Introduction
The Biggest Plus
You Have Options
Flexibility
Warranty
Maintenance
Safety
Asset Management
High Mileage
Total Cost of Ownership
What if I am Upside Down?
Introduction
Here at the Arrow Dealerships we believe that leasing is a great way to manage your vehicle expense. By developing a planned trading cycle program for each of your vehicles you know exactly what your cost will be and you will have the peace of mind that you and your family are looking for. Many experts in the area of leasing promote it as a low down payment and low monthly payment program. While this may be true in some cases, at Arrow, we look at it a little bit differently. We believe that leasing provides our customers with the lowest cost of vehicle operation.
When providing your families transportation needs you must consider total cost associated with the vehicle that you choose. These costs include: insurance, maintenance, and the value of your vehicle at the time of trade in. Leasing helps control all of these costs and allows you to manage your vehicle expenses without the worry of the unknown. Our sales consultants understand leasing and will be happy to assist you in setting up a program that is best suited for you and your family.
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ADVANTAGES AND THOUGHTS ABOUT LEASING
The Biggest Plus
The biggest plus is the Lease End Value, or the residual value. As the price of vehicles continues to rise, the problem of negative equity (owing more on your vehicle than it is worth) has become a major cost we must learn to manage. Market conditions are also constantly changing. Whether it be a natural disaster like a hurricane, a man made disaster like 9/11 or an everyday occurrence like a wreck or the fluctuation of fuel prices, it is impossible to predict the value of your vehicle when it comes time to trade. Leasing allows you to transfer the risk of market conditions to a 3 rd party so that you never have to worry about being upside down. If your vehicle is not worth the lease end or residual value at the end…you have options.
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You Have Options
At the end of the lease you are still in control of the vehicle. You have 3 options:
- Keep It! The vehicle is the best vehicle you have ever owned and you aren’t ready to let it go. So you can buy it for the Residual Value.
- Sell It! If the market value is greater than the residual value you can sell it and keep the profit.
- Give It Back! If the market value is less than the residual value you can give it back and avoid the negative equity or loss.
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Flexibility
As your conditions change and you need to have the ability to change with them. Maybe it’s a good news, like a new addition to the family and you need to trade in the sports car for and SUV, or the truck won’t pull the new boat and so you need something larger. Well, by not locking yourself into a 60 or 72 month contract you can get a different vehicle sooner than you were expecting.
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Warranty
Depending on the term of the lease and the miles you drive most vehicles remain under factory warranty for major repairs. So all you have to budget is for maintenance on the vehicle.
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Maintenance
It doesn’t take a rocket scientist to figure out that the best part of a vehicles life is while it is still in warranty, and the older the car gets, the more it costs to maintain it. By keeping your lease term short you reduce the risk of costly repairs as regular maintenance such as oil changes are easily budgeted.
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Safety
Through the use of your planned trading cycle program you can drive confident that those unexpected breakdowns which can occur in older vehicles will not plague you and your family.
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Asset Management
The rule of thumb is to buy assets that appreciate and lease assets that depreciate. You know that the value of your vehicle will be less in three years, so a lease program allows you to plan for this obsolesces.
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High Mileage
Mileage is an important factor to consider when leasing a vehicle. The residual value is determined in part by the number of miles you plan to drive during the lease term. Most residual values are calculated on either 12,000 or 15,000 miles per year. If you drive more than the standard mileage be sure to tell your sales associate so that can be budgeted into your expense.
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Cost of Ownership
Selling Price + Tax, Title and License Fee + Insurance + Lost investment income on cash price + maintenance + repairs – actual vehicle value at time of trade in
Monthly payments + Insurance + Maintenance + Repairs +/- equity at the time of trade in
Monthly payments + Insurance + Maintenance + Repairs – Equity at the time of trade in
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What if I am Upside Down?
The first thing to understand is that you probably didn’t get there overnight. Negative equity usually occurs as you trade in one vehicle for another and then trade again before you have had time to get to that magic number we call equity.
The second thing you have got to understand is that the amount you are upside down won’t go away overnight either.
One thing is for sure, if you keep on doing what you’ve been doing, you gonna keep on getting what you’ve been getting.
The only way, other than cash down, to get out of a negative equity situation is discipline. Americans, by our very nature, are an impatient group. When we want something we want it now. This is the major cause of negative equity; we keep trading before we hit that “magic number”, and we keep adding depreciation on top of depreciation, compounded by longer and longer term financing. This snowball is becoming the industry and out customers biggest headache.
THE ANSWER: Make the commitment and bite the proverbial bullet and keep your vehicle long enough to reach the “magic number”. You can reduce the time it takes by putting down more cash, or adding to your monthly payment if you so choose.
REMEMBER…no matter what you do you will always be upside down without the right cash down payment.
THE KEY: Is to match your desire to trade, with the trade cycle that gets you to the magic number at that time. Let us help you set up a plan that gets you out of your current negative equity and then a plan that coincides with your driving habits.
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