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Car Forum / Driving, Maintenance, Tuning / Maintenance and Repair / January 2007Buying vs Leasing A Car
Buying versus Leasing A Car If you are considering whether to buy or perhaps lease your next car and which would afford you the best deal, most consumer experts agree that from a purely financial aspect you will be better off in buying your next car. Of course paying cash in full is the best possible scenario since with this option you would avoid any type of finance charge. But for the vast majority of us and for the scope of this article we'll take a look those purchases or leases that involve financing. In the short term leasing may look attractive to you because monthly lease payments will more than likely be less than the monthly payments of a purchase agreement. Why? Because with a lease you are essentially only paying for the part of the car you are going to use. It's kind of like splitting the cost of a pizza with someone. You are only paying for the pieces that you are going to eat. In car terminology the part that is left over in a lease is called the residual value of the car. The higher the residual value of the car the less of the car you will use during the lease so you payments for the part that you do use (the lease) will be lower... Read the entire article at http://www.ourcartips.com/car/buying_versus_leasing_a_car.html You are the same spamming bozo who thinks car bras are the next best thing to sliced bread right? Do you actually get hits to your site by posting such bullshit? Mike 86/00 CJ7 Laredo, 33x9.5 BFG Muds, 'glass nose to tail in '00 88 Cherokee 235 BFG AT's Canadian Off Road Trips Photos: Non members can still view! Jan/06 http://www.imagestation.com/album/pictures.html?id=2115147590 (More Off Road album links at bottom of the view page) > Buying versus Leasing A Car > [quoted text clipped - 21 lines] > Read the entire article at > http://www.ourcartips.com/car/buying_versus_leasing_a_car.html > You are the same spamming bozo who thinks car bras are the next best > thing to sliced bread right? > > Do you actually get hits to your site by posting such bullshit? Yes, unfortunately, people do support spammers.  SignatureAll relevant people are pertinent. All rude people are impertinent. Therefore, no rude people are relevant. -- Solomon W. Golomb > Buying versus Leasing A Car > [quoted text clipped - 20 lines] > > Read the entire article athttp://www.ourcartips.com/car/buying_versus_leasing_a_car.html Yes, leases are great if you want to keep paying for the first three years of depreciation over and over and over. > Buying versus Leasing A Car IMHO, leases bring this to the table... Corporations can use their cash for other purposes and lease. Leasing may be tax deductible whereas owning is a liability. For ordinary folk, leasing may allow some people to drive cars they couldnt afford otherwise. As a family financial decision, I think leasing is pisspoor. On Jan 25, 11:36 am, <H...@nospam.nix> wrote: > > Buying versus Leasing A CarIMHO, leases bring this to the table... > Corporations can use their cash for other purposes and lease. Leasing may [quoted text clipped - 4 lines] > afford otherwise. > As a family financial decision, I think leasing is pisspoor. Unless the vehicle is used more for work than for personal travel. The tax benefits can be enormous because the IRS considers a lease car a rental vehicle and a business expense. That is until somebody in DC figures out a way to take that away. > On Jan 25, 11:36 am, <H...@nospam.nix> wrote: > [quoted text clipped - 9 lines] > rental vehicle and a business expense. That is until somebody in DC > figures out a way to take that away. In a purchase transaction wouldn't a business be able to depreciate the cost and write off any interest payments? Both of those purchase costs are analagous to writing off the payments under a lease. Under either scenario the operating costs would also be deductible. > > On Jan 25, 11:36 am, <H...@nospam.nix> wrote: > [quoted text clipped - 12 lines] > costs are analagous to writing off the payments under a lease. Under > either scenario the operating costs would also be deductible. Yes but if you own (finance) the vehicle you have to do some depreciation calculations before calculating your write off. With a lease you write off the entire percentage of your payments that were business related plus insurance, maintenance, etc. regardless of how old the vehicle is. The year I wrote off 90% percent of my lease payments I thought it was absurd but took the deduction. I don't drive nearly as much for work anymore so now I buy. > > > On Jan 25, 11:36 am, <H...@nospam.nix> wrote: > [quoted text clipped - 13 lines] > > either scenario the operating costs would also be deductible.Yes but if you own (finance) the vehicle you have to do some > depreciation calculations before calculating your write off. It's pretty basic math: Purchase price plus any other acquisition costs divided by the number of months to be depreciated. One could straight line or accelerate the depreciation but in either case most small business accounting and packages perform the math automatically. > With a > lease you write off the entire percentage of your payments that were > business related plus insurance, maintenance, etc. regardless of how > old the vehicle is. T You can do exactly the same thing with a car purchased outright. But I'm sure that you are aware that generating tax writeoffs involves an outlay of cash and that you are reducing your tax bill by roughly 33 cents for every dollar of lease payment. So if you lease a new car every three years you will be making lease payments for as long as you have a car in the business. With a purchase deal you pay for the car once, write it off and that is that. Leasing is a good way for a business to get transportation without having to pay out much cash up front. But you do ultimately pay. And in the case of a lease you pay over and over. > he year I wrote off 90% percent of my lease > payments I thought it was absurd but took the deduction. Again, you can write off either the purchase price or the lease payment.... > I don't drive > nearly as much for work anymore so now I buy.