Customer is responsible for controllable and non-controllable factors:
Mileage
Condition
Accidents
Higher gas prices
New models/Enhanced technology
New vehicle Incentives
Poor third-party reviews
Economy/market conditions
Weak resale value
Finance term
60
months
Finance end-of-term options
Keep the vehicle
Sell or trade the vehicle
Customer is responsible for controllable factors:
Mileage
Condition
Residual = purchase price
Lease term
36
months
Lease end -of- term options
Purchase the vehicle
Sell privately/pay off residual
Negotiate trade-in
Extend the lease
Return lease vehicle
Customer Options
When Financing:
Customer will own the vehicle without a lien after the term of the loan.
When LEASING, customer delays the purchase decision and has options:
Buy it and keep the vehicle
Buy it and sell the vehicle at a profit (If market above residual value).
Buy it and trade it for another vehicle (if market above residual value).
Extend the lease
Return the vehicle to the dealer with no resale or trade-in hassles.
Choosing to lease may offer the additional benefits of lower monthly payments and less cash outlay than with a retail contract.
Wear & Use Considerations
When Financing:
Owner is responsible for all wear and use.
As wear and use increases, vehicle depreciates
At time of trade or sale, wear and use negatively affects the market value of vehicles.
When LEASING:
Lender is responsible for all normal wear & use.
Lessee is charged for excess wear and use.
Refer to sample condition report for example of both normal and excess wear, as well as to the Excess Wear & Use Protection Plan brochure and the Lease-End brochure. Note that the EWU Protection Plan is not available in all states.
Mileage Considerations
When Financing:
Owner is responsible for miles - ALL
AAA Study mid-size sedan, 5 years*. - .374/mile
When LEASING:
Standard mileage allowance - 15,000/year
Additional miles at inception - .10/mile
Excess miles at lease end - .15/mile
*AAA's 2012 "Your Driving Costs" study
Considering Paying Cash?
If paying cash to avoid interest:
In exchange for all the payment upfront, the Lender discounts the money factor and rent charge.
The cost of money represented by the rent charge may be lower than other lease or finance programs
If Paying cash to avoid monthly payments:
There are no monthly payments with a 1-Pay lease
Investment or Expense?
It may not be the best use of a customer's cash to tie it up in a fixed asset (the vehicle that depreciates), rather than something that might increase in value.
Leaves cash available for an emergency or opportunity
Fixed residual value (based on mileage and condition) provides market protection.
