Lexus Loaner Car Program standard, with every Lexus (on applicable plans refer to Lexus Owner's Manual Supplement under "Special Services" for more information).

Travel Planning Assistance

Let us assist you on your next road trip with a personalized travel planner; which includes colour maps; alternate routes and trip log; tour and accommodation directories and lists of Lexus Dealers, notable attractions and entertainment en route.

Mechanical Protection

Component coverage includes Powertrain components, as outlined in your Lexus Owner's Manual Supplement under "New Vehicle Warranty", and other important components outlined below. With Lexus Owner Protection the length of coverage is extended from the 48 month/80,000 km to the preferred term selected.

Roadside Assistance Program

24 hours a day, 365 days a year, one phone call brings emergency road service and mechanical breakdown service as outlined in your Lexus Owner's Manual Supplement under "Roadside Assistance Program". With Lexus Owner Protection, coverage is extended from the original 48 months to the preferred length of time selected with unlimited kilometers.

Services included:

Towing (up to 300 km per occurrence)
Battery boost
Tire change
Winching from ditch
Fuel delivery if you are stranded (up to $100 per occurrence)
Key lockout service
Spare key delivery (up to $100 each time, for any of these services)

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Powertrain Coverage

Engine

Engine block and all internal components, cylinder heads, oil pan, engine mounts, intake manifold, exhaust manifold, harmonic balancer, flywheel, starter, air cleaner, timing belt and cover, accelerator rod and cable, vacuum pump, expansion plugs, engine dipstick and tube, valve covers, camshaft cover, timing belt tensioner, water pump, fuel pump, fan and/or motor, fluid coupling, radiator, thermostat, oil cooler and steel lines, injection pump, timing gear and chain, engine control computer, oil pump.

Manual Transmission/Transaxle or Automatic Transmission/Transaxle

Case and all internal parts, transmission mounts, transmission cooler and steel lines, oil pan, clutch cover, clutch master cylinder, clutch release cylinder, torque converter, dipstick and tube, kickdown linkage.

Front / Rear Wheel Drive

Final drive housing and all internal parts, drive shafts, front hub, bearings, differential carrier assembly, axle carrier, axle case, axle bearing, rear axle hub bearings, universal joints, propeller shafts, axle housing and all internal parts, drive shaft centre supports, constant velocity joints and boots, axle shafts, front axle hub bearings.

Four Wheel Drive

Transfer case and all internal components, front/centre/rear differential assemblies and all internal components, front hub and spindle assembly (including locking device).

Seals/Gaskets/Fluids/Filters

All seals and gaskets used to contain fluid/lubricants within covered components, replacement of coolant, refrigerant, lubricants and filters when required as a result of a failure of a covered component.

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Comprehensive Coverage (In addition to all components listed under Powertrain coverage.)

Safety Restraints

Front and rear seatbelts, airbags.

Front/Rear Suspension

Suspension arms, stabilizer bars, stabilizer links, ball joints, stabilizer bushings, wheel bearings, shock absorbers, shafts, steering knuckles.

Steering

Steering column, shaft, power steering pump, power steering pulley, rack ends, steering wheel, linkage, tubes, rack end boots, steering gear, power steering fluid reservoir tank, hoses.

Heating/Air Conditioning

All A/C components, blower motors, electronic heater control unit.

Brakes

Master cylinder, brake booster, calipers, wheel cylinders, proportioning valve, hydraulic lines, ABS actuators, parking brake, control handle, cables, master cylinder reservoir, actuator, pedal.

High Tech Components

All computers, actuators and sensors used in the following electronically controlled units and/or systems: electronic modulated suspension system, progressive power steering system, electronic controlled transmission, antilock brake system, cruise control system, body and door control computer. All sensors. including hoses, pipes, nuts, clamps, wires, switches and sensors.

Emission Control

Electronic fuel injection system, distributor, ignition coil, igniter, ignition wire, fuel tank, fuel cap, hoses, pipes, air pump, air injection manifold, throttle positioner, modulator, catalytic converter, exhaust pipe (manifold to catalyst), EGR pipe, EGR valve, vacuum switching valve, all parts used in positive crank case ventilation system, air injection or air suction system, emission control sensor.

Electrical System

Power window motors and regulators, exterior mirror motors, electric door lock actuators, power seat motor and gears, sunroof motor, wiper motor, washer pumps, all manually operated switches, wiring harness, speedometer and cable, wiper arms, linkage and other parts used in the preceding components and/or systems including hoses, pipes, nuts, clamps, wires, switches and sensors.

Body Hardware

Door hinges (front/rear/hatch), inside door handles (front/rear/hatch), outside door handles (front/rear/ hatch), hood and hatch supports, fuel door release cable, trunk release cable, child safety door lock mechanism.

Select From 9 Excellent Terms Available:

• 48 Month/100,000 km (lease plan)*
• 48 Month/120,000 km**
• 72 Month/120,000 km*
• 72 Month/160,000 km*
• 72 Month/180,000 km*
• 84 Month/140,000 km*
• 96 Month/120,000 km*
• 96 Month/160,000 km*
• 96 Month/200,000 km*

* Protection is provided for up to the chosen number of month or kilometers, whichever comes first.
** Retail Extension.  Must be purchased and approved by the ECP Division prior to the expiration of the 48/120 plan.

Life and Disability Coverage

There are those who feel that even at a low price, loan repayment insurance is an unnecessary 'Luxury.' The "it could never happen to me attitude is understandable when your health is good and you're in the prime of life. Nevertheless, the statistics on disability and death cannot be ignored. The best way to achieve peace of mind is to plan ahead. So it's good to know that the insurance coverage you choose will reduce the financial impact on your loved one if anything should happen to you.

If you were to suffer a fatal injury or illness, life coverage will pay off the insured portion of your loan.

If you become totally disabled through illness or as a result of injury, disability coverage will take care of your loan payments.