School me on lease/early buyout vs financing
 

So here's the deal; I'm thinking about picking up a new truck. My intention is to keep it for the required six months, drive it, then flog it.
The sales guy says if that's my plan, best option is long-term lease then buyout early when it's time to sell. Reason being is that I'll only be paying tax on each payment rather than the entire vehicle.
As I understand it, third party buyout relieves me of paying the tax. And if the third party is a seller with pst number, and shipping it down south, he also isn't required to pay it. That sound correct so far?
There's a $4500 rebate for leasing, which would negate the 3 $1000 payment penalty for breaking the lease.
Are there any disadvantages to achieving my objective through leasing over financing?
I've never bought, leased, or financed a new vehicle before so any advice from someone with knowledge on the subject, either through experience or someone who works a sales department, would be greatly appreciated.

Sorry to tag into this thread but I’m also interested in buying out a lease return from a friend who will likely be returning the lease on a 2019 F150 Lariat in 2 years

Just wondering if this type of thing is worth it in terms of the value as even if I am paying a little more I know the trucks history etc? Will the dealer offer to pay more in order to try and retain the vehicle?

The buyout of the vehicle is already written in the contract your friend signed off at the beginning. There is no negotiating the price after that. In addition, it may not be worth while at the end to you because your friend will have to buyout(tax on top) and once he transfers it to you, you will be taxed as well. You cannot simply buyout the car in your name from the dealership when it's under your friend.

^ could he not take over the lease, make one payment, and then buy it out?

I'm not seeing how you avoid taxes either way but I've never done such a thing.

can't you do this but pay like an "admin fee" of $500 or something to the dealer?

You are correct. You can take over your friend's lease and then buy it out after. Lease transfer fees vary from dealership to dealership. It can range from 500 to 1000 bucks.

The other thing you have to do as well is redoing your insurance twice if you decide to go the one month insurance and license transfer then buyout. Certain dealerships do require you to also do an inspection fee and that's another few hundred on top as well.

Sounds like a lot of additional fees and headaches involved..

I guess it would be in my best interest to see what the buyout value is and factor in additional fees and then see what the same truck is going for in private sales etc.

So can anyone answer my question? Lol

Sorry Welfare lol

What you've described makes sense. It's how a lot of people make payments on high end exotic cars, by keeping a high residual and leasing it to just pay taxes on the payments for X months. You're just renting it from the financing company really as the ownership is in their name.

The thing you'll want to check with the financing company is what fees you'd incur to break the lease early and the process as that will change from financer to financer. If financing through a dealer, they might buy the truck back (I'm not sure on this) however if you're financing through a 3rd party financer, you'll want to make sure you have a buyer lined up and see what the process would be as far as payment to get the vehicle into their name without ever being in yours to avoid that unnecessary tax.

This isn't anything shady to ask the financing company either as it's a pretty common thing to do and they're still making money off you so should be happy to get your business

Just focus on 3 things and those 3 things ONLY when it comes to leasing! Any other gimmick the sales tries to "work with" you is BS.

1. Final price of the vehicle. That is the price after all the haggling and rebates.
2. Residual value. This is how much the car is suppose to worth at the end of the lease period.
3. Interest rate. Self-explanatory.

The reason to focus only on these 3 things is because you can determine the actual cost for you and your payments. Everything else are irrelevant. Yes, the term comes into play too, but that's more of a variable that you can choose.

So, when negotiating, focus on those 3 things. 1 and 3 to be as low as possible, and 2 to be as high as possible. You can then calculate your total actual out of pocket obligation for the lease.

For example, we are near the year-end with 2021 models arriving to dealers. The 2020 might have 0% interest, but much lower residual value while the 2021 has 1.99%, but much higher residual. It is entirely possible that the 2021 model actually works out to be a better deal.

@Welfare, had to break up the paragraphs; it was pretty hard to read. Are you planning to lease/finance through the manufacture (ie: Toyota/GM finance) or third party financing?

That is correct; you are paying taxes on the amount of car that you are leasing. For example, if you are leasing a $50k car and residual value is $20k, then you are paying taxes on the $30k through monthly payments. At the end of the lease contract, you can pay the $20k plus tax to own the vehicle.

Not quite sure what you mean by relieves you from paying tax. If the someone buys out the vehicle, they pay the tax on the buy out amount. For example, you've made 6 payments of $1000, for $6000 in total assuming interest rate of 0%. They would pay $44k plus tax and whatever buyout fees.

IF the third party has PST number, they STILL HAVE TO PAY TAX. All they do is claim it back from the government.

