Vark

I have never leased anything yet, as was under firm impression, that you lose money when you lease.
Is there an article or website I can read through to better understand the difference?
I mean, come to think of it, the car depreciates , and as you pay down your car loan, so goes down the value and the money you get back plus you have to hassle to sell on your own, vs trade-in, to get more money, etc

Also, I'm looking at MBUSA.com, they have that BALOON option, what's that all about? Anybody tried that yet?
Thanks,
Max
p.s. wifey wants a disel GL

infamily

Googel lease vs. buy option and you will get plenty of websites which help you compare the two. Having said that, if you are planning to keep your car for long time (with diesel you can) then finance is the only way to go. If you replace your car every 4 yrs then sometimes lease delas are much more attractive. Even then I have at times found financing a car is better. I know MB shows Baloon option, but it is not available in all states. Check with your dealer if that is offered in your state

LEOSOPHIE

If The Vehicle Is Used For Business Leasing Can Be Useful, Payments Or A Percentage Are Tax Deductible. Also If You Put On More Than 15,000 Miles A Year Buying Might Be Better. Consider Home Equity Line Of Credit Now That Fed Interest Has Dropped. Interest Paid Will Be Tax Deductible. I Hate Private Sales Also So At Least With A Lease You Know The Cost Of Ownership Up Front.

Vark

Just found a pretty good site: http://leaseguide.com/

Practice shows, that we can't keep a car for more than 3 years Plus disel residual value on a lease is supposed to be higher, thus lower monthly payments I hope.

Do you still have an option to negotiate vehicle price and lease terms or it's "take it or leave it".

From experience I know, that the best time to buy in winter is January - the holiday rush is over, 2007 models just became 1 year older and such. Does the same apply to lease?

Vark

I gotta get w/ my tax guy - as a realtor, I claim 70 cents per mile driven for work on my C55. I heard, if you lease, the whole lease payment is deductible, so I need to figure out which yields more savings.

infamily

You should always negotiate the car price first and then negotiate lease terms. Generally lease terms are fixed by MB so not much negotiation there but you could shop around with different banks for lease. Of course 2 things to focus on.. the money factor ( not what he quotes as interest rate, many dealers twist the definition of interest rate) and residual value will help determine your lease payment. money factor multiplied by 24 will give you APR. Good luck

LEOSOPHIE

FOR BUSINESS USE THERE IS STILL ACCELERATED DEPRECIATION ON TRUCKS WITH A 6500 GVWR, AND THE GLS QUALIFY.

Chicky Monkey

Leosophie: I'm sorry if this has already been mentioned, but I never read any of your posts because the way you capitalize every word makes it difficult to read. So I skip right by your comments every time.

I'm not trying to be mean, I'm just thinking others may be doing the same and I'm sure you have stuff to contribute that we may all be interested in!

LEOSOPHIE

It won't happen again.

oknish

Great to see your awesome attitude, Leo. Just goes to show how mature and sophisticated this board is.

Nevada Jack

Amen nish...:-)

HoustonRider

How do you deduct $.70 per mile? 2007 Fed deduction is $.485 per mile. how do you get the other $.215 ??

I gotta know, I do about 40,000 miles per year... thats another $8,600 in deductions over what the Fed rate is.

BJ021

I would consult with your accountant, but a car/truck depreciates over 5 years, a lease is a % of use over the period of the lease. If you sell your depreciated car after 3 years, you will give up some of the tax gain you just took if you maxed it out early. So you are sorta stuck with that car for 5 years unless you keep it in the family... For me a lease works best. I drive low miles and expense the bulk of the payment.

Vark

I'm pretty sure that was my tax company told me - now, I used only around 70% of total milage for the year. Maybe it is business related? I mean for realtors is different?

dsunnym1

Question,,

being that I don't keep cars for very long at all ..
Maybe a year or more,, is that whether a lease or finance I am still selling
for what the car is worth minus what I owe...

so whats the difference??
If you are not planning to keep the car till term??
whether it be a 36 month lease or 60 month finance??

any info??

infamily

you should consider 2 yr lease.. otherwise , I think you will come ahead by financing.. here is an example.

Lets say $70 K car including tax and license. (assuming you pay tax upfront for lease)

A 3 yr lease term will be approx $ 1000 per month assuming no downpayment, residual of 64% ( $44800) and 0.0018 moneyfactor ( 4.3% APR).

Now lets say you finance for 5 yrs at 7 % interest rate again with no downpayment, monthly payment will be $ 1386.

Now assume you trade your car after 2 yrs, and your car value is 70 % of new. So your car is worth $ 49000.

If you lease , you are still responsible for 12 more payments which would be $ 12 K. so at trade in you will owe 12K plus the residual which is 44800 for a total of 56800. So you have to pay $7800 above what your car is worth.

In 2 yrs your total cost if you lease..

Payments for 2 yrs $ 24000

Money you owe at end of 2 yrs $ 7800

Total cost of owership $31800

Now if you finance,
At end of two yrs the loan amount owed will be $ 44890. So you have built an equity of $ 4110 (Worth of your car - loan amount).
This equity can be used against new car purchase.

