ggesq

iTrader: (1)

When did this change?

LaCostaRacer

For the average (non-business deduction) Joe, the only advantage one would have in leasing is the ability to drive a more expensive car than one can actually afford. Very similar to renting .vs. buying a house in many ways. It's much easier to qualify to rent .vs. buying the item that may require a cash down payment and a higher monthly payment to own the item free and clear at the end of the term. (Now in these times with declining real estate values, this might be a weak argument for buying a house for some but the principle is valid. Even now, anyone under water now probably won't be in 15-20 years if they just made the payments. )

If those aspects of leasing is important to you, and you can't save, you don't mod your car, and need the peace of mind of a new car then by all means lease. For anyone that buys a quality car (e.g. Honda/Acura) and keeps their car for 8 years or longer then why would you ever want to lease and then try to negotiate with a dealer on buying your 'used' car to drive another 3-5 years? It would be much easier to simply buy the car initially and be done with things.

For gaining wealth, the best way to acquire wealth related to cars is buying the <3 year old car that might be somebody's lease return car and one that is in great condition. That way you take very little depreciation hit and still get to drive a recent body style car. German cars in general are not great avenues for gaining wealth- they are much better as trophy's after wealth has been gained IMHO.

SpicyMikey

?? Gaining wealth from buying a car? Aside from buying an antique (25+ years) a car is no investment. Having said that, I agree, buying a 3 year old car is LESS of a drain than a new one, but its a fast depreciating asset none the less. Unless you start getting into the 7+ age the depreciation rate is high.

Regarding leases; man, that's a worn out debate. Leases serve an excellent purpose and are financially logical in the right circumstances. There's no right answer. For me I tend to lease these days. I have good reasons. In the past, under different circumstances, I owned and kept my cars between 7-9 years. It depends on your priorities. Also, having my own business allows me to take the car payment fully as a business expense as well. But again, it all depends on your priorities and needs. No right or wrong answer.

Having said that; I'd seriously advise folks to look at a lease right now on a 2012. I just replaced my daugheters 09 TL with a 12 TL this month and I can say there are good numbers out there right now for leasing.

On a 36m/15k 2012 TL Tech, the residual is great between 58-60% depending on your region. MF is average at .0017 but fair. Also, there is dealer cash of $1000 and another dealer bonus of $750. They are supposed to use the $750 as a loyalty program but they don't have too. Make sure you get that $750 at least. At any rate, incentives from Acura are good, sales are slow, and dealers need to move cars. Good formula to get a deal.

I got the 2012 at invoice minus all the dealer cash ($1750). Plus, Black Book had my car worth $1500 more than the lease payout. So I got $1500 cash on the 09 TL trading it in rather than waiting for the lease to expire in October. That was a pleasant surprise.

Bottom line was a 2012 TL for a base payment of $427/mth. I live in Florida and you pay taxes monthly with the payment. So, add $25/mth for taxes.

Hope those numbers help someone on the fence considering whether to lease or buy. Eitehr way, go do some dealing before the end of the month.

jasonwdp10

You are not allow to fully deduct the lease unless your vehicle is 100% used for business. If you even drive it, home, it is not 100% business use.

You are supposed to take an allocation/mileage/percentage based on your business use. So what you're doing is illegal.

SpicyMikey

Oh really? Stick to talking about cars my friend. Many expenses for items that are shared for business and personal use have allowances for determining the percentage of use for both and applying that percentage to the deduction. Even your mortgage can be deducted partially if you run your business from home. Not all of it, but the percentage equal to the proportion of space being used for business (e.g. a home office, etc.). Also, my daughter works for my company so she is an employee.

Ok, back to talking about cars and not wild ass speculation about other people's business.

omaralt

i believe i was told by my accountant that the car had to be used at least 60% of the time for business (my info is a few yrs old btw and my memory foggy at best )

SpicyMikey

yea there are percentages that have to be followed. My accounting firm takes care of all that.

By the way, I reread my original post and saw that I mispoke slightly and said I was taking the car payment fully as a deduction. I can't say that for sure. I don't know exactly what percentage is deducted. As i said, that's all handled by the accountants and it's all perfectly legal. Sorry to get a little ugly with the other poster folks, but I don't appreciate someone saying I'm doing something illegal when they know NOTHING about me.

