Leasing Cars in Retirement

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michaeljc70
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Re: Leasing Cars in Retirement

Post by michaeljc70 » Tue Sep 18, 2018 2:22 pm

inbox788 wrote:
Tue Sep 18, 2018 1:10 pm
Frisco Kid wrote:
Fri Sep 14, 2018 10:05 am
Op here.....keywords are IN RETIREMENT. All purchases in our case would trigger a large taxable event, looking at how leasing might offset that or not......
Are you selling stocks? How long do you plan to keep your cars? How many miles do you drive a year?
michaeljc70 wrote:
Tue Sep 18, 2018 9:42 am
Isn't leasing just delaying the taxes?
Is this a math or finance question? Does paying the lump sum capital gains tax all in one year increase the total taxes paid? Does it move OP up a tax bracket? If you don't have to pay the tax by spread things out or if your heirs have a step up basis, then there may be a benefit to delaying payment.

A loan costs interest, but there's a time value to money, so if you can get a free subsided car loan (0% or very low rate, less than 2%) that doesn't increase the cost of the deal, that may be less costly than paying cash. Similar with leases, but additional lease costs/benefits.

Anyway, the math doesn't change whether you're in retirement or not.

New Car: Ever make sense to lease?
viewtopic.php?t=231128
Obviously, this varies given the situation. Who says you have to take out the whole cost of a car in one year? With the lease there is typically money down and monthly payments which is money that could go toward the new car. If one lump sum puts you in the next tax bracket, do it over multiple years. If leasing and buying, over the long haul, cost the same, there won't be much difference in taxes really. And I doubt that most people are paying the same by leasing. You are typically paying a premium for the convenience.

Personally, I have to wrap my head around taxes in retirement as most of my money is in tax deferred accounts. I hope I don't turn into a miser adding 22% (or whatever it is) on to everything I buy mentally due to the taxes incurred taking money out of my retirement accounts. :shock:
Last edited by michaeljc70 on Tue Sep 18, 2018 2:50 pm, edited 1 time in total.

TheAccountant
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Re: Leasing Cars in Retirement

Post by TheAccountant » Tue Sep 18, 2018 2:41 pm

strafe wrote:
Tue Sep 18, 2018 2:19 pm
TheAccountant wrote:
Tue Sep 18, 2018 11:22 am
I recently bought a boat by "triggering a taxable event." In my case I had funds specifically earmarked for a purchase such as this (car, truck, boat, etc.) So I'd have to ask you - if you're not willing to spend the money on a car, then what else are you using that money for?

Put it this way - leasing a car is generally like paying 14% interest. Interest on a boat is something like 9%, and they depreciate like crazy.

I had zero issue with selling stock to buy an asset, albeit a depreciating one. I'd never use my cashflow to rent something long term unless it was to put a roof over my head.

My .02. Pay cash and be done with it.

Where did you get that interest rate figure? The interest rate on leases is nowhere near 14%. More like 0-4% depending on the lease program.
This will give you a basic understanding on how to calculate:

https://www.fool.com/knowledge-center/h ... rates.aspx

smitcat
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Re: Leasing Cars in Retirement

Post by smitcat » Tue Sep 18, 2018 3:15 pm

TheAccountant wrote:
Tue Sep 18, 2018 11:22 am
I recently bought a boat by "triggering a taxable event." In my case I had funds specifically earmarked for a purchase such as this (car, truck, boat, etc.) So I'd have to ask you - if you're not willing to spend the money on a car, then what else are you using that money for?

Put it this way - leasing a car is generally like paying 14% interest. Interest on a boat is something like 9%, and they depreciate like crazy.

I had zero issue with selling stock to buy an asset, albeit a depreciating one. I'd never use my cashflow to rent something long term unless it was to put a roof over my head.

My .02. Pay cash and be done with it.
FWIW - our recently retired boat loan was for 4.5% on a used boat. If you buy boats used and are a bit handy they do not have to represent a large depreciation.

michaeljc70
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Re: Leasing Cars in Retirement

Post by michaeljc70 » Tue Sep 18, 2018 3:37 pm

smitcat wrote:
Tue Sep 18, 2018 3:15 pm
TheAccountant wrote:
Tue Sep 18, 2018 11:22 am
I recently bought a boat by "triggering a taxable event." In my case I had funds specifically earmarked for a purchase such as this (car, truck, boat, etc.) So I'd have to ask you - if you're not willing to spend the money on a car, then what else are you using that money for?

Put it this way - leasing a car is generally like paying 14% interest. Interest on a boat is something like 9%, and they depreciate like crazy.

I had zero issue with selling stock to buy an asset, albeit a depreciating one. I'd never use my cashflow to rent something long term unless it was to put a roof over my head.

My .02. Pay cash and be done with it.
FWIW - our recently retired boat loan was for 4.5% on a used boat. If you buy boats used and are a bit handy they do not have to represent a large depreciation.
I haven't had a boat for around 8 years. However, I bought my last boat (cabin cruiser) less than a year old and sold it after 10 years for 70% of what I paid. Boats generally depreciate a lot less than cars. Sometimes they will let you finance a boat for 20 years. Try that on a car.

denovo
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Re: Leasing Cars in Retirement

Post by denovo » Tue Sep 18, 2018 3:44 pm

jdb wrote:
Mon Sep 17, 2018 3:51 pm
So why do you think car dealers love leases? Cause they want to give you best financial deal? No. They want to maximize their margin off you and see you again in three years to rinse and repeat. And if you think negotiating a car purchase tricky try negotiating a lease. And if want to limit down payment just take out bank loan from your friendly local bank or credit union. I would rather make a local banker happy than a car dealer. As you can guess I am not a fan of car leases or car dealers. Good luck. Edit: as an aside, I am also retired and paying 30 percent tax on my RMD, at least those which don’t go to QCD. But am always puzzled by comments like OP which seem to indicate tax on RMD unusual. All the years that you earned income you paid tax, why is tax on tax deferred savings that you are finally taking any different?
+1
"Don't trust everything you read on the Internet"- Abraham Lincoln

randomguy
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Re: Leasing Cars in Retirement

Post by randomguy » Tue Sep 18, 2018 3:52 pm

TheAccountant wrote:
Tue Sep 18, 2018 2:41 pm
strafe wrote:
Tue Sep 18, 2018 2:19 pm
TheAccountant wrote:
Tue Sep 18, 2018 11:22 am
I recently bought a boat by "triggering a taxable event." In my case I had funds specifically earmarked for a purchase such as this (car, truck, boat, etc.) So I'd have to ask you - if you're not willing to spend the money on a car, then what else are you using that money for?

