Car leasing....brilliant or a trap? - GoFuckYourself.com

Boxer3 · 03-31-2009, 07:44 PM

I was having a discussion with a friend about that, I see the argument both ways.

Pros: Lower payments, even with inception fee...., no negative equity or repairs to worry about, tax advantage with business use, more equitable buyouts than in the past.....I know you are always paying this way, but usually in the time frame of most leases, even when purchasing, the first 24-36 months is catching up with negative equity / depreciation anyhow.

Drawbacks: You never keep a car long enough to have trade in value, if your lifestyle changes and more miles are required, it costs more, you may get charged for even minor wear on car as dealer sees fit (contract gray area), you pay and have nothing in the end except a rented car to drive.

I'm sure there is more.....anyone here leasing? Does it turn out to be cheaper even by the time you pay the inception fee? Or are the limitations not worth the savings? Is the tax advantage significant? Just wondering what others' experiences are.

WebairGerard · 03-31-2009, 07:54 PM

Speaking of new cars only. If you own a profitable biz and can write it off leasing is good. if you need lower payments and can't afford down payments leasing is good. though if money is that much of issue should probably not be shopping for a new car. ;)

If you are they type to hold on to a car for 5-10 years and do not need to have the newest, hottest car you see then you will always do better buying IMO.

pros and cons to both for sure and all depends on your personal interests and financial situation.

If money is not really a concern then an old rule of thumb is lease depreciating assets and buy appreciating assets.

2MuchMark · 03-31-2009, 08:30 PM

Hi Boxer,

I've leased and owned lots of cars. You're right there are good reasons for both, but some of yours are wrong:

Quote:

Originally Posted by Boxer3

Pros: Lower payments, even with inception fee...., no negative equity or repairs to worry about,

This is not true. Your car company owns the car but you're driving it, so you're responsible for the wear and tear (tires, brakes, oil, collissions, etc). Then if the warranty runs out before the lease does, you're responsible for the rest too. And you can get into negative equity if you put too many miles on the car as you will end up having to pay the value of the difference when you return the car.

Quote:

Originally Posted by Boxer3

tax advantage with business use,

Not always. If your business owns the car you save a little bit of tax, however, there is something called Taxible bennifits: Because you bennefit from the use of the car, you are taxes on that bennefit. Generally, if you got $10,000 use out of a $50k car, you pay tax on that $10k.

(And if your car is worth more than $50k, it is considered a luxury car, and your tax goes up even more. Fucking Quebec government s.o.b's)

Plus, you have to keep a log of everywhere you went if you plan to write off your gas purchases. If you don't have a log, you may not be able to claim the gas, insurance, etc.

The best thing about leasing is the lower montly payments. Payments can be as much as 50% less which makes any car easier to afford to drive, just not to own.

There IS however, a way to make back quite a bit. Here's how:

First, when you lease your car, you will have what they call a risidual buyout value. Let's say for the sake of argument that on a $50k car, the buyout is $25k after 4 years at 80,000 Kilometers.. (This is adjustable at the time you are negotiating your monthly rates).

After the 3-4 years of your lease, if the car is in good condition and under its milage limit, you can return the car and walk away if your car is below 80k. Sounds fair enough, right?

Wrong!

If your car only has 70 or 60k, your car is worth MORE than the buyout. If you have only 50% or less, your car is worth quite a bit more.

You can't deal with the finance company on this so you must either give the car back to them, buy it out for the $25k, or do what I do, Sell the car myself.

I have done this EVERY time and it works like a dream. First, get the car fixed if anything is broken. Clean it up and polish it and make it look sexy. Double check the buyout value, then add 15%. This is the minimum a dealer will mark up the car for on the buyout value. Even more interesting, dealers sometimes buyout these cars for less because the finance company may sell for less just to unload the car.

In other words, whatever your lease buyout value is, it is worth much more to the end user / retail customer. If its a good car in good condition, ESPECIALLY if its SPRING TIME, you can get an extra 15-20% on your car by selling your leased car directly to the a new driver.

Boxer3 · 03-31-2009, 08:37 PM

Quote:

Originally Posted by **********

Hi Boxer,

I've leased and owned lots of cars. You're right there are good reasons for both, but some of yours are wrong:

This is not true. Your car company owns the car but you're driving it, so you're responsible for the wear and tear (tires, brakes, oil, collissions, etc). Then if the warranty runs out before the lease does, you're responsible for the rest too. And you can get into negative equity if you put too many miles on the car as you will end up having to pay the value of the difference when you return the car.

Not always. If your business owns the car you save a little bit of tax, however, there is something called Taxible bennifits: Because you bennefit from the use of the car, you are taxes on that bennefit. Generally, if you got $10,000 use out of a $50k car, you pay tax on that $10k.

