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thebajarunner
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Vehicle leasing vs. buying
There has been so much heat on this subject that I decided to add fuel to the fire.
Way back.... when I had my CPA practice, easily the most frequently asked question was "Should I lease or should I buy?"
And, the easy answer.... "Leasing is simply another way of financing, make your best deal from an overall economic standpoint."
In today's market, with so many zero percent finance deals, and such small downstrokes required, and 60+ month financing available, I cannot imagine
that leasing is an advantage. Maybe you cut a better deal, I would like to see it.
The one advantage I know of in leasing, at least in California, you only pay sales tax as you go, by the payment, and not by the full amount.
As to tax deduction ease.... either way you need to qualify the vehicle as a biz expense... Today's rapid writeoffs can actually give a greater up
front write off by purchasing than by leasing.
The greatest disadvantage of leasing- you never build equity.
I drive my vehicles 'til they die. Thus, I have three fully paid for vehicles in my garage, lots of miles, but have not had payments for some time.
That makes me smile, a lot!!
O.K., bring it on!!! Tell me why you disagree.
(and I have a wonderful Baja related anecdote about leasing which I will disclose after the first salvos come across my desk)
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jerry
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back in the seventies when you leased it was at wholesale prices i dont think that whats happening now??
it all depends on the position your in recently one could buy a new rig and wright it all off in one year .but that can hurt you down the line or
when ever you have to recap it
jerry and judi
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jerry
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i should qualify that a busness could wright it all off in one year up to $100,000 for equipment including a work truck
jerry and judi
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JZ
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Lease benefits are: 1) tax deduction for business use, and 2) lower monthly payments putting you in a nicer car, and 3) a clear path to change
cars every 3 years or so for people who want to do that.
For certain circumstances leasing makes more sense, for most it does not. I know a girl who writes off 75% of her payments on a Porsche Cayan that
she uses to visit clients in her sales terriority. The terriority is pretty small geographically, so she is not racking up a bunch of miles. She
deals with high-end clients where having a newer car is part of the image she needs to keep up. For her example, leasing makes a lot of sense.
I don't follow this comment: "Today's rapid writeoffs can actually give a greater up front write off by purchasing than by leasing."
[Edited on 8-29-2006 by JZ]
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jerry
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its not that it gives you a greater write off. it the fact that you can write it off totally in one year
example
your having a banner year or a one time deal thats your going to make more money then usuail thuse leaving you with more taxes to pay that year
you buy a new rig and wright it all off in that year thuse reducing your taxes
jerry and judi
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thebajarunner
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Careful here!!
| Quote: | Originally posted by jerry
its not that it gives you a greater write off. it the fact that you can write it off totally in one year
example
your having a banner year or a one time deal thats your going to make more money then usuail thuse leaving you with more taxes to pay that year
you buy a new rig and wright it all off in that year thuse reducing your taxes |
This is marginally correct (except for the spelling) and also misleading.
Not to get into the delicacies of taxation and depreciation, but...... if your vehicle is under 6000 gvw, then you are not eligible for the $100,000
annual deduction under IRC Sec. 179. Also, luxury vehicles are not eligible for this deduction.
So, buy a nice car, have a "banner year" and write (wright?) off at your risk..... NOT!!!
Also, whoever says that leasing gives deductibility subscribes to the "Urban Myth sector of Taxation"
Leasing has nothing to do with deductibility!!!!!!!!!
Business usage has everything to do with it.
And again, leasing, or buying, it is just a method of financing, and I have yet to see the leasing deal that is as economically plausible as buying...
Show me!
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jerry
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yup it has to be over 6000 gvw
depending on what your business is a nice car still may be able to be ductable
when a lease was based on wholesale prices its total cost would be less and a advantage but the way there figured now i see no advantage
jerry and judi
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JZ
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| Quote: | Originally posted by jerry
when a lease was based on wholesale prices its total cost would be less and a advantage but the way there figured now i see no advantage
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It is up to the buyer to negoiate the price of the vehicle the lease will be based on just like you would when buying a car.
[Edited on 8-28-2006 by JZ]
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Skeet/Loreto
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Leaseing is just another "Sales Gimmick" just like "Extended Warranty"
When you are in a Position to need the use of your Cash leasing does free up the Cash and allows that use and write off on a Monthly Basis.
Extended Warranty is just another Sales Gimmick which will bring you back to the Dealership so that they can Charge the $100 an Hour Labor rate!
