leasing vs financing

[Guidolovesit]

I was brought up that you pay cash for everything. Having said that I am in a role that I can write off vehicle expenses / lease payments...

Wondering what your take on this is.... I don't know what to do

 

[sdw]

I was brought up that you pay cash for everything. Having said that I am in a role that I can write off vehicle expenses / lease payments...

Wondering what your take on this is.... I don't know what to do

Whatever is too your financial advantage. If over half of the kilometers are work kilometers, lease. If most of the kilometers are personal kilometers, buy. If you lease and are deducting the work kilometers, you need to keep a log book. CRA has a habit of asking for proof of your claim.

 

[poonmiester]

Work portion of your vehicle if purchased is also deductible at pro rated depreciation on a yearly base....
Lease is great if you don't really care about throwing money away..... no real advantage....
Lease rates are based on residual value at the end of your term.... we all know cars in general depreciate real quick...starting the time you drive off the lot.... in many cases you will need a down payment ..same as buying it... they also charge interest rate... same as buying it.... still need to pay for maintenance ....she as buying it....when you bring the car back...lots of items to be aware of...otherwise there is a surcharge....example millage...tires... condition overall of vehicle..... etc..
The good part of a lease...is that you can get in a new vehicle every 2 years or so.... but the day you decide to terminate leasing.... you hand over the keys..and take the bus home. ... no equity in hand....

 

[SolidSnake]

"Business mileage" is what you incur to generate income, but going to and from a regular place of work does not count. The lease payments can be written off as a cost if you have your own business/company. If you buy, the vehicle's annual depreciation can be written off as capital cost allowance. Of course you have to prorate all costs for the business portion against personal use, whether you lease or buy.

The interest rate for leasing is typically higher than financing (purchase.) These days zero-percent financing or cash-back are very common if you buy. You can also sell the vehicle later for cash which is not possible with leasing.

Some companies reimburse the employee for business mileage, so don't "double dip" if that's your situation.

CRA's webpages are a valuable resource, very well written and easy to understand.
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/mtr/menu-eng.html
http://www.cra-arc.gc.ca/tx/ndvdls/...g/ddctns/lns206-236/229/slry/mtrvhcl-eng.html
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/mtr/menu-eng.html
http://www.cra-arc.gc.ca/tx/ndvdls/.../ddctns/lns206-236/229/cca-dpa/clsss-eng.html

 

[badbadboy]

I have purchased and leased many vehicles for biz. The times I leased turned out to be a financial disaster because (unless it's changed) the number of km per year average was 20,000. I drove many more than that and had to pay a lot when the lease was finished.

You might want to lease if you need a new car every three years or if you really like the car and intend on buying it outright at the end of the lease. Usually not an investment in your favour and tilted towards the lessor.

If you purchase you can depreciate the costs CCA on your taxes which is more favourable tax wise than a lease. Right now I'm running two vehicles for biz and pleasure keeping track of all biz km's.

 

[Guidolovesit]

So my question is... I went to the Toyota website abd built a 4 runner.

It gives you the cost... the info I got was as follows (approximate numbers)

Cash price 54000

Finance 56000

Lease 46000

That was including paying the residual...

 

[wilde]

By leasing you can have a car you ordinarily wouldn't be able to afford. If your end goal is to own the vehicle, financing should always come out ahead. If you want a spanking new vehicle every 2 to 4 years then go with leasing. The tax treatment of both makes them almost negligible.

 

[poonmiester]

All in all unless your intentions are to provide vehicles for corporate use.....there are no real advantage of leasing a vehicle....
On the other hand if you want to drive around town with a Porsche or Austin Martin or any vehicle of that price range....leasing will be some what a better option.....
Only because the risidual value of these vehicle can remain fairly high....
On a lease they calculate total cost of car ....adding any fees applicable ...for example maintenance .... no worry return ...meaning when you bring the car back any damages or excessive wear and tear is already built in the lease....
They will deduct the projected residual value... and the balance is what your lease plus interest plus taxes will cost you.

Example ..... $60,000 for car
$ 3,500 for worry free return
$ 3,500 for additional options on vehicle...
Total.... $67,000.......
Residual. $30,000
Balance. $37,000
So let's say your lease is for a 36 months duration.... $37,000 divided on a 36 month payment ....add 12% taxes.....and add whatever the interest rate will be....

If leasing companies or dealers went about it in the same terms as when you rent an apartment, there might be some advantage to lease. ....but you are responsible for all repairs that may not be covered by the warranty....all maintenance ...oil changes.. and services and tires etc....
Also lease vehicles cost more to insure then owned vehicles.....
My recommendation is do your homework as to what vehicle you really need or want.... compare depreciation of vehicles over let's say 3 to 5 years... and buy it...

 

[summerbreeze]

many perspectives to have on this one

once asked a friend who owned several car dealerships why he thought there was a market for leasing

thought his answer was the most practical, not about the gains on the vehicle and tax side, just freed up capital to used for business growth on the core business side

main gain just came from ROI (return on investment) on the deploying capital side

 

[poonmiester]

Take a peak on CL and see how many people are trying to get out of their leases.... and when you read the amount of money they put down...and how much they are paying on bi-weekly or monthly.... only thing I feel like saying is.... what were you thinking. ... if you weren't smart enough to take your time and think about this before hand....and all that mattered is hw cool yu look driving the car.... well I don't feel sorry...cause you deserved it....