Put it this way - leasing a car is generally like paying 14% interest. Interest on a boat is something like 9%, and they depreciate like crazy.

I had zero issue with selling stock to buy an asset, albeit a depreciating one. I'd never use my cashflow to rent something long term unless it was to put a roof over my head.

My .02. Pay cash and be done with it.

Where did you get that interest rate figure? The interest rate on leases is nowhere near 14%. More like 0-4% depending on the lease program.
This will give you a basic understanding on how to calculate:

https://www.fool.com/knowledge-center/h ... rates.aspx
Easier just to multiply the money factor by 2400 to get the lease interest rate which will be in the 0-5% for well qualified buyers. You might be able to get some 14% number by including various fees but that isn't the interest rate you are paying.

Paying more for something just so you can say your an owner instead of a renter seems suboptimal. The good news is that owning is normally cheaper so in general it is the right move.

inbox788
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Re: Leasing Cars in Retirement

Post by inbox788 » Tue Sep 18, 2018 5:11 pm

michaeljc70 wrote:
Tue Sep 18, 2018 2:22 pm
Obviously, this varies given the situation. Who says you have to take out the whole cost of a car in one year? With the lease there is typically money down and monthly payments which is money that could go toward the new car. If one lump sum puts you in the next tax bracket, do it over multiple years. If leasing and buying, over the long haul, cost the same, there won't be much difference in taxes really. And I doubt that most people are paying the same by leasing. You are typically paying a premium for the convenience.

Personally, I have to wrap my head around taxes in retirement as most of my money is in tax deferred accounts. I hope I don't turn into a miser adding 22% (or whatever it is) on to everything I buy mentally due to the taxes incurred taking money out of my retirement accounts. :shock:
Presumably, OP is cash poor, so is choosing between cashing out stock paying a capital gains tax and potentially going into the next tax bracket or leasing a car and staying in the same tax bracket. If the lump sum didn't drive him into the next tax bracket and that wasn't a factor, it's a lease vs. cash question.
Frisco Kid wrote:
Fri Sep 14, 2018 8:27 am
Wanted to get others thoughts on leasing cars in retirement in lieu of triggering an additional taxable event by spending down investments.
...
Pluses are covered maintenance and investments continue to grow.
AFAIK, 1) retirement, 2) triggering taxable event, and 3) covered maintenance and investments growing are separate and unrelated issues. I would address each one independently.

The conventional wisdom is that leases are more costly and loans bear interest, but like you say, it depends on each given situation. And some people have advocated getting a car loan, effectively leveraging the equity in the car and investing it.

If OP has time, a lease or loan may not be needed to stay in the current tax bracket. If OP has space in current tax bracket for this year (and next year), he could pull out cash now up to the tax bracket this year and buy the car after January 2019 and split the capital gains over 2 years. And if he can stretch it to January 2020 (planning ahead), it would be similar to a 3 year car loan as far as cash flow without the interest cost and limiting the tax issue.

HEDGEFUNDIE
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Re: Leasing Cars in Retirement

Post by HEDGEFUNDIE » Tue Sep 18, 2018 7:40 pm

ThankYouJack wrote:
Mon Sep 17, 2018 6:29 pm
Chip wrote:
Fri Sep 14, 2018 10:14 am
Frisco Kid wrote:
Fri Sep 14, 2018 10:05 am
All purchases in our case would trigger a large taxable event, looking at how leasing might offset that or not......
Not if you take out a loan.
+1. Not sure why a loan couldn't be an option.
Why would a lender approve a loan for an unemployed retiree?

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Toons
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Re: Leasing Cars in Retirement

Post by Toons » Tue Sep 18, 2018 7:48 pm

I don't know if it is good or bad
I buy.
Cash.




:happy
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mountain-lion
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Re: Leasing Cars in Retirement

Post by mountain-lion » Tue Sep 18, 2018 8:02 pm

HEDGEFUNDIE wrote:
Tue Sep 18, 2018 7:40 pm
Why would a lender approve a loan for an unemployed retiree?
Because said retiree has non-wage income, such as from 401k's, IRA's, social security, and rental properties.

michaeljc70
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Re: Leasing Cars in Retirement

Post by michaeljc70 » Tue Sep 18, 2018 8:18 pm

mountain-lion wrote:
Tue Sep 18, 2018 8:02 pm
HEDGEFUNDIE wrote:
Tue Sep 18, 2018 7:40 pm
Why would a lender approve a loan for an unemployed retiree?
Because said retiree has non-wage income, such as from 401k's, IRA's, social security, and rental properties.
Yes, but if they are trying to limit withdrawals due to taxes, they may not have the reported income to support the loan.

It was best said above. When you put money in IRAs or 401ks you must know that sooner or later you will pay the taxes (or die before doing so).

strafe
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Re: Leasing Cars in Retirement

Post by strafe » Tue Sep 18, 2018 8:19 pm

TheAccountant wrote:
Tue Sep 18, 2018 2:41 pm
strafe wrote:
Tue Sep 18, 2018 2:19 pm
TheAccountant wrote:
Tue Sep 18, 2018 11:22 am
I recently bought a boat by "triggering a taxable event." In my case I had funds specifically earmarked for a purchase such as this (car, truck, boat, etc.) So I'd have to ask you - if you're not willing to spend the money on a car, then what else are you using that money for?