Again, lets stick with cars. I was just offering a post to help let everyone know (in case they weren't aware) that the leasing numbers are very very good right now. IF you like to lease, AND if your lease is close to expiring, THEN I'd go take a look.

Good luck to everyone

jasonwdp10

umm.. this is what i saw:
Percentage use is one thing, but taking the entire lease payment, especially for a luxury sedan (which at most can only drive you and maybe some clients around), not a truck or actual work vehicle, in your case is illegal.

Even if your daughter was an employee.. so what? Does she chauffer clients back n forth? If not, then you should not be deducting the full payment like you said you did.

Maybe you should pick up a tax publication and read up a bit before illegally taking deductions you are not allowed.

jasonwdp10

You don't even know whether they fully expensed the lease payment or took a percentage for you.. and you're saying it's all good and legal?

If anything, some CPA firms will put the full lease payment so you can get an extra few bucks on your return and play what some call the audit lottery. They hope the $$ u save each year will offset a potential audit which can and will force you to pay all those taxes back with penalties.

From reading this post in particular, you seem like the type of business owner that says "oh yea, my accountant handles everything... i just run the business.. they handle the taxes.."

In the end, you sign the return, you are responsible if they make mistakes. I always tell people to sit with their accountant and have them explain parts of the tax return to you so you can understand why the numbers are there.

My harsh sounding post is to stop you from spreading misinformation to people that "it's ok" to fully deduct a lease payment incorrectly.

SpicyMikey

^^ Hey thanks for looking out for everyone. I can appreciate not wanting mis-information being stated to misguide people. I'm not being sarcastic. I'm serious. I think you could have handled it different but ok.

Regardless, that wasn't the main trust of my comment which I think still is worth considering. Whether you buy or lease, the dealer and loyalty money is still there. Dealer money could go in a few days but Loyalty money is good through 8/31 according to Edmunds. Leasing is good right now (as it always is at the beginning of a new model year) because the residuals are very good on top of all this other stuff.

Also, even if you buy, and use the car for business (in whatever percentage), you can still deduct it. Just have to deduct it differently. When buying you deduct the depreciation based on a predermined schedule set by the government. If you hold the car long enough it still has its advantages there also.

So forget about the business deduction stuff we've gotten off on a tangent with. A TL lease is very good right now regardless.

HighRevving

Good points, but you have to admit you did squeeze that poor sales associate

Have you checked your messages lately? :wink:

SpicyMikey

It's a skinny deal but they still made money. They still had their holdback. We didn't dip into that. Plus it involved a trade-in. They are going to do very well with the 09 trade-in. It was in excellent condition and I accepted black-book "average" on the trade. They will resell that as a CPO and make a good $3k profit. Probably sell it in 2 weeks also since its an Acura on an Acura lot.

Yes I got your PM. I gave you the info you asked for. Good luck.

Bearcat94

There are numerous potential hidden charges in leases. Acura is, in my experience, pretty straight forward.

A couple of places where I KNOW advertised lease rates for MB, BMW, Lexus and others tend to vary:

- Very high "down payment", aka, capitalized cost reduction. As much 2, 3, even $4k higher than what Acura advertises.

- Advertised leases are very often based on base models. I.e. lowest MSRP models. Acura does this too, BUT, a bottom tier TL is still very well equipped compared to MB, BMW, Audi.

- Mileage allowance. Reduced mileage allowance keeps the residual higher and the payment lower. Acura typically bases their rates on 12,000 miles per year. Others moved to 10k miles per year. With the downturn, perhaps Acura has as well.

- Mileage charges. In addition to offering less miles, upping the charge per mile for overage to $0.25 or more per mile to "catch" the unwary.

Bottom line: A lot of the leases you see advertised are completely un-realistic. In some cases it is (nearly) impossible to find a car equipped poorly as the advertised car; typically cars on the lot have some package or another added. Acura isn't innocent, but they are less egregious in their manipulation than some other brands.



