Leasing & Financing with rates as low as 5.9
Thomson MacConnell Cadillac and 1st Source Bank are our Preferred Lenders
General points to consider leasing vs. financing…
The biggest difference is on a lease you are only paying for a portion of the vehicle and you write off the monthly payments as an expense, and with a loan you take depreciation. I guess that would be an accountant’s opinion to tell the funeral home which way is preferable.
A closed end lease is one where the customer does not have the purchase option and it goes back to the dealer. An open ended lease would be a TRAC lease or a lease where the customer has the purchase option.
The tax benefits for a straight lease and TRAC lease would both be the same. The property tax is calculated based on a formula the state uses which factors in the original sales price and some other items. We estimate the property tax and then bill the customer for that amount.
Straight Purchase
This method of acquiring a vehicle entails the buyer paying for the vehicle outright at delivery. This could involve a loan from a bank of the buyer’s choice or funds directly from the buyer.
Straight Lease
•Also called “walkaway lease” or “traditional lease”
•Typical term is 60 months (but can be different)
•At end of term, customer returns car back to dealer in good condition and has no further responsibility (car must be within mileage and condition limits set forth in agreement)
•Customer is only paying for a “portion” of the car; at lease end, the car still has “life” (value) left and can be sold again; therefore, customer enjoys lower payments during the term because he/she is not paying for 100% of the vehicle
•100% of the lease payments can be expensed – written against your taxes
•Oftentimes, lease rates are a little better than a straight purchase rate because under leasing laws, the bank can depreciate the car as an asset and can therefore give a more attractive lease rate
•Customer cannot depreciate the car since it is not an asset on the customer’s books
•Ideally, this works well when a customer does not want to keep the car for an extended amount of time (wants to keep more current body style vehicles)
Lease-Purchase
•Also called “dollar buyout” lease
•Typical term is 60 months (but can be different)
•At end of term, the customer owns the car 100%
•This is virtually identical to financing the car through a local bank
•Customer is paying for the entire full value of the car over the term, so the payments are higher than a straight lease (but customer will own the car at the end)
•Customer is able to depreciate the vehicle as an asset on the company’s books
•Payments cannot be expensed because the car is an asset on the company’s books
•Typically, these rates are a little higher than a straight lease because the bank cannot depreciate the car as an asset since the car
•Ideally, this works well when a customer wants to keep the car for many years
Trac Lease
•Typical term is 60 months (but can be different)
•At end of term, the customer owns the car 100%, but also guarantees to pay a pre-determined residual amount
•This lease is helpful when the customer wants lower payments than a straight purchase but also wants to own the car at lease end
•The customer must fully understand that the agreed upon residual amount is his / her responsibility to pay to the dealer at lease end – this is not optional
•The customer can dictate the payment amount by how much he / she agrees to pay at lease end…the higher the end payment, the lower the monthly payment during the lease term
•BE CAREFUL about some companies offering you “too-good-to-be-true” lease payments…CHECK YOUR PAPERWORK CAREFULLY…there is probably a guaranteed payment at the end of which you may be unaware
•Trac leases are useful tools when the customer is AWARE it is a trac lease…some unscrupulous dealers have used this type of lease unbeknownst to the funeral home to beat other dealer’s pricing – KNOW what you are signing!
