leasing terminology presentation
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© 2012, Hyundai Motor America. All Rights Reserved.
LEASING BASICS & BENEFITS
© 2012, Hyundai Motor America. All Rights Reserved.
© 2012, Hyundai Motor America. All Rights Reserved.
Lease Terminology
1:CAPITALIZED COST
2:RESIDUAL VALUE
3:DEPRECIATION
4:MONEY FACTOR
5:TYPES OF LEASES
6:LEASE FEES
7:ADDITIONAL TERMS
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Capitalized Cost
Gross capitalized cost― The agreed-upon value of the vehicle at the beginning
of the lease― The amount the leasing company agrees to pay the
dealership for the vehicle― Computed by adding the agreed-upon value of the
vehicle to the price of allowable options plus taxes and fees
• Certain accessories• Pre-paid maintenance agreements 1:
CAPITALIZED COST
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Capitalized Cost
Capitalized cost reduction• Lowers the gross capitalized cost through:
Down payment Trade-in Factory-to-dealer incentives
1:CAPITALIZED COST
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Capitalized Cost
Net capitalized cost• The gross capitalized cost less any cap cost
reduction Down payment Trade-in Factory-to-dealer incentives
1:CAPITALIZED COST
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Residual Value The estimated value of a vehicle at the end of the
lease Based on M.S.R.P. of vehicle and allowable options Expressed as a percentage of vehicle’s M.S.R.P. Determined based on variables in four categories:
• Industry factors• Product factors• Macroeconomic factors• Transaction factors
2:RESIDUAL VALUE
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Residual Value
The higher the residual value, the lower the payment
Factors that raise residual value:• High quality reputation• Model is new on market• Expected economic boom• Projected high demand for model• Low-mileage driver
2:RESIDUAL VALUE
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Residual Value
The lower the residual value, the higher the payment
Factors that lower residual value:• Long lease term• Projected high unemployment rate• High-mileage driver• Model has been recalled multiple times• Expected oversupply of model
2:RESIDUAL VALUE
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Residual Value
Calculating the residual value of a Hyundai vehicle on an HMF lease― M.S.R.P. before any package discounts― Plus any allowable options― Times the current published residual value percentage for
model and term of lease― Residual percentage based on standard 12,000 miles/year
Deduct 2% from residual value for 15,000 miles/year Additional miles may be purchased:
– Up front for $0.15/mile– At lease end for $0.20/mile
2:RESIDUAL VALUE
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Depreciation
The amount a vehicle is expected to decline in value over the term of a lease
Difference between a new vehicle’s cost at the beginning of a lease (net capitalized cost) and its estimated value at the end of the lease (residual value)
NET CAPITALIZED COST – RESIDUAL VALUE = DEPRECIATION
Always expressed as a dollar amount 3:DEPRECIATION
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Money Factor
Monthly rent charge a customer must pay to compensate the leasing company for the use of its capital
Used to determine the amount of the rent charge the client will pay
May also be referred to as lease rate To convert to an equivalent A.P.R.,
multiply by 2,400 4:MONEY FACTOR
MONEY FACTOR OF 0.00194 × 2,400 ≈ A.P.R. OF 4.66%
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Open-End Leases
• Relatively uncommon type of lease• At lease end, lessee is responsible for difference
between residual value and actual market value• Payments usually lower than for closed-end
leasesNot currently offered by Hyundai Motor Finance
5:TYPES OF LEASES
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Closed-End Leases
• Most common type of lease• At end of lease term, lessee is not responsible for
difference between residual value and actual market value
• Lessee pays any end-of-lease fees and may purchase the vehicle or walk away
5:TYPES OF LEASES
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Other Types of Leases
Single-pay lease• Allows lessee to make one single up-front payment instead
of monthly installments• Money factor is usually discounted• Not currently offered by Hyundai Motor Finance
Multiple security deposit lease• Allows lessee to reduce monthly payments by putting
down multiple security deposits• At lease end, deposits may be refunded or rolled over to
new lease• Not currently offered by Hyundai Motor Finance
5:TYPES OF LEASES
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Lease Fees
Acquisition Fee• Assessed to cover administrative costs• May be added to net capitalized cost or paid up front• Cannot be waived
Disposition Fee― Administrative fee charged to customers who do not
purchase vehicle at end of lease term― Used to cover reconditioning, transportation and resale
fees― Cannot be waived
6:LEASE FEES
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Lease Fees
Excess Mileage• May be purchased at start of lease for $0.15/mile• May be charged to customer at end of lease at $0.20/mile
Excess Wear and Tear― How HMF defines excess wear and tear― How customers can pay for excess wear and tear
Early Termination Fee• Charged to customers who choose to terminate lease agreement
prior to maturity date• Charged along with sum of remaining payments
6:LEASE FEES
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Additional Leasing Terms Advance
• Another term for net capitalized cost• Amount paid to dealer at beginning of the lease
Lessee• Person leasing the vehicle
Lessor• The bank or financial institution funding the lease (e.g., Hyundai Motor
Finance)
Guarantor • Entity guaranteeing payment of the lease• Usually the lessee
7:ADDITIONAL TERMS
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Additional Leasing Terms
Guaranteed Auto Protection (GAP)• A loan deficiency waiver that covers the “gap”
between the insurance payout for a stolen or totaled vehicle and the amount still owed on the lease
• Also referred to as “GAP insurance” or “GAP waiver”
• Included with all HMF leases
7:ADDITIONAL TERMS
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Summary
Capitalized cost• Gross capitalized cost• Capitalized cost reduction• Net capitalized cost
Residual value Depreciation Money factor
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Summary
Types of leases• Closed-end• Open-end• Other types
Lease fees• Acquisition• Disposition• Excess mileage• Excess wear and tear• Early termination
© 2012, Hyundai Motor America. All Rights Reserved.© 2012, Hyundai Motor America. All Rights Reserved.
Summary
Other leasing terms• Advance• Lessee• Lessor • Guarantor• Guaranteed Auto Protection (GAP)
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