Regards the cost of lease vs buy arguments, in most cases leases do cost more in the long run. But depending on use, when you sell, resale value, financing terms, accuracy of the residuals, etc, it's often less than most people might think.

yunginTL

what kind of limitations are there with leasing as a small business owner?

omaralt

you have to use the car for business purposes a certain amount of the time. for example my accountant told me if i only used my car to go to work and come back home than i cannot write it off. the car has to be used for the business and not just commuting to the business. there was a famous case where some guy wrote off his car even though he only drove it back and forth to his business claiming that it was advertisement because he had his business info on his car or something. he lost

yunginTL

so that percentage of business use is the percentage of the lease amount that is deducted?

omaralt

read this for a in depth explanation:

http://www.wwlaw.com/auto.htm

CGTSX2004

iTrader: (1)

Comparing it to gambling is more than a tad hyperbolic, don't you think?

As for the question about the German makes, it is usually due to the combination of high down payments (cap cost reduction in lease parlance) and high residual values (i.e. estimated depreciated value at the end of the lease term). Since a dealer makes money on a car even at invoice price due to the holdback, leases are usually favorable to them because the predetermined price of the lease is going to be a bit higher than invoice and allows them to actually hold the purchase price of the vehicle closer to what they ideally want it to be since consumer resources like Edmund's TMV calculations likely include the sale price of the leased vehicles as well as purchased vehicles.

SpicyMikey

This debate on leasing vs. buy always gets that way. It's like discussing religion or politics. Not sure what causes it because neither is better than the other. There's no right answer. They both make sense given the buyers needs and wants. Not everyone who leases is a blithering idiot, or vice versa, as some want to suggest.

The argument always seems to revolve around which is cheaper in the long run. But of course its not that simple. Certainly it's cheaper to finance for 4 years and keep it for 6, versus two 3 year leases. But for businesses the savings is not that dramatic, and, if you finance it for more than 4 years (5 or 6) it is DEFINITELY not that dramatic, in fact it's often more costly to finance. The interest rate specials usually don't apply to 60+ month loans and you have to accept the risk of being upside down for a couple of years. You could buy gap insurance (like a leaser) but that makes financing even more expensive still.

Regardless, the problem with financing is always that there is higher payments. If you finance with a 4 year loan you might have a $700 car payment for 4 years and then $0 for the next two. But if you do two consecutive 3 year leases, the payment might be $500 the whole 6 years. Some people want the nicer car but can't afford a $700 a month car payment for a 24-48 month loan, thus leasing makes sense.

So its really a cash flow issue. Some would argue leasing is better because it frees up cash, even if you can afford the $700 payment. At very least, it evens out the payments.

Before people who are looking at this as purely as a "Total Cost of Ownership" issue, consider this; Some people can afford to finance an Acura TL but chose to buy a stripped down Honda Civic and pay cash. They call all those who finance a car (simply to ride a nicer vehicle) just a bunch of fools because they are paying more for the car in the long run then necessary. Sound familiar? Maybe we all should just be driving 1998 Honda Civics. Then we'd all be really "smart" because we wouldn't have any depreciation to deal with. In the end, buying a car, a house, etc. involves some things beyond TCO. There is no right or wrong answer.

kixo

My very first lease was for an 08 TSX AT Navi back in 2008. I did it because I was up for an overseas job transfer, and my company would buy me out of my lease, but not if I had a car purchase with payments.

So in addition to my 36 mos lease payments, I squirreled away an amount each month that would total the residual/buyout price at the end of the lease. It took a disciplined commitment, but I did it.

I felt this gave me some flexibility. If my circumstances changed and I wanted a different car, I could jump to that. Or if the TSX was in an accident during the lease and I didn't want to purchase it, I kept my options open.

I was all set to just buy the car at the end of the lease, but then two things happened. I decided I really wanted a manual transmission. And the blue/black book value of my 08 TSX was several thousand dollars higher than the residual.

So I turned in my 08 TSX, and the dealer used my equity and the $750 loyalty to get me into an 11 TSX Tech 6MT with zero down and at about the same payment I was making for my 08 TSX. And I didn't touch the savings I had accumulated to buy the 08.

I will say I have been very impressed with Acura Leasing. They extended my lease by a few months (as I was looking for a 6MT) and then also gave me a 10-day grace period to finalize the deal. And they have humans that answer the phone after just a few rings!

For me at least, the leasing option gives me that flexibility that I want. To each his own.