 

[CrazedandAbused]

Shit man , take a look at finance rates. Why would you lease when you can buy so cheap?

 

[87112]

I leased once on a car way beyond my means cause it was affordable per month. Than when the party is over its time to go out and get another car which mean $$$ out the door. Leasing is for people who want toys and not something that makes sense.

 

[DiscreetOG]

There is an old saying that goes like this....Lease what depreciates, buy what appreciates. However, every ones situations is different. badbadboy is correct about excess km's. You have to be careful.
The other issues is do you have a trade-in? You pay taxes only on the difference between the new car value and the trade-in value. Say if you buy a new car @ $35,000., but your trade in is worth $ 15,000., you'll pay tax only on $ 20,000.
I've done both over the years. To be quite frank, I'm done with buying new and/or leasing new. If you buy new, the depreciation kills you. I had a 3 year old vehicle, perfect condition, and dealer was offering only 33% of original purchase price for trade-in! With leasing, you never own anything. No asset. Going with late model used cars from here on out.....

 

[Chef99]

I've leased the last couple of vehicles (strictly personal, not business) because of cash flow implications, here's the data....

A typical lease is 3 or 4 years. In that time, you're paying for roughly 50% of the vehicle cost (so a 50% residual at the end of the term, this is rough, in reality it depends on the vehicle and such)
During that time, you're only paying tax on the 50%
If you buy the car and finance it, you're paying for the complete purchase price in a similar amount of time (4-5 years usually). So you've got twice the $$ to pay back in a similar amount of time plus the full tax.
So even though the interest rate is less on the financing option, the lease payments are far less.

When you lease, you can get different mileage allowances. The 3 common ones are 16K, 20K or 24K per year. If you go for just 16K per year, the payments will be less and the residual will be higher. However, as BBB points out, if you end up using the car more than this you really get penalized. I've gone for 20K per year and just manage to stay under that.

Lastly, at the end of the lease term, the car is quite often worth more than the residual. In this case, you can pay the residual (and the associated taxes) and either keep it or sell it privately to make a few bucks. Toyota/Lexus is one brand that usually ends up like this. If the vehicle isn't worth more than the residual, just give it back and move on...

If the cash flow doesn't bother you and you intend to keep the vehicle for a long time, financing is always cheaper versus lease....

 

[poonmiester]

Agree with you DiscreetOg...... my last new car was in 08..... bought it for just over $50,000 ...extended warranty and taxes in.... after 6 or 7 months broke up with the GF and so I put the car up for sale.....
With 5000kms on the car I had a hard time getting $30,000 for the car.....
The cause was GM had a $10,000 rebate at the end of the year.....
Only way I was able to sell it was to support the financing for a year...so the buyer could get his financing afterward....
Now I buy vehicles around 3 to 4 years old..... most of the time it's less then 50% of its original price.... and 5he way most vehicles are built nowadays you can drive them over 300,000ks.... as long as it's maintained properly and you don't get caught in heavy repairs such as drive train components.....
What helps me is that the majority of the repairs I do myself.....
Makes a huge difference on the wallet......
Vehicle paid outright.... can still write off the depreciation for work use... and same as all repairs. ...
Of course leasing a vehicle sounds interesting as some say minimal cash needed.... financing longer terms are available as opposed to 36 months..... in my opinion if you lease for 36 months or finance for 60 months there will not be a huge difference in monthly payments.....
And if you wish to pimp out your car or truck.... then no one can stop you from doing it.... many leases will forbid any mods done to a vehicle... whether it's aftermarket wheels...or exhaust ... or even sound deck...
Of course one could always save the original parts and slap them on when returning it....

Other issues may be encountered if by badluck your vehicle was involved in an accident and it was a write off...
Make sure to read the fine prints for that clause.... because depending on the lease agreement .... you could be on the hook for the difference in lease value...and current depreciation .....

 

[Sibar]

I can't lease myself, because all the mileage (around 30K a year I throw on).

Will throw in a monkey wrench into this thread. You have Lease vs financing vs cash (normally from a new care dealership) There are at times you are better off, paying cash vs financing through the dealership. Because they offer a rebate. If the rebate is large enough. Getting a loan from elsewhere can save you money.

 

[Robert Upndown]

I can't lease myself, because all the mileage (around 30K a year I throw on).

Will throw in a monkey wrench into this thread. You have Lease vs financing vs cash (normally from a new care dealership) There are at times you are better off, paying cash vs financing through the dealership. Because they offer a rebate. If the rebate is large enough. Getting a loan from elsewhere can save you money.

I lease for a variety of reasons, but my current lease is 4 years 120,000 KM, so your 30 would not be an issue.

 

[tadolder]

In terms of writing off a vehicle expenses on your income tax. If you write off 75% for business you do not need a mileage log. They can ask for one all they want, you do not need to provide one. As soon as you go above 75% you have to keep one, and they will scrutinize it. If you write off 90% for business, and they check, you better have another vehicle registered and insured in your name or they will deny your expenses. Thing like running to the store for milk, or dropping kids off will work against you. I always use the 75% and both times i was audited, they asked for my log and i refused to give it and they dropped it.