aherndon@crossbowgroupinc.com 949 279 6062

Outsourced Lease Program

‘Cash Flow and Capital Drive Profits & Return on Equity-Investment’ Dealers/Originators & any Lien Holder who properly control their Challenged Credit - BHPH Level business model know sufficient amounts of both (cash flow & capital) are hard to come by in the current economic environment. The higher average ACV is constantly devouring capital…which triggers cash issues while down payments are static. NABD: “…in 2008, the average cash in deal exceeded $5,000 for the first time in 10 years, according to industry benchmarks.” With more dollars going for higher ACV vehicles and down payments remaining static, cash flow is negatively impacted. This process did not change in either 2009 or 2010, except to go up further. Adequate capital is essential to grow and prosper. In the current environment’s tighter credit markets, capital is scarce. Originators/Lien Holders/Dealers must increase their cash flow just to maintain the status quo. Hence, most have been working hard to refine their operations, implementing new technologies and training their personnel in an effort to boost positive cash flow. However, there are limits to what can be done before you get diminishing returns. Even smart originators/dealers/lenders with highly trained personnel using the latest technologies can only squeeze the grape so hard...until the last drop is gone. After that, they must look outside their comfort zone (the proverbial ‘Box’) for a chance to increase cash flow. In most states, the next opportunity to significantly increase cash flow comes from moving from traditional sales and lending to Outsourced Leasing. The impact can be huge. In most states, sales tax on a lease is paid on the payment rather than up-front on the selling price of the vehicle. Example: $8,000 vehicle in a State with 7% sales tax due up-front using a retail installment sales contract, or direct loan agreement, sales tax of $560 is due…NOW. Using a lease agreement, it would be $7 a week! The operator/originator doing 30 leases a month would pay the state approximately $525 in sales taxes for the month versus $16,800 for conditional sales contracts! I believe that is called Cash In Fist. It limits the up-front expenses of the Challenged Credit Consumer while retaining cash in the deal. Now that is positive cash flow – cash flow that can be used to pay down debt, put more vehicles on the road, increase a portfolio, or create liquidity. Yes, leasing requires some changes on the part of the originator, but the dynamics and requirements of the Challenged Credit - BHPH Industry TODAY related to capital and cash flow…suggest it is a rapidly growing niche that all originators/dealers & lien holders will be compelled to evaluate.

Are you ready to climb out of the box?