SeismicGuy

I have always bought cars and tended to keep them more than 5 years. Several times I explored leasing and even spoke with a few knowledgeable car broker types and it always came down to one simple rule. If you tend to keep cars more than a couple of years then buy. If you like changing cars every couple of years then lease--end of story.

CGTSX2004

iTrader: (1)

Since I negotiate nearly all car deals for my entire family, I have studied a pretty good cross section of the leases on the market and I must say, I too am impressed with the flexibility that Acura and Honda allow in their lease programs. In fact, they are one of the few lease programs that allow you to buy the vehicle at any point without any additional penalty costs and their customer service has been excellent in those instances when I have had to deal with them.

SpicyMikey

Agree. From my experience over the years you cannot beat an Acura lease program. On top of what you mentioned, they also give you $1500 alowance for damage with damage not to exceed $500 in any one spot. Thats fantastic. You're not going to get that at BMW, etc.

I wish Lexus offered that. My other daughters IS250 has some minor bumper damage from clipping an electric gate. One way or another that's going to cost me. If it was an Acura that damage would have been 'forgiven".

jjsC5

I have tried to avoid these threads because there is so much bad information and advice, and people tend to generalize.

The answer to the leasing question is that it can or can't be bad for you, depending on the deals available. Now...how is that any different than buying? If you pay full list for a car that can be bought at a $10,000 discount - you have had your head ripped off just as much as if you make a bad lease decision.

I've leased several cars, and I've bought tons of cars. I make my decision based upon what is available on the leases. Its really a pretty simple matter of deciding which cars you are interested in, how long you normally keep a car - come up with what is a realistic estimate of what it will be worth at the end of that time and do the math. It's not rocket science.

Right now there are residuals on some BMW's that are close to and even over 60% for three years. Run the math on them. Anyone think they can trade a car in after three years and get more than 60% as a trade-in? Not likely. And in the case of the lease you eliminate the risk and you likely don't tie up nearly as much of your own money.

I will say that virtually all the good leases are the ones where the manufacturer is essentially subsidizing either the residual, money factor, or both.

jjsC5

Just to clarify a couple of points - if you bought the car and it has visible damage you are still going to "pay" for that damage if you go to trade the car in. Second, most of the "forgiveness" programs are only if you lease or buy another of the same brand. They are effectively washing the cost of the damage into the next vehicle. I think every vehicle I've leased has offered something like that if you lease again from them. It may not be part of the initial lease deal, but 90 days before your lease ends you starting getting the offers in the mail. It is simply their way of trying to keep you in the family.

SpicyMikey

No this doesn't work that way. Read the contract if you are holding a current Acura lease. The appraised damage is forgiven up to$1500. The only exception is that it cannot be more than $500 for any one incident of damage. It works at lease return, not trade in. At trade in the dealer (or whoever) is giving you a wholesale price for the car with the damage. If the damage is within bounds of normal wear and tear he probably will just ignore it and give you black book "fair" for the car. With a leasor, they will try to nickel and dime you as much as they can. Acura leases are truly different and better than almost any I've gotten involved in. Once, GMAC (many years ago) actually banged me for $300 to "clean the car! Needless to say, I never leased another car from GM.

SpicyMikey

You're 100% correct. Glad you brought that point up. To me its obvious and I didn't even think to mention it. Manufacturers run different specials at different times on leasing that do NOT translate to the finance side. That's when leasing becomes a slam dunk. In fact, we have that right now with Infiniti G37's. The August numbers just came out and the residual on a 36month/15k mile lease is 61% (check out www.RideWithG.com) and the money factor is .00099. That equates to 2.35%. Those are great numbers. You almost HAVE to lease that car right now. If you bought that car and wanted to sell it in 4 years you'd lose a ton of money. The car would probably be realistically only be worth about 45% of purchase price after 3 years with 45k miles on it

Thanks for bringing up that point

winstrolvtec

For the most part, the lease and finance of a given vehicle at the same time are structured to have similar costs for the same time intervals. When looking at a 3 year lease vs 60 month financing for the same 36 month time period, both with similar out of pocket expenses initially and a normal trade-in value for the finance, generally the equity return on the finance will at least offset the higher payment, effectively making the costs the same. Sometimes you will do better and sometimes worse, it's usually never a significant margin and there are many variables and factors involved, so once again, it’s very hard to generalize this sort of thing.