(And if your car is worth more than $50k, it is considered a luxury car, and your tax goes up even more. Fucking Quebec government s.o.b's)

Plus, you have to keep a log of everywhere you went if you plan to write off your gas purchases. If you don't have a log, you may not be able to claim the gas, insurance, etc.

The best thing about leasing is the lower montly payments. Payments can be as much as 50% less which makes any car easier to afford to drive, just not to own.

There IS however, a way to make back quite a bit. Here's how:

First, when you lease your car, you will have what they call a risidual buyout value. Let's say for the sake of argument that on a $50k car, the buyout is $25k after 4 years at 80,000 Kilometers.. (This is adjustable at the time you are negotiating your monthly rates).

After the 3-4 years of your lease, if the car is in good condition and under its milage limit, you can return the car and walk away if your car is below 80k. Sounds fair enough, right?

Wrong!

If your car only has 70 or 60k, your car is worth MORE than the buyout. If you have only 50% or less, your car is worth quite a bit more.

You can't deal with the finance company on this so you must either give the car back to them, buy it out for the $25k, or do what I do, Sell the car myself.

I have done this EVERY time and it works like a dream. First, get the car fixed if anything is broken. Clean it up and polish it and make it look sexy. Double check the buyout value, then add 15%. This is the minimum a dealer will mark up the car for on the buyout value. Even more interesting, dealers sometimes buyout these cars for less because the finance company may sell for less just to unload the car.

In other words, whatever your lease buyout value is, it is worth much more to the end user / retail customer. If its a good car in good condition, ESPECIALLY if its SPRING TIME, you can get an extra 15-20% on your car by selling your leased car directly to the a new driver.

Well, it only works if you stay within the mileage parameters.....if in 3 years / 36,000 miles you wear out tires and brakes, that's extreme and in most cases that wouldn't happen.....some companies like Volkswagen offer free oil changes during the lease term......but then again, interest rates are pretty low now too.

Iron Fist · 03-31-2009, 09:56 PM

Most people don't realize that they can sell the car and take the buyout value to the dealer and close the books on it. They think they NEED to buy it out as it's part of the contract.

Diezel Jim · 03-31-2009, 10:25 PM

I've always leased, getting a new car every 3 or 4 years. My brother who has been a long-time sales manager also prefers to lease, and swears by it.

But as others have already mentioned, there are pros and cons to both. Ultimately boils down to personal preference.

03-31-2009, 07:44 PM	#1
Boxer3 Confirmed User Industry Role: Join Date: Jun 2004 Location: Nashville, TN. Posts: 350	Car leasing....brilliant or a trap? I was having a discussion with a friend about that, I see the argument both ways. Pros: Lower payments, even with inception fee...., no negative equity or repairs to worry about, tax advantage with business use, more equitable buyouts than in the past.....I know you are always paying this way, but usually in the time frame of most leases, even when purchasing, the first 24-36 months is catching up with negative equity / depreciation anyhow. Drawbacks: You never keep a car long enough to have trade in value, if your lifestyle changes and more miles are required, it costs more, you may get charged for even minor wear on car as dealer sees fit (contract gray area), you pay and have nothing in the end except a rented car to drive. I'm sure there is more.....anyone here leasing? Does it turn out to be cheaper even by the time you pay the inception fee? Or are the limitations not worth the savings? Is the tax advantage significant? Just wondering what others' experiences are.

03-31-2009, 07:54 PM	#2
WebairGerard Confirmed User Industry Role: Join Date: Sep 2005 Posts: 8,113	Speaking of new cars only. If you own a profitable biz and can write it off leasing is good. if you need lower payments and can't afford down payments leasing is good. though if money is that much of issue should probably not be shopping for a new car. ;) If you are they type to hold on to a car for 5-10 years and do not need to have the newest, hottest car you see then you will always do better buying IMO. pros and cons to both for sure and all depends on your personal interests and financial situation. If money is not really a concern then an old rule of thumb is lease depreciating assets and buy appreciating assets. __________________ Last edited by WebairGerard; 03-31-2009 at 07:55 PM..

03-31-2009, 09:56 PM	#5
Iron Fist Too lazy to set a custom title Join Date: Dec 2006 Posts: 23,400	Most people don't realize that they can sell the car and take the buyout value to the dealer and close the books on it. They think they NEED to buy it out as it's part of the contract. __________________ i like waffles

03-31-2009, 10:25 PM	#6
Diezel Jim Confirmed User Join Date: Mar 2009 Location: Los Angeles Posts: 253	I've always leased, getting a new car every 3 or 4 years. My brother who has been a long-time sales manager also prefers to lease, and swears by it. But as others have already mentioned, there are pros and cons to both. Ultimately boils down to personal preference. __________________ [email protected] ICQ: 561929023 www.diezelmedia.com