They call it a “lease” it may not be a lease at all

ImageWhat passes as a car lease today in Israel many times is not a lease at all; it’s a residual note or balloon financing plan.  To be clear, we have these types of plans too and some of our customers opt for them; we call it LAP (lease alternative purchase).  There are indeed circumstances where this is the best option.  The difference is our clients know exactly how the plan works and their responsibilities at the end of the contract.

The difficulty today is that new car dealers and local banks are selling these balloon finance plans as “leases” and we English speakers from the west are expecting a very different reality when we hear the word lease.  Simple rule of thumb, if the car is put in your name it’s not a real lease.

Why Are Israeli Dealers Promoting These Plans?

#1.  It sells cars.  Payments using this plan are cheaper than conventional 60 month purchase contracts.

#2.  It’s also a cash flow issue.  The dealer receives all the money for the car at closing from the bank-because you are ultimately responsible for it.   In a real lease the residual value of the car is not paid to the lease company they must carry this value on their books until the end of the contract.

In a real American style lease, which is what you are probably accustomed to and is what we suggest in most instances, the lease company is the bank.  They will agree to let you have use of the car in turn you will make the the scheduled payments  while they hold the remaining 48-62% residual balance on their books at no charge to you.  At contracts end, if you do not exercise your option to buy it, then the leasing company will sell the car to recoup the rest of their investment.   This is a  very important feature for you.

Another Variation

There is another kind of lease being sold today by some lease companies.  This plan is more comparable to an American style Lease in that the car remains the property of the company, but there is a small catch.  You have no obligation at the end of the contract if you take another lease contract.  Should you not contract with them again, the chickens will come home to roost — you will have penalties.  You must read the fine print.

They are pushing these plans today, not for your benefit but for theirs.  Be careful to ask a lot of questions.

The reasons you are taking or at least considering a lease beyond the affordability is:

  • Protection from rapid and certain asset depreciation
  • Avoiding the hassle of liquidation of the car when it has finished its service for you.

It would be a shame to find out at the end of the contract that you accomplished neither, due to a misunderstanding of what you were actually signing. If you require an  American style lease, one which allows you to walk away at the end with no further obligations, should you desire to do so, please visit this link where you will find new and used cars for lease just like the ones you were accustomed to in the West. 

Leasing and Its Perceived Black Eye

Leasing and Its Perceived Black Eye

It’s ironic that leasing has such detractions associated with it, when in reality it’s probably the most useful tool we have to maintain a vehicle for our personal use.  We have listed three reasons we think leasing gets a bad reputation from those not familiar with the benefits.

Non-Ownership – It’s possible that there is a comfort level we experience with ownership, which is absent in leasing, that is off putting; however that comfort or familiarity comes at a price.  With ownership you experience a brisk depreciation of your asset and must you engage in the process of selling the vehicle when it has completed its service.

You must ask yourself what you are trying to achieve.  Do you want to own another asset, or do you want to make use of an asset in the most economical way possible?  If it’s the second, then ownership is not necessarily the best option.

Remember this: no one really buys a car. They really buy its use, which is why as soon as its usefulness is diminished they sell it.

No equity Build-up: This is a big misconception to which we devote a full page. It’s called “Elephant in the Room and No One is Talking About It” please visit that page. It should clear some of the reservations people usually voice.

Common Misuse of the Program:  Maybe it’s because leasing was initially designed by manufacturers to move an ever price-increasing inventory, or in our opinion, the reluctance to considering leasing is a result of what the popular western culture morphed leasing into.  Pop culture used the affordability to enhance their perceived net worth, to look more affluent.

Leasing made it possible for someone who could normally only afford a Toyota to drive a Lexus, or if you had a Nissan Maxima level salary you could now drive an entry level Infinity.  We call this “plastic fantastic” because it’s all about the show, but it’s not the same here in Israel.

In Israel we live within a more reality-based existence, we don’t experience the same “keeping up with the Jones/Cohen’s” phenomenon that we did in the west.  Here leasing is more a function of protection of assets than that of embellishment of financial or social stature.

