Getting a good Lease on a car

[red-beard]

The BMW 328i (4 door, premium wheels, no other options), the 2009 retails for $37,500. A 2007 with 20,000 miles, same car, retails for $30,500. A drop of about $7000

The Truck's retail is $36,375, 2009, Ford FX4 no options, except extended bed. A 2007 FX4 with the same options has a retail of $23,590. A drop in value of almost $12,000

[kaisen]

Originally Posted by onewhippedpuppy

A few counterpoints. Purchasing a new car outright can be used as an expense to reduce net income for tax purposes, my in-laws do it nearly every year with their business.

Maybe it's conservative, but I don't agree with borrowing to invest. That's essentially what you're doing by leasing the car, borrowing the money for the car so you can invest the cash elsewhere. That mentality has led to a lot of problems over the last few years. Remember, you should never invest money that you can't afford to lose.

If the vehicle depreciates more than the residual, you saved more than the interest you spent. The majority of luxury-marque leases are subvened, so the 'interest' is often less than 3%.

My current Nissan lease is less than 1/2 of 1%

[kaisen]

Originally Posted by red-beard

The BMW 328i (4 door, premium wheels, no other options), the 2009 retails for $37,500. A 2007 with 20,000 miles, same car, retails for $30,500. A drop of about $7000

The Truck's retail is $36,375, 2009, Ford FX4 no options, except extended bed. A 2007 FX4 with the same options has a retail of $23,590. A drop in value of almost $12,000

You are missing a KEY component. You can buy a new pickup for $10,000 off sticker based on REBATES.

What are the rebates on the BMW? Yep

[RWebb]

Expensing will usually work best from a tax standpoint. Slog thru the numbers or hire a tax expert to be sure...

re "borrowing to invest" - there is always a risk to that, eh. But it can sometimes work out well -- usually when the investments (say, stocks) are depressed in cost, growth is likely, and the cost of borrowing is low -- e.g the Fed. cuts interest rates to the bone, the S&P is low, and it is likely the economy is showing signs of resurgance....

As the cycle matures, interest rates go up, and stocks seem highly (over) valued, it is time to get out of that. A good indicator is that people keep talking about stocks at parties, and a pic of a bull is on the cover of Time or Newsweek...

[911Freak]

Originally Posted by red-beard

Any help?

Bump

Red Beard-
Straight out of the mouth of my buddy who has been a F&I manager and now general manager of a massive auto dealer in Nor-Cal: "Jason here's a short list to help your buddies not get hosed when leasing an auto...I can't tell you just how profitable leasing vehicles can be to a dealer (unless your Chrysler... I digress), good luck! " -

#1 Negotiate price just as if you were going to buy it with cash
#2 DO NOT mention a trade-in until you have negotiated price
#3 Know the manufacture lease incentives, prior to visiting dealer (research at kbb.com or Nada etc
#4 See #1
#5 See #2
#6 Don't walk in and say "hey I wanna invoice deal on a lease" That's what Internet managers are for

Hope this helps a little RB

Cheers

[onewhippedpuppy]

Originally Posted by red-beard

I am sure that the tax laws don't work that way. You can buy the car, but you only get to depreciate it against income.

True. But you reduce your taxable income with the purchase expense. My wife (accountant) does all of the accounting for her parent's business, nearly every year they purchase a vehicle to reduce their tax burden. It works out well for them, they drive the vehicle for a few years then pass it along to the next teen driver (they have 10 kids). Therefore the cars are basically kept until they're ready for the junkyard. No real worries about depreciation if you never sell it.

[red-beard]

Well, I'm glad to see that if I buy a truck, we can write it off in the 1st year. I better do this while I can. I think we will be buying a truck this year.

I still will be leasing the BMW.

[kaisen]

Originally Posted by red-beard

Well, I'm glad to see that if I buy a truck, we can write it off in the 1st year. I better do this while I can. I think we will be buying a truck this year.

I still will be leasing the BMW.

We buy our trucks and write them off in 1-3 years depending on other tax components. Then we also write off actual expenses. Fuel has been the big variable. Also, since trucks don't depreciate as much as cars, they are actually worth keeping. Be careful in how you move them out of the business (sell, or transfer ownership) because if you depreciated the truck to zero then sell it two years from now for $15K, you have a gain. Or if you sell it to someone in your family for $1 you can raise red flags.

But we lease our cars. It's much cleaner accounting and a better deal.

