GT3 Lease or Finance???
08-08-2009, 12:25 AM
#17
GT3 player par excellence
Lifetime Rennlist
Member
Lifetime Rennlist
Member
Thanks Mooty, I'm leaning towards leasing with 10k miles/year increasing the residual and putting some money down. Compared to retail financing, the same amount of money down would be higher monthly payments. Wish I could write a check but then again, not all of us are that fortunate or can let that kind of money fly in this economy
it's better to pay the bigger pmt, ESPECIALLY if you terminate early. postpone your cash out lay as late as you can.
08-08-2009, 08:35 AM
#19
Point #1 I am not an accountant or tax attorney.
Point #2 I have another car as a daily driver. I keep a log showing my business mileage use of my p-car.
Point #3 Currently my corporation (which owns my car) can depreciate 50% of the cost of a car in the first year. Given my combined state and federal income tax rate of about 45%, I actually spend very little buying a new toy each year. If you have the option of running it through your business, current tax law may make it advantageous to purchase. I'd rather give the money to my porsche dealer than uncle sam.
Point #2 I have another car as a daily driver. I keep a log showing my business mileage use of my p-car.
Point #3 Currently my corporation (which owns my car) can depreciate 50% of the cost of a car in the first year. Given my combined state and federal income tax rate of about 45%, I actually spend very little buying a new toy each year. If you have the option of running it through your business, current tax law may make it advantageous to purchase. I'd rather give the money to my porsche dealer than uncle sam.
08-08-2009, 04:30 PM
#20
08-09-2009, 10:44 AM
#22
Rennlist Member
If the interest rate on the lease is reasonable it is always better to lease, unless you always flip the cars very short term.
Financially, the lease is the same as a loan but with an option to "sell" the car at the residual value (put option). That option is "free" when you compare it to a loan (or buying outright cash). It is always better to get free options!!
The higher the residual the more valuable the option. It's the bank's loss if the value of the car drops below the residual, and there;s some profit for you to make if the residual is below market value (heads you win, tails they loose!)
Financially, the lease is the same as a loan but with an option to "sell" the car at the residual value (put option). That option is "free" when you compare it to a loan (or buying outright cash). It is always better to get free options!!
The higher the residual the more valuable the option. It's the bank's loss if the value of the car drops below the residual, and there;s some profit for you to make if the residual is below market value (heads you win, tails they loose!)
08-09-2009, 11:59 AM
#23
GT3 player par excellence
Lifetime Rennlist
Member
Lifetime Rennlist
Member
^ the logic is correct, the put option.
however, when i tried to do it, wont work in CA, unless future mkt value FAR exceeds the residual.
say 2010 GT3, end of year 3 is worth 50k on pre stated residual (msrp $100k for ease of calc)
and the mkt value is 55k.
in theory i would buy the lease out at 50k and sell in private mkt for 55k thereby pocket 5k
but without dealer license, the lender wont let me transfer title unless i buy out the lease. without dealer license the minute i buy the lease out, i have to pay tax on residual. it's about 9.75% where i leave. let's round it off to 10%, so that's 5k + car at 50K = 55k, my profit just got wiped out.
of course, if the mkt is at $60, then i am ahead by 5k. but USUALLY lenders aren't that far off.
i am hoping that i did something wrong in my logic above. i would love to make some money while driving fun cars ;o)
maybe this is just a CA thing...
however, when i tried to do it, wont work in CA, unless future mkt value FAR exceeds the residual.
say 2010 GT3, end of year 3 is worth 50k on pre stated residual (msrp $100k for ease of calc)
and the mkt value is 55k.
in theory i would buy the lease out at 50k and sell in private mkt for 55k thereby pocket 5k
but without dealer license, the lender wont let me transfer title unless i buy out the lease. without dealer license the minute i buy the lease out, i have to pay tax on residual. it's about 9.75% where i leave. let's round it off to 10%, so that's 5k + car at 50K = 55k, my profit just got wiped out.
of course, if the mkt is at $60, then i am ahead by 5k. but USUALLY lenders aren't that far off.
i am hoping that i did something wrong in my logic above. i would love to make some money while driving fun cars ;o)
maybe this is just a CA thing...
