triman

Hello all, bought my 05 C2 cab used in 06 for 63K. Sticker was 87k. Since then have watched the value drop to the high 40 range (from what I can tell on ebay and autotrader). Starting to get the itch again for something new and the 997.2 PDK is very sweet. I know the topic of buy vs. lease has been batted around here and on other forums many times. Wondering if anyone with an accounting background has any insight or advice. I can pay cash for a new 997 but it seems crazy to take the full hit of depreciation, when that money could be invested conservatively and hopefully make a small percentage over a period of 4 years or so until the itch hits again. OTOH I have not checked lease rates recently and am wondering what is out there for a 997.2 S (cab preferred). I can write off a portion of a leased vehicle for work (~ 40%). Thoughts?

echere88

I think you already answered your own question. Lease is the way to go. Also, if you are tired of the car or need upgrade 3-4 years later, it is much easy just return the car, and will probably not take a hit on the trade in value. JMHO

Speed

I've always been of the impression that a lease is a very expensive way to own a car because you're paying a lot of non-tax deductible interest to the dealer-- unless you can run the payments through a business or really like to trade in frequently. For myself, I tend to keep my cars for a longer period and finance them through the home equity line of credit I have on my house. The interest rate is much lower than a dealer's and it's tax deductible. And I'm religeous about paying it off over 3 years.

Asquared

I'm not an accountant, but I do work broadly in the financial consulting. The way I think about leasing is, it gives me a way to finance only a portion of the vehicle with a call option at a fixed price at the end of it, but that option isn't free, you are paying for it. The lease doesn't protect you from depreciation, just higher than expected depreciation, but allowing you to keep the upside costs you something.

Therefore, the key question is how much do you value that option. That plus the interest and tax implications should be driving your decision ultimately. And not just the deductibility of interest, remember, if you lease a car and then buy it at the end of the lease, you will pay sales tax on the entire value of the car plus all the interest components of lease payments, so your state sales tax needs to be considered.

If you trade your cars in frequently (and don't put a lot of miles in your cars), then the call option can have real value. If you are just going to keep it forever and you finance the buy out, you are just extending the period you are paying interest on (and paying a lot more sales tax depending on your state).

If you have a HELOC, that is often a very good way to buy a car, but depending on your tax circumstances, don't forget that interest on a HELOC that was not used for home improvement is not deductible for AMT purposes, and as noted elsewhere around here, the annual AMT patch for 2010 did not get passed before congress recessed, and given the strong need to increase tax revenue, I would not rely on the AMT brackets increasing with inflation.

Fahrer

With a lease you are basically paying the interest and depreciation. With a loan you will, at some point, (assuming you pay off the loan) gain the residual ( market) value of the car. The monthly rates for loans are, of course, higher for the same car and time period. It is true, that if you trade you cars in every few years, leases are more convenient and more expensive. With a lease you should always negotiate the purchase price of the car in order to reduce the payments which are based on the difference between price and residual value. Whether with cash, a loan or a lease, you will lose money on the depreciation of a new car.

cole328

If you can run it through business (which I can as well), and if you get bored with cars every 2-3 years(which I definitely do), leasing is a great option.

brendo

we are just now leaving an extraordinary time in our economic history IMO so you can't compare the depreciated values on the 997 to a normal depreciation curve or to the 996.

lease rates and residual values are calculated so that the manufacturer and dealers make money and reduce cash flow to the drivers. if cash flow is the issue, or you know you're going to get into a car in 3 years, then it makes sense.

to generalize, the least-bad time to buy a late model car from a financial pov is after somebody else took the up front depreciation hit in years 1-3.

triman

One other consideration that I learned recently is the additional 'hit' in value our cars take if involved in an accident. I had a lady turn left into my driver's door and front quarter (no frame damage), repairs were approx. 12k. with perfect results. As a result of the accident, a number of dealerships wouldn't even look at the car for trade-in this summer. If the vehicle was leased, I would just hand the keys back to the dealer and let them deal with the loss of value from the accident.

daddyscar

Sales tax is often overlooked for those in CA. When you lease, you pay sales on the portion that you rent. When you buy, you pay for sales tax on the full price of the car. Unlike some states, when you trade your car in, you still pay sales tax on the full price of the next car you purchase, not just the difference between your trade-in and next car.

On my monthly cayman statements, the payment is broken down by rent and sales tax. I'm paying sales tax on only the amount I'm renting it for that given month. If I trade it in a little earlier than the 36 month lease term and assuming the trade-in value is equal to the payoff amount for that given month than I'd only pay sales tax up to the amount I actually rented it for.

Read up on the many threads on lease vs buying and see what works best for you. After that see what dealers are supporting and what cars are actually available new or used. Do you really know how much you'll drive it? Is it really a keeper? Will the car be so unreliable that you'll always want a warranty on it? How much do you think this thing will actually depreciate? Lots of factors, lots of unknowns. The lease vs buy answer really depends on the car and driver. I leased the cayman but plan to buy a cpo 911 convertible to drive about 5k miles a year and keep for a while.

MUSSBERGER

Don't worry the current powers to be in DC will take care of that for you. Its all gonna be income baby.

CamsPorsche

Exactly! That's why I jumped on my 06 Carrera.

If you are leasing make sure you crunch the numbers of both options (Loan or Lease)...it may surprise you to find leasing the best option.

LagunaDallas

I leased my 2009 997 S Cabrio since I'm self-employed and can write off about 80% of the payment. Paying cash or even 1.9% financing didn't make as much sense in my situation, though it'd be smart to compare options as others here have mentioned since you're only taking partial advantage (40%) of the self-employed tax benefits. I can't remember the exact lease money factor through Porsche Financial, but it translated to an interest rate of about 4% and the residual was decent. It's a good enough deal that I should be able to put the car on Swapalease.com or Leasetrader.com and find a qualified person to take it over without much difficulty (and not take a big resale hit) if I ever get crazy and decide to get something else. The 997.2 and PDK are awesome!

daddyscar

The ability to transfer a lease free and clear is another example of a car dependent factor on deciding to lease or not. Porsche actually still holds the original lease holder responsible if the next guy flakes. I know Mercedes and BMW allows you to transfer and release liability. Honda does not even allow lease transfers. When I sold my Honda Civic Hybrid in April 2009, it was tougher to sell it because it was leased and I didn't have the title. I found a buyer willing to take my asking price so long I had the title. I paid off the car to get the title but ran up close to the deadline in CA to get the title transferred before having to pay sales tax on my payoff amount. The buyer could have changed his mind too.

But that's all part of the fun. There are usually a half dozen cars that I'm interested in at any given time. My car decision is partly based on the lease, cpo and new car deals I can find. Our GL lease is up in May which replaced a cpo 2004 Land Rover Discovery we financed. Next car will be a new LR4 if they start offering attractive lease deals, another new GL if they give us a really really good deal after the headaches it gave us, a new loaded Honda Pilot but nobody seems to be dealing on those here in norCA , a silver 2008 Honday Pilot with nav and under 30k miles but it's surprisingly hard to find, a 2005 G500 or cpo Range Rover.

RUSSCPA

Greetings and happy and a healthy 2010,

If you have any questions, you may email me.

Gary

brendo

i agree. i didn't mention that in my other post but of course, if you're going to flip, or lose interest, or are the tiger woods of autos, you'll want the lowest total cost of ownership

i actually have a 2007 997 for sale right now and i would have purchased a used one then but i was terrified my wife would change her mind. i knew when i bought i that if the PDK was as good as they said it was going to be, that i'd get a new one...and here i am.