Put it this way - leasing a car is generally like paying 14% interest. Interest on a boat is something like 9%, and they depreciate like crazy.

I had zero issue with selling stock to buy an asset, albeit a depreciating one. I'd never use my cashflow to rent something long term unless it was to put a roof over my head.

My .02. Pay cash and be done with it.

Where did you get that interest rate figure? The interest rate on leases is nowhere near 14%. More like 0-4% depending on the lease program.
This will give you a basic understanding on how to calculate:

https://www.fool.com/knowledge-center/h ... rates.aspx
Thank you for your patronizing reply. I understand perfectly well how leases work. Do you? Your comment about 14% interest rates was absurd. I know of no mainstream manufacturer leases with a money factor greater than 5%. The figures used in the link you supplied are hypothetical and have no bearing on current finance rates.

michaeljc70
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Re: Leasing Cars in Retirement

Post by michaeljc70 » Tue Sep 18, 2018 8:25 pm

I didn't quote any response to get in the middle, but I would venture to say that among non-Bogleheads, most people entering leases couldn't identify the interest rate or many other key figures in their lease. They know what they have to put down, the payment, and the number of months.

UpperNwGuy
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Re: Leasing Cars in Retirement

Post by UpperNwGuy » Tue Sep 18, 2018 8:30 pm

michaeljc70 wrote:
Tue Sep 18, 2018 8:25 pm
I didn't quote any response to get in the middle, but I would venture to say that among non-Bogleheads, most people entering leases couldn't identify the interest rate or many other key figures in their lease. They know what they have to put down, the payment, and the number of months.
The three most important facts. I’ve never leased a car, but when I contemplate the possibility of doing so, those are the three things upon which I focus.
Retiree with a pension and a 60/40 taxable portfolio: Total Stock + Total Int'l + Total Bond + Interm Term Tax Exempt.

michaeljc70
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Re: Leasing Cars in Retirement

Post by michaeljc70 » Tue Sep 18, 2018 8:56 pm

UpperNwGuy wrote:
Tue Sep 18, 2018 8:30 pm
michaeljc70 wrote:
Tue Sep 18, 2018 8:25 pm
I didn't quote any response to get in the middle, but I would venture to say that among non-Bogleheads, most people entering leases couldn't identify the interest rate or many other key figures in their lease. They know what they have to put down, the payment, and the number of months.
The three most important facts. I’ve never leased a car, but when I contemplate the possibility of doing so, those are the three things upon which I focus.
That's why most people overpay on leases. As said above, dealers love leases. If that doesn't tell you something.....

If you don't know the interest rate, cost of the car, etc., you are not making a good deal. Because $X99 per month sounds good is meaningless. No disrespect meant, but you sound like a perfect customer to a dealer for a lease.

UpperNwGuy
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Re: Leasing Cars in Retirement

Post by UpperNwGuy » Tue Sep 18, 2018 10:39 pm

michaeljc70 wrote:
Tue Sep 18, 2018 8:56 pm
UpperNwGuy wrote:
Tue Sep 18, 2018 8:30 pm
michaeljc70 wrote:
Tue Sep 18, 2018 8:25 pm
I didn't quote any response to get in the middle, but I would venture to say that among non-Bogleheads, most people entering leases couldn't identify the interest rate or many other key figures in their lease. They know what they have to put down, the payment, and the number of months.
The three most important facts. I’ve never leased a car, but when I contemplate the possibility of doing so, those are the three things upon which I focus.
That's why most people overpay on leases. As said above, dealers love leases. If that doesn't tell you something.....

If you don't know the interest rate, cost of the car, etc., you are not making a good deal. Because $X99 per month sounds good is meaningless. No disrespect meant, but you sound like a perfect customer to a dealer for a lease.
As I said, I have never leased, and one of the reasons is all that additional complexity. It makes my brain hurt. I will confess, however, that I am not a good negotiator in the car purchase arena either and usually overpay for my cars.
Retiree with a pension and a 60/40 taxable portfolio: Total Stock + Total Int'l + Total Bond + Interm Term Tax Exempt.

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BrandonBogle
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Re: Leasing Cars in Retirement

Post by BrandonBogle » Wed Sep 19, 2018 11:10 am

michaeljc70 wrote:
Tue Sep 18, 2018 8:18 pm
mountain-lion wrote:
Tue Sep 18, 2018 8:02 pm
HEDGEFUNDIE wrote:
Tue Sep 18, 2018 7:40 pm
Why would a lender approve a loan for an unemployed retiree?
Because said retiree has non-wage income, such as from 401k's, IRA's, social security, and rental properties.
Yes, but if they are trying to limit withdrawals due to taxes, they may not have the reported income to support the loan.

It was best said above. When you put money in IRAs or 401ks you must know that sooner or later you will pay the taxes (or die before doing so).
I know multiple retirees that have had no issue getting loans on vehicles even with limited withdrawals. While the Op and others may limit withdrawals due to taxes, there is (typically) social security and some other income to show vs. none. Those are often sufficient, especially if the lender is also one that considers available assets in addition to income.

blevine
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Re: Leasing Cars in Retirement

Post by blevine » Wed Sep 19, 2018 12:14 pm

Most BH posts that express a preference for buying usually mean buying for cash, not a loan.
Easy to negotiate when there is only one variable....

randomguy
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Re: Leasing Cars in Retirement

Post by randomguy » Wed Sep 19, 2018 12:20 pm

michaeljc70 wrote:
Tue Sep 18, 2018 8:25 pm
I didn't quote any response to get in the middle, but I would venture to say that among non-Bogleheads, most people entering leases couldn't identify the interest rate or many other key figures in their lease. They know what they have to put down, the payment, and the number of months.