As far as we can tell at the time of purchase, the advantages and disadvantages of the two are the typical ones and lie with however one intends to use the car and what the future intentions might be. It's a good idea to stick with what method one prefers and their financial situation, since a large part of determining what is better in a pure financial sense will require one to be able to sort of predict the future, which we can't.

If the car depreciates more than expected on it's own or it's a particular brand that has a tendency to do so (maybe they inflate their residuals as a form of subsidy), or you are accident prone or one's cars just can't seem to stay without getting banged up from the usual scratches and dents, etc, you will likely benefit more from leasing. That is if you can easily comply with the standard stuff like mileage limits and other term conditions.

If the car or brand holds it's value better than expected, you manage to keep it in good condition and the mileage is on the lower end, then financing could prove to cheaper and the better financial move, although there is the whole sale or trade-in aspect to it that is usually not involved with leasing and even if the finance is a few thousand cheaper long term, you do need to pay or invest the extra money monthly into the car and often times more investment into a depreciating asset than you have to can make for a potentially disastrous investment if crashed, stolen, or the unexpected depreciation. There are some brands I probably would never finance for some of these reasons.

You always have the option of taking the monthly savings from leasing and investing that into other means to offset any of the typical additional finance charges the lease may carry instead. Since someone else risks the normal depreciation and any extra in leasing to you, it doesn't fall on the buyer, it falls on them but usually does cost slightly more as a result, so normally you do have to pay more for this aspect of it. The finance charges in leases do tend to be slightly higher but I have seen in some rare instances where they were less, which in that case makes leasing a no-brainer IMO. That's why I measure all of my deals on a case by case basis and base my decision largely on that.

There is some offset to the potentially higher lease cost though, as there usually are lease loyalty incentives, mileage forgiveness plus rollover at times which I know Acura has and they also allow for a degree of extra wear and tear, up to $1500 no questions asked, for stuff like dents and scratches, etc that could hurt a finance's sale or trade-in which you don‘t have to worry about when leasing. Honda/Acura leasing policies are really laid back when it comes to this stuff, and their people who write up the condition reports for turn-ins don’t look to drill you, from my experiences. So again, while maybe not the most aggressive leases in a financial sense, at least you don’t have to worry about stuff like that or possibly only saving upfront and paying crazy overages and fees later.

I know a lot of folks talk about tax deductions but you can do the same for a car you own or finance, it's just the way the deductions are calculated that's different, so I have heard. I am not an accountant or anything like that.

This is why in most cases, I believe the two are very much the same or close enough considering everything that it shouldn't really matter all that much in a pure financial sense as long as the terms are not terrible but you should compare the lease and finance for the particular vehicle in that timeframe of purchasing, in relation to the overall deal, to try to establish this for sure and also see how they compare.

Personally, for how I use my car and how the lease and finance compared, I chose to finance. My car is almost exclusively a weekend cruiser, I don’t need it everyday as a daily driver and total buyout at the 2 and 3 year points are cheaper on my finance than how it compared to lease deal at the time. I figured it had the potential to be cheaper after return on trade or sale down the line, so I pay a few thousand more in additional payment cost but save a few thousand long term, worst case it would end up costing the same but I don’t have to be tied in for as long but it’s a matter of taking a much bigger risk than leasing.

The big thing about leasing when viewed in a financial sense is that even though it usually costs a bit more, you avoid subjecting yourself to any additional depreciation from the unexpected. Anyone who has owned a vehicle and gotten into an accident or has experienced terribly unusual amounts of depreciation, knows it takes an already bad financial aspect of a vehicle and makes it that much worse.

SpicyMikey

^^ yes to everything. Also, regarding what you said about deducting on a finance for business. I can confirm that for you. yes a finance can be deducted also. There are many ways to do it and benefit just as much as with a lease. At very least you can deduct the deprecating value of the asset each year. However, you can also purchase the car with one company and then "lease" it yourself to your other company. I am on the finance committee of our HOA and we do something similar to that although not exactly. The HOA finances all their maintenance trucks but ends up fully deducting the expense similar to lease payments. Bottom line on that: The deduction issue is not the main reason you would want to lease or not lease, although it can help

jjsC5

I didn't lease my Acura, and have not leased an Acura in the past, so I apologize for my generalization being wrong about the Acura lease. Thanks for correcting me.

