Tag: leasing

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.