[hchang]

Just thought I'd explain a bit and break down leasing vs buying out a car, maybe to help out some new and old revsceners as at first I was completely confused about the concept.

So, when is it best to buy out a car?
1. When you are literally buying out the car, and not borrowing money.
2. When you will drive over the allotted kms from leases
3. You rarely trade in your cars.

When is it best to lease?
Pretty much all the time, unless the previous 3 apply. Unless you own your own company.

So what is a lease?
Consider a lease as going to your local Budget, Dollar or Thrifty car rental dealership, and renting it for 3 or 4 years. That's pretty much leasing, minus the oil changes, maintenance and etc in between that is your responsibility, unless all that is covered under your warranty.

A predetermined percentage of the car is rented to you for a certain amount of years, which is usually 3 to 4. If you are pretty expereicned with this car buying gig you'd probably know that it usually ends up "upside down", meaning that you owe more on the car than it is worth.

If you are one that "needs" to always be driving the newest cars, or just "wants" to be always driving the newest cars on the market, then this negative amount of money would have to be dealt with. Cars depreciate faster than they get paid off

Let's say you are $3000 upside down. You are looking at a $15000 car. Well now you have to pay $18000 for it.

But wait, hchang, the dealership I went to showed me that they were paying it off and it's all good.

In reality, there isn't usually $3000 markup on new cars unless it's something $40,000 or more. There are many numbers the dealer can show you as a trade allowance of your pay off. Take a look at how much you are financing, subtract the interest, and do the math. You paid for it and it was hidden in your payments. While

With that being said, its just illusionary that the dealer is esperate to sell a car. But obviously, they aren't. It'd be like them losing roughly $3000 just to sell a car. Dealers don't "pay" somebody to take a car off their hands, or how else do they make money? Most numbers they present to you are fake.

Now, lets say I go into a dealership to lease a car. I turn in my lease, and looks at a new $15000 car. I start out on an even keel, and leases a car again and only pays the 50% of the car I am using.

Difference in payment:
Buyer - Financing $18000 - Monthly payment: $360
Leasee - Financing $8000 - Monthly payment: $160

Difference in amount financed/ car value as soon as you drive off the lot:
Buyer - Financing $18000. Drives off the lot in a car worth $12000 - Equity situation after 30 seconds of ownership: Negative $6000
Leasee - Financing $8000. Drives off in a car worth $12000

So what can I do with my lease after the term expires?
1. Trade it in and get a new car to lease.
2. If it is worth more than what the buyout is they can use it as money down when trading.
3. Sell it outright and make a profit.
4. Buy the buyout amount and keep the car. Spending less money than the example we used as the original buyer.

If the car depreciates in value, lease it.
But if the car will appreciate in value, then buy it.

Hope this is helpful and useful.

[Blinky]

I failed you because you say it's "almost always best to lease". And what you say is straight out of a dealer's sales handbook.

3. You rarely trade in your cars.

Problem no. 1. Cars = flushing money down the toilet.
More new cars, more often = financial diarrhea.

First thing is to get off the want or need to always have the latest and greatest.


A predetermined percentage of the car is rented to you for a certain amount of years, which is usually 3 to 4. If you are pretty expereicned with this car buying gig you'd probably know that it usually ends up "upside down", meaning that you owe more on the car than it is worth.

If you are one that "needs" to always be driving the newest cars, or just "wants" to be always driving the newest cars on the market, then this negative amount of money would have to be dealt with. Cars depreciate faster than they get paid off

You're actually paying off the depreciation... and you're only "upside down" if you're financially retarTed. In other words, you've bitten off more than you can handle financially.

Depreciation is always highest in newest cars, so the more often you turn over cars on lease, the more you actually end up paying.

I'm quoting the stuff below for the WTF factor. Half of it makes no sense!