08-09-2009, 01:43 PM
#24
Still plays with cars.
Lifetime Rennlist
Member
Do you make a habit of this?
Red89, you posted a quote from MJones. I notice that you failed to mention that his post dates back 4 years, pre-meltdown and low interest rates from Porsche Finance.
Would you call your post "out of context?". I also wonder why you seem to go out of your way to 'dis' MJones? He has provided early and useful information regarding Porsche Cars, often before even our local dealers are aware of it.
Does this bother you somehow?
Would you call your post "out of context?". I also wonder why you seem to go out of your way to 'dis' MJones? He has provided early and useful information regarding Porsche Cars, often before even our local dealers are aware of it.
Does this bother you somehow?
08-09-2009, 03:22 PM
#25
Racer
Join Date: Jan 2006
Posts: 267
Likes: 0
Received 0 Likes
on
0 Posts
Red89, you posted a quote from MJones. I notice that you failed to mention that his post dates back 4 years, pre-meltdown and low interest rates from Porsche Finance.
Would you call your post "out of context?". I also wonder why you seem to go out of your way to 'dis' MJones? He has provided early and useful information regarding Porsche Cars, often before even our local dealers are aware of it.
Does this bother you somehow?
Would you call your post "out of context?". I also wonder why you seem to go out of your way to 'dis' MJones? He has provided early and useful information regarding Porsche Cars, often before even our local dealers are aware of it.
Does this bother you somehow?
Why would it bother me?
I think that a Porsche is a toy.
I think toys should be paid for.
08-09-2009, 07:53 PM
#26
Three Wheelin'
I don't believe a Porsche is a necessarily a toy for all...mine is a car...plain and simple...a sweet car...but a car that I drive every day. As a small business owner, I can write my car off thru the company, plus I like a new car every 3 years or so, so leasing is a perfect option. As has been discussed on prior threads, to each his own evidently.
08-09-2009, 08:49 PM
#27
Instructor
Join Date: Aug 2006
Location: Newburgh,Indiana
Posts: 231
Likes: 0
Received 0 Likes
on
0 Posts
^ the logic is correct, the put option.
however, when i tried to do it, wont work in CA, unless future mkt value FAR exceeds the residual.
say 2010 GT3, end of year 3 is worth 50k on pre stated residual (msrp $100k for ease of calc)
and the mkt value is 55k.
in theory i would buy the lease out at 50k and sell in private mkt for 55k thereby pocket 5k
but without dealer license, the lender wont let me transfer title unless i buy out the lease. without dealer license the minute i buy the lease out, i have to pay tax on residual. it's about 9.75% where i leave. let's round it off to 10%, so that's 5k + car at 50K = 55k, my profit just got wiped out.
of course, if the mkt is at $60, then i am ahead by 5k. but USUALLY lenders aren't that far off.
i am hoping that i did something wrong in my logic above. i would love to make some money while driving fun cars ;o)
maybe this is just a CA thing...
however, when i tried to do it, wont work in CA, unless future mkt value FAR exceeds the residual.
say 2010 GT3, end of year 3 is worth 50k on pre stated residual (msrp $100k for ease of calc)
and the mkt value is 55k.
in theory i would buy the lease out at 50k and sell in private mkt for 55k thereby pocket 5k
but without dealer license, the lender wont let me transfer title unless i buy out the lease. without dealer license the minute i buy the lease out, i have to pay tax on residual. it's about 9.75% where i leave. let's round it off to 10%, so that's 5k + car at 50K = 55k, my profit just got wiped out.
of course, if the mkt is at $60, then i am ahead by 5k. but USUALLY lenders aren't that far off.
i am hoping that i did something wrong in my logic above. i would love to make some money while driving fun cars ;o)
maybe this is just a CA thing...
