Recession car deals

[Buster]

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Wouldn't quite say I'm gaming the system, just trying to get the best deal possible

We are thinking of putting 20k down to reduce the payments, is that a bad idea?

on a lease? yes

[88CRX]

Never put money down on a lease. If the car is written off or stolen that money is 100% gone.

[ExtraSlow]

Here's a real smart idea, since this is a "recession" thread, if you have 20K to put down, put that 20k down on a car that you can buy outright for that price, without a lease or loan, and drive that bitch for several years. Put the amount that you are saving on a payment straight into your RRSP, get a big tax refund.

[killramos]

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Wouldn't quite say I'm gaming the system, just trying to get the best deal possible

We are thinking of putting 20k down to reduce the payments, is that a bad idea?

On a 0%ish lease yea that’s a bad idea. You would be better off leaving the 20k in a savings account and synthetically reducing your payments.

Security deposits which you get back at the end to buy down the rate can work out to be an ok investment however. But not if the rate is already 0, which at Lexus it often is.

[shakalaka]

I guess the only times it makes sense putting money down on a lease is if it's an open ended lease (much like financing - you can't walk away from the car) or if you know for sure that you will be keeping/buying out the car no matter what at the end of your term.

[killramos]

The only time it makes sense to put money down on a lease is when the interest rate is really high.

That is really the only factor here.

The depreciation is what it is, you can’t change that, you can however change how much of your monthly payment goes to interest.

What the car is worth at the end, or what you want to do with it when the lease is up is irrelevant.

[shakalaka]

^Yes for sure, interest rate too.

But, say you're leasing something for whatever reason and I know I am going to keep the car for a long time no matter what. I would put money down in that situation if my only goal is to keep the monthly payments as low as possible and the interest rate is on the higher side. If cashflow isn't an issue and you can afford whatever payments and the interest rate is super low then of course it makes no sense in giving a down payment regardless of whether it's financing or leasing.

And I know you can always justify no downpayment if there is low interest by saying that whatever cash you're going to put down just put it aside and keep making the payments from it instead of giving a huge chunk right off the bat but some people may actually prefer smaller payments for whatever reason.

For me personally, I would never put cash down if the interest rate is extremely low or 0, regardless of whether it's finance or lease. I did put some cash down on the Aston but the interest rate is not exactly low and the car isn't exactly cheap. I contemplated buying it outright but the interest rate wasn't THAT high for me to justify that as I rather use the cash for other things that I am doing right now.

[killramos]

How does being incorporated make it make more sense to put money down?

The only benefit of being incorporated and leasing is that it’s easy to justify the monthly cost as a slam dunk business expense to offset taxable income.

If you invest business capital to lower that monthly cost how does that help? You are just making your business more complicated from a tax perspective and lowering the amount that is easily deducted as operating expenses.

If cash flow is a consideration you really need to reconsider buying the vehicle regardless of how it’s structured.

[shakalaka]

Perhaps you misunderstood, or I wasn't clear. Being incorporated has nothing to do with putting money down.

[Buster]

Are you sure there is a big benefit to leasing over financing? The CRA has basically made it so that no matter what car you get, or how you finance it, your tax benefit is the same. Also, I'm not personally a fan of putting vehicles into the corporation, either as a lease or finance. Much cleaner (and the CRA loves it) if you just charge yourself mileage at the prescribed rate.

[shakalaka]

Who the hell knows how it all works - needs a re-assessment.

[killramos]

Did you buy the Aston for business use?

[Buster]

I think you have to track your personal use one way or the other.

Also - the lease write-off is dependent on the value of the car (IIRC). I'm definitely not an expert on these things.

[killramos]

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I think you have to track your personal use one way or the other.

Especially if you want to convince the CRA that your Aston is a legitimate business expense and not a toy for personal use, CRA loves people who try to claim things like that.

[Prelude_dude]

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Never put money down on a lease. If the car is written off or stolen that money is 100% gone.

What is your mind set on this?

I'm still getting insurance on the car; does insurance work different than a lease?

If I were to finance the car and put the same down payment, then the car gets stolen; i would still lose my 20gs; or whatever the difference is depending on how much insurance pays out?

What am I missing here?

[Prelude_dude]

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^Yes for sure, interest rate too.

But, say you're leasing something for whatever reason (example: as a professional corporation it's better for me to lease over finance) and I know I am going to keep the car for a long time no matter what. I would put money down in that situation if my only goal is to keep the monthly payments as low as possible and the interest rate is on the higher side. If cashflow isn't an issue and you can afford whatever payments and the interest rate is super low then of course it makes no sense in giving a down payment regardless of whether it's financing or leasing.

And I know you can always justify no downpayment if there is low interest by saying that whatever cash you're going to put down just put it aside and keep making the payments from it instead of giving a huge chunk right off the bat but some people may actually prefer smaller payments for whatever reason.

For me personally, I would never put cash down if the interest rate is extremely low or 0, regardless of whether it's finance or lease. I did put some cash down on the Aston but the interest rate is not exactly low and the car isn't exactly cheap. I contemplated buying it outright but the interest rate wasn't THAT high for me to justify that as I rather use the cash for other things that I am doing right now.