Sure. But why do I care what other people do? I am not that nosey and their signing good or bad leases doesn't change my lease numbers. If your running a financial advice show give sound bites like "lease bad" makes sense. When you are looking at your specific situation, you need to run the numbers.

dpm321
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Re: Leasing Cars in Retirement

Post by dpm321 » Wed Sep 19, 2018 6:06 pm

jdb wrote:
Mon Sep 17, 2018 3:51 pm
So why do you think car dealers love leases? Cause they want to give you best financial deal? No. They want to maximize their margin off you and see you again in three years to rinse and repeat. And if you think negotiating a car purchase tricky try negotiating a lease. And if want to limit down payment just take out bank loan from your friendly local bank or credit union. I would rather make a local banker happy than a car dealer. As you can guess I am not a fan of car leases or car dealers. Good luck. Edit: as an aside, I am also retired and paying 30 percent tax on my RMD, at least those which don’t go to QCD. But am always puzzled by comments like OP which seem to indicate tax on RMD unusual. All the years that you earned income you paid tax, why is tax on tax deferred savings that you are finally taking any different?
I can confirm the dealer preference. A friend of mine owns a dealership. He's a pilot and owned a nice single engine Beechcraft. When he first started leasing he bought a nice new twin engine Beechcraft!

MikeG62
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Re: Leasing Cars in Retirement

Post by MikeG62 » Thu Sep 20, 2018 8:31 am

randomguy wrote:
Wed Sep 19, 2018 12:20 pm
michaeljc70 wrote:
Tue Sep 18, 2018 8:25 pm
I didn't quote any response to get in the middle, but I would venture to say that among non-Bogleheads, most people entering leases couldn't identify the interest rate or many other key figures in their lease. They know what they have to put down, the payment, and the number of months.

Sure. But why do I care what other people do? I am not that nosey and their signing good or bad leases doesn't change my lease numbers. If your running a financial advice show give sound bites like "lease bad" makes sense. When you are looking at your specific situation, you need to run the numbers.
I agree with micaheljc70. Actually I think it is a good thing that many (possible most) people don’t have a clue how to negotiate a lease. This provides a nice deep pool of people who provide fat profit margins to the dealers and this makes it easier for this of us who know how to negotiate to get a better deal.
Real Knowledge Comes Only From Experience

TheAccountant
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Re: Leasing Cars in Retirement

Post by TheAccountant » Thu Sep 20, 2018 1:47 pm

strafe wrote:
Tue Sep 18, 2018 8:19 pm
TheAccountant wrote:
Tue Sep 18, 2018 2:41 pm
strafe wrote:
Tue Sep 18, 2018 2:19 pm
TheAccountant wrote:
Tue Sep 18, 2018 11:22 am
I recently bought a boat by "triggering a taxable event." In my case I had funds specifically earmarked for a purchase such as this (car, truck, boat, etc.) So I'd have to ask you - if you're not willing to spend the money on a car, then what else are you using that money for?

Put it this way - leasing a car is generally like paying 14% interest. Interest on a boat is something like 9%, and they depreciate like crazy.

I had zero issue with selling stock to buy an asset, albeit a depreciating one. I'd never use my cashflow to rent something long term unless it was to put a roof over my head.

My .02. Pay cash and be done with it.

Where did you get that interest rate figure? The interest rate on leases is nowhere near 14%. More like 0-4% depending on the lease program.
This will give you a basic understanding on how to calculate:

https://www.fool.com/knowledge-center/h ... rates.aspx
Thank you for your patronizing reply. I understand perfectly well how leases work. Do you? Your comment about 14% interest rates was absurd. I know of no mainstream manufacturer leases with a money factor greater than 5%. The figures used in the link you supplied are hypothetical and have no bearing on current finance rates.
You do realize a money factor of 5% equates to an interest rate of 120%, right?

I do accounting for multi-million dollar businesses of all kinds. I've never once recommended leasing a vehicle, nor has any business owner came up to me and said "you know, I love owning this truck, but I wish we leased it instead."

visualguy
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Re: Leasing Cars in Retirement

Post by visualguy » Thu Sep 20, 2018 2:02 pm

TheAccountant wrote:
Thu Sep 20, 2018 1:47 pm
You do realize a money factor of 5% equates to an interest rate of 120%, right?

I do accounting for multi-million dollar businesses of all kinds. I've never once recommended leasing a vehicle, nor has any business owner came up to me and said "you know, I love owning this truck, but I wish we leased it instead."
If you want to get a new vehicle every 3 years or so, leasing is typically more cost-effective than buying as already mentioned.

TheAccountant
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Re: Leasing Cars in Retirement

Post by TheAccountant » Thu Sep 20, 2018 2:20 pm

visualguy wrote:
Thu Sep 20, 2018 2:02 pm
TheAccountant wrote:
Thu Sep 20, 2018 1:47 pm
You do realize a money factor of 5% equates to an interest rate of 120%, right?

I do accounting for multi-million dollar businesses of all kinds. I've never once recommended leasing a vehicle, nor has any business owner came up to me and said "you know, I love owning this truck, but I wish we leased it instead."
If you want to get a new vehicle every 3 years or so, leasing is typically more cost-effective than buying as already mentioned.
Not true at all, unless you trade it in and allow the dealer to rip you off.

visualguy
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Re: Leasing Cars in Retirement

Post by visualguy » Thu Sep 20, 2018 3:26 pm

TheAccountant wrote:
Thu Sep 20, 2018 2:20 pm
Not true at all, unless you trade it in and allow the dealer to rip you off.
I disagree. Manufacturers "subsidize" leases by providing residuals which are higher than what you would be able to sell the car for. This applies even if you're willing to take on the considerable hassle of selling the car yourself. Another factor is that in most states you don't get any of your sales tax back when you sell the car, so you pay sales tax on the full amount when you buy, but only sales tax on the depreciation when you lease.

I've gone through the math many times on our cars... In fact, my wife just returned her leased BMW. The residual was at the high end of Kelley Blue Book for private party sale in excellent condition. It would have made no financial sense to buy rather lease this car.

Obviously in most cases it's financially better to buy and keep for many years, but if you want to replace your cars fairly frequently, leasing is typically better.