I must say that I've leased from a few different companies - One Ford, a few GM, two Infinitis - I think that's all. I've actually had very good experiences with all of them. But I also keep even my leased cars immaculate.

HighRevving

Agreeing that a lease could be vital option when all the conditions are satisfied; I find myself struggling with couple of issues that are specific to the state of VA (and undoubtedly others) - maybe someone can shed some lights on..

1. One has to pay for property taxes on the vehicle every year – including leased vehicles @ $4.20 per $100 assessed value. Leasing means paying prime taxes for 3 years then doing it again another 3 years (as it is the case when buying new frequently)
2. 3% Sales taxes on full price of vehicle not just monthly payment..

Help!

jjsC5

I can't speak to the first part, but I have no sympathy for the second. In Texas we also have to pay sales tax on the full price - but we pay 6.25%. There are some ways around it here. They occasionally have deals where there is little or not tax due to tax credits that the dealers accumulate. These are usually available for a very limited time and often in December.

The other is if you are leasing already and lease again from the same leasing company you usually only have to pay taxes on the difference of the residual value subtracted from the new cars full "sell" price.

But you do make a good point - when evaluating the lease you have to decide whether that tax makes it a bad deal for you or not.

CGTSX2004

iTrader: (1)

This is the trade-off for the lower income taxes in VA. At least you're not paying the 6% sales tax that DC has.

n-spring

When I leased my car from Sterling McCall in June, I got a sales tax subsidy of 5%, lowering the sales tax rate to 1.25%. I can attest that these subsidies do exist, and not always just in December.

jjsC5

Yes, that is true, but there is a limit to them. I know how they work. Do a search on "Members and Lenders".

HighRevving

@jjsC5 - RE paying partial taxes when re-leasing from same company; that is a great point! I thought it was limited to purchasing only. I will ask dealers on that.

@CGTSX2004: Agree!

SpicyMikey

I don't understand the sales tax issue. From everything I know about leasing/buying cars in various states, you pay sales tax either way. As others pointed out above, there are some differences in HOW you pay, but in the end you pay the same. With a purchase you always pay sales tax on the entire purchase price, up front, as part of the deal before drive off. With a lease that can vary from state to state. As was already pointed out, in some states you have to pay sales tax up front like a purchase. NY is like that and many others. Here in Florida we pay the sales tax as we incur the expense each month. So you pay a little sales tax each month rather than all at once. it all adds up to the same number but of course its better to for you if they charge you monthly since you don't have to lay out all the cash up front.

Is someone saying that in some states you do NOT pay sales tax if you lease? I can't believe that but if its true that's a big plus

Bottom line: sales tax should not be much of a deciding factor unless its true that sales tax is forgiven on leases in some states

HighRevving

When you pay taxes on incurred monthly charges, you are in fact being taxed on the depreciation – a very friendly lease configuration. In other states, one has to pay sales tax on the full sale price; now the method of paying the latter tax (monthly/lump sum) is I think irrelevant except for the fact that rolling it in causes additional interest.

But yes you always pay sales tax - at least i do

HighRevving

Dealer just confirmed that there is no tax benefit when returning the leased vehicle and leasing another in VA..

SpicyMikey

I by no means do I think I understand the tax laws of every state. Not even close, but at least here in Florida I can tell you we pay sales tax on the entire monthy lease payment not just the depreciation based on the agreed upon residual percentage. In other words, sales tax is for the "rent" charge and the depreciation.

Also, regarding your issue with tax benefits on lease return. Not exactly sure what you mean by that but here in Florida if you trade in a vehicle AND it has equity THEN that equity can be deducted from the new deal and you do NOT pay any tax on that equity transfer. That seems fair and helps not only the customer but the dealer to entice people to trade into a dealer. if you sold the car yourself then you'd have to pay tax on the sale.

Sounds like Florida is a good place to be We don't even have an income tax! You guys have to get out of those northern, democratic, union driven, states and come south. I left NJ 20 years ago and wild horses couldn't drag me back there. Although I miss the good pizza