New to leasing car/trucks for busniess use

[JB @ C and L Machine]

Dad and I are thinking about leasing on our next purchase.

What are some do's and do not's with leasing?

I have never leased a car/truck in my life so I' am very green to this.

Jay

 

[Chip Chester]

If you drive a lot, or the condition of vehicles tends to deteriorate whilst in your care, then leasing may not be for you. If your travel is withing normal leasing limits (10-15k miles a year) and you take care of the vehicle, then maybe. Asking your accountant/tax advisor will complete the picture. Plus, there are threads here dealing with decisions to privately purchase formerly company leased vehicles... it gets complicated quickly.

I have leased before, but don't any more.

Chip

 

[WDW]

As others have said it would be best to talk to your accountant as it depends on how much money your business makes. Strictly speaking it is easier accounting wise to lease. If you plan on getting a new car every 2-3 years then leasing may also be better. If you typically drive your car for a very long time or it takes a lot of abuse I would purchase it.

To answer your question on dos and don'ts of leasing.

1. Figure out how many miles you average per year, build in a slight cushion and then get a lease with that many miles per year. It is always a lot cheaper to buy mileage up front than when you have to turn the car in.

2. If your car takes a lot of cosmetic abuse it may not be worth leasing some leasing companies are very strict with the turn in condition.

3. Shop around because leasing formulas vary and are not widely known some dealerships will take advantage of this. Make sure the vehicle you are getting pricing on is similar with similar term i.e. mileage, money down, length of lease and equipment.

4. In my experience leasing from the manufactures leasing company is usually a better deal than a private leasing or finance company.

 

[Chip Chester]

I should add another factor to my post up above...
In my case, I tend to drive very, very little, and consequently the vehicle is darn fine shape, so I would end up overpaying for the use/depreciation of it. First time around, I was obligated to return the vehicle even though I could have gotten much more for it, paid off the bank, and pocketed the difference. But no matter, because instead, they bumped up the "buyout" proportionately. Time to find a new truck, and a new bank. (This was back in the wilder days when lease packages were all over the map in structure.)
There can be sort of a sweet spot in leasing where you may get more selling the car than the payoff is. In my example above, I missed that opportunity. When the lease term expired, my options were more limited.

Chip

 

[IronReb]

I know jack about taxes/depreciation etc for business so I am pretty much giving noob advice.

I would find out the value if any in being able to claim depreciation on a company owned car versus renting one.

If the lease cars are for office/sales staff it may a good way to go so you can keep them in a new car and if it has problems you can unload it for another.

If it is for shop use were you have Joe Breaksshit hauling stuff in it around town often then leasing may not be a good idea when you turn it in and have to pay for
cosmetic damages caused from daily use in a machine shop.

 

[JW Machine]

Leasing is the most expensive way to drive. The car company needs to take the hit for depreciation, account for wear and tear, cover their overhead, deal with missed payments- and still come out on top. They're not in business to lose money by letting you drive their car during its most valuable years for less than the cost of ownership.

That's probably not the advice you were looking for, but mathematically that's how it plays out.

I would -and do- pay cash for good used vehicles. You can still write off the expense when it's business related, without paying interest or losing $100 a week in depreciation alone during the first four years or so.