TheAccountant
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Re: Leasing Cars in Retirement

Post by TheAccountant » Thu Sep 20, 2018 3:41 pm

visualguy wrote:
Thu Sep 20, 2018 3:26 pm
TheAccountant wrote:
Thu Sep 20, 2018 2:20 pm
Not true at all, unless you trade it in and allow the dealer to rip you off.
I disagree. Manufacturers "subsidize" leases by providing residuals which are higher than what you would be able to sell the car for. This applies even if you're willing to take on the considerable hassle of selling the car yourself. Another factor is that in most states you don't get any of your sales tax back when you sell the car, so you pay sales tax on the full amount when you buy, but only sales tax on the depreciation when you lease.

I've gone through the math many times on our cars... In fact, my wife just returned her leased BMW. The residual was at the high end of Kelley Blue Book for private party sale in excellent condition. It would have made no financial sense to buy rather lease this car.

Obviously in most cases it's financially better to buy and keep for many years, but if you want to replace your cars fairly frequently, leasing is typically better.
More false information here.

First of all, the dealer determines the residual value of the lease, not the manufacturer.

Second, you don't "get the sales tax back" when you trade-in. A traded-in vehicle simply reduces the taxable amount of the new vehicle sale. Why anyone would trade-in and get thousands less for their car so that you can save a few hundred dollars on sales tax is beyond me. Then again, I do have clients that can afford to take the hit and simply cannot be bothered to sell a vehicle private party, so they trade-in at the dealership. More power to them. :moneybag

MikeG62
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Re: Leasing Cars in Retirement

Post by MikeG62 » Thu Sep 20, 2018 4:03 pm

TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm

First of all, the dealer determines the residual value of the lease, not the manufacturer.
This is not true, the finance company determines the RV (and sets the MF). After all, they are the ones who own the car. I've leased several cars and been through this with several different car brands.
Real Knowledge Comes Only From Experience

visualguy
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Re: Leasing Cars in Retirement

Post by visualguy » Thu Sep 20, 2018 4:05 pm

TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm
More false information here.

First of all, the dealer determines the residual value of the lease, not the manufacturer.

Second, you don't "get the sales tax back" when you trade-in. A traded-in vehicle simply reduces the taxable amount of the new vehicle sale. Why anyone would trade-in and get thousands less for their car so that you can save a few hundred dollars on sales tax is beyond me. Then again, I do have clients that can afford to take the hit and simply cannot be bothered to sell a vehicle private party, so they trade-in at the dealership. More power to them. :moneybag
I have no idea what you're talking about. Are you even remotely familiar with car leases at all, and terms such as lease residuals?

The dealer doesn't determine the residual value of the lease. It's the leasing company, which is typically the manufacturer's financial arm. They tend to subsidize leases with high residuals, as in the example of the car we just returned where the residual is the same as the top of the range of KBB private sale for excellent condition. There would have been no benefit to buying even if we managed to sell the car privately for this top value.

The point with sales tax is that when you lease, you pay sales tax only on the depreciation in most states, so that's an advantage for leasing since in most states there's no sales tax credit when you sell the car. You pay sales tax on the full amount when you purchase, but only on the depreciation when you lease.

ncbill
Posts: 350
Joined: Sun Jul 06, 2008 4:03 pm

Re: Leasing Cars in Retirement

Post by ncbill » Thu Sep 20, 2018 4:07 pm

TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm
visualguy wrote:
Thu Sep 20, 2018 3:26 pm
TheAccountant wrote:
Thu Sep 20, 2018 2:20 pm
Not true at all, unless you trade it in and allow the dealer to rip you off.
I disagree. Manufacturers "subsidize" leases by providing residuals which are higher than what you would be able to sell the car for. This applies even if you're willing to take on the considerable hassle of selling the car yourself. Another factor is that in most states you don't get any of your sales tax back when you sell the car, so you pay sales tax on the full amount when you buy, but only sales tax on the depreciation when you lease.

I've gone through the math many times on our cars... In fact, my wife just returned her leased BMW. The residual was at the high end of Kelley Blue Book for private party sale in excellent condition. It would have made no financial sense to buy rather lease this car.

Obviously in most cases it's financially better to buy and keep for many years, but if you want to replace your cars fairly frequently, leasing is typically better.
More false information here.

First of all, the dealer determines the residual value of the lease, not the manufacturer.

Second, you don't "get the sales tax back" when you trade-in. A traded-in vehicle simply reduces the taxable amount of the new vehicle sale. Why anyone would trade-in and get thousands less for their car so that you can save a few hundred dollars on sales tax is beyond me. Then again, I do have clients that can afford to take the hit and simply cannot be bothered to sell a vehicle private party, so they trade-in at the dealership. More power to them. :moneybag
The lessor determines the residual value...the dealer has no control over that.

For some vehicles, e.g. Toyota trucks, leasing is currently better through a 3rd party like Ally Bank vs. Toyota's captive lessor because the 3rd party has set a higher RV than the captive.

desiderium
Posts: 706
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Re: Leasing Cars in Retirement

Post by desiderium » Thu Sep 20, 2018 9:59 pm

visualguy wrote:
Thu Sep 20, 2018 4:05 pm
TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm
More false information here.

First of all, the dealer determines the residual value of the lease, not the manufacturer.

Second, you don't "get the sales tax back" when you trade-in. A traded-in vehicle simply reduces the taxable amount of the new vehicle sale. Why anyone would trade-in and get thousands less for their car so that you can save a few hundred dollars on sales tax is beyond me. Then again, I do have clients that can afford to take the hit and simply cannot be bothered to sell a vehicle private party, so they trade-in at the dealership. More power to them. :moneybag
I have no idea what you're talking about. Are you even remotely familiar with car leases at all, and terms such as lease residuals?

The dealer doesn't determine the residual value of the lease. It's the leasing company, which is typically the manufacturer's financial arm. They tend to subsidize leases with high residuals, as in the example of the car we just returned where the residual is the same as the top of the range of KBB private sale for excellent condition. There would have been no benefit to buying even if we managed to sell the car privately for this top value.

