Rennteam 2.0 - EN - Forum - Re: Lease vs. Own? - Page1

Oct 5, 2005 7:55:15 PM

Dasein: Veteran; Loc: Mountains of western NC, USA , United States; Posts: 933, Gallery; Registered on: Sep 19, 2005

Lease vs. Own?

I did a topic search here but didn't see much on this so I'll ask. Any thoughts on lease vs. own? I tend not to keep my vehicles for a long time (2 to 3 years) and it may not be wise (financially) to keep a P-car past the 4 year warranty in any event. I've paid BMW repair costs before and still remember going "Ouch". I have a little business (white squirrel note cards, postcards, DVDs, and a soon to be published photo book) that I run out of my home. I also have another vehicle that I own so I can make the case the P-car will be used 100% for business and so I can most likely deduct 100% of the lease cost.
Other than the pleasure of knowing the beautiful car was all m-i-n-e, it sure seems like leasing might, for me, be the way to go. Any thoughts on this? Thanks.

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Oct 5, 2005 9:15:39 PM

jonquiljo: Junior; Loc: SF Bay Area - Marin; Posts: 85, Gallery; Registered on: Aug 14, 2005; Reply to: Dasein

Re: Lease vs. Own?

I normally lease cars, but in this case I own. I'm not sure why I did that - it makes no sense other than for "personal" issues. If you own a car for only a few years its best to lease it IMO. So why did I buy it --- good question.

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Oct 5, 2005 9:38:31 PM

LowPolarMoment: Senior; Loc: Boca Raton, FL; Posts: 725, Gallery; Registered on: May 22, 2005; Reply to: Dasein

Re: Lease vs. Own?

Porsche options can expensive and many are worth little or nothing at trade in time. However, if you lease the car, the residual value is a percentage of the whole car so you'll get back more than half of the cost of the options at the end of the three years. This is particularly important if you're going to get some expensive options and only keep the car three years.

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Oct 5, 2005 11:25:40 PM

997man: Newbie; Loc: usa; Posts: 48, Gallery; Registered on: Dec 28, 2004; Reply to: LowPolarMoment

Re: Lease vs. Own?

I also usually lease, but I cound not rationalize spending over 40 thousand dollars and not have anything in the end. On the other hand when I drive my car I feel like its value is dropping with every mile I go. Either way it is a expensive luxury. I also have a 2006 ML350 which is leased through my buisness.

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Oct 5, 2005 11:49:59 PM

U Boat Commander: Veteran; Loc: Los Angeles, CA; Posts: 1250, Gallery; Registered on: May 8, 2004; Reply to: 997man

Re: Lease vs. Own?

I always lease. Leasing is the exactly the same thing as buying, except you also get a put option at the end of the lease term, which you'll exercise if the car is worth less than your buyout. Of course, if the car is worth more than your buyout you just do a third party lease transfer when the lease is over and take a profit. Plus, with a Porsche, you really don't want to own this car out of warranty so leasing is perfect.

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Oct 6, 2005 12:07:30 AM

tnunnery: Junior; Loc: SF, CA; Posts: 87, Gallery; Registered on: Oct 6, 2004; Reply to: U Boat Commander

Re: Lease vs. Own?

Buy what appreciates and lease what depreciates.

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Oct 6, 2005 12:34:40 AM

ArthurY: Co-Pilot; Loc: Los Angeles, CA; Posts: 153, Gallery; Registered on: May 26, 2004; Reply to: U Boat Commander

Re: Lease vs. Own?

Quote:
U Boat Commander said:
Leasing is the exactly the same thing as buying, except you also get a put option at the end of the lease term, which you'll exercise if the car is worth less than your buyout.

If the price of the lease were limited to anticipated depreciation, amortized on the monthly lease basis (36 months, 48 months, etc), I think you'd be right. But leasing also usually includes not only interest, but a financing profit for the dealer on top of the interest.

If you can legitimately write off lease payments, then you can depreciate a car you own. Figuring net tax effects going the different routes may not be simple, but it's your money, so take the time. Each person's situation may be different.

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Oct 6, 2005 1:22:14 AM

Silver Bullet: Veteran; Loc: Canada; Posts: 1126, Gallery; Registered on: Nov 24, 2004; Reply to: ArthurY

Re: Lease vs. Own?

If you know that you're going to change the car out every 2 or 3 years, then it's really 6 of 1 and a half dozen of the other. Leasing may actually be better. It's darn expensive to drive a new 911 every 2 or 3 years any way you look at it.