In 2 yrs your total cost if financed

payments in 2 yrs $ 33264

equity built in 2 yrs $ (4110)

total cost of ownership $ 29154

So you see even though you are paying higher interest rate for financing, you still come out ahead by $ 2646. Of course this difference will depend on your sales tax rate etc.. so maybe plus or minus $ 500.

The only way lease would make sense is if you complete (or very close) your lease term otherwise you will loose money.

LEOSOPHIE

My GL has been a much better investment than the stock market lately, whenever I have an urge to bring up my brokerage account I go for a drive and forget about it. However you finance be done with it and enjoy your new truck.

dsunnym1

Thanks so much for the excellent break-down!!

I think financing does indeed make more sense for me, being that I don't even come close to completing a 36 month lease!!

So lets say I did a 60 month finance that would probably bring the payments very close maybe even cheaper then the a 36 month lease!?

BJ021

Lets not forget early termination costs, return car costs, acquisition fee, etc. on the lease. This could be around $2K total. Also on a lease you pay taxes on the payment not on the total value of the car. On a buy of a $70,000 car with no trade in, taxes would be $4,550 here in MN at 6.5%. The lease tax would be $780 on a 2 year lease with $1,000 payments. That's a large swing. Seems your 'built in equity' is lost in the taxes.

On the purchase there is no guarantee of the cars value at the end, the lease is bound by contract.

I think infamily did show a 60 month (5 year) finance option for the comparison...so no, your payment on the finance would not be lower than the lease. If you stretch out to 72 months, then you just owe more after 2 years.

Honestly - if you drive 10-15K miles a year. Seems you should be leasing every 2 years. Go 3 if you can for an even better monthly. Plus if you own your own business - you can deduct a business % of the payment....there are lots of angles!

Happy Turkey Day!
BJ

Stumblefoot

I see lots of folks referring to the business end of the equation and this is where I get lost. Maybe BeanCounter can chime in here with his thoughts.

In the end, isn't the business case always a wash? It's my understanding that if you write-off any car as a business expense, you have to show the car as income as well.

For example, early in my career I worked for large Fortune 500 companies where I was given a company car. Each year, even though I was allowed to expense to the company all of my business expenses for the car, my W-2 would show a gross-up amount for the value of the car for that year.

As a business owner today, my tax accountant has told me there is absolutely no benefit to me to write-off the value of the vehicle, because I would also have to show the value of the asset as income, so in the end, everything is a wash. So, each year, I just take the standard mileage deduction for business mileage which I believe is 48.5 cents in '07.

Am I missing something here, or is my tax accountant just being extra conservative, because he used to work for the I.R.S. before starting his own firm? I'd love to get a much larger deduction if possible somehow. Maybe it depends on the corporate tax structure too. My firm is an LLC, so ultimately, all income flows directly to my 1040 anyway.

BJ021

Tax code is all about interpretation. Ask 10 accountants the same question and you will get 10 different answers. I shopped accountants until I found the one that had the right answers to my questions. (She also worked for the IRS forever before setting up shop)

My company is an LLC as well, and my gal has me leasing. We have 3 cars and the GL is my company car. So the payment is nearly 100% expensed. I work out of the house so taking mileage would not work for me because I only drive 10-12K miles a year. There are other car expenses that add up too. Car washes, service work, etc.... BeanCounter?

The company car allowance is an addition to salary when working for corporations...I had that too. Always bummed me out... Here's $750 a month for a car! Oh, and you'll get taxed for that!!

Vark

I was considering 24 mo lease anyway, and no matter how hard we tried, we can't keep any car for over 3 years. You do not build an equity, when financing, but if you are organized, you should take the difference between lease payment and possible financing and put it aside - for the next down payment on a lease.
Excellent break down, thank you!

gordongl450

Every time we buy a car my wife and we crunch the numbers and consider leasing, but we never do it. I just bought a 2008 ML 320.

No doubt that there are some personal preferences for some people that make them decide on leasing, mainly lower monthly payment for more vehicle and having a new vehicle. But leasing is a business that makes money for the dealers and the leasing companies. My dealer just told me Friday that they LOVE to lease cars, they make more money. They get to sell you a car every two to three years, plus they get to make a profit on the car you turn in at the end of the lease. Residual values are calculated to the benefit of the dealers and wholesalers.

Remember some of the costs of getting a new car every three years, new lease fee, new dealership docking fee, new title registration fee. Also, you always have a relatively new vehicle so your car insurance never has a chance to go down, you car registration (DMV) never has a chance to go down.

In addition, what if interest rates (and money factors) go way up three years from now. At the end of the lease you own nothing and you are forced to lease or buy again at much higher costs.

In terms of tax deductions, I am a physician, my accountant has told me a number of times in the past, everytime I ask him about leasing, I get the same answer; for physicians, the only thing that can be deducted are the car expenses used to drive between various hospitals to make rounds. In my situation, I only work at one hospital, so I have nothing to deduct. But you can be sure that I will call him again this week and ask him again what the rules are!?

My thoughts, but remember, I always talk myself out of leasing.

infamily

I agree, I leased a car once, would never do it again. At the end of 3 yrs there is nothing to show. With purchase, sure payments are a bit higher, but I know I have some equity left and if the interest rates do jump, I don't have to trade.

I think I am going to call my CPA today too..

Vark

damn it, gotta think again