The point with sales tax is that when you lease, you pay sales tax only on the depreciation in most states, so that's an advantage for leasing since in most states there's no sales tax credit when you sell the car. You pay sales tax on the full amount when you purchase, but only on the depreciation when you lease.
BMW provides the best illustration of visualguy's argument. 60% of these cars are leased (higher in some dealerships), and leasing is part of the overall manufacturer's business plan. The high residuals fuel a profitable used car business for the dealers under the CPO program and drive the overall business plan. This presumably varies with other manufacturers/models

Also, sales tax is 10% in my state, while it is 0% in Oregon, so that argument can also vary.

I have reproduced visualguy's results doing the numbers in my circumstance (BMW in Washington state, mileage consistent with lease deal, negotiation over sales price, timing to take advantage of mfr incentives). Bottom line is do your own numbers by plugging in your own situation and go with what works.

dekecarver
Posts: 292
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Re: Leasing Cars in Retirement

Post by dekecarver » Fri Sep 21, 2018 5:04 am

Why not just buy what you want (work the deal) then take it to Carmax 3 years later and sell in 45 minutes, repeat process? Write the depreciation and overall cost off as a lease payments. Either way you end up with a new car every three years.

hudson
Posts: 1486
Joined: Fri Apr 06, 2007 9:15 am

Re: Leasing Cars in Retirement

Post by hudson » Fri Sep 21, 2018 12:29 pm

Frisco Kid wrote:
Fri Sep 14, 2018 8:27 am
Wanted to get others thoughts on leasing cars in retirement in lieu of triggering an additional taxable event by spending down investments. Thinking $350 or so monthly for three years within mileage allowances, wash and repeat. Pluses are covered maintenance and investments continue to grow.
Please chime in with your thoughts on the minuses................. thanks in advance.
James Bragg has a service for a charge where he helps with buying or leasing a vehicle. I've used him 4-5 times. His service paid for itself.
He sells a package that comes with phone calls to him or his assistant for advice. I've called him several times and he's gotten me over several hurdles.

From his website...
"You'll have us as your coaches as you go through the process. Got a question? Call us. Want to run the numbers before you sign a lease? Call us. There's no such thing as a "silly question" here."

https://www.fightingchance.com/
Last edited by hudson on Fri Sep 21, 2018 12:43 pm, edited 1 time in total.

visualguy
Posts: 742
Joined: Thu Jan 30, 2014 1:32 am

Re: Leasing Cars in Retirement

Post by visualguy » Fri Sep 21, 2018 12:34 pm

dekecarver wrote:
Fri Sep 21, 2018 5:04 am
Why not just buy what you want (work the deal) then take it to Carmax 3 years later and sell in 45 minutes, repeat process? Write the depreciation and overall cost off as a lease payments. Either way you end up with a new car every three years.
Leasing would most likely cost you less than doing this. What you get from carmax won't typically be as high as the lease residual. There's also the sales tax aspect that I mentioned.

TheAccountant
Posts: 155
Joined: Sun Nov 05, 2017 4:21 pm

Re: Leasing Cars in Retirement

Post by TheAccountant » Sun Sep 23, 2018 2:47 pm

ncbill wrote:
Thu Sep 20, 2018 4:07 pm
TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm
visualguy wrote:
Thu Sep 20, 2018 3:26 pm
TheAccountant wrote:
Thu Sep 20, 2018 2:20 pm
Not true at all, unless you trade it in and allow the dealer to rip you off.
I disagree. Manufacturers "subsidize" leases by providing residuals which are higher than what you would be able to sell the car for. This applies even if you're willing to take on the considerable hassle of selling the car yourself. Another factor is that in most states you don't get any of your sales tax back when you sell the car, so you pay sales tax on the full amount when you buy, but only sales tax on the depreciation when you lease.

I've gone through the math many times on our cars... In fact, my wife just returned her leased BMW. The residual was at the high end of Kelley Blue Book for private party sale in excellent condition. It would have made no financial sense to buy rather lease this car.

Obviously in most cases it's financially better to buy and keep for many years, but if you want to replace your cars fairly frequently, leasing is typically better.
More false information here.

First of all, the dealer determines the residual value of the lease, not the manufacturer.

Second, you don't "get the sales tax back" when you trade-in. A traded-in vehicle simply reduces the taxable amount of the new vehicle sale. Why anyone would trade-in and get thousands less for their car so that you can save a few hundred dollars on sales tax is beyond me. Then again, I do have clients that can afford to take the hit and simply cannot be bothered to sell a vehicle private party, so they trade-in at the dealership. More power to them. :moneybag
The lessor determines the residual value...the dealer has no control over that.

For some vehicles, e.g. Toyota trucks, leasing is currently better through a 3rd party like Ally Bank vs. Toyota's captive lessor because the 3rd party has set a higher RV than the captive.
That's not true. The dealer comes up with the number and the lessor approves it.

TheAccountant
Posts: 155
Joined: Sun Nov 05, 2017 4:21 pm

Re: Leasing Cars in Retirement

Post by TheAccountant » Sun Sep 23, 2018 2:48 pm

visualguy wrote:
Thu Sep 20, 2018 4:05 pm
TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm
More false information here.

First of all, the dealer determines the residual value of the lease, not the manufacturer.

Second, you don't "get the sales tax back" when you trade-in. A traded-in vehicle simply reduces the taxable amount of the new vehicle sale. Why anyone would trade-in and get thousands less for their car so that you can save a few hundred dollars on sales tax is beyond me. Then again, I do have clients that can afford to take the hit and simply cannot be bothered to sell a vehicle private party, so they trade-in at the dealership. More power to them. :moneybag
I have no idea what you're talking about. Are you even remotely familiar with car leases at all, and terms such as lease residuals?

The dealer doesn't determine the residual value of the lease. It's the leasing company, which is typically the manufacturer's financial arm. They tend to subsidize leases with high residuals, as in the example of the car we just returned where the residual is the same as the top of the range of KBB private sale for excellent condition. There would have been no benefit to buying even if we managed to sell the car privately for this top value.

