Leasing Terminology Presentation

© 2012, Hyundai Motor America. All Rights Reserved.

LEASING BASICS & BENEFITS



LEASING TERMINOLOGY


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


Capitalized Cost

Capitalized cost reduction• Lowers the gross capitalized cost through:

Down payment Trade-in Factory-to-dealer incentives

1:CAPITALIZED COST


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


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


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


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


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


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


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%


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


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


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


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


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


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


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


Summary

Capitalized cost• Gross capitalized cost• Capitalized cost reduction• Net capitalized cost

Residual value Depreciation Money factor


Summary

Types of leases• Closed-end• Open-end• Other types

Lease fees• Acquisition• Disposition• Excess mileage• Excess wear and tear• Early termination


Summary

Other leasing terms• Advance• Lessee• Lessor • Guarantor• Guaranteed Auto Protection (GAP)


LEASING TERMINOLOGY


LEASING BASICS & BENEFITS

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Leasing Terminology Presentation