Presentation on theme: "Click to begin We are an independent insurance agency doing business in Louisiana, Alabama, Mississippi, Arkansas, Nebraska, Ohio, West Virginia, New."— Presentation transcript:
We are an independent insurance agency doing business in Louisiana, Alabama, Mississippi, Arkansas, Nebraska, Ohio, West Virginia, New York and Texas. In other states we use brokers and general agents. Our agency specializes in 2 Niche Programs: Mardi Gras Parades & Special Events (Over 40 years) Car Dealer Programs (Over 15 Years)
Insurance Carriers we represent Lloyds of London Great American Progressive Affirmative Insurance
Let’s Talk About Car Sales As a dealer, are you feeling the pinch in these Troubled Economic times? U.S. Economy Need a Bailout? Have you ever had a slow month in sales?
Bank Financing First, banks are in the business of issuing loans. In a down economy, where more and more people are experiencing credit challenges, banks are tightening their lending. Interest rates on an auto loan may not be as attractive to people with less than perfect credit. How many banks are offering auto loans today? What type of FICO score will qualify?
BHPH A very good option, but it does have some negatives. The mark-up on the vehicle creates a large dealer federal/state income tax liability (even after sale of the transaction to a Related Finance Company (RFC) at a discount). Most of the customer’s upfront cash payment goes to state sales tax. ”Related Finance Company.” To reduce the income tax liability on the “gain on sale”, typically the dealer establishes a wholly owned “Related Finance Company” to which the vehicle can be sold at a loss. However, the discount rate in the sale must reflect the true market value and cannot create a tax loss.
RTO While RTO programs offer great tax advantages they are not as safe from a compliance standpoint. RTO programs have no federal safe harbor so the states have created a messy array of rules. State attorney’s general often view RTO programs as “predatory” and create retroactive restrictions and penalties in response to consumer complaints.
LHPH Increased CASH FLOW! Deferred Federal and State Income Tax Liability No UPFRONT sales tax in most states (33 states) Acceleration of Accounting Income Collection of Tax-Free Security Deposits Bankruptcy Protection No Usury Limits
A tale of two buyers Both John and Mike are shopping for vehicles. Both have $1,000.00 total available cash. Both can afford a monthly payment of around $240 JohnMike
As fate would have it, they chose the same car on the same lot John suggested to the dealer that he wanted to Buy Here Pay Here ---but--- Mike suggested to the dealer that he wanted to know more about Lease Here Pay Here
John chooses Traditional BHPH Financing The car is priced at$7,200.00 + 8.75 sales tax at630.00 + title and license at44.00 For a grand total of$7,874.00 Less his available cash down payment 1,000.00 Financing the balance 36 mo @ 18%$6,874.00 His monthly payment is$284.66
Total available cash down$1,000.00 - 8.75% sales tax on $7,200.00630.00 - title and license at44.00 Dealer keeps only ………………………$326.00 … after the tax man takes his $ CHUNK $ The Buy-Here-Pay Dealer gets to keep the cash down…
Mike chooses a Lease Here Pay Here The car is leased at$7,200.00 + Sales Tax (8.75%)$630.00 Sub-total$7,830.00 Lease Here Pay Here$217.50 Insurance & Tracking Fee$8.00 = Total Monthly Lease Payment (36 mo)$225.50
Mike’s $1,000 gets divvied up too! (4 months) Security Deposit*950.00 Processing Fee+25.00 Detail/Delivery/Destination Fee+25.00 -Tax (8.75%) x 4 months, Title & License-114.00 Dealer keeps ……………………………………..$886.00 Because the sales tax is deferred, the dealer keeps more of the up front cash.
Let’s Recap How Much Each Buyer Spent John’s NOTEMike’s Lease The Car$7,200.00 The Cash$1,000.00 The Payment$ 284.66$225.50 Interest Rate18%0% Of the two, which buyer feels that he got the best deal? Mike
… and which dealer feels that he got the best deal? John’s NOTE Mike’s LEASE Down Payment Retained $326.00$886.00 Sales Tax Paid Up FrontDeferred Survey Says???
Both Dealers… Make Credit Decisions Must Verify Insurance Must Track Payments Deal With Business …but let’s look at the differences
What if an unforeseen event interrupts the planned payments?