Our income generation here in Israel is not at the same level as it was in the west and our cost of living is more.  Leasing gives us the ability to pay only for the use of the car and protects our cash reserves at the same time.  Down payments are less as are the monthly payments.  Since leasing is for new or 1-3 year old used cars we experience less repairs, enjoy better fuel consumption’s and best of all the depreciation that all cars experience are no longer factors. Visit our site please at this link Ianglo Leasing to continue your investigation of this fantastic financing option.

Why Used Leasing Deserves Serious Consideration

 

Everyone is aware and we make the point repeatedly on our site that cars are poor investments; nevertheless they are central to modern life, so we continue to buy them.  Due to their high costs most of the time we need some form of financing.    It’s common knowledge that leasing is cheaper than financing, but did you know that used leasing can be very similar in monthly cost to paying cash for a used car?  The cost comparison we have prepared below may surprise you.

Let’s do the math.  We chose a 2010 Ford Focus Trend for our comparison because it is a popular model here in Israel and it’s very dependable.  Listed in the table below are the annual and monthly cost of cash, conventional 60-month finance, and a lease.  Yes, there is monthly cost even when you pay cash.

 

Down Payment Annual cost Annual Earned Interest Loss Total Annual Cost Total cost per month
cash      0 11,000 860 11,860   988
conventional 8500 17,868   85 17,953 1496
lease 8500 13,200   85 13,285 1107

Cash Purchase costs explained:

While it’s true when you pay cash there are no “monthly payments”, you do have real costs.  First there is depreciation.  The value of this 2010 Focus in January of 2012 was 86,000 NIS, according to the Levi Yitzak Catalog (mechiron).  January 2013 the same car is now valued at 75,000.  The depreciation cost for one year: 11,000 NIS.  We can expect similar results this year as well.

That’s the first and major cost of using cash, but there is another cost: earned-interest loss.  Since cash was used, 86,000 NIS is no longer at your disposal, nor can it continue to work for you earning interest.  Using a conservative bank rate of 1% annual return on deposits, 860 NIS of earned-interest income will be lost.  Combine the annual depreciation of 11,000 and interest-income loss of 860, and the car actually cost you 11,860 to own for one year or 988 per month.

Conventional Finance:

8500 NIS down and payments of 1489 per month for 12 months equal 17,868.  As with the cash purchase, there is a cost of loss-of-income, based on the 8,500 down payment that is no longer at your disposal, nor earning interest.  It’s not much, but for a fair comparison we must include it: 85 NIS per year.  Annual payments of 17,868 plus 85 loss-of-interest income, the car actually cost you 17,953 to own for one year or 1496 per month.

Used lease:

8500 NIS down and payments of 1100 per month for 12 months equal 13,200.  As with the cash purchase and conventional finance, there is a cost of loss-of-income based on the 8,500 that is no longer at your disposal nor earning interest: 85 NIS per year.  With annual payments of 13,200 plus 85 loss-of-interest income, the car actually costs you 13,285 to lease for one year or 1107 per month.

The bottom line is it will only cost you 119 NIS more per month to lease than pay cash, and the lease program protects your cash reserves.  You will save 389 NIS per month leasing a used car over financing.

Used leasing will keep you in newer models, which generally translates into less repair costs, better km/l ratings, and ever improving safety features.  With leasing the depreciation costs  are a thing of the past for you, it is now the leasing companies problem.  And if you are concerned about not building equity read this please we call it The Elephant in the Room and Nobody is Talking About It.

If you normally keep an automobile for 6 years or more, leasing may not be right for you, you will be better served to pay cash, or obtain conventional financing.  If you generally keep a car for less than 6 years you owe it to yourself and your family to investigate our new used-lease program.

Hezy BenTzur

President

Ianglo-Auto-Association.com

Do You Really Mean Lease or Maybe Affordable Alternative Financing?

This article is not intended to be an in-depth discussion on the differences of leasing and residual financing.  We have highlighted some of the main advantages and disadvantages of both plans. 