If you plan to keep the car for a while, and I think a 911 is the kind of car you can drive for 20 years or more if you take good care of it, then obviously buying outright makes more sense than leasing first and then buying, as it's cheaper in the long run. Having said that, an arguement for leasing can still be made as one might not be interested in getting stuck with a lemon. It depends on how comfy you are with potentially having to sell if it is one.

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Oct 6, 2005 6:57:02 AM

U Boat Commander: Veteran; Loc: Los Angeles, CA; Posts: 1250, Gallery; Registered on: May 8, 2004; Reply to: ArthurY

Re: Lease vs. Own?

Quote:
ArthurY said:
If the price of the lease were limited to anticipated depreciation, amortized on the monthly lease basis (36 months, 48 months, etc), I think you'd be right. But leasing also usually includes not only interest, but a financing profit for the dealer on top of the interest.

Art: It all depends on the financing deal you cut with your dealer. Both a loan and a lease can include a markup by your dealer. It's not as easy to know whether your dealer is marking you up on a lease as with a loan, but armed with the right info you can get the same deal with the same internal rate of return on a lease as a loan. For instance, when I ordered my new 997S, I got it in writing from my dealer that they would not charge a financing profit on the lease and I intend on confirming that by looking at their lease computers before finalizing my deal.

Two points I will concede are that (i) on a lease you wind up paying an acquisition (and possibly disposition fee) but that is really the price of your put option in my view and (ii) with a lease you will pay more interest over the same period of time compared to a loan because the principal amortization on the lease is less than on a loan for a similar term because you are only amortizing the cap cost minus the residual value. So, yes, a lease is slightly more expensive than a loan. But figuring in opportunity cost of your high loan payments, taxes and the value of the put option, I think you come out ahead on a lease.

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Oct 6, 2005 7:42:08 AM

BC: Rennteam Pro; Loc: Cape Town , South Africa; Posts: 2586, Gallery; Registered on: May 19, 2005; Reply to: U Boat Commander

Re: Lease vs. Own?

I'd prefer to buy, but in you're position, maybe leasing could be better.

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Oct 6, 2005 1:50:13 PM

AJVIP: Expert; Loc:; Posts: 1862, Gallery; Registered on: May 30, 2005; Reply to: U Boat Commander

Re: Lease vs. Own?

Keep leasing and your Porsche will always be under warranty, and we all know how expensive the parts are for a Porsche...

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Oct 6, 2005 2:05:13 PM

Silver Bullet: Veteran; Loc: Canada; Posts: 1126, Gallery; Registered on: Nov 24, 2004; Reply to: AJVIP

Re: Lease vs. Own?

Quote:
ajcastaneda said:
Keep leasing and your Porsche will always be under warranty, and we all know how expensive the parts are for a Porsche...

While that's true, it's also incredibly expensive to drive a new 911 every 2 or 3 years, whether you lease or buy. If you buy and hold on to the car beyond the expiration of the warranty (> 4 yrs), even with repairs (which are a gamble, I admit), you're probably still looking at less than continuous leasing, especially if you hold on to the car for >5-6 years and take good care of it.

The rationale that leasing is more cost effective because repairs can be pricey is analogous to paying big extra bucks for an extended warranty.

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Oct 6, 2005 2:36:47 PM

ArthurY: Co-Pilot; Loc: Los Angeles, CA; Posts: 153, Gallery; Registered on: May 26, 2004; Reply to: U Boat Commander

Re: Lease vs. Own?

Quote:
U Boat Commander said:

Both a loan and a lease can include a markup by your dealer.

I agree with most of what you said, though I would not consider a dealer loan. The only alternative loan would be a mortgage loan (so the interest would be deductible). How do those numbers work out compared to your lease options?

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Oct 6, 2005 2:44:24 PM

SoCal Alan: Rennteam VIP; Loc: Orange County , United States; Posts: 7268, Gallery; Registered on: Mar 6, 2004; Reply to: ArthurY

Re: Lease vs. Own?

One other thing to consider is that should your Porsche ever suffer damage due to an accident, you end up taking the hit for loss-of-value if you own whereas if you lease, you can walk away after your lease is up and let the leasing company take the hit.

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Oct 6, 2005 2:47:08 PM

U Boat Commander: Veteran; Loc: Los Angeles, CA; Posts: 1250, Gallery; Registered on: May 8, 2004; Reply to: ArthurY

Re: Lease vs. Own?

