YOU CAN’TAFFORDTO BUYMY CAR!BRUCE MOUNCEY OF ROLLING HILLS AUTO PLAZA

MY MISSION IS TO HELP YOU MAKE SMART CHOICES

• I HELP THE BEST PEOPLE, TO DRIVE THE BEST CARS, THE BEST WAY POSSIBLE.

• The “BEST PEOPLE” is YOU, the educated customer.

• The “BEST CARS” are the 3 best brands available, TOYOTA, HONDA, AND NISSAN.

• The “BEST WAY POSSIBLE” is through LEASING.

• Today I want to talk about the last part, leasing. If I can’t convince you why leasing is the best way to drive a car, in ONE slide, you don’t need to read any further.

FIRST, AN IMPORTANT CONCEPT: DEPRECIATION

• Let me take an analogy from home ownership to explain a concept:

• One of the benefits of buying a home is that you have the ability to capture the appreciation, if the value of the home goes up.

• But in times when the homes values are falling, does anybody want to “capture” the DEPRECIATION?

• So, if vehicles typically depreciate, why would anyone that is smart enough to lease a depreciating house, choose NOT to lease a depreciating car?

• Can I share a little more information with you now?

TYPICAL BUYER’S PHILOSOPHY

• Leasing is complicated/waste of money/somehow illegitimate

• (Really) I want to own because I understand ownership:

• Pay the negotiated price

• Drive the vehicle for a while

• (The vehicle depreciates in value)

• Trade the vehicle in for some amount

• Do it again

• Life is rarely this simple, and the simple solution is rarely the least expensive

(SOME) DRAWBACKS OF OWNERSHIP

• You assume all the risks that come with ownership:

• You are committed to pay the whole price of the vehicle no matter what

• If you pay cash, your cash is tied up in the vehicle (CASH FLOW)

• Borrowers pay interest on the whole price of the vehicle (CASH FLOW)

• Sales tax is due up front (CASH FLOW)

• You do not know what the trade value will be (THE BIG GAMBLE)

• If you have a loan, the equity may not pay off the loan (NEGATIVE EQUITY)

• Accidents reduce the trade value, even if insurance fixes it (DIMINISHED VALUE)

• Insurance may not pay the whole loan off if the vehicle is totaled (THE GAP)

VEHICLE DEPRECIATION: DO YOU WANT ALL OF IT, OR ONLY PART OF IT?

• You can’t totally escape paying for depreciation with a vehicle, but you CAN make a smart decision about HOW MUCH of it you are willing to pay for.

• Let’s use a different term for “purchasing.” Let’s call it, “Pre-paying for 100% of the depreciation.”

• Likewise, “leasing,” is the same thing as, “Paying for PART of the depreciation.”

• When you purchase, it is as if you plan on keeping the vehicle forever, so you must pre-pay for 100% of the depreciation up front. Then, if you sell it later, you will recapture whatever depreciation is left unused.

• When you lease, you only pay for that part of the vehicle you are going to use up.

HOW AUTOMOBILE LEASING WORKS

• Instead of paying for the whole purchase price, you pay only for the portion you use. This is called the “capitalized cost.” You also agree to drive the car for a certain time.

• You only pay interest on the capitalized cost. (This is a big deal!)

• You only pay sales tax on the lease payment each month, not on the entire purchase price, and not up front.

• The guaranteed repurchase value at the end of the lease is fixed by the factory. This is called the “residual.” The vehicle will never be worth less than the residual.

• You have three options at the end of the lease: Turn it in if there is no equity, or either trade it in or buy it outright if there is equity in the vehicle.

SINGLE-PAY LEASE VS. CASH PURCHASE

• $25,000 purchase price

• $25,000 cash outlay for purchase

• $12,987 cash outlay for lease

• Sales Tax: $2,112 up front for purchase; $1157 up front for lease

• Lease residual= $12,500

• Equity= ???

• Cash tied up for 3 years: $27,112 for purchase; $14,144 for lease

• Cash that stays in YOUR bank account with a lease: $12,968

P U RCHASI N G L EASI N G

2112 1157

25000

12987

12968

TOTAL CASH OUTLAYSales Tax Cash outlay Savings

LEASE VS. PURCHASE CASH FLOW WITH FINANCING

• Example: $25000 purchase price

• 60-month loan, 36 month lease, both traded in at 36 months

• $0 down for both; 2.5% interest

• Sales Tax: $2112 up front for purchase, $32.13 per payment for lease, or $1157 (8.45% locally)

• Payments: $443.68 for purchase, $360.77 for lease

• Lease residual=$14,500

• Equity=???

• Total cash outlay: $18,084 over 36 months for purchase, $14,144 for lease

• Net lease cash savings: $3940

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Down Payment Taxes 36 Payments Cash Difference

Cash Flow of Purchase vs. Lease

Purchasing Leasing

BREAKING NEWS: LEASES GO ON SALE!

• Actual sale offers taken from Honda website on 5/26/16, 2016 Accord LX

• $23,840 purchase price, 60-month loan, 1.9% interest

• 36-month lease, 0 down

• Sales Tax: $2014 up front for purchase; $20.28 per payment for lease, or $730 (8.45% locally)

• Payments: $416.82 for purchase; $240.00 for lease (!)

• Lease residual= $13,588

• Equity on purchase= $???

• Total cash outlay: $17,019 over 36 months for purchase; $9,130 for lease

• Net lease cash savings: $7889

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Down Payment Taxes 36 Payments Cash Difference

Cash flow of Purchase vs. Lease on sale

Purchasing Leasing

THE BEST WAY: LEASING

• LEASING IS ALL ABOUT AVOIDING RISK. SMART PEOPLE AVOID RISK.

• NO GAMBLE AT TRADE-IN TIME

• ONLY PAY FOR WHAT YOU USE

• ONLY PAY INTEREST ON WHAT YOU USE

• ONLY PAY SALES TAX ON WHAT YOU USE

• LEASES OFTEN GO ON SALE, SAVING YOU EVEN MORE!

• TRADE IN ANY TIME, JUST LIKE A PURCHASE

• TAX DEDUCTIBILITY FOR BUSINESSES – 100% OF PAYMENTS ARE DEDUCTIBLE

• EASIER FINANICAL PLANNING

THE BEST CARS: TOYOTA, HONDA, AND NISSAN

• Leasing works best if you lease the RIGHT vehicle.

• Rolling Hills Auto Plaza is one of only a handful of places in the country where you can shop for the three top import brands in one place.

• The Toyotas, Hondas, and Nissans at Rolling Hills Auto Plaza have some of the best lease residuals on the market. The result: Lower payments than competitors, for higher-quality vehicles(according to Kelly Blue Book, Forbes, Consumer Reports, etc.).

• Now, one last surprise: You can lease Certified Pre-Owned vehicles, too!

THE BEST PEOPLE LEASE TOYOTAS, HONDAS, AND NISSANS FROM ME, BRUCE MOUNCEY, AT ROLLING HILLS AUTO PLAZA

IF YOU WOULD LIKE TO SAVE $50-250 PER MONTH ON YOUR CAR, CONTACT ME AT (816)671-4546, TO ARRANGE A TIME WHEN WE CAN VISIT, TO SEE IF I CAN POSSIBLY HELP YOU WITH YOUR NEXT VEHICLE LEASE. OR EMAIL ME AT WMOUNCEY@ROLLINGHILLSAUTO.COM.