HalfMoon

So Michigan doesn't tax leases on a per-payment basis?

If you got an incentive which lowered the payment the tax would then be lowered as well, at least in California.

titletaker

Not true. Some states, such as AZ, WI and various other only tax the monthly payment. In other cases its the actual sales price less any trade credit applied.

LT1xL82

In New York, sales tax is due on incentives regardless if it is a lease, financed, or cash. Yep, pay sales tax on dollars you never spent!

J50

I don't ignore it, but that's something most people should be aware of. That if you get into a lease contract, you should have an idea of what kind of mileage you do on an annual basis. And if you take out let's say a 36 month lease, that you plan on staying in it for 36 months. If you can get out earlier and want to without losing your shirt ....great.

jimmyb

I assume you are referring to trading cars sooner if something comes along that grabs your fancy...

If you BOUGHT the car outright, then you are clean to do that.

If you FINANCED the car, baring putting down some crazy sum (Like 50% down which would NOT be very smart), the car will be expensive to trade but car dealers CAN (and will) make it happen....just roll all that negative equity into the new car loan....

Leasing allows one to hold on to more of THEIR money to do other things with. And you can get out of a lease early, but it costs MONEY to do it, no different than getting out of a financed car early....you owe more than the car is worth.

In the end, if you plan on keeping a car for many years (or you put a lot of miles on it), buying the car makes more sense. If you are getting a toy (which a Corvette is to many), leasing makes sense (you have a warranty the whole time, payments are lower, etc). BOTH options have plusses and minuses, it is up to YOU to decide which works.
Jimmy

$$$frumnuttin'

oh yes, that is also taxed, but not up front like the incentives, like the other poster said, it's a tax on money you never spent. Costco does it too...buy a cellphone with a rebate on it, and you still pay tax on the rebate....some jackwipe politician started this nonsense and it pisses me off!

DWS44

punky

You are correct. You have the flexibility to in many cases sell the car for far less than what is owed any time you so desire.

335i

What you say doesn't really make any sense. There's nothing wrong with putting 50% down when purchasing a car. Yeah, there's a good chance you can make more with investments than the ~2% it should cost you to finance the car, but putting more money down is the safer option. Additionally, you absolutely don't need to put down 50% to avoid having negative equity -- that's ridiculous. If that happened, generally speaking it would mean the car depreciated by 50% immediately after you bought it, which doesn't happen (baring some very unusual scenarios perhaps).

HalfMoon

Any update on sample numbers? Curious what you see on your side.

Thx

335i

This is not necessarily true. You can often negotiate the capitalized cost on a lease deal. You may also be able to negotiate the money factor (interest rate), security deposit, acquisition fee, etc. About the only thing you can't negotiate is the residual value for the model/term/miles.

0Hendrick Chevrolet in Cary

Well,

Here it is... We did a comparison on a 2014 1LT, base car, using fees in NC. MSRP: $51,995.00

36 months, first payment down
12,000 miles - $798.81/month for S tier (top tier)
12,000 miles - $1,033.47/month for C tier (lowes prime rate)

So, all payments include all fees.

For comparison purposes here is the same car for 72 months for 1.99% to 7.99%

1.99% - $805.06
5.99% - $906.04
7.99% - $959.34

and 36 months 5,000 miles/year Super Low mileage Lease...
S tier: $687.88
C tier: $933.71

Please remember these are calculated at MSRP for a base car, including all our fees and NC taxes... There are a million and one possibilities. Lease rates are Ally buy rates. Ultimately Ally will determine the tier you qualify for. Also, purchase rates are as an example. You may fall anywhere in between...

04_Z06_CE

Thanks for your time

$$$frumnuttin'

Now that I think of it you are correct. I am used to employee discounts which fix the price of the vehicle at the bottom of the invoice. There is no negotiating that number.

Vader_1

I find it interesting that there's only a $110/mo difference in the lease payment to drop from 12K miles/yr down to 5K/mi yr...you're only allowed 42% of the miles, yet the payment drops by only 14%. Obviously there won't be a linear relationship between the two, but I would think that a car with only 15K miles at lease turn in would have significantly higher value than one with 36K miles after three years and hence a greater delta in the monthly payment amount.

I may be looking at this all wrong, so others please chime in...

jimmyb

What I said makes perfect sense. Putting $30K down on a $60K car is foolish. If you can't make more than 2 percent on investment, then you're not doing ANY homework. And how can putting more money down on a DEPRECIATING object be safer????

The car doesn't depreciate by 50% immediately nor does someone buy a new car and immediately trade it or sell it....what are you talking about? The average new car depreciates 20% in the first year (actually, the minute it's titled and driven off the lot), 15% per year for the next 2 years, so in 3 years, the average car is worth 50% of it's purchase price.

In the end, I would rather use someone else's cheap money to buy/lease a car and use my hard earned money to gain value. There is not a financial advisor alive that would advise you to put YOUR $30K cash down on a car rather than investing it.

Jimmy

LIStingray

In the traditional leasing market, which is based upon car sales, there isn't a huge discount for high mileage or premium for ultra low mileage when used cars are sold - typically it is $0.08-0.11 per mile, so for a 3 year lease the difference between 36,000 miles and 15,000 miles in terms of resale value is at most $2,300, or about $64/mo, so at $110/mo, the Corvette is doing close to $0.19/mi, which is well above average.

335i

While I agree with you that making more than 2% on investments is generally quite achievable, there will still be risk. If the market crashes, your investments will probably lose money, and the guy who put down 30k will come out ahead (until your investments catch up, which could take years). Unless there's an investment I'm not aware of that is 100% guaranteed to yield greater than 2% after fees, and that has no restrictions (i.e. anyone can invest at any time, with any amount of money, liquid). If something like that exists currently, I'd like to know about it.

The fact that it's a depreciating object is not particularly relevant. This same argument could be applied to a mortgage for a house. It's about the choice between reducing your liability (debt) and reducing the interest you're paying (however little it may be), or making an investment which will most likely return more than the interest you're paying on the loan, but may not. That's why I said it's safer, if not necessarily smarter.

In your original post, you seemed to be saying that it was necessary to put down approximately 50% on a car to avoid having negative equity on it. This is not the case. To take your example, let's say the car costs 60k, is worth 80% of the purchase price for the first year, and depreciates 15% per year for the next 2 years. Let's say the down payment is 20% (12k), 72 month term, 2% interest. At no point will there be negative equity:

Month | Loan Balance | Car Value
0 | 48000 | 48000
12 | 40394 | 48000
24 | 32635 | 39000
36 | 24719 | 30000

Granted, this example doesn't take into account sales tax or dealership fees that may be rolled into the loan, but you still don't need to put down 50% to avoid having negative equity (baring some crazy scenario where the car depreciates by 50% within the first year). Also, many cars do not depreciate as quickly as in this example.

I think there are scenarios where many advisors would suggest you to put more money down on a car. For example, if their client is already well into retirement, it may be advisable to buy the car outright rather than financing it and risk losing a portion of their portfolio on an investment that may or may not earn more than the loan interest over the next few years.

ronfellows208

Sounds like a bunch of confusion to me.... My dealer can not find anything for a lease on this car! Someone please clarify

DRLC5

These lease rates don't seem to good to me. I leased a 72k car for about the same as this 52k car? Maybe I am missing something? Residule?