Quote:
ArthurY said:
I agree with most of what you said, though I would not consider a dealer loan. The only alternative loan would be a mortgage loan (so the interest would be deductible). How do those numbers work out compared to your lease options?

It depends on whether or not you can write off the lease payment as a business expense. If so, you obviously get a bigger write off on the lease. It also depends on what rate you can get on your mortgage loan and what your opportunity costs are. If you can take the vig between the lease payment and the loan payment and invest it at 10%, then your probably better off with the lease.

I guess at some point the lease vs loan decision depends on the particular individual circumstances. For me, leasing works financially because of the tax advantages and I do pretty well in the market generally. I also like the idea of getting a new car every three years because I beat the crap out of my car and don't have time to baby it. Further, I would never own another Porsche out of warranty because of the parts cost. I once did that and found myseld spending $3000 on repairs each year.

In the end, I think you need to look at what your alternatives are between the available lease and loan options for you and then make a decision.

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Oct 6, 2005 4:46:43 PM

STRADALE: Rennteam VIP; Loc: NY , United States; Posts: 11075, Gallery; Registered on: Mar 9, 2005; Reply to: Dasein

Re: Lease vs. Own?

Depends on a lot of factors.
Which model is it ? (an outgoing model like a 996 Turbo S it might be smarter to lease, where as a brand new model if you're one of the first to take delivery and you plan to sell to trade in shortly would be better to buy. If it's a model like a F430 and you live in the US buying would be the way to go, that's a no brainer)

How many miles do you intend to drive ? (if you're only going to drive the car for 5-8000 miles a year paying for the depreciation on a lease for a car that you're contracting to use for 12,000 doesn't make sense)

How do you take care of your car ? (if you usually get into accidents or have to drive the car to public parking a lot then leasing might be better. If you are able to take really good care of the car, insuring a good residual then finanicing might be better.

With my suv's (where I'm not so anxious to buy a new model)I always lease. I can put 15,000 miles a year and not worry about public parking or re-sale. (With a Porsche if you intend to put on 15,000 miles a year and definately know you will hold the car for 3 years plus usually it's better to lease.)With my high-end sports cars that I like to trade every year or so I always finance to own. I can easily get out of the bank note at any time I want without worrying about paying off a large ballon on a lease. After 1 years time or so with the last 4 sports cars I've found that it costs me less out of pocket to finance then it would have cost to lease.

Bottom line - you have to ask for the numbers on both and compare to see which one makes more sense. You have to estimate the time you intend to keep the car, add what the monthly lease and finance costs are during that time and calculate the amount the car will be worth (w/ the finance) On a longer term lease with a ballon the payments might be lower but trying to get out of the car before lease end usually will cost big time. If the bank has a lease contract over a 5 year term and they intend to make X dollars over that term they still intend to make that money on you by getting out early. They're in the money business not used car business. They don't want that car back sooner, for you to do so will cost you. If you intend on trading in only after a year or so (but take a 60 month finance) and it's a new model (997 4S cab) the payments you make over a year will cost you less than a lease but you have to sell the car for the amount that's left on the bank note to settle it. Also on a finance in some states you can use the value of the car to cancel the tax on the new car you trade for. Example) If you have a 997 4S cab and trade for a 997 Turbo cab you only pay tax on the difference in value..

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Oct 6, 2005 5:03:29 PM

Deven: Junior; Loc: Scottsdale, Arizona; Posts: 78, Gallery; Registered on: Jul 26, 2005; Reply to: U Boat Commander

Re: Lease vs. Own?

I am in the same finacing dilemma (November build), and I spoke to my accountant briefly about buying or leasing through the business. He mentioned that the 1st year depriciation will be caped at 2500 (buying), and then there is a formula to calculate the annual depriciation after that which may not be that much. With a lease however, most of it can be written off. As a result, the car will be depreciated 50% (or so) after 4 years (residual on the lease I assume), but not as much with financing. If I finance through a home equity loan, only the interest will be tax deductable. My plan was to buy (non business) after the lease/finacing finished as likely I will keep the car long term (as much as the thought of getting a new car every 4 years or so is tempting), and buy the next family vehicle through work. His take on that was leasing might be better (tax advantage point of vew), but ultimately would depend on the finance rates between lease and loan (I assume 3rd party leasing companies should give good money factor rates). I have not sat down with the numbers yet but I am leaning towards leasing. (I guess the best way to compare financing vs leasing is to calculate the 'pre-tax' dollar cost between the two so though the leasing numbers may be more, because it is all pre-tax, it may actualy be more cost effective?)