If you are living in Israel or intend to make Aliyah in the near future and want to fully understand all the financing options  please go to this link and leave your information.  We will be happy to consult with you by phone or better yet schedule a desktop share session with you.

Consumers often use the term leasing as a generic description to describe a financing plan popular for its reduced monthly payments, instead of using it as a description of a specific finance plan.  An example comes to mind in the generic use of the word Jell-O, to describe any type of gelatin desert, or in America the word Kleenex to describe all facial tissues.

There is a finance plan that looks very similar to a lease but has a few distinct characteristics that some find useful.  This  alternative finance plan offers the same, and/or lower monthly, payments as a true lease but the two plans are quite different in their mechanics.   Here are the major differences between these two beneficial financing options.

Leasing – Essentially it is a long-term rental contract generally 24 – 36 months in duration.  The vehicle continues to be the property of the leasing company which provides you some nice benefits.

  • Monthly payment savings of (20-30%).   Since you will use the vehicle for a set period of time you will only pay the difference of the originating capitalized cost minus the end of contract residual value, which is typically 60%.
  • The real market depreciation of the vehicle is absorbed by the lease company.  You will pay for the anticipated depreciation in the monthly payments but should the market value of the car drop more than expected you are protected.
  • Self employed persons can gain tax advantages.  You should consult your personal tax advisor before deciding on which type of finance program to utilize.

LAP “lease alternative program” – Also known as “balloon financing” or “residual note financing” is a 36 – 60 months in duration.  Utilizing the same calculations as a standard lease program it differs in that the car is titled in your name, this too has benefits.

  • Cost of the vehicle is divided into two portions same as a lease.   Just as in a lease since you will use the vehicle for a set period of time you will only pay the difference of the originating capitalized cost minus the end of contract residual value, which is typically 60%.
  • No contractual restrictions on km usage.
  • Ability to cancel contract at any time with no contractual penalties.
  • Generally lower down and lower monthly payments.
  • You are absorbing the anticipated depreciation of the vehicle in the monthly payment same as with a standard lease, however if the value of the vehicle drops more than expected you will pay that cost.  The converse is also true should the value not drop as anticipated you will benefit at contracts end.

To sum up; a standard lease contract releases you from the concern of the future value of the car and places it on the leasing company.  This option makes a lot of financial sense because the lease company is in the business of cars and is better equipped to handle market fluctuation than an individual.  This responsibility release comes at a price of course which is why lease payments can be higher than LAP “balloon” programs but lower than conventional 60 month finance contracts.

LAP “balloon” programs, normally the least expensive way to finance a new or used car, requires you to be more involved in its future value.  There are several ways to protect yourself, and we can explain these options to you by phone or by conducting a desktop sharing session with you.

Here is a 30 second video Jeanne G. on using LAP program

Acclimating to Life in Israel

Making Aliyah was the best choice I could have made for my family; however some of my initial decisions in the process of settling into daily life here left room for improvement.  One such decision was waiting too long in acquiring a personal car.

Now to my defense there was not a service like ours, Ianglo-Auto-Association, at the time; a service geared to assist English-speaking Olim in buying and financing automobiles in Israel.

Security Issues in 2002 was a Factor – But the Real Reason Was…

We made Aliyah in 2002 and experienced different security issues than we now endure.  Rock throwing and the occasional use of bullets on private vehicles in the Judea Samaria area were more prevalent then.  Looking back however I think I let that issue shoulder the weight of my reluctance to buy a car more than the real reason which was – I did not want to diminish our savings by such a large sum.  Olim quickly realize there are enough other things waiting in the wings that will converge to reduce our savings, and financing a used car was not an option, or so we were told it was not.

Ironically my reflective lament is not so much the loss of convenience or the time savings we would have had in not relying on buses and taxis.  The regret is the absence of a familiar part of family life that I could have provided my wife and kids to make their and my transition into our new life more comfortable.  Had we known then what we know now we would have done it much differently.