Difference in payment:
Buyer - Financing $18000 - Monthly payment: $360
Leasee - Financing $8000 - Monthly payment: $160

Difference in amount financed/ car value as soon as you drive off the lot:
Buyer - Financing $18000. Drives off the lot in a car worth $12000 - Equity situation after 30 seconds of ownership: Negative $6000
Leasee - Financing $8000. Drives off in a car worth $12000

So what can I do with my lease after the term expires?
1. Trade it in and get a new car to lease.
2. If it is worth more than what the buyout is they can use it as money down when trading.
3. Sell it outright and make a profit.
4. Buy the buyout amount and keep the car. Spending less money than the example we used as the original buyer.


Re no 1 and 2, no. If the car is worth more than the buyout, the lessor will have to purchase the car and resell it to realize the profit (as per No. 3). The lessor cannot trade a leased car as it is not theirs to trade.

If the car is returned, one walks away (after paying possible charges such as excess milage or wear 'n tear).

Re No. 4... um, WTF. You generally will end up spending more money on lease + buyout than on financing a car from the get-go:
- lease rates are usually higher
- the buyout, if financed, stretches out the payments beyond the period if the car was financed initially


If the car depreciates in value, lease it.
But if the car will appreciate in value, then buy it.

Hope this is helpful and useful.[/QUOTE]

[rawr]

thanks for taking your time to write that. a quick lil search on google gives me all the information i need.

[1exotic]

"I want lease superman car lol"
http://www.drugbuyers.com/freeboard/ubbthreads.php/ubb/download/Number/9303/filename/super-retard.JPG

"lol now I have superman car I drive fast. Mexicano wash for me before I drive"
http://archive.meguiarsonline.com/gallery/data/500/1482Yellow_Gallardo_01.jpg

"... i fucked up lol"
http://pictures.topspeed.com/IMG/crop/200902/lamborghini-gallardo_460x0w.jpg

[JiggaZed]

"I want lease superman car lol"
http://www.drugbuyers.com/freeboard/ubbthreads.php/ubb/download/Number/9303/filename/super-retard.JPG

"lol now I have superman car I drive fast. Mexicano wash for me before I drive"
http://archive.meguiarsonline.com/gallery/data/500/1482Yellow_Gallardo_01.jpg

"... i fucked up lol"
http://pictures.topspeed.com/IMG/crop/200902/lamborghini-gallardo_460x0w.jpg

http://www.randomfunnypicture.com/pictures/1871lol_wut.jpg

[sleazyho]

I thought most of us would buy used cars anyways

[Domani]

good intention... thanks anyways.

[fishing666]

i got a better idea. do not finance cars and do not lease cars

buy a car that's between 2005-2007 and resell it after 2-3yrs because the depreciation in that time frame would be around 1000-5000$ dollars which is much less than leasing or financing a new car

[DuhDang]

http://i275.photobucket.com/albums/jj300/Zhusuke/CoolStoryBro.jpg

[gearshifter]

I didn't fail you for being a nice guy,

but...

If the car depreciates in value, lease it.
But if the car will appreciate in value, then buy it.

So the advice is to pretty much NEVER buy a car huh?

[flagella]

Buy an F40.

[no_clue]

I didn't fail you for being a nice guy,

but...

If the car depreciates in value, lease it.
But if the car will appreciate in value, then buy it.

So the advice is to pretty much NEVER buy a car huh?

lol there are almost NO cars that appreciates in value. The only car I can buy following his advice is a lamborghini reventon.

Oh and the best reason to lease a car is when you have a business. Leasing is better than financing in the event that you lost your job and have to downsize, but I can't think of why leasing is better, having an asset is always #1

[Amaru]

When is it best to lease?
Pretty much all the time, unless the previous 3 apply. Unless you own your own company.

You have this completely backwards. If you own a small business, leasing makes more sense, because you can write off the majority of car cost as a business expense, and thus decrease your taxable income.