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Oct 6, 2005 5:45:19 PM

964C2: Expert; Loc: Dallas, TX , United States; Posts: 1825, Gallery; Registered on: May 11, 2004; Reply to: Dasein

Re: Lease vs. Own?

I always buy, because I keep my cars 6-10 years.

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Oct 6, 2005 6:29:17 PM

Dasein: Veteran; Loc: Mountains of western NC, USA , United States; Posts: 933, Gallery; Registered on: Sep 19, 2005; Reply to: Deven

Re: Lease vs. Own?

Deven,
I spoke with my (new) tax guy today and he said leasing a "luxury vehicle" sets off red flags at our friends, the IRS. He also said his favorite economist calls it "fleecing", not leasing. Anyone care to comment? Also, you state that only the interest would be deductible on a home equity line loan but I'm almost positive the entire monthly payments would be deductible. If I buy outright, I'm going to go the home equity line route. I think it's legal to deduct 100% of a home equity line loan.

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Oct 6, 2005 7:48:04 PM

Deven: Junior; Loc: Scottsdale, Arizona; Posts: 78, Gallery; Registered on: Jul 26, 2005; Reply to: Dasein

Re: Lease vs. Own?

My previous understanding is that the IRS used to consider a Ford Taurus as the 'standard' for leasing, but it does not seem so any more? (I am not sure) (My accountant is a by the book kind of guy so I trust his statements and he will figure out how much is tax deductable (maybe 80% of the lease amount or something like that). The home equity loan is just ike you regular mortgage for your home, only the interest is tax deductable (you cannot deduct principle) And that is why they do not charge taxes on capital gains when you sell you homes.

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Oct 6, 2005 8:31:02 PM

911Fanatic: Co-Pilot; Loc: Alpharetta, Georgia; Posts: 176, Gallery; Registered on: Apr 26, 2005; Reply to: Deven

Re: Lease vs. Own?

I bought and took the home equity loan route to write off the interest. Planning to keep the car for an extended period of time, so I also purchased an extended warranty through the dealer (not sure if this was a smart move). Guess I'll find out the first time I have a problem outside the factory warranty.

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Oct 6, 2005 8:36:43 PM

Dasein: Veteran; Loc: Mountains of western NC, USA , United States; Posts: 933, Gallery; Registered on: Sep 19, 2005; Reply to: 911Fanatic

Re: Lease vs. Own?

911Fanatic, if you don't mind me asking, could you tell us if you got the 7 yr./100,000 mile extended warranty and what it cost?

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Oct 6, 2005 9:09:01 PM

LowPolarMoment: Senior; Loc: Boca Raton, FL; Posts: 725, Gallery; Registered on: May 22, 2005; Reply to: Silver Bullet

Re: Lease vs. Own?

Quote:
Silver Bullet said: The rationale that leasing is more cost effective because repairs can be pricey is analogous to paying big extra bucks for an extended warranty.

Not exactly. If avoid driving a car without a warranty by leasing every 3 years, you're driving a brandy new, latest technology car every three years. If you avoid driving a car without a warranty by buying an extended warranty and keeping the car longer, you're not.

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Oct 6, 2005 10:16:23 PM

911Fanatic: Co-Pilot; Loc: Alpharetta, Georgia; Posts: 176, Gallery; Registered on: Apr 26, 2005; Reply to: Dasein

Re: Lease vs. Own?

7yr/100k warranty. Cost $3k. Basically covers everything except wear items (brakes, clutch, etc.)

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Oct 7, 2005 6:53:33 PM

vtach88: Co-Pilot; Loc: bay area, ca; Posts: 272, Gallery; Registered on: May 15, 2005; Reply to: LowPolarMoment

Re: Lease vs. Own?

Quote:
LowPolarMoment said:
Quote:
Silver Bullet said: The rationale that leasing is more cost effective because repairs can be pricey is analogous to paying big extra bucks for an extended warranty.

Not exactly. If avoid driving a car without a warranty by leasing every 3 years, you're driving a brandy new, latest technology car every three years. If you avoid driving a car without a warranty by buying an extended warranty and keeping the car longer, you're not.

Also, during year 4-5 and onwards, while the leasors are off leasing a new vehicle and paying roughly 1000-1500$/month, the buyers have paid off the vehicle. While porsche vehicle repairs are very high, I doubt they are going to match the $12000/year-$18000/year cost of leasing a new vehicle. If so, it is time to sell or cut your losses.

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