- Hide quoted text -- Show quoted text - > You can do exactly the same thing with a car purchased outright. But > I'm sure that you are aware that generating tax writeoffs involves an [quoted text clipped - 12 lines] > Again, you can write off either the purchase price or the lease > payment.... The only difference is that there are depreciation limits depending on what year of ownership you are in. Rental or lease payments are not limited, probably because you don't own it and the car is of no 'value' to you. So it really depends on how much the car costs. > > You can do exactly the same thing with a car purchased outright. But > > I'm sure that you are aware that generating tax writeoffs involves an [quoted text clipped - 15 lines] > limited, probably because you don't own it and the car is of no 'value' > to you. So it really depends on how much the car costs.- Hide quoted text -- Show quoted text - Comparing out the dollars involved to obtain the deductions in both situations would make a lot of sense for individuals contemplating a lease. Unfortunately not many people do that. I suspect many are swayed by a combination of low down payment and the undefined promise of tax benefits. I suspect that in an audit the IRS would look very closely at a 36 month lease where the car was supposedly only used in one of 3 years as a business tool and a deduction taken. My gut feeling is they would disallow it because the primary use of the car is personal. > > On Jan 25, 11:36 am, <H...@nospam.nix> wrote: > [quoted text clipped - 12 lines] > costs are analagous to writing off the payments under a lease. Under > either scenario the operating costs would also be deductible. There is more than one way to skin a cat... http://www.theautochannel.com/mania/affairs/cartax.html Explains some of the differences. Now that I think more about it I was driving a car that *leased* for $400+ a month so the payments easily passed the maximum allowed under ownership. Wized up and now I drive a vehicle with an MSRP of less than 20K. > On Jan 25, 11:36 am, <H...@nospam.nix> wrote: > > [quoted text clipped - 11 lines] > rental vehicle and a business expense. That is until somebody in DC > figures out a way to take that away. That is exactly what I indicated. BUT, to gain on tax credits, you have to have a business, own a business, or use creative accounting unless you ARE a de facto business. John Doe, driving to Taco Bell for shift work, need not apply On Jan 25, 5:51 pm, <H...@nospam.nix> wrote: > > On Jan 25, 11:36 am, <H...@nospam.nix> wrote: > [quoted text clipped - 15 lines] > have a business, own a business, or use creative accounting unless you > ARE a de facto business. It is amazing the number of people who buy into the car salesman's pitch about the suposed tax benefits of leasing over owning. >It is amazing the number of people who buy into the car salesman's > pitch about the suposed tax benefits of leasing over owning. Equally amazing is the number of people who believe there are no benefits to leasing and assume that anyone who thinks there are benefits is a sucker. >>It is amazing the number of people who buy into the car salesman's >> pitch about the suposed tax benefits of leasing over owning. > >Equally amazing is the number of people who believe there are no >benefits to leasing and assume that anyone who thinks there are >benefits is a sucker. For the most part, I think leasing has major benefits if you have to be driving a new car all the time. If you don't, it's probably not cost effective. I know a lot of people, though, that because of their job need to be seen in a new car. Leasing works for them. On the other hand, people pay me to keep ancient equipment running. If I showed up in a new car, they might lose faith in me. --scott Signature"C'est un Nagra. C'est suisse, et tres, tres precis." > >It is amazing the number of people who buy into the car salesman's > > pitch about the suposed tax benefits of leasing over owning. > > Equally amazing is the number of people who believe there are no > benefits to leasing and assume that anyone who thinks there are > benefits is a sucker. There are some tax benefits for certain people. Most of us dont qualify. If you dont get substantial tax credits, then I think the concept is a financial mistake. On Jan 26, 9:15 am, <H...@nospam.nix> wrote: > > >It is amazing the number of people who buy into the car salesman's > > > pitch about the suposed tax benefits of leasing over owning. > > > Equally amazing is the number of people who believe there are no > > benefits to leasing and assume that anyone who thinks there are > > benefits is a sucker.There are some tax benefits for certain people. Most of us dont qualify. Which tax benefits are those and how do they differ from someone who purchases the same car outright. > If you dont get substantial tax credits, then I think the concept is > a financial mistake. I'm not aware of any tax credits for leased cars. The ITC is available but it is used for purchases and you have to reduce the asset basis by that amount of the credit. > > > . Most of us dont qualify. > > Which tax benefits are those and how do they differ from someone who > purchases the same car outright. If you use a car in business, as a salesman, deliveryman, etc, then your legitimate car expenses are deductible. You can deduct a mileage fee for business travel if you own the car, but you have to keep a log in case of audit. (The car is yours to do with as you like