Your comments about only buying a car that appreciates in value indicate that your general ignorance on the topic, imo... the only cars that actively appreciate are rare collector's cars, ie. McLaren F1, etc. No new car worth less than $100k that you can drive off a dealer's lot will appreciate. Ever.

[EmperorIS]

http://www.threadbombing.com/data/media/29/AbandonThread.gif

[jackal]

leasing makes no sense to me??? why would anyone want to pay out their ass for 4-5 years only to be right back where they started in the end? leasing works as mentioned for fleets and businesses and for people who want to drive a car that would otherwise be out of their price range. but for anyone else buying outright or financing is the best way to go. or in a perfect world if you were to buy a 60k car and had the cash up front and the car was offered at 0-0.9% financing then i would finance and throw the rest of the cash in a savings acount earning like 2% or more and make money off the interest in the end bringing the total price of the car much lower then any of the other options.

[Qmx323]

Yeah I always thought leasing was bad?

Pay money for a car that you don't even keep after?

[Blinky]

Yeah I always thought leasing was bad?

Pay money for a car that you don't even keep after?

Saying that leasing is always bad is as wrong as saying that one should "always lease". That said, for the demographic of this board, leasing a car is usually a bad thing: there are people who are probably playing the "how low can I get the monthly payment game". In other words, living nearer the margins of their means.

Nothing really wrong with that, but it's often the same crowd that ends up having to sell a bunch of toys at loss to cover an unexpected emergency.

There are many situations, particularly business situations, where leasing makes the most sense due to capital, cash flow and tax implications.

[benwang]

no matter what you do, financing, leasing or buying, you always get rip off by stealerships. we make up the name "stealership" for a reason

[benwang]

"I want lease superman car lol"
http://www.drugbuyers.com/freeboard/ubbthreads.php/ubb/download/Number/9303/filename/super-retard.JPG

"lol now I have superman car I drive fast. Mexicano wash for me before I drive"
http://archive.meguiarsonline.com/gallery/data/500/1482Yellow_Gallardo_01.jpg

"... i fucked up lol"
http://pictures.topspeed.com/IMG/crop/200902/lamborghini-gallardo_460x0w.jpg

looks like its different cars to me

[benwang]

btw leasing cost more than financing

[simsimi1004]

leasing makes no sense to me??? why would anyone want to pay out their ass for 4-5 years only to be right back where they started in the end? leasing works as mentioned for fleets and businesses and for people who want to drive a car that would otherwise be out of their price range. but for anyone else buying outright or financing is the best way to go. or in a perfect world if you were to buy a 60k car and had the cash up front and the car was offered at 0-0.9% financing then i would finance and throw the rest of the cash in a savings acount earning like 2% or more and make money off the interest in the end bringing the total price of the car much lower then any of the other options.


with lease, after 4 years if the car has depreciated alot, u have the choice not to buy it.

ex. 2008 g35x
finance. = spend 45k.
lease = spend total of 33k to lease for 4 years.
4 years later.
Assuming that the car is only worth 25k
finance = you lost "20k" to have the car for 4 years
lease = you lost 33k$ to use the car for 4 years. IF i return.
buyout turns out to be 17k. making money spent on the car 50k$.
so if i
buy out the car, then i spent total of 50k to have a 25k value car. i spent 5k more than financing.
if i dont buy out the car ive lost 13k compared to finance.

However, some factors compensate for the potential loss.
1. After 4 years, I will know the true market value of the car before i purchase it. .
2. I will have the choice of buying it based on 1.
3. Other factors such as ICBC claims, known car problems, can be taken into factor before i buy the car.
4. no hassle of selling the car if i need the money. mind you selling cars cost more now with HST.

but i guess it really depends on potential and type of car.
luxury cars depreciate alot more then eco cars, certain brands, etc.

[Pt20]

http://img143.imageshack.us/img143/7627/0online1cm1.jpg

[Mugen EvOlutioN]

^

you just saved the thread

[RabidRat]

I do appreciate the effort hchang. And even if you're off on a couple things I think it's a great topic to bring up.