Joe
08-09-2009, 09:31 PM
#28
Rennlist Member
^ the logic is correct, the put option.
however, when i tried to do it, wont work in CA, unless future mkt value FAR exceeds the residual.
say 2010 GT3, end of year 3 is worth 50k on pre stated residual (msrp $100k for ease of calc)
and the mkt value is 55k.
in theory i would buy the lease out at 50k and sell in private mkt for 55k thereby pocket 5k
but without dealer license, the lender wont let me transfer title unless i buy out the lease. without dealer license the minute i buy the lease out, i have to pay tax on residual. it's about 9.75% where i leave. let's round it off to 10%, so that's 5k + car at 50K = 55k, my profit just got wiped out.
of course, if the mkt is at $60, then i am ahead by 5k. but USUALLY lenders aren't that far off.
i am hoping that i did something wrong in my logic above. i would love to make some money while driving fun cars ;o)
maybe this is just a CA thing...
however, when i tried to do it, wont work in CA, unless future mkt value FAR exceeds the residual.
say 2010 GT3, end of year 3 is worth 50k on pre stated residual (msrp $100k for ease of calc)
and the mkt value is 55k.
in theory i would buy the lease out at 50k and sell in private mkt for 55k thereby pocket 5k
but without dealer license, the lender wont let me transfer title unless i buy out the lease. without dealer license the minute i buy the lease out, i have to pay tax on residual. it's about 9.75% where i leave. let's round it off to 10%, so that's 5k + car at 50K = 55k, my profit just got wiped out.
of course, if the mkt is at $60, then i am ahead by 5k. but USUALLY lenders aren't that far off.
i am hoping that i did something wrong in my logic above. i would love to make some money while driving fun cars ;o)
maybe this is just a CA thing...
In a private sale you will have to justify the arbitrage to be large enough to cover the sales tax as you mention. Still, better off with the lease than purchase as in the purchase you would have paid that sale tax way before (when car was new), so you have a time value of money gain there too.
08-09-2009, 10:20 PM
#29
Rennlist Member
Keep in mind that using post-crash money to buy right now may mean you miss some of the market rebound (if you believe were recoving) over the next 3 years ... can make putting that money into a depreciating asset very expensive
Leasing versus buying is a toss-up really, all depending on individual circumstances - i.e. business write-off, risk aversion to market conditions, incentives etc. If you believe you can invest your money and achieve a greater return than the money factor, then hold on to your money. Really depends on each deal.
The put option is nice, but it's not free - you pay for it in lease inception fees, although its cheaper for the lease companies to purchase residual insurance in bulk
I got a 5% lease on my 07 and chose not to use cash - better left in the market. Looking back, I'd have been better off buying outright!!
There is no right single answer to this question - don't let anyone brow beat you away from leasing, it's fine if you're gonna purchase frequently and the deal makes sense financially!
US bank and others have pre-pay penalties, so watch out on that front
Leasing versus buying is a toss-up really, all depending on individual circumstances - i.e. business write-off, risk aversion to market conditions, incentives etc. If you believe you can invest your money and achieve a greater return than the money factor, then hold on to your money. Really depends on each deal.
The put option is nice, but it's not free - you pay for it in lease inception fees, although its cheaper for the lease companies to purchase residual insurance in bulk
I got a 5% lease on my 07 and chose not to use cash - better left in the market. Looking back, I'd have been better off buying outright!!
There is no right single answer to this question - don't let anyone brow beat you away from leasing, it's fine if you're gonna purchase frequently and the deal makes sense financially!
US bank and others have pre-pay penalties, so watch out on that front
Last edited by Chris C.; 08-10-2009 at 01:30 AM.
08-09-2009, 10:32 PM
#30
GT3 player par excellence
Lifetime Rennlist
Member
Lifetime Rennlist
Member
Yes, there's an inefficiency in the system by the sales tax, but you can use the tax credit on trade in for the prepayment of the sales tax on the lease (NY now forces you to pay up front the sales tax on the depreciation portion of the lease, before it was pay as you go..).
In a private sale you will have to justify the arbitrage to be large enough to cover the sales tax as you mention. Still, better off with the lease than purchase as in the purchase you would have paid that sale tax way before (when car was new), so you have a time value of money gain there too.
In a private sale you will have to justify the arbitrage to be large enough to cover the sales tax as you mention. Still, better off with the lease than purchase as in the purchase you would have paid that sale tax way before (when car was new), so you have a time value of money gain there too.
wow, NY is bad. prepaid tax....
but CA aint much better. as we trade in, we dont just pay tax on the "difference". you pay full tax on the next car.