The point with sales tax is that when you lease, you pay sales tax only on the depreciation in most states, so that's an advantage for leasing since in most states there's no sales tax credit when you sell the car. You pay sales tax on the full amount when you purchase, but only on the depreciation when you lease.
Yes they do!
Last edited by TheAccountant on Sun Sep 23, 2018 2:57 pm, edited 1 time in total.

TheAccountant
Posts: 155
Joined: Sun Nov 05, 2017 4:21 pm

Re: Leasing Cars in Retirement

Post by TheAccountant » Sun Sep 23, 2018 2:49 pm

MikeG62 wrote:
Thu Sep 20, 2018 4:03 pm
TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm

First of all, the dealer determines the residual value of the lease, not the manufacturer.
This is not true, the finance company determines the RV (and sets the MF). After all, they are the ones who own the car. I've leased several cars and been through this with several different car brands.
The finance company approves the number, but the dealer comes up with the initial figure at lease signing.
Last edited by TheAccountant on Sun Sep 23, 2018 2:57 pm, edited 2 times in total.

TheAccountant
Posts: 155
Joined: Sun Nov 05, 2017 4:21 pm

Re: Leasing Cars in Retirement

Post by TheAccountant » Sun Sep 23, 2018 2:53 pm

If leasing makes you happy at the end of the day, then lease. I'm telling you the facts, and I am coming from someone who has had first-hand experience on a volume dealer's Accounting system. I can guarantee you that my statements are correct.

User avatar
8foot7
Posts: 751
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Re: Leasing Cars in Retirement

Post by 8foot7 » Sun Sep 23, 2018 4:53 pm

TheAccountant wrote:
Sun Sep 23, 2018 2:49 pm
MikeG62 wrote:
Thu Sep 20, 2018 4:03 pm
TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm

First of all, the dealer determines the residual value of the lease, not the manufacturer.
This is not true, the finance company determines the RV (and sets the MF). After all, they are the ones who own the car. I've leased several cars and been through this with several different car brands.
The finance company approves the number, but the dealer comes up with the initial figure at lease signing.
You are simply wrong, at least when it comes to captive leases, which must be an overwhelming majority of car leases. The finance guy at the dealer looks at a book provided by captive financing arm, finds value, that’s it. There’s no approval or suggestion on the part of the dealer when it comes to the residual. The residual is set.

David Althaus
Posts: 7
Joined: Wed Feb 14, 2018 8:05 pm

Re: Leasing Cars in Retirement

Post by David Althaus » Mon Sep 24, 2018 9:02 am

Yes it's more expensive to lease. Compare that cost to the peace of mind never having to worry about repairs, tire replacement or the chance you could break down at the worst possible moment. You'll also get the latest in safety technology about every three years. As a retiree myself--some things are simply worth the extra cost.

MikeG62
Posts: 1114
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Leasing Cars in Retirement

Post by MikeG62 » Mon Sep 24, 2018 10:47 am

8foot7 wrote:
Sun Sep 23, 2018 4:53 pm
TheAccountant wrote:
Sun Sep 23, 2018 2:49 pm
MikeG62 wrote:
Thu Sep 20, 2018 4:03 pm
TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm

First of all, the dealer determines the residual value of the lease, not the manufacturer.
This is not true, the finance company determines the RV (and sets the MF). After all, they are the ones who own the car. I've leased several cars and been through this with several different car brands.
The finance company approves the number, but the dealer comes up with the initial figure at lease signing.
You are simply wrong, at least when it comes to captive leases, which must be an overwhelming majority of car leases. The finance guy at the dealer looks at a book provided by captive financing arm, finds value, that’s it. There’s no approval or suggestion on the part of the dealer when it comes to the residual. The residual is set.
I completely agree with 8foot7. In every case where I have leased, the dealer had zero input or influence on the RV or the MF. Those were simply provided by the finance arm and they were non-negotiable. The key item to negotiate is the capitalized cost (selling price) - as with a purchase.
Real Knowledge Comes Only From Experience

michaeljc70
Posts: 3586
Joined: Thu Oct 15, 2015 3:53 pm

Re: Leasing Cars in Retirement

Post by michaeljc70 » Mon Sep 24, 2018 10:53 am

David Althaus wrote:
Mon Sep 24, 2018 9:02 am
Yes it's more expensive to lease. Compare that cost to the peace of mind never having to worry about repairs, tire replacement or the chance you could break down at the worst possible moment. You'll also get the latest in safety technology about every three years. As a retiree myself--some things are simply worth the extra cost.
You also get all that buying a car every 3 years. That is what we are comparing. Of course, buying and keeping a car for 10 or 15 years is cheaper than leasing a new one every 3 years.

ncbill
Posts: 350
Joined: Sun Jul 06, 2008 4:03 pm

Re: Leasing Cars in Retirement

Post by ncbill » Mon Sep 24, 2018 2:56 pm

TheAccountant wrote:
Sun Sep 23, 2018 2:47 pm
ncbill wrote:
Thu Sep 20, 2018 4:07 pm
TheAccountant wrote:
Thu Sep 20, 2018 3:41 pm
visualguy wrote:
Thu Sep 20, 2018 3:26 pm
TheAccountant wrote:
Thu Sep 20, 2018 2:20 pm
Not true at all, unless you trade it in and allow the dealer to rip you off.
I disagree. Manufacturers "subsidize" leases by providing residuals which are higher than what you would be able to sell the car for. This applies even if you're willing to take on the considerable hassle of selling the car yourself. Another factor is that in most states you don't get any of your sales tax back when you sell the car, so you pay sales tax on the full amount when you buy, but only sales tax on the depreciation when you lease.

I've gone through the math many times on our cars... In fact, my wife just returned her leased BMW. The residual was at the high end of Kelley Blue Book for private party sale in excellent condition. It would have made no financial sense to buy rather lease this car.

Obviously in most cases it's financially better to buy and keep for many years, but if you want to replace your cars fairly frequently, leasing is typically better.
More false information here.