So I had a question for those of you who've had some experience in writing off lease payments. If I've purchased my vehicle outright, is there a provision for me to write off *depreciation* of the vehicle as a business expense? How about the interest on financing - could this be written off as a business expense?

Does the CRA care what kind of vehicle you're claiming for business use (within reason) as long as you have a good explanation, or are they very strict about it?

[q0192837465]

Apart from business owners, commission based employees can also write off leases. That's why real estate agents generally lease cars.

If u'r not a business owner or a commission based employee, leasing car does not make financial sense. The predominant reason to lease is to get something that u can't otherwise afford. The interest rate on the lease is generally higher than the rate of return of the money u "saved" by not financing. So at the end u lose out both ways, higher interest charges & negative return. Don't get suckered by the sales guy into getting a higher end car with lower payment.

[Blinky]

So I had a question for those of you who've had some experience in writing off lease payments. If I've purchased my vehicle outright, is there a provision for me to write off *depreciation* of the vehicle as a business expense? How about the interest on financing - could this be written off as a business expense?

Assuming it's legitimately for business, yes, you can write off a portion of the depreciation. It's called a capital cost allowance. Keep in mind it has to be for business. Commuting to work doesn't count!

[hchang]

I do appreciate the effort hchang. And even if you're off on a couple things I think it's a great topic to bring up.

So I had a question for those of you who've had some experience in writing off lease payments. If I've purchased my vehicle outright, is there a provision for me to write off *depreciation* of the vehicle as a business expense? How about the interest on financing - could this be written off as a business expense?

Does the CRA care what kind of vehicle you're claiming for business use (within reason) as long as you have a good explanation, or are they very strict about it?

Thanks dude.

Guess I am off on a few things... but oh well. Just tried to help.

As for your depreciation I don't think you can write that off as a business expense. But however, I think, but don't quote me, that the whole car can be written off as a business expense for the year, or maybe over a period of time as a business expense (better to consult an accountant) and also insurance if it is insured for work.

Interest on financing/The car in general should be able to be written off.

As for the type of cars, the CRA wouldn't really care unless they suspect you of cheating them, which then will result in them looking more closer to you. If its remotely close to your line of work you should be fine, as long as its not you writing off a smart car for a construction company or something.

[Blinky]

Thanks dude.

Guess I am off on a few things... but oh well. Just tried to help.

While the effort is admirable, please keep this in mind: it's best to avoid writing a post that purports to be authoritative and absolute when you're not sure about what you're writing about.

[freakshow]

There is so much misinformation in this thread, I don't know where to start. We should honestly delete it or send it to FC so that people will not be misled.

The bottom line is that anyone who says financing is always wrong, or leasing is always wrong if you're not a business is WRONG. Depending on the car, price and purpose, both financing and leasing can be very viable, financially sound options.

[Meowjin]

I wish I bought a car 2 years ago when I got in my accident. Leasing was the biggest mistake i've ever made. Not because I couldn't afford it, but insurance rules with honda canada, especially after I took a big paycut at work, is what's screwing me.

[maxx]

downside to financing is, a bad accident may happen to your vehicle and if ICBC order to repair your vehicle instead of writing it off, you're stuck with a vehicle with a huge dec on it.

my co-workers' gf rear ended a car and her 08 GTI has around 23k damage. ICBC chose not to write it off, so now she is financing a rebuild car, pretty much.

great topic to discuss though, OP!

[RabidRat]

downside to financing is, a bad accident may happen to your vehicle and if ICBC order to repair your vehicle instead of writing it off, you're stuck with a vehicle with a huge dec on it.

my co-workers' gf rear ended a car and her 08 GTI has around 23k damage. ICBC chose not to write it off, so now she is financing a rebuild car, pretty much.

great topic to discuss though, OP!

