1. Lease Here Pay Here FUNDING STRATEGIES 2014 NVLA ANNUAL CONFERENCE Tucson, AZ April 1, 2014 Edward P. Kaye, President Advantage Funding Lake Success, New York

2. Presentation Overview What is LHPH Benefits and how it works Funding structure Sample transaction Capital availability Sources of funding Sample lender package 3. Background Started in the leasing business in 1988 Founded Advantage Funding 1997 Sold majority stake to Marubeni America 2006 Continue to oversee the daily operation and long term strategic planning 4. Advantage Funding Brief Overview Niche markets $250M in assets 5,000 contracts 50 employees Direct lender Fund through securitization and Marubeni 5. Independent Niche Focus Divisions and collateral types funded LHPH/BHPH Dealers Commercial coach School bus and shuttle bus Limousine and livery use Ambulance and paratransit Tow trucks and other vocational trucks 6. WHAT IS LHPH? (Courtesy LHPH, LLC) 7. The LHPH Opportunity Independents always forced to reinvent themselves (bank competition) A smarter business model Profitability Risk adjusted structure Significant growth opportunity 8. Benefits of LHPH Improved cash flow (most states sales tax is paid on the payment rather than upfront) Increased profits and fee income (acq. fee, termination fee, etc...) 9. Benefits (continued) Shorter term than standard loans (customer control) Better car (less maintenance, giving customer more ability to make payments) BK remote (assume or reject the lease) 10. Benefits (continued) Lower monthly payments Repossession friendly since the lessor owns the vehicle Inventory management (lessee required to bring the vehicle back at termination) 11. How it works Three Possible Legal Structures: Dealer as lessor Outsourced lessor Related Finance Company (RFC) or Independent Leasing Company 12. Dealer as Lessor Dealer decides to do leasing Dealer buys a vehicle and leases the vehicle to the Lessee. 13. $7,500 ACV $12,500 selling price (cap cost) $1,000 cash from customer (security deposit) $12,500 amount Financed (Adjusted Cap Cost) 36 month term 21% interest rate (lease rate) $3,500 balloon (residual) Payment - $400/month ($92 per week) Typical deal for the BHPH/LHPH Industry 14. Funding Structure Dealer Advantage Funding Example: Advance Cost of Vehicle + up to $750 Rate 10.5% Subject to Approval Fees $100 per Lease Cash Flow You Control Deal Structure Residual (~ 20% of cap cost) 15. The Lease example (typical deal) Advantage Funding (same deal) $ 12,500 Cap Cost $ 8,250 Amount Financed $ 3,500 Residual $ 2,500 Balloon at End $ 400 Mo. Pymt. ($92 weekly) $ 212 Mo. Pymt. Dealer gets cost of vehicle + $750 + $1,000 Security Deposit (and any other cash from customer) + $188/mo. positive cash flow on deal! Funding Structure Dealer Advantage Funding Example: 16. 1. Positive cash flow for the dealer 2. Control of cash by the dealer 3. Fixed rate financing on each deal 4. No unused line fee 5. Dealer services and collects the leases 6. Perfect pay to lender (customer delinquency does not excuse payment) Funding Structure Benefits 17. Greatest Market Share 18. Capital Availability The Lease Here Pay Here business models greatest challenge Few lenders in the space 19. Capital Availability Select national lenders Target market Large BHPH dealers ($5M portfolios and up) 20. Capital Availability Local banks or lenders you have an existing relationship with What is their appetite for leasing? Do they have capital constraints? How strong is your relationship with them? Must create a detailed business plan strong enough to sell a conservative credit committee 21. Capital Availability Independent finance companies Portfolios under $5M Minimum three (3) years in business Reliable accounting Reliable portfolio analytics Not a lot of choices 22. Capital Availability Hard money lenders High cost of funds expected as a return on investment (more common in real estate transactions) Subject to termination Friends and family Home equity LOC 23. Sample Lender Package Business history Time in business Ownership bios High level description of operations Customer profile 24. Sample Lender Package Financial disclosure Two years tax returns (Form 1120) or financial statements on LHPH operation and any corporate guarantor(s) Two years tax returns (Form 1040) on personal guarantor(s) Updated personal financial statement http://www.sba.gov/sites/default/files/tools_sbf_finass t413_0.pdf 25. Sample Lender Package Portfolio and process analytics IT system Contract data (How many? Interest calculation? Modification process?) Receivable detail Debt structure and detail Aging 26. Sample Lender Package Portfolio and process analytics (contd) Typical deal structure Vehicle Info (Acquisition process, concentration) GPS system utilized Existing lending relationships and terms (comparable borrowing experience) 27. Sample Lender Package Compliance and policies Credit policy Repossession policy Charge off policy Document retention practice FCRA (Fair Credit Reporting Act) FDCPA (Fair Debt Collection Practices Act) CFPB Compliance 28. Regulation and Licensing Regulatory considerations Lease must be Reg M compliant (proper consumer disclosures) Business subject to CFPB oversight State Leasing License may be required Also consider whether or not you need a sales finance license and an automobile dealers license 29. Contacts Toll Free 866.392.1300 Toll Free Fax 800.896.5952 Program Directors: Edward Kaye 866.392.1300 ext. 786 516.280.1786 Direct Dial ekaye@advantagefunding.us Michael Kaplan 866.392.1300 ext. 796 516.280.1796 mkaplan@advantagefunding.us www.advantagefund.com