Home Automotive News Financing and Leasing Automobiles.

Financing and Leasing Automobiles.

413
0
SHARE
Financing and Leasing.
CONSIDER THE RIGHT LEASE
CONSIDER THE RIGHT LEASE

Financing and Leasing Automobiles.

The answer is — it depends. It’s not possible to simply say that one is always better than the other because the answer depends on the specifics of each individual situation, which we will explain further. Leasing a car is a great option for some people or businesses but not for others. Some will not qualify because of credit, income, or other requirements. Therefore, if you are considering leasing, it’s important to know how to determine if a lease is a good option for you, or if you qualify. Tax laws allow businesses to deduct monthly leasing payments as an expense. But individuals get a tax break, too. In most states, you pay sales tax only on the monthly payments, not the vehicle price. There is one more difference between buying and leasing a business vehicle. That difference is the disposition of the vehicle. When you dispose of a business vehicle that you own, there may be taxable gain or deductible loss. The portion of any gain that is due to depreciation will be taxed as ordinary income. When you return your leased car to the dealer, there is no taxable gain or loss. If you purchased a car this year to transport passengers like for Uber and Lyft and you bought a sports utility vehicle, you may be able to deduct up to $25,000 of the cost of the vehicle if you use it more than 50% for your business.  If you purchased a car for your business you may also be able to deduct up to the depreciation deduction allowed if your business use is more than 50%.

Keep In Mind.

1) Number of miles your drive each year (leased cars- often charged extra fees for miles driven over 10,000 or 12,000/year)

2) How long you keep a car. Most leases are 2-3 years. Or keep it until it’s paid off.

3) How much do you want to spend on your monthly payments (lease payments are usually quite a bit less than monthly payments on car loan)

4) Are you going to customize the vehicle? Lifting / Lowering, upgrading the sound system or adding performance parts. This doesn’t make sense with a lease.

It’s personal. All of us have different personal styles, objectives, and priorities — in cars, life, and in finances. Car lease-versus-buy decisions must be made with your own lifestyle and priorities in mind. What’s right for one person can be totally wrong for another.

Opting for a longer-term loan of, for example, six years, could result in roughly the same low monthly payments as a three-year lease. But longer loans make it easier to get “upside down” on your loan, where you owe more than the vehicle is worth. So, if you decide to get rid of the car early on or if it’s destroyed or stolen—the trade-in, resale, or insurance value likely will be less than you still owe on the loan. Indeed, if you want to drive a new car every couple of years, taking out a long-term loan but trading in early will leave you having paid so much in finance charges compared to principal. If you can’t pay off the difference on an upside-down loan, you can often roll the amount you still owe into the new loan. You end up financing both the new car and the remainder of your old car. If you decide on a long-term loan, hold on to the vehicle until it’s paid off. If low monthly payments and the opportunity to drive a new vehicle every few years with little hassle are worth the extra cost, consider leasing. Be sure, however, that you can live with all the limitations on mileage, wear and tear, vehicle modifications, and the like. Finally, keep in mind that you should be able to afford the lease for the entire period, since the early termination penalties can be costly

LEASE – If you enjoy driving a new car every couple years, want lower monthly payments, like having a car in stock trim and is always under warranty, don’t care about building ownership equity, have a stable predictable lifestyle, drive an average number of miles, properly maintain your cars, are willing to pay more over the long haul to get these benefits, and understand how leasing works, then you should LEASE.

BUY – If you don’t mind higher monthly payments at first, like owning your cars for more than 2-3 years, prefer to build up some trade-in or resale value (equity), enjoy the idea of having ownership of your car, like paying off your loan and being payment-free for a while, don’t mind the unexpected cost of repairs after warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, or you might have lifestyle or job changes in the near future — then you should BUY.

LEAVE A REPLY

Please enter your comment!
Please enter your name here