I think if I ever bought a car brand new, I'd get the new vehicle replacement coverage from ICBC, or at the VERY least, limited deprec coverage (one perk is that they pay you back exactly what you paid for your car NEW, with no hit on depreciation!). It's only a few bills more a year, and the fact that you aren't completely, completely fucked when the above situation happens is some real peace of mind.

http://www.icbc.com/autoplan/optional/optional-new/new-replacement
http://www.icbc.com/autoplan/optional/optional-new/limited-depreciation

[Ferra]

Leasing doesn't necessary mean you are paying more, and from an accounting or tax stand point, neither one is definitely better than the other. (it depends)

Lease = You typically pays higher interest rate (1-2%), and an additional of $200-$500 in lease fees, so that you get the option to choose whether or not to keep the car at the end of the terms.

Leasing car is almost like buying a stock put option:
- Higher lease rate and fees = the cost of the option
- Car residual value = the possible value/benefit of the option

[GabAlmighty]

Leasing is for ruhtards that don't know how to best maximize their money.

[Tegra_Devil]

http://img143.imageshack.us/img143/7627/0online1cm1.jpg


i failed you cause she had a top on...

[TOS'd]

Buying vs. Leasing Guide for Dummies...more like written by a dummy, amirite

[cctw]

ok..from a personal consumer point of view..leasing is almost always more expensive than financing..
for one...even if..assuming lease and finance rates are the same...you are paying more money for leasing because with the lower payments, you pay off less of the principal of the car..and interest accumulates based on the amount of the principal left outstanding..
therefore..if you plan to lease a car..you should never buy it out cos that'd be equivalent to fianancing except with higher interest rates. Also to be able to pay off the final lump sum amount to buy out, you'd have to save up money every month for the ex. 4 year lease which would be the same as financing anyways.

Now for those of you that say you wanna see 4 years later what the car will be worth, it'll almost always be true that the final lump sum payment is greater than what the car is worth. That's because you paid off alot of interest with your monthly lease payments and thus a large portion of the principal is left to be paid off. Another point is that car retailers take depreciation into account which is reflected in the high interest rates of leasing. They make enough profit off the interest to ensure a profit when they resell the car after the lease is up.

Now for businesses, both financing and leasing can be beneficial depending on a number of factors. The benefits of financing is you can write-off the depreciation on the car as well as the interest payments on debt (note not the principal,..you'd have to separate each monthly payment into its interest and principal portions to determine the amount you save). On the other hand the main benefits of leasing is that you dont own the asset on your books and thus not the liabilities as well. You can write off the whole monthly payment as an expense. When deciding between financing and leasing you should take into account the lost CCA and interest deductible amounts and choose the one that saves you the most money.

And one more thing, leases are classified in two ways. Expensing the payments are only possible if the lease is classified as an operating lease. If the lease is classified as a capital lease, the asset and liability of purchasing the vehicle still remains on your books and you depreciate it as if it was financed. (this was kinda put in place cos companies in the past took advantage of the benefit of not having the liability on the books even though in essence the lease was like a finance and abused the policies)..

the criteria for determing whether its a operating or capital lease is below:
* the lease term is greater than 75% of the property’s estimated economic life;
* the lease contains an option to purchase the property for less than fair market value;
* ownership of the property is transferred to the lessee at the end of the lease term;
* or the present value of the lease payments exceeds 90% of the fair market value of the property.

you meet any of the one criteria and you have to classify as capital lease (so basically treating it the financing way)..

of course it's judgmental whether you treat the lease as operating or capital for vehicles..depending on the lease terms and monthly payments and such since businesses probably get diff rates and have lease contracts that differ greatly from what personal consumers get