You can purchase 70,000 extra miles @ 10 cents/mile for a $7000 lower residual ($7000 more write-off) and buy it at the end in your personal name for a really deflated price then sell it and it's not a business gain

Some lease companies allow you as low as a $1 residual for this reason. Equipment leases often work this way.

BTW, my father who is a prominent tax accountant and multiple business owner also leases his cars and buys his trucks.

PS: Your example of 09/07 F150 vs 3 series is also skewed by the fact that the 2007 BMW is still 'current' where the 2007 F150 is the 'old' bodystyle and that makes a BIG difference in their resale values.

[red-beard]

Originally Posted by 911Freak

Red Beard-
Straight out of the mouth of my buddy who has been a F&I manager and now general manager of a massive auto dealer in Nor-Cal: "Jason here's a short list to help your buddies not get hosed when leasing an auto...I can't tell you just how profitable leasing vehicles can be to a dealer (unless your Chrysler... I digress), good luck! " -

#1 Negotiate price just as if you were going to buy it with cash
#2 DO NOT mention a trade-in until you have negotiated price
#3 Know the manufacture lease incentives, prior to visiting dealer (research at kbb.com or Nada etc
#4 See #1
#5 See #2
#6 Don't walk in and say "hey I wanna invoice deal on a lease" That's what Internet managers are for

Hope this helps a little RB

Cheers

So, is it better to phone/e-mail an internet manager and work something out, or to try my luck with the wolves? I think I may have already answered my question.

Besides, I found the car I'm looking for, there is exactly 1 in Houston...

[red-beard]

OK, here we start:

The "lease offer" for the car I would like is as follows:

MSRP of $42,900.00
Purchase option at lease end for $25,311.00
10,000 miles per year.

$4,934 Cash due at signing

$509*/month for 36 monthsVehicle Registered outside N.Y.

Where would that put your "rate" ?

I want to get this to around $300 per month. The SUV I plan to turn in will probably get me around $10K, so I can put an extra $5000K

The specific car is a 328i Wagon, List price is $41,650

I expect to get at least 10% off MSRP, and put the excess valuation of my above vehicle into this. How would you suggest I approach this, to maximize the benefit. One thing to remember, there is only 1 car in Houston (within 100 miles) that is a 3 series wagon. I know if I were going to the lot to buy it, I would look at everything BUT that car, then ask about it. How would you approach it from an internet approach?

[onewhippedpuppy]

Originally Posted by red-beard

So, is it better to phone/e-mail an internet manager and work something out, or to try my luck with the wolves? I think I may have already answered my question.

Besides, I found the car I'm looking for, there is exactly 1 in Houston...

It's in your town?! Rookie.

[Steve Carlton]

Did you get those numbers from the dealer or from the lease offer page of the BMW website? Looks like they're based on a selling price of MSRP, according to the BMW website. Are you dealing with someone at the dealership yet? If so, what's their position? Can they tell you the specifics of the lease? Fax you a recap?

I'd suggest finding the best person to deal with, then have them locate and trade for the car. If you can do your research and get the local dealer to beat or come close to the deal, that's better. You'll probably be somewhat preferred in the service department if you got the car at the same place.

[kaisen]

Originally Posted by red-beard

OK, here we start:

The "lease offer" for the car I would like is ....

Where would that put your "rate" ?

I want to get this to around $300 per month. The SUV I plan to turn in will probably get me around $10K, so I can put an extra $5000K

The specific car is a 328i Wagon, List price is $41,650

The rate can't be extrapolated based on just those numbers. How much of the $$ due at signing is acquisition fees or security deposits?

There's $17589 in straight depreciation from MSRP, so the 36 month residual is 59% of MSRP at 10K miles per year. It's probably 58% at 12K miles/yr and 56% at 15K miles/yr, IF you'd like a cushion for miles and a greater write-off. In other words, you'd pay an additional $1287 (3% of $42900) to bring the car back with 45,000 miles rather than 30,000 miles. That's $0.085 (8.5 cents) per mile. And you have a purchase option of $24024 ($1287 less) regardless of the miles acutally on the car.

If the car you're interested in is $41650 and the 36 mo residual is 59% (@10K) then the residual on 'your' actual car would be $24574.

If you can save 10% off MSRP, you are paying for roughly 30% of MSRP for your 36 months of use (principal only). So if you paid $37485 and had a residual of $24574 your PRINCIPAL-ONLY would be $359 per month. You need to add tax and interest, and any fees. You only need to pay your first payment, security deposit, state fees/lic, and acquisition fees up-front. Anything else in cap reduction and goes to lower the lease payment/principal.