Topic: buy or lease??

[migelis]

My big dilemma is should I buy or lease when considering tax consequesnces (ie business writeoff)...

for tax types I think the max for depreciation or CCA on an owned car used in a business is 30k plus tax..... whereas the effective allowance for monthly lease payments would allow one to write off a car that is worth more than 40k if I understand the rules correctly (ie lease payments of around 600 per month)...

so I am thinking it may be best to lease first and then pay the residual (if I want to own outright) later so I can benefit from lease and CCA over the lifetime of the car.....

my only concern is will I get shafted with the total price by leasing over buying? in other words is there is some additional cost buried in the lease down payment, monthly payment and residual that translates into an overall greater cost than outright buying from the start??....

thanks in advance

[wing]

Interest rates are typically higher, it really depends on the vehicle, but generaly leasing then buying out (assuming a cash buyout at lease end) is around $1-2k more expensive.

There are exceptions.

[johngenx]

If you look closely, you'll see that the MSRP of a leased car is also capped by RevCan.  Leasing is no longer a "backdoor" way to hopping over the MSRP-max rule.

[articsteve]

Leasings is excellent for people that have next to nil legitimate business use but get the business to lease it and then claim a taxable benefit on their personal return.

Providing one borrows the entire amount and writes off the interest buying is the way to go.  It might take a year to get up and running for the depreciation to take effect fully.  I duuno what the rules are now.  Before one could buy late in the year and start the next year at 30% depreciation.  Thats probably changed.

Essentially leasing is for folks looking for ways to extend their cash flow or are afraid to ask their bank manager for more cash.

[johngenx]

Essentially leasing is for folks looking for ways to extend their cash flow or are afraid to ask their bank manager for more cash.

I agree.

I've only leased one car, the C230 I now own.  The reason was that my employer at the time would make a lease payment, and only a lease payment, up to a certain dollar value.  They had a wonky car policy that wasn't a "car allowance" that was simply paid to you.  You could only participate if you submitted your leasing documents and they paid your lease payment directly.  So, I leased the C230 and negotiated a higher payment and lower residual with MBCC so that the payment matched the maximum set by my employer.  When I quit, my employer stopped paying the lease (of course!) and I simply called MBCC and they gave me an early buy-out amount, and I bought the car for far less than the current market value.  I hated this system as it lacked flexibility and forced me to lease a car or lose the benefit.

When I owned the consulting firm, we simply paid a set car allowance amount to each employee and you did what you wished with it.  It was about $500 (generous 12 years ago!) and if you drove your old car, you pocketed the $500 for running costs.  A couple guys leased really expensive cars and used the $500 to subsidize their payment.  Tax wise, you had to handle the $6000 per annum and the vehicle expenses yourself.  Simple.

[vt]

The biggest question you should ask yourself is "Can you afford the finance payment?"  Most people lease because the finance payment keeps them awake at night.  I would suggest that if you can write-off any payment, you should consult your accountant because everyone's circumstances are different.

As for getting ripped-off, Ontario has a full disclosure law that requires all leases show the selling price of the vehicle on the agreement.  If you feel more confident with negotiating the price you are paying instead of a payment, negotiate a pre-PST/GST price on the vehicle (since your taxes are paid monthly) and then check the figures on the agreement (what we refer to as the bill of sale or offer to lease).  Any dealership can translate a selling price into a monthly lease payment for you.

[safristi]

..short answer BUY a 3 year old lease return.........a lease is a leash around yer neck...ya have ta treat the car like yer firstborn OR the dealer/leasor will eat yer baby if it has so much as a rash on it's arse at return and you will be watching the mileage and paint and upholstery to DISTRACTION...BUY a decent 3 year OLD car and FART away,drive it anywhere ,anyhow ya want..... a bud has a Jeep TJ and treats it like an Airport Limo...NO FUN....!!!!

[Trainman]

..short answer BUY a 3 year old lease return.........a lease is a leash around yer neck...ya have ta treat the car like yer firstborn OR the dealer/leasor will eat yer baby if it has so much as a rash on it's arse at return and you will be watching the mileage and paint and upholstery to DISTRACTION...BUY a decent 3 year OLD car and FART away,drive it anywhere ,anyhow ya want..... a bud has a Jeep TJ and treats it like an Airport Limo...NO FUN....!!!!

That is what I did to get my 02 Pathy.  62,000 km, lots of options that made sense for what I use the truck for.  It gets beat on the bush roads but I work in forestry, so that is what it is supposed to do.  Paid $22,000 for it.

Have leased in the past, would not do it again if I wanted to keep the vehicle.  All the ones I leased, when you added the lease payments, buy-out and any down payment, came out to $2-3,000 more than buying outright (about 7%) (plus costs of moving radios and other bolted in gear every 3 years).  If you are looking at Big Three vehicles, can you go wrong with the low/no interest rates now if you buy?