Same type of Sales Gimmicks as the "Equity Loans" and borrowing to pay off Credit Cards, making your Payments smaller and over a longer period of
Time.
Watch the Foreclosure Actions in the Near Future as those Peole who have borrowed on their Equity each time the vaule of thier House increases, then
take the money, make a Down payment on a new Car or Toy..
Control your Desire for that New car, purchase or Lease in the Near Future, buy a 3 year old Model, that has been depreciated out. There are going to
be some Great Deals on Vehicles that are within the Warannty miles.
Skeet/Loreto,
.
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oxxo
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| Quote: | Originally posted by JZ
I don't follow this comment: "Today's rapid writeoffs can actually give a greater up front write off by purchasing than by leasing."
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We're talking about "accelerated depreciation" available in some cases for business purposes rather than straight line depreciation.
From a simple economic standpoint, buying is more cost effective than leasing for MOST people.
[Edited on 8-28-2006 by oxxo]
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Bob and Susan
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Skeets thinking is from 1940's
Welcome to the 2000's
If everyone followed his plan we be in a depression again.
Why would someone care who really owns a car if it's sitting in their garage?
They have complete use of it.
3 year old cars start to break down and repairs need to be completed...
and the smell....
Davik K has the right idea...nicer car for less monthly payment...
Nothing wrong with an "equity loan"
At least it's a tax write-off...credit card commerical credit is not.
People don't need to sell-out to benifit from their profit in their real property.
Buy buy buy...lease lease lease...
The economy and the USA will thrive.
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jerry
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borrow and spend, borrow and spend, seems people are following the federal government idea and it simply doesnt work. your squandering your future
when you spend your equity on a car or pickup you are basicly financing the rig for the next 15-30 years
now if you take the equity and buy another house rental you will be levegering your future and come out way ahead now you can write off at least
part of that qualifying pickup because you have a business
jerry and judi
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thebajarunner
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Wow!!! Glad I don't take tax and/or financial advice from this board
O.K. I promised a Baja leasing story, here goes, mebbe we can lighten the mood on this post....
Back in the 70's we were having some success at racing the 500 and the 1000.
Some of the local guys who had followed and watched decided they wanted to enter a pickup in the next 500.
Problem- no vehicle!
Solution- amble over to the little old Ford dealer in Escalon and lease a new F-100.
So they did, took it home, totally stripped it of all seats, carpets, headliners, dash, etc. etc.
Installed all the roll bars, skid plates, reinforced the frame, made it pretty respectable.... brand new truck and all.
Took it down for the 500 and wrecked right off the start.
Came home and reported it stolen.
End of story.....
Except the real story kept coming around in the local community and their credit never recovered,
they eventually started racing boats instead.
Never went back to Baja.
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Hook
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I am conditionally in Skeet's camp
Do your research. Buy a reliable car (based on Consumer's Reports analysis) that's used and let someone else take the initial depreciation. Dont buy
used cars from dealers; be patient and find a pp vehicle with good maintenance documentation and relatively low mileage. It will be much cheaper than
a dealers used car. Start looking for a vehicle long before you HAVE to have it so you dont make a decison based on desperation.
There is no way I could ever own a vehicle and keep it under the maximum mileage of a lease. Same goes for my wife. We are active people who love to
travel in our vehicles, especially since 9/11.
That said, I bought a Ford diesel truck even though I knew there were reliability issues with them.
The truck had capabilities that I needed; it would tow ANYTHING economically and it would be replacing a motorhome that was only getting 7mpg. Plus,
it was too good a deal to pass up from a pp who wanted it gone. A desperation sale. Since then, I have managed to mitigate some of the reliability
issues with aftermarket add-ons. The total cost of mitigation was the equivalent of what three lease payments or monthly payments would have been on
this vehicle. Well worth it.
I would never buy a new car.....unless I came into a large amount of cash. I like the smell of money better than the smell of a new car interior.
I tend to buy cars with an eye towards function. So if I've done my research correctly, the car should last for quite a few years. I tend to keep
cars/trucks at least 6 years, often longer. When we sold my wife's last car, she had had it for 9 years and it had 180,000 on it. My Toyota before the
Ford had 150,000 on it before we sold it. Sure, we got almost nothing for them.....but we also had many years of no monthly payments and no
collision/comprehensive insurance. Money in the bank!