As Olim we face major changes in all aspects of our lives.  It would have helped all in the family to have that familiarity available earlier than we did.  We really felt like onlookers or “also-rans” until we bought a car and started mixing it up on the highways with our fellow Israeli’s.

You don’t have to make the same mistake. Ianglo can help you to find and pay for a car utilizing conventional and new progressive financing programs that are very affordable, and of course real American style leasing.  Please visit our customer page and see for yourself, you’ll be glad you did.

AAA Announces New Vehicle Technology Trends for 2012 Read more here

To see the full article click this link from Bradenton.com

Here are some high points of the article, and if you are interested we have now in Israel Mobile Eye which is a “lane departure warning system add on” contact us for pricing.

Brake Assist- This feature, now standard equipment in some vehicles, recognizes when a driver has just instituted an emergency stop. The system then applies full braking power, even if the driver has not pressed the brake pedal hard enough to do this. If the driver backs off the brakes, the system steps out of the picture. This feature was first offered in some vehicles in the mid-90s after studies showed that even experienced drivers were reluctant to use all the braking power built into their vehicles during an emergency.

Parking Proximity Warning Systems and Backup Cameras- These features let a driver know when he or she is getting close to an object and/or show the path the car is taking. Using sensors, the warning system identifies items, animals or people, including small children that the driver cannot see because his or her view is blocked by parts of the vehicle. The backup camera shows the area directly behind the vehicle when in reverse. Originally a luxury car exclusive, today parking sensors and back up cameras are far more common, even on popularly priced vehicles.

Lane Departure Warning Systems- A safety feature that lets a driver know they have begun to cross over lane markers without signaling, lane departure warning systems use cameras to sense the lane markings on pavement. It will issue a warning that can be audible or take the form of a vibration in the steering wheel. Originally offered on top Infiniti models, today, lane departure warning systems are more widely available.

Active Cruise Control– This feature, once a luxury car exclusive, uses radar or laser to maintain a set distance from the car ahead. If a driver using such a system encounters slower traffic, the cruise control will automatically reduce speed by backing off the throttle. If the traffic clears or speeds up, the active cruise control will return to the driver’s original speed. Newer systems can also apply the brakes when needed to maintain a safe following distance. In some cases the active cruise control system will actually bring the car to a stop if the traffic ahead stops. Active cruise control is now offered as an option on a wide range of vehicles, including those that cost less than $30,000.

Stop-Start- Stop-start is a feature that is well known to any hybrid vehicle owner and drivers in Europe. This technology automatically stops the gasoline engine while the driver waits for a red light to turn green. It saves fuel while reducing emissions. Kia may soon bring this technology to non-hybrid applications in two of their low-priced cars, the Soul and Rio.  Expect expanded use of this technology in the next few years as vehicle manufacturers’ work to meet the higher Corporate Average Fuel Economy standards set for 2016.   Driver Alert Warning System– Driver alert warning systems, originally introduced on costly luxury models, looks for signs of an inattentive or tired driver.  There are several ways to monitor the alertness or attention of a driver that range from lane departure to monitoring the driver’s movements via cameras.  Despite differences in monitoring technology, when the vehicle senses drowsiness or inattention it warns the driver to take a break.

Blind Spot Warning Systems– This warning system uses a radar or camera to detect and warn a driver that another vehicle is lurking just out of view in an adjacent lane. Often, an amber light on the appropriate mirror is illuminated when a vehicle is in the driver’s blind spot. If the driver signals to move in that direction, an audible alert or flashing light is activated as a warning. First seen in costly vehicles, it is now standard equipment is some family vehicles, including several Mazda models.

New cars multiply drivers’ tasks | The Portland Press Herald / Maine Sunday Telegram

New cars multiply drivers’ tasks | The Portland Press Herald / Maine Sunday Telegram.

Automakers race to add infotainment devices to cars as safety officials warn of their dangers.

San Jose Mercury News

SAN JOSE, Calif. – American drivers are about to become a lot more distracted.

