Discussion:Lease vs buy

I do not put a lot of mileage on the car. Is the first year depreciation the same for a car I leased and now I am going to depreciate?

Short answer tho'...the bottom line is that over time, the write offs for leasing or buying are identical unless you're an employee where you can't write off interest on a loan. Now, leasing generally gets you quicker write offs unless there's some bonus deal in play from IRS. And if you like more expensive cars, you definitely get better write offs with a lease much much faster since the lease tables are a joke and don't come even close to balancing the luxury auto rules between lease and buy.

Not totally true due to the income inclusion adjustment you must calculate on the lease; this is a permanent difference in your out of pocket costs that become tax deductions. It is not a consequential difference in my view.

Leasing has the advantage of matching deductions with cash flow (execept for the above statement), and benefits those who want the more expensive vehicles plus tend to only use for two or three years. Leases keep you from absorbing all the hit to a vehicle's value that occur in the earliest years of ownership. Remember the old saying that a new car depreciates in value as soon as you drive it off the lot. In the end, your client must understand a lease is simply a rental agreement and you get no ownership in it.

If your client tends to put high mileage on vehicles, or prefers more economically priced vehicles and intends to keep one for several years they are better off to purchase it outright. High mileage comes with penalties on leases.

I'm also curious how many of us buy vs lease our vehicles.

I read an article (years ago) that compared lease vs buy on vehicles, both personal and business vehicles. The end result was that buying the vehicle, for cash, and driving it for many years while maintaining it properly is the least costly way to go.

Of course, that is NOT the American way (especially here in California).  :-)

As for myself, I have enough gang members as clients, that if I need to run to the drugstore for something, they can usually find me a new automobile so I can get there in style (I do all my shopping at Walgreens, including Christmas gifts for my girlfriends).

Unfortunately, I really like sports cars. I don't need the luxury liner, but a clutch and lots of horsepower - plus handling - makes me happy. And as I'm in a mountainous, rural area - fun roads are close by. Too bad those tickets (for my business vehicle) aren't deductible.

BTW, what are you hunting tomorrow?