smartest way to make a "bad" decision? (car buying/leasing)

[Phobos]

Looking for a few ideas. I'm thinking about buying a new luxury car in the 40k-50k bracket in the new year as a gift to myself. Yes, I realize that cars depreciate horribly and I'd do just as good with a car half as much or more hence the title "bad decision".

My question is what would be your opinion on the smartest/best way to finance it? I have purchased all my previous cars with bank loans and/or with cash and have absolutely no experience with leases but was thinking about it this time.

couple notes
I can most likely write off about 75% of the car expense as a business expense.
I have never owned a single car for more then 4 years before getting a different one.
I'd probably have about 8k-10k downpayment.
I figure I drive 20k-24k km a year...but possibly could go up.
I've always bought cars because I like the idea of being able to sell it if needed. Not sure how hard it is to get out of a lease.
Is it worthwhile buying the car at the end of the lease?

Anyways, any thoughts or suggestions are welcome. Thanks

[charliebrown]

went through the similar set of questions as you in the summer

things to consider:

Residual value (higher the better = lower monthly payments)
Lease term (will affect residuals...longer term = lower residuals; higher end cars tend to hold residuals better)
Lease rate (obviously lower the better)

We chose leasing based on teh following

- couldnt borrow at 4.5% unsecured over 36 months
- savings between lease & finance pymts can be invested at 3+%

With lease, at the end of 3 yrs, we will have $$$; and we can choose to buy out the vehicle at a pre-determined price

With finance, we could own the car in 3/4/5 yrs and have the option of selling.

And remember: EVERYTHING is negotiable, higher residuals, lower interest rate, lower PDI, etc

[pitz]

Tell us more about your business's assets, and liabilities, your business' overall cost of capital, your business' incremental tax rate, and the specific lease terms you are interested in.

Leasing can be a sensible option, but you need to look carefully at tax rates, costs of capital, cashflow, etc. Its probably not possible to render a simplistic opinion on an Internet forum that, in any way, reflects your circumstances.

[Bullseye]

Edit - nevermind.

[Phobos]

Tell us more about your business's assets, and liabilities, your business' overall cost of capital, your business' incremental tax rate, and the specific lease terms you are interested in.

Leasing can be a sensible option, but you need to look carefully at tax rates, costs of capital, cashflow, etc. Its probably not possible to render a simplistic opinion on an Internet forum that, in any way, reflects your circumstances.



I work for a Municipality (Vancouver) as an inspector so my job requires me to have my own car. We are paid a monthly car allowance. Yearly gross income is about 55k-60k give or take. I'm really not sure of the lease terms, I have to do some more research on it.

and yes, you need to be careful what information you take from a forum...but some info taken with a grain of salt is better then no info. I guess right now I am looking for pros and cons. I just have no experiences with leases at all.

[charliebrown]

You have to be careful with the car allowance as there could be income inclusion if the allowance is not mileage based

Most likely, you will need to include the allowance as income

then deduct your lease as an employment related expense subject to limits re: leases (i think it's 700 or 800 per month + GST now?)

[Phobos]

Thanks Charliebrown, I do include my car allowance with my income.

Anyone have experience with buying a lease out at the end? Do you generally end up losing a lot of money as opposed to just financing the whole deal up front?

[shelly0983]

I work for a lease financing company for a large Korean automaker, and in my opinion, don't ever lease a vehicle if you don't intend on buying it out at the end of the lease. The residual value, at our company, can be negotiated, but depends entirely on the black book value at the time of lease expiry.
Just an FYI, generally, when you intend to return the car, it will inspected by the company,and this is where you can run into some trouble. They inspect for wear and tear, and in some cases it can be pretty strict, and you may be left with a pretty big bill of repairs to be done.
In some cases if you want to buy out the car, it's better to try and negotiate for higher monthly payments and then you have a lower residual at the end of the lease. However in my opinion if you can afford to buy a car do that, and save yourself the mandatory servicing, and forced inspection at the end of the lease, good luck.

[charliebrown]

having finished one lease and currently on our second, I wanted to add some comments:

Lease-end
The residual was established at lease inception (start). We checked autotrader.ca and blackbook near the end of the lease, and noticed that market value had dropped (i.e. pre-set residual > asking price)

So, it didnt make sense to buyout the car (and we were under the km limits)

"Inspection"
We simply dropped off the vehicle at a dealership. A salesperson did a simple walkaround for visual damage, noted the mileage and gave us some papers.
Got a call about 1 wk later from the dealership confirming that their inspection did not reveal unusual wear & tear and our lease was done.

We simply followed the routine maintenance schedule, i.e. oil changes, tire rotations, etc. So total cost of ownership during the lease were simply the lease payments, the routine servicing costs, gas, insurance.

[grant]

I think someone's a fool not to perform routine maintenance regardless of owning or leasing.

[cannon_fodder]

Because you are close to the US border, you may want to check out this thread where the discussion has been about buying and importing a car from the US and taking advantage of favourable differences, especially for higher end cars.

http://www.redflagdeals.com/forums/showthread.php?t=307601