[xpl0sive]

you can't call a financed car an asset... Cars should never be viewed as invesments, they are a luxury and are there for enjoyment, not a savings account. Leasing might make sense to someone who doesn't really care about the end result, and just wants to drive a new car all the time. here's my personal example.
I only usually keep my cars for about 2 years. My last car, I bought it used for $22k. Financed the whole thing at a really low rate. Two years later, I got into an accident and the car was written off. Market value of the car at that point was about $15k. I had $14,500 left on my loan. So, I have been "renting" the car for those two years. So I paid $7k to drive the car I liked for two years.
Some people say that financing is bad. "If you can't pay cash for it, then you can't afford to have it". But that doesnt really make sense to someone like me. Why would I pay $22k cash up front, then drive the car for two years, sell it for $15k and be out $7k. I would rather pay the $500/month, which you don't really notice if you work full-time, and then invest the $22k where it will actually earn me money instead of sitting there in my garage depreciating everyday.
Leasing works in a similar way, but there are longer time periods and more money involved. Leasing should only be done on new cars. I've seen people lease used cars, because they got a lower monthly payment... they ended up paying $50k for a $35k car. I also don't understand the people that put $20k down on a $80k car lease and then return the car at the end of the lease. Why not finance it with the same $20k down and actually be able to sell the car and get some of that money back?
anyways, just my personal opinions here, not trying to teach anyone how to live

[cctw]

^a financed car is an asset in business terms if it is used as part of the operations of your business..because if finance you have title to the car, whereas for a lease the title of the car remains with the lessor.

[xpl0sive]

oh ok well I'm not talking about buying a car for business, and I'm pretty sure most people on RS aren't buying cars for business purposes. But for business use in canada, either lease or finance works. You can only write off a portion of either one... unlike in the US, if your vehicle is over 5000lbs, the entire lease can be written off, not sure if thats still true, but while i live there, that was the case. That "loophole" contributed to the production of the HUGE trucks and SUVs in the US because people were leasing them for their businesses and writing them off

[i-VTEC]

Would type of car make be a factor when choosing buy or lease?

Toyota, Honda, they are quite reliable and parts/maintenance aren't that expensive

While BMW, Mercedes, Audi are the opposite since they are quite expensive when dealing with parts/maintenance.

[Great68]

Thanks dude.



As for your depreciation I don't think you can write that off as a business expense. But however, I think, but don't quote me, that the whole car can be written off as a business expense for the year, or maybe over a period of time as a business expense (better to consult an accountant) and also insurance if it is insured for work.



Wrong on both counts.

You absolutely can claim annual depreciation of a vehicle for business as a (Blinky previously mentioned) capital cost allowance. I just did this for the first time on my last income tax. Unfortunately to me, my amount of usage didn't exceed the allowance my company allocated for me as "Vehicle allowance" and I didn't get anything back.

Personal use of property (http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/prsnl-eng.html)

You have to have a signed T2200 form from your employer. If you get mileage payments from your employer, you would probably not get this form.

[bing]

Would type of car make be a factor when choosing buy or lease?

Toyota, Honda, they are quite reliable and parts/maintenance aren't that expensive

While BMW, Mercedes, Audi are the opposite since they are quite expensive when dealing with parts/maintenance.

I think that the type of car only becomes an important factor when it has a direct bearing on the number of jerry cans that will fit in the trunk.

[Harvey Specter]

If you're looking to get a loan or say re-financing your home in the future than stay away from leasing a car. The bank wants to see you own hard assets, if you have a lease against your name the bank will take that into account were as if you're financing the car the bank will see that as an asset.

Also, a lot of manufactures are offering financing with balloon payments and a lower interest rate than leasing. So you put a little down which doesn't go to waste like it does when you lease and you pay out the same amount for say 4 years that you would with a lease with one balloon payment at the end. It's your car, you have an asset and most people don't pay the full term out because they'll flip their car way before the balloon payment is due.

What I've realized is more expensive the car is, the bigger money pit it is. Sort of like having a super hot girlfriend, she'll leave you broke at the end but it was fun while it lasted.