Tesla's Model S beta prototype

click image to enlarge

Tesla’s Motors’ upcoming Model S will feature a 17-inch touch screen. Within five years, more than 90 percent of new cars will come equipped with Internet-connected technology features, one expert predicts.

The Associated Press

THE WELL-CONNECTED CAR

To meet the demands of the iPhone generation, automakers are rolling out models packed with new information and entertainment features.

• BMW: New models come with Internet access and allow videos to be viewed through an iPhone and on-demand streaming music.

• Ford: Using voice commands, drivers can make phone calls, hear in-coming text messages and get news updates.

• General Motors: A driver can play with a 7-inch, high-resolution touch screen. The system also allows text messaging and audio streaming from smartphones.

• Mercedes-Benz: Voice-activating system for radio, phone and navigation system and comes with a Facebook app.

• Tesla Motors: The upcoming Model S will be equipped with Internet access and a 17-inch touch screen.

SOURCE: Mercury News reporting

As safety officials fret about drivers taking their eyes off the road to play with smartphones, automakers from Detroit to Japan are rolling out vehicles that are becoming virtual iPads on wheels.

Next-generation vehicles, safety experts warn, could make multitasking motorists even more of a hazard on the nation’s roads and freeways. U.S. Transportation Secretary Ray LaHood has called distracted driving “a dangerous epidemic.”

What began as perks for luxury cars are now becoming standard features of lower-end vehicles, said Carroll Lachnit, an editor at auto information site Edmunds.com.

Motorists can press steering wheel buttons to buy movie tickets and give voice updates for their Facebook pages.

Daimler AG, the German manufacturer of Mercedes-Benz and other vehicles, is working on technology that will enable drivers to read information on the windshield by waving their hands………

Oh that new car smell

We all love it the smell of a new car.  You can even buy the fragrance in auto stores or at the local car wash although its not nearly like the real thing, but it seems there may be a problem with it.  What did our parents tell us growing up, everything fun in life is either illegal, immoral, or fattening, well seems this much sought after fragrance is slightly toxic. Noooo!!  Check out this link http://www.triplepundit.com/2012/02/toxins-responsible-new-car-smell/comment-page-1/

If you are living in Israel and want the real thing click here http://www.ianglo-auto-association.com/new-car-program.html 

It’s Not a Dent On the Car “That’s Character”

 

It’s a common scenario when olim hadashim earnestly begin their quest for their first car in Israel.   They are all taken aback by the minor scrapes and bruises to the body of most every used car, and the fact that no one is saying “oh that can be buffed out”; no one but the oleh even notices the scratches.  Of course this reaction is exacerbated by the high cost of autos here.

I’ve become accustomed to the scrapes and bruises over the last 10 years though it still bugs me to see a 2009 model car with the right front fender slightly scraped and not on the way to the body shop any time soon; that car would have been in a paint booth within two days back in the US.  Here it is what it is, a scrape on the fender, nothing to bother with.

Maybe it’s our driving conditions, the narrow streets, absence of decent parking areas save for sidewalks, or my arch nemesis the kamikaze motor scooter drivers.  Where do these guys and gals come from?

Several months ago I failed to complete my left turn to the inside lane while driving my car.  I opted to move over to the right lane quicker than the police like, and received a ticket and an invitation to driver’s education class.  Yet these 2 wheeled magicians bob and weave at will creating lanes between lines of traffic or on the shoulders of the highway while police sit in their cars and watch.  And at stoplights it’s not enough for scooter operators to drive inbetween cars they cut in front or right behind your bumper to go from the right lane over horizontally 2 lanes to the left turn lane.  They even have the audacity when they cannot pull off this stunt without having to take their feet off the pegs to look at you like “why are you so close to the guy in front I had to put my foot down”? Enough about the scooters.

I guess in a way I should be glad we are not so obsessive compulsive about the appearance of our cars as in the west.  But as an auto consultant it’s a challenge to present a car to an olim and say yes this car is in excellent condition, and they are only asking 50k, and as for the scrapes on the corners, here we call that “character”.