Depends on the lease or finance contract and whatever fees are associated with breaking the contract. I would personally be wary about doing a lease and having a third party buy it out in 6 months.

Usually with most vehicle purchases, you're highly underwater with negative equity so you could be potentially stuck with a depreciated asset even with factory leasing programs.

Negative equity is when you owe $50k but your truck is worth $35k. Please don't be that guy who's stuck with a money pit.

In house

But not if it's a buyer from South of the border though right?

Actually with our in house leasing, there's no penalty for breaking it, apparently.
I'm an employee so i get the vehicle almost at cost.
Basically I'm trying to capitalize off the fact that the US dollar is strong, the market is extremely dry right now because of manufacturing shortage from covid, and my cost of the truck is significantly below msrp.
In 6-8 months it'll be spring/summer. Which is primetime for truck sales. I'm hoping the market will still be at least somewhat dry.

I browsed through cl Seattle today for similar trucks in last year's model, and they're going for $15-20k more (after converting) than the net lease on what I'm looking at for this year's brand new.
And this year's have a higher msrp than those ones did last year.

seems convoluted af
way too many what if's in your plan
i dont see americans desperate enough they'll shop north for a truck
not to mention it'll probably raise flags selling a 6mos old vehicle

I don't think it's that convoluted. The only what if is the market.
6 months and 15000km is required before it can be sold across the line, if I'm not mistaken.
EVERY used truck on a Ford lot is going down south right now. It's not even a question.
Sorry, Ford's are. Since they're built in the US and don't incur foreign tariffs. Whereas dodge and gm are mainly built in Mexico i believe.

Stock is so low right now that our guys are driving gm's (we're a Ford dealer) and had to give up the demos.
Normally I'd get a vehicle at cost +$100. I'll have to fork over an extra $2k since there's so few on the lot. It's still well below msrp though so I'm ok with that. I understand the situation.

How will the buyer come into Canada to buy your truck? Imo, the border for the foreseeable future will probably still be closed.

My understanding is that if you drive your truck into the US and sold it, then the buyer would be paying local taxes. But if the deal happens in BC, then they would pay the local taxes.

I think if you're able to get a vehicle near cost then it might be a good deal. That being said though, I have a hard time believing that a dealer would sell an employee a hot truck at near cost while profits could be maximized at COVID times.

Vehicles are still going across the border for sale, that I can assure you.
There are brokers who'd deal with that end of it I believe.

As far as the price goes, whether they're being honest about the price isn't really my concern. All that matters to me is the margin.
However, I do believe they're being honest with me. I spoke with our owner about the deal and he's a very straight forward, old school kinda guy FWIW.

as long as there’s no conflict of interest with your work and the contract

if it’s not going thru truck crossing there’s a high chance cbp will scrutinize your practically new vehicle

I still don’t understand how a domestic truck has better allocation here vs the US to the tune of 15k profit

the exchange rate is favorable for them but not like we are trading below 70 cents or anything

would you get the same price on the vehicle if you just buy it outright?

OP technically will maximize his margins by leasing the truck since he would be only paying taxes on the leased amount and not the full amount.

Leasing is pretty much paying for the depreciation of the vehicle.

Think of the residual as the downpayment that you don't pay right now but will be in the future.

Financing is you taking on the entire amount right from the start, thus the tax on the entire price.

why don't you just lease short term. Shortest term possible. Don't fixate on how much the truck is. focus on monthly payments, lower that and you are golden.


It's very simple. At the end of the day, you are trying to minimize how much you need to pay to use the truck right? that's why you are comparing buying out and selling the truck, why do all that?

Just focus on the monthly payment on the shortest term

I'm not sure how a shorter term would benefit. The payments would be higher and so more tax. I'd also like to have as little of my own money invested.
After six months, it'll be bought out.

Freakshow: yes, the net lease is the same price as financing, less the tax

residual changes based on the term chosen, the shorter the term, the less you are obligated to pay. it's really simple, if you are getting out in 6 months, you just need to find a term that you would pay the least, and be able to get out after.

because any vehicle depreciates, and being able to get out of a lease 6 months in is....impossible on anything that has a bad resale value.

After 6 months, if you are to get out of a lease, the dealer will appraise you car according to market, and they evaulate how much you are still owing on the truck (your remaining lease payments plus residual), and that's the "penalty" you pay to get out early.

Speaking of leasing. Destination Honda called me a few days ago to come in, a little over a year early of my lease ending (currently in a 2018) to trade for a 2021 model, same or less monthly cost.

I'm assuming this is essentially bullshit?