USAA.COM INSURANCE BANKING INVESTMENTS RETIREMENT ADVICE Your Next Car Buying vs. Leasing August 30, 2011 Joseph (J.J.) Montanaro CERTIFIED FINANCIAL PLANNER ™

USAA.COM 2 Views and opinions expressed in this seminar are provided for informational purposes only and are subject to change. This discussion should not be considered a recommendation, tax, legal or other estate planning advice, but rather a general overview of the subject matter discussed. Consult with your tax, legal or estate planning professional regarding your own specific situation. Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP ® and CERTIFIED FINANCIAL PLANNER ™ in the United States, which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. USAA means United Services Automobile Association and its affiliates. Investments provided by USAA Investment Management Company and USAA Financial Advisors, Inc., both registered broker dealers. Life insurance and annuities offered by USAA Life Insurance Company, San Antonio, TX. Financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer. Trust Services provided by USAA Federal Savings Bank. Credit cards provided by USAA Savings Bank, other bank products by USAA Federal Savings Bank, both Member FDIC Since Our Attorneys Couldn’t Be Here

USAA.COM The Backdrop Car Decisions = Big Money Average price for a new car in the U.S. is almost $30,000* 2011 AAA study estimated the cost of buying and driving a new average sedan was $8,776/year.** *NY Times May 21, 2011 ($29,602) **AAA 2011 “Your Driving Costs” Analysis

USAA.COM Buying Potential Advantages It’s your vehicle Financing options Bells & Whistles Clean track record Warranty Flexibility—sell it when you want and drive it the same Potential Disadvantages Buying a depreciating asset Higher down payment Higher monthly payment

USAA.COM Buying When it Makes Sense You’re in it for the long haul You drive it hard Mileage Wear & tear You want to make it your own

USAA.COM Leasing Where does that lease payment come from? Capitalized Cost Money Factor Residual Value Negotiate, Negotiate, Negotiate!!! Other key leasing terms: Capitalized cost reduction Gap Insurance Excess wear & tear/mileage Acquisition/Disposition fees 6

USAA.COM Leasing Potential Advantages A shiny new vehicle…over and over again Potentially lower down payment and monthly payment Normally always under warranty Many states lease = lower sales tax Potential tax advantages for business owners Potential Disadvantages No equity No end to car payment Restrictive (mileage/use)

USAA.COM Leasing When it Makes Sense You know you’ll get the three year itch You want the latest and greatest You use the vehicle for business

USAA.COM Edmunds.com Case Study Facts: $20,000 Car 5-year holding period 3-year loan vs. 2 3-year leases Results: Over 5-year holding period expenses were almost identical Additional value of buying new car based on being able to sell at the 5-year mark or continuing to drive for extended time period. 9

USAA.COM Wrapping it All Up From a purely financial perspective, buying a car, preferably used, and driving it for hundreds of thousands of miles is most advantageous. Know yourself and your habits. If you anticipate acquiring a new care every 3 years or so, leasing is a viable financial alternative. 10

USAA.COM INSURANCE BANKING INVESTMENTS RETIREMENT ADVICE USAA.COM