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Discussion Starter #1
Now that cars are slowly rolling in, are people buying the car or going the lease/balloon route? If any balloon or leasees out there, what is the residual value you have been given for 36/48 months? I've searched the internet for residuals and since it is so new, nothing. My dealership said they would not balloon the payments and a buy is the only option.
 

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Buy. Cash.

Perhaps not the wisest move... but a deal is a deal. Argh.
 

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Lease isn't really desirable unless you can right it off as a business expense? Plus, even though cars depreciate you will have some level of equity if/when you go to buy another car, not the case with a lease?
Chris
 

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You can write off a car without a lease. A lease simplifies accounting. This is my understanding, and I am not an accountant nor play one on TV. Some differences-

Buy car outright (cash or loan) - write off as depreciation or depreciated expense. Recapture when sold eventually. There are some limits on the amounts though. But you can expense up to $24,000 in the first year and then straighline depreciate following years. With a car valued at $45,000, you will not be able to use a lot of the depreciation.

Lease - Write off entirety of lease payments each month. No recapture since you never owned the vehicle. The leasing company did. Leasing is not a free thing, something has to pay the overhead and salaries of the leasing company.

There are some other details.

Leasing- good for cash flow. Bad if you put a lot of miles on it. May be a problem for people that like to modify the cars. Not as desirable for people that will keep the car many years.

Leasing good if you get sued. You don't own it, it's not an asset.

Any accountants on board? :)
 

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But to depreciate it has to be predominantly a business expense, and don't you have to keep pretty accurate logs on the car?
Chris
 

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Chris, I believe you are correct. If you get audited(which isnt likely), you better be able to prove that you use your vehicle for work(and to and from work doesnt count!) and you better be a small business owner. Now if you dont get caught, you can pretty much do what ya want. My wife is a CPA so Im not allowed to get away with anything cause her license is at stake...:(.
 

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Regardless of how you write if off, depreciation or lease, it has to follow specific rules regarding business use.

In my case, the corporation owns the car.
 

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Leasing is for suckers. Back in the early days it was worthwhile
as it allowed people without downpayments to get started, then dump the car or make the downpayment on the end. Now it takes the same upfront money to start a lease as to buy. Now the payments for a lease are not all that much less than for a purchase. Now the residual value is set to somewhere very close to what the original dealer price paid was, so that after "renting" the car for 3 years you then lose it or pay they dealer the whole damn price he paid all over again. You pretty much end up buying the car twice, or buying it once and then giving it back.

I have a golf buddy who is an accountant who leases a Porsche Cabriolet. When you figure in the lease,insurance,allowed miles
ne is paying approx $1.60 per mile driven to "rent" that car. Then he has to give it back.

My opinion

Steve
 

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Discussion Starter #9
In my case I do own a small corporation and do use the mileage write-off for tax purposes. I lease most of my cars for this reason. I also have a tendency to get "tired" of my autos very quickly and a two year lease is perfect for me. Although the Elise may be different. I might want to hold onto this one! I really was hoping to get an idea as to the residual value of the car in 24/36/48 month increments. Since the Elise is so new lenders I have dealt with can't seem to help me out. My dealership doesn't even want to touch it. They say BUY, BUY! Has anyone looked into a lease/balloon yet or is everyone buying the car?
 

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Amazon Financial will lease just about anything. I already have a pre-approved lease through them from my old Ferrari days.

With the Elise, I plan to take out a loan for it. If I wanted, I could "lease it back" to my company for an amount more than I pay monthly on it and write-off the lease expense as a cost to the company (and hence my gross profits.)

Personally... I get tired of my cars quickly too. But I drive far too many miles to engage in a lease.

Bob
 

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Discussion Starter #11
Sownman-

Your buddy must really go over his miles, or California has some interesting lease rules! For the record, I should actually say I don't really "lease" my cars, but balloon them. I know it's almost the same thing, but balloon type loans typically don't have the fees associated with true leases or early termination fees. Just for fun, here's a case scenario on my Audi a4:
Sale price-38,570
Purchase for 60 mos. at 6%-$745.66
Lease for 48 mos. Same terms-$582.80
Purchase for 48 mos. Same terms-$905.81

Zero down payment, with a balloon can sell the car at any time during contract without a fee, and 15,000 Miles per year allowed.

If I keep the car for 2 years and sell, I would keep $3908.58 in my pocket over a 60 mos. purchase term! Obviously if you kept the car for 5 years, a lease/balloon is not the way to go. I have done this with 8 cars thus far and can't see the downside.
 

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xclusivecar said:
Sownman-


Zero down payment, with a balloon can sell the car at any time during contract without a fee, and 15,000 Miles per year allowed.

Difficult to believe, but if true it is a factor. I have not seen an advertised lease with ZERO upfront money in many many years.
In most cases around here leases ask for more upfront money than purchases.

The last time I took a close look at leasing was when I purchased my Vette.

Buy.... $2500 down $512 month 60 months
Lease... $4000 down $469 month for 48 months, then
give back the car.

I said, "you're joking right ?" they weren't, I bought.


Besides, I never keep cars for short periods. I shop the car carefully and make sure it's something I really want rather than switching vehicles constantly. New cars and short term ownership is the best way to maximize loss. Thats when the heavy depreciation occurs. If you keep them long enough they start to creep back up in value.

Steve
 

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that's cause vettes have crappy residuals.

i looked at leasing a Mitsu Evo a couple weeks ago and it would have cost about the same amount as to lease a new M3 because of the amazingly low residual.
 

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dealers advertise down payments on leases because most people look at the advertised monthly payment and not the fine print.

It is not a requirement to put money down on a lease, doing so just makes the monthly payment smaller. A little lease lesson for everyone

The lease formula is:

A. purchase price (known as cap cost) - residual divided by months of lease = monthly depreciation expense

B. cap cost + residual x money factor = monthly rental charge (interest)

A + B = monthly payment

Also, money factor x 2400 = true interest rate.

Let's take a fake example:

assume cap cost = $45,000 with 55% residual after 36 months and a 5% interest rate which equals a money factor of .002083

monthly depreciation = (45000-24750)/36 = 562.50
monthly rental = (45000+24750)*.002083 = 145.29

MOnthly lease rate = 707.79

Manufactures will subsidize leases (and thus make them more attractive) by either subsidizing the interest rate or subsidizing the residual.

For example, honda has a 24month lease special on their Odyssey minivans that they subsidize by giving you a 72% residual after 24 months and a 0.9% interest rate. This works out to about a $260 monthly payment on a $30,000 car.

If you turn over cars, leasing is much cheaper in the long run than buying cars. If you keep your cars more than 3 years, leasing is a bad deal. I happen to turn over cars every 2 years, because I'm a car freak and like to piss my money away. I am not a sucker for leasing, I'd be a sucker for buying. It just depends on your car buying habits.
 

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I wish the Elise made the 6,000 lb IRS loophole, under which you can depreciate the entire purchase amount in a single year.

Oh well. Now I'm left to convincing my wife that I need the Elise, to accompany my other vehicles.
 
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