The 3 rd payment is due but… John and Mike just can’t make it. Worse yet – we can’t find them!
What will we do? John is in John’s car and the police won’t help.
but Mike is in a stolen car! The LHPH Dealer owns the vehicle
Let’s Recap Both Deals Compare and Save Buy-Here Pay-Here Lease-Here Pay-Here Usury Laws ApplyYESNO Sales Tax Up Paid Up FrontYESNO Income Tax Paid Up FrontYESNO Bankruptcy RiskYESNO Title Signed Over to Customer YESNO Limited Repo RightsYESNO Hard to “Divorce”YESNO
Pro’s and Con’s of LHPH Pro’s No UPFRONT sales tax in most states (33 states) Collection of Tax-Free Security Deposits Deferred Federal and State Income Tax Liability Bankruptcy Protection No Usury Limits Acceleration of Accounting Income Con’s Vicarious Liability Exposure Lease Accounting System Training & Compliance
What are the risks to LHPH? 1.Vicarious Liability Exposure In some states, lessors have been held to be responsible “vicariously” (i.e., with no finding of lessor negligence or fault) for injuries caused by negligent lessees simply because the lessor owned the leased vehicle.
Solution: Lessors Contingent Insurance We offer 2 types of Lessors Contingent Insurance: 1.Lessor Contingent Defense Insurance 2.Lessor Contingent Liability Insurance Dealers must qualify: The lessee must carry liability limits of not less than (25/50/25) The lessee’s insurance company must name you as Additional Insured; and the lessee’s insurance company must provide you with at least a 10-day notice of cancellation.
What are the risks to LHPH? (cont’d) 2.Separate Lease Accounting System LHPH programs cannot be accounted for and managed properly on BHPH accounting and data processing systems. A specialized system is required.
What are the risks to LHPH? (cont’d) 4.Compliance & Training Since most dealership staff are not leasing experts, there must be a “technical assistance” capability to develop accurate answers to “frequently asked questions”. All staff must be trained not to use BHPH sale and/or finance terminology because of the potential for confusing customers or violating federal and state disclosure or lease advertising rules and regulations.
Compliance & Training Solution: BLC Associates In each industry there is one person or organization that is recognized as the principal authority. The national authority in consumer vehicle leasing is BLC Associates. Their clients include virtually every major lessor and finance company doing business in the United States.
Earn Money Qualified Dealers can earn serious money when they start, own and operate our complete Turn-Key LHPH Program which includes Dealer Software, Insurance, Tracking, Training and Compliance. As a bonus we show qualified dealers how to Make Money with our Point of Sale Insurance. This is a brand new program launched this year.
Customer Pays for Car Loan Maintenance/Repairs Insurance Why not collect the insurance payment at the same time as the car payment and earn additional income?
Point of Sale Insurance Now you can with Point of Sale – Blanket Collateral Protection Insurance (CPI) – Self Insured Program with Great American. Here’s how it works…….
Dealer opens a CPI Policy and sets a fixed monthly premium to charge each customer for comprehensive & collision insurance and builds this into the price of the car. No underwriting required. 70% of the money is used to pay all comp & coll claims by Great American from this account.
Dealer also opens a Blanket Policy which allows him to file supplemental claims for coverage such as: Repo reimbursement - $500 Repo storage reimbursement - $500 Non-payment of comp/coll premium – up to $2000 Insufficient insurance coverage (GAP Plus) – up to $2,500
Example of Premium $100 per month paid by the customer to the dealer. This can be paid by the customer weekly, bi-weekly or monthly. Hub Financial / Great American keep $30 and the remaining $70 goes into the account to pay both single interest and blanket claims to the dealer.
Web-Based System handles Enrollments Claims Accounting Reports Dealer receives his own unique login name and password. This web- based system is very easy to use. This system handles everything…
Prints Certificates File Claims Billing & Statements Reporting
What we do for you… Open Lessor Contingent Policy with Open Blanket CPI Policy with Set-Up LHPH Turn-Key Program incl. 5 Year Cash Flow Proforma, Worksheets & Manual with BLC Associates Arrange DMS System with Constellation Auto
Dealers will… Make Money Save Money Sell More Cars Do you definitely see where you and your dealership will use and benefit from our Programs? To complete the one page set-up form and get started today, contact: Arceri & Associates, Inc. @ 800-242-6393