Traditional auto financing with lease benefits.

Routing Number: 282075028

Lease Alternative Loan

Arkansas Federal Credit Union’s Lease Alternative Loan is similar to traditional retail financing, but includes some benefits much like a lease. It could offer lower monthly payments than traditional financing because members do not pay the entire principal balance over the term of the loan. Once all payments have been made and the loan reaches maturity, a final lump sum or balloon payment remains and the member has several options to satisfy the remaining loan obligations.

Key Facts


Lower monthly payments than traditional financing (based on difference between residual value and total amount financed) on similar term loan.

One large lump sum (balloon) payment of remaining balance due at end of contract term


Member is the titled owner of the vehicle

Can sell back vehicle once loan balance is paid off and contract obligations are met


No up-front costs or early termination fees

No higher insurance premium required

Easy “walk-away” option at loan maturity1

Buy new or used (up to 5 years old)

Trade-in, pay-off, refinance or sell at any time

Payment Example2018 Honda Accord 4dr Sdn EX AT

  Traditional Loan Lease Alternative Loan
Loan Amount $25,000 $25,000
Loan Term 60 months 48 months
Guaranteed Future Value n/a $10,0252
Monthly Payments $450 $3953

How Lease Alternative Loan Works

Eligible Vehicles

New and used vehicles (up to five model years old)

All vehicles excluding motorcycles, commercial vehicles and RVs

Financing Terms

24 - 60 months

Residual Value

Established based on the term of the loan using industry approved guidelines similar to leasing


The difference between what the member pays for the vehicle and the residual value is used to determine the principal portion of the payment, which results in a lower monthly payment than conventional financing


At any time during the loan term borrower(s) can:

Sell the vehicle, pay the loan balance (including residual value) and keep any difference

Use the vehicle as a trade-in.

Keep the vehicle and refinance final payment amount.

At loan maturity:

Return the vehicle and walk away from the balloon payment.

Lease Alternative Loan Advantages

Member Owns the Vehicle

Unlike leasing where the vehicle is titled in the name of the leasing company, with the Lease Alternative Loan the vehicle is titled in the member’s name. This offers members greater flexibility both during the loan and at the end of the loan.

No Down Payment

Most leases require a down payment - the Lease Alternative Loan does not.

No Security Deposit

Most leases require a security deposit - the Lease Alternative Loan does not.

No First & Last Payments

Many leases require the first and last payments to be made at the time of loan disbursement - the Lease Alternative Loan does not.

Mileage Options

Members can select a 12,000, 15,000 or 18,000 miles per year option. The excess mileage cost is only $.10 per mile, unlike leasing which can cost up to $.25 per mile. End of term fees only apply if the member exercises the “walk-away” option.

No “Back End” Surprises

Members will not be exposed to any hidden expenses either during the term of the loan or at the end of the loan if the member elects to return the vehicle. Leases have an excess wear and tear clause that is not clearly defined. In contrast, the Lease Alternative Loan clearly defines the vehicle return condition requirements.

No Early Payoff Penalty

Because the member owns the vehicle, he/she may pay the loan off, sell the vehicle or use it as a trade-in at any time during the term of the loan - without any penalty. With a lease, you do not normally have these options without a stiff “early lease termination” penalty.

Local Return Option

If the member moves during the term of the Lease Alternative Loan and elects to return the vehicle, it may be returned locally. Many leases require borrowers to return the vehicle to the original dealership, and if borrower has moved adds the added cost of returning it.

Private Auto Insurance Flexibility

With the Lease Alternative Loan, members can determine what private auto insurance coverage they need. Most lease programs/companies dictate the minimum private collision and/or liability insurance coverage that must be bought. This is because with a lease, the lease company owns the vehicle and has exposure to liability in the event the borrower is in an accident. Minimum insurance requirements apply.

Realistic Residual Value

The Lease Alternative Loan uses standard industry residual values. The residual value is not inflated to arrive at an arbitrary lower payment. This means if the member elects to keep the vehicle upon loan termination, he/she will not have to pay an inflated price to pay off the loan.


1. Fees apply if member chooses walk away (turn in) option

2. Residual value determined at time of origination.

3. Payments 1-47 are $395 with a final payment of $10,025 if member chooses to keep vehicle.

(Rates used to figure monthly payments based on 740+ FICO and are subject to change.)