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The only time it makes sense to put money down on a lease is when the interest rate is really high.

That is really the only factor here.

The depreciation is what it is, you can’t change that, you can however change how much of your monthly payment goes to interest.

What the car is worth at the end, or what you want to do with it when the lease is up is irrelevant.

Our mindset for putting money down is to just reduce the monthly payments. We have a certain % of our money allotted to savings and investments; and the rest is play money. Instead of having a good chunk of our play money going to the car; we wanted to reduce the monthly payments so we can still enjoy our quality of life plus adding a nice new vehicle to it as well.

May not be the smartest decision financially; but it works for us and our lifestyle.

I am just not 100% sure how leases work, so I did not 100% know how a down payment will work on a lease. Between this thread and the lease thread, i think i have a pretty good idea now.

Still not sure about 88crx's comment though.....

[kJUMP]

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Based on what my accountant has told me leasing is better in some ways because you can write-off a portion of your payments up to a certain maximum amount every month (don't recall fully what that is but maybe $800-$900). Doesn't mean if you're paying $4K for a Lambo every month - you can write off the entire amount. Where as in financing, you depreciate the car a certain percentage every year and write off that amount. Last I had done the math with the accountant was when I still had my M3 and it came to be that I could write-off more amount as lease payments vs the amount I could by depreciating the car yearly. Since then I just stick to that mentality even though the M3 has been long gone. lol. And about putting the vehicles in corporation; since only my various corporations generate income (no personal), it makes sense to write-off whatever I can from these corporations so I pay taxes on a lower amount. Also if I recall correctly, if you're financing through your corporation the CRA could demand for mileage logs to assess if the appropriate depreciation is being claimed, where as for lease because it's a set amount they don't care about mileage logs and I absolutely abhor trying to keep a mileage log and what not. Such a pain in the ass.

I should do the re-calculation with my accountant for the Aston though as obviously it's not valued the same as the M3 but when I think about it and how much it'll get driven I'd imagine it'd be harder for me to depreciate an amount that would be more than the allowable lease payment write-off on a yearly basis. I may be wrong about all this but that's my understanding. I wish they thought these things in high schools instead of stupid things like fucking dance.

i too have a prof corp and i have been advised very clearly by my accountants at MNP in addition to my FIL who is a retired CRA auditor, to not even think about putting a car in the business, and i even work at several different sites. as others have said before, holding it personally and claiming mileage in some fashion is the best way. it just opens you up to more scrutiny, which should be the one thing we are all trying to avoid on the tax front. think about it, if i was a CRA lifer driving a honda accord and a file came across my desk showing a dentist driving a fancy AM for "business purposes", i'd get ready to tee off.

[Xtrema]

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What is your mind set on this?

I'm still getting insurance on the car; does insurance work different than a lease?

If I were to finance the car and put the same down payment, then the car gets stolen; i would still lose my 20gs; or whatever the difference is depending on how much insurance pays out?

What am I missing here?

Insurance does work a bit different in a lease. They don't pay you, they pay the leasing company. So if you put $20G down on a lease, how much you really get back is at the mercy of leasing company.

Leasing without tax write off is about not tying up your money in a depreciating asset.

You put $20G in cash or finance, $10K is bascially gone the second you drive it off the lot.

You put $20G in lease, you may have lower payments, but in the event of total loss (theft/accident), you will have a tough time getting that $20G or portion of it back.

Putting huge $ down on lease is almost always a bad idea. If you bulk at the monthly lease payment without a huge down, you should get a cheaper car.

My golden rule on leasing is, you MUST be able to pay for the whole car in cash but you choose leasing due to it being a good deal. (ie, my $ can outperform the interest incurred else where).

There is also buyout fee at the end if you are buying out.

If you are sure you are keeping the car but want low payments with a lump sum buyout at end, future finance may be your loan of choice if Lexus offers it.

[Prelude_dude]

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Insurance does work a bit different in a lease. They don't pay you, they pay the leasing company.

Leasing without tax write off is about not tying up your money in a depreciating asset.

You put $20G in cash or finance, $10K is bascially gone the second you drive it off the lot.

You put $20G in lease, you may have lower payments, but in the event of total loss (theft/accident), you will have a tough time getting that $20G or portion of it back.

Putting huge $ down on lease is almost always a bad idea. If you bulk at the monthly lease payment without a huge down, you should get a cheaper car.

My golden rule on leasing is, you MUST be able to pay for the whole car in cash but you choose leasing due to it being a good deal. (ie, my $ can outperform the interest incurred else where)

Thanks for the explanation.

We're only leasing because the rate is so low. We'd rather not have to cash out any of our investments to buy a car, so we'd rather finance or lease. At the end of the lease we'd have enough money to buy the car outright or give it back to the dealer depending on all the different factors.

[88CRX]

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Thanks for the explanation.

We're only leasing because the rate is so low. We'd rather not have to cash out any of our investments to buy a car, so we'd rather finance or lease. At the end of the lease we'd have enough money to buy the car outright or give it back to the dealer depending on all the different factors.

And if the lease % is low then why give them that cash when you can just hold onto it (earn some interest on it) and draw it down as you need it to make your monthly payments.