If something goes wrong with a used car, its usually fixable by me. And for much less than the cost of that limited warranty you are indirectly paying
for when buying a dealer's used car. About the only things I dont fix myself are ones related to the tranny, the block itself or the rear end.
Alternators, water pumps, belts, hoses, PS pumps, radiators, brakes, etc, are pretty easily replaced and are the things most likely to fail. The other
things are pretty reliable these days, IF YOU DO YOUR RESEARCH.
On financing, the money we save by not having monthly payments for so long ends up in our savings accounts, unintentionally. We have LARGE cash down
payments or buy them outright. Maybe its old-fashioned, depression-era thinking but we would rather not pay interest to someone if we can avoid it. I
would never consider refi-ing the house JUST to pay for a car....too many other associated expenses with the loan.
Leases are for people who are cash poor or credit poor or who have just the right business to make it justifiable. A real estate agent comes to mind;
someone where fashion and luxury and newness can be important aspects of buying, as well as the write-off. That's just not us.
Besides, why do you think all the car ads these days tout what they will lease the car for instead of its purchase price? Its because they make a
killing on leases and the eventual resale. Who is being killed here? Not the dealer, not the manufacturer......who's left?
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JZ
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| Quote: | Originally posted by thebajarunner
Wow!!! Glad I don't take tax and/or financial advice from this board
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Don't be lumping everyone in the same bucket there partner. I'll put my financial planning skills against yours any day.
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Baja Bernie
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Hook
I'm with you and doubt that our buying habits will throw the country into a depression.
My last two cars have been purchased for cash from Budget Car Rentals. I have been very please with each purchase, normally they have only about
20,000 miles on them, and I drive them to about 120,000 and then sell them myself. My wife insists on a new vehicle and because I love her so much we
get her one about every 8 years--this works well because they only have about 25,000 miles on them when we give hers to the kids.
I always get the warranty because I have become lazy and I now hate to work on cars.
Because I write books on Baja I can take the tolls, mileage, Mexican Insurance, hotels/motels/camping spots, and the Sentri costs off as a business
expense.
My CPA thinks very much like the Runner does and I believe they both give very good advise.
Good thread! But lighten up on the spelling--schoolmarm.
It would be fun to see JZ and Runner go head to head on financial planning. Hey! they just might do mine--nah! I would be far to embarrassed to
reveal my inner self. Besides I hate to pay for that which I can do fairly well myself. Color me a control freak when it comes to green stuff and I
ain't no golfer.
My smidgen of a claim to fame is that I have had so many really good friends. By Bernie Swaim December 2007
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Dave
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| Quote: | Originally posted by Hook
I would never buy a new car.....unless I came into a large amount of cash. I like the smell of money better than the smell of a new car interior.
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Haven't bought a new car in over 20 years, and won't. If I'm gonna spend 30k+ on something it had better appreciate.
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thebajarunner
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That might be an interesting session!?
| Quote: | Originally posted by JZ
| Quote: | Originally posted by thebajarunner
Don't be lumping everyone in the same bucket there partner. I'll put my financial planning skills against yours any day. |
Nahhh, you won't get me into that scuffle.
Three years ago I breezed into the CPA practice office that I founded years back and dropped off some stuff.
My two former partners ambushed me in the lobby,
placed one hand on each of my shoulders.
And formally declared me incompetent!!!
Then John smiled and said, "And you are dangerous, too!"
So there you have it.
Two of the last three years they have awarded me the
"Best scheme of the tax season" award.
Last year John refused to sign my return...
Oh well, been more fun turning farms into subdivisions, than numbers into financial statements.
And that's the truth!!!! |
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Sonora Wind
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What the heck Because I know nothing I'll jump in too
Back in the Nevada Wholesale Nursery Inc. days. I would buy trucks tractor trailer rigs trailers backhoes, you name it. I purchased these as a
contractor, then I would lease the equipment to the nursery. I could wright/write/right everything off as a contractor and take the deprisated value.
The corp/Inc. could wright off the lease payments (made to me ). Corprate tax year ended Oct, mine ended Dec. My tax guy would decide in Oct if the
company needed to pay more or less lease payments. SIDE NOTE the first time I bought a truck under the the 179 plan uncle came after me. Oh my 2sents Buy a low mileage used vehicle from someone who just refied the
equity in their house, and now wants a new ride.
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Sonora Wind
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I almost forgot
All of the above mentioned tax loop holes were closed in the late 80s and early 90s. Today the best tax brake/break/broke is cash.
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