outside of business. You are acquiring some equity for your payment) If you lease a car for a business, you can deduct the entire monthly fee as an expense. (But, you are paying money into a car that you likely will not ever own. Leasing companies dont do it for fun). For business which need to manage their liquid assets carefully, buying cars is perhaps not a wise decision. At least this is my understanding. > > If you dont get substantial tax credits, then I think the concept is > > a financial mistake. > > I'm not aware of any tax credits for leased cars. The ITC is available > but it is used for purchases and you have to reduce the asset basis by > that amount of the credit. IF you have a legitimate business, you can deduct the leasing fee as an expense. The person who has a car to drive to work cannot claim this, generally. It has to be a primary business application. Do some people cheat? Sure they do. On Jan 27, 9:44 am, <H...@nospam.nix> wrote: > > > > . Most of us dont qualify. > [quoted text clipped - 5 lines] > business. > You are acquiring some equity for your payment) You can also depreciate a car which has been purchased for business use. Thus the deductions are likely equal or more for the purchaser in the short term. For the person leasing they will spend more and therefore deduct more in the long term. > If you lease a car for a business, you can deduct the entire monthly fee > as an expense. (But, you are paying money into a car that you likely will > not > ever own. Leasing companies dont do it for fun). For business which need > to manage their liquid assets carefully, buying cars is perhaps not a wise > decision. And said more directly by myself and others leasing is a good way for individuals and businesses to acquire the use of a vehicle that they would not otherwise be able to afford. > At least this is my understanding. > [quoted text clipped - 8 lines] > has to > be a primary business application. That is NOT an example of a tax credit. It is an example of a deduction which will net the user at most 33 cents in tax reduction for every dollar spent on fees, etc. A tax credit would be one that reduces the tax liability directly - the ITC credit, alternative fuels credit, etc. > Do some people cheat? Sure they do. Well, yes that is true for those who do not mind looking over their shoulder continually. >>It is amazing the number of people who buy into the car salesman's >>pitch about the suposed tax benefits of leasing over owning. > > Equally amazing is the number of people who believe there are no > benefits to leasing and assume that anyone who thinks there are > benefits is a sucker. Or just WANTS a new car every 3 years. There is mathematically NO WAY that leasing wins if you buy and then keep a car for its whole useful life, rather than toss it arbitrarily. >Or just WANTS a new car every 3 years. There is mathematically NO WAY >that leasing wins if you buy and then keep a car for its whole useful >life, rather than toss it arbitrarily. I know someone who is a metals broker. He doesn't actually have a lot of money, but he needs to look like he has a lot of money. He trades his car in every year. Of course, he never changes the oil, because he figures it's not worth the money if you're going to keep the car for only a year. Leasing works out as a substantial win for him, compared with buying a new car every year and trading it in. --scott Signature"C'est un Nagra. C'est suisse, et tres, tres precis." >>Or just WANTS a new car every 3 years. There is mathematically NO WAY >>that leasing wins if you buy and then keep a car for its whole useful [quoted text clipped - 3 lines] > of money, but he needs to look like he has a lot of money. He trades his > car in every year. He might actually HAVE a lot of money if he'd stop doing that. ;-) Seriously, this example proves my point. I only question whether anyone really "needs" to look like they have a lot of money when they don't. If I'm dealing with such a broker and see a flash car, my first thought is "that jerk is adding to my cost just so he can drive a hot-shot car. I'll look for a more financially responsible broker, thank you very much." Maybe he has sufficient clientele that thinks differently than I do. I guess that shouldn't surprise me. I also have a friend who is in medical equipment sales and he tells me the same thing- "I need a new car so the doctors will take me seriously." OK, fine. We KNOW that a lot of MDs are that shallow. But then I get to kid him that if that's the case then why always park in the hospital or medical building parking garage and then WALK inside to meet with clients? I mean, do they ever even SEE the car??? ;) > I know someone who is a metals broker. He doesn't actually have a lot > of money, but he needs to look like he has a lot of money. I have a stepson who feels the same. He needs to look prosperous, although he is a beggars scrotum. People like this do what they have to do. For the greater cross section of us, leasing is not wise. On Jan 25, 5:51 pm, <H...@nospam.nix> wrote: >.That is exactly what I indicated. BUT, to gain on tax credits, you have to > have a business, own a business, or use creative accounting unless you > ARE a de facto business. > > John Doe, driving to Taco Bell for shift work, need not apply Partially correct. Driving to your office does not count as business usage but any other driving FOR work does count. ex. A salesman who drives to his office can't count those miles but a salesman who visits a client first then goes to the office can count the whole trip. Also a pizza delivery guy can count all of the miles driven delivering pizza just not the miles from home to the pizzeria, as long as the employer doesn't pay them mileage. http://www.irs.gov/businesses/small/article/0,,id=105708,00.html |
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