First of all, the dealer determines the residual value of the lease, not the manufacturer.

Second, you don't "get the sales tax back" when you trade-in. A traded-in vehicle simply reduces the taxable amount of the new vehicle sale. Why anyone would trade-in and get thousands less for their car so that you can save a few hundred dollars on sales tax is beyond me. Then again, I do have clients that can afford to take the hit and simply cannot be bothered to sell a vehicle private party, so they trade-in at the dealership. More power to them. :moneybag
The lessor determines the residual value...the dealer has no control over that.

For some vehicles, e.g. Toyota trucks, leasing is currently better through a 3rd party like Ally Bank vs. Toyota's captive lessor because the 3rd party has set a higher RV than the captive.
That's not true. The dealer comes up with the number and the lessor approves it.
Nope, the lessor sets the value.

Again, that's why people choose to lease from 3rd parties like Ally over TFS, if they can qualify.

The much higher residual set by Ally means a significantly lower monthly payment.

Though 3rd parties are usually stricter on "wear & tear" so they might make it back at the end...

JoeRetire
Posts: 1593
Joined: Tue Jan 16, 2018 2:44 pm

Re: Leasing Cars in Retirement

Post by JoeRetire » Mon Sep 24, 2018 3:23 pm

Frisco Kid wrote:
Fri Sep 14, 2018 8:27 am
Wanted to get others thoughts on leasing cars in retirement in lieu of triggering an additional taxable event by spending down investments. Thinking $350 or so monthly for three years within mileage allowances, wash and repeat. Pluses are covered maintenance and investments continue to grow.
Please chime in with your thoughts on the minuses................. thanks in advance.
If tax avoidance is your primary goal, you should really be comparing leasing versus loans.

And if you want a new car every three years your answer might be different than someone who is willing to keep the car until it's not longer viable (like me).

mouses
Posts: 3724
Joined: Sat Oct 24, 2015 12:24 am

Re: Leasing Cars in Retirement

Post by mouses » Mon Sep 24, 2018 3:32 pm

alfaspider wrote:
Fri Sep 14, 2018 12:06 pm


Finally, it's worth noting that leasing is tax disadvantaged in some states (Texas is one of them). In some states, you pay tax on the value of the entire vehicle, not just on the lease payments. In some cases (especially with some EVs) it can more than double the cost of leasing compared to a state that only taxes the lease payments.
I'm confused about what you're saying. Are you talking about sales tax? Texas collects sales tax on the entire leased vehicle price vs. the monthly payments? What brain cells are they using to come up with that?

mouses
Posts: 3724
Joined: Sat Oct 24, 2015 12:24 am

Re: Leasing Cars in Retirement

Post by mouses » Mon Sep 24, 2018 3:34 pm

David Althaus wrote:
Mon Sep 24, 2018 9:02 am
Yes it's more expensive to lease. Compare that cost to the peace of mind never having to worry about repairs, tire replacement or the chance you could break down at the worst possible moment.
How does leasing avoid the breakdown problem?

Dead Man Walking
Posts: 698
Joined: Wed Nov 07, 2007 6:51 pm

Re: Leasing Cars in Retirement

Post by Dead Man Walking » Mon Sep 24, 2018 3:41 pm

I've never leased a car, and usually buy one and drive it for 10-15 years. However, I have sold a few cars because I either didn't like the car or anticipated problems with it because the model was notorious for a specific problem. The problem that I see with a lease is that I may be stuck with a car that is a lemon for 2-3 years. I actually sold a car because my wife hated it. I took a hit due to depreciation - happy wife, happy life - was the logic behind the decision.

After reading this thread, I don't really understand the negotiation of a lease. Buying a car can be a hassle, but it gets my competitive juices flowing. I'm a tenacious negotiator and do my homework before I begin the buying process. I actually take notes to the negotiation. The information available online has really made buying a car much easier. Occasionally, I've run into to the salesman who is a "closer" and enjoy the banter. As mentioned by another poster, buying is easier because the buyer only has one variable to negotiate - the out the door price.

DMW

User avatar
8foot7
Posts: 751
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Re: Leasing Cars in Retirement

Post by 8foot7 » Mon Sep 24, 2018 3:56 pm

mouses wrote:
Mon Sep 24, 2018 3:34 pm
David Althaus wrote:
Mon Sep 24, 2018 9:02 am
Yes it's more expensive to lease. Compare that cost to the peace of mind never having to worry about repairs, tire replacement or the chance you could break down at the worst possible moment.
How does leasing avoid the breakdown problem?
It doesn't avoid it necessarily, but a leased new car is (1) younger and thus certainly less likely to break down, (2) almost certainly under the manufacturer's original warranty thus making any repairs covered completely, and (3) almost certainly covered by roadside assistance service from the manufacturer/warranty in the event of a breakdown. Typically the leases end and the car is turned in before these factors "expire" and the cycle starts anew, though of course buying a new car, selling it in month 36-42, and buying another new car would certainly satisfy these factors as well.

tesuzuki2002
Posts: 523
Joined: Fri Dec 11, 2015 12:40 pm

Re: Leasing Cars in Retirement

Post by tesuzuki2002 » Mon Sep 24, 2018 4:12 pm

Frisco Kid wrote:
Fri Sep 14, 2018 8:27 am
Wanted to get others thoughts on leasing cars in retirement in lieu of triggering an additional taxable event by spending down investments. Thinking $350 or so monthly for three years within mileage allowances, wash and repeat. Pluses are covered maintenance and investments continue to grow.
Please chime in with your thoughts on the minuses................. thanks in advance.
Really going to throw it out there.. how much do you really drive? Get a bicycle? the cost is irrelevant after 2 months and you'll be healthier in 6 months...

alfaspider
Posts: 1532
Joined: Wed Sep 09, 2015 4:44 pm

Re: Leasing Cars in Retirement

Post by alfaspider » Thu Sep 27, 2018 9:05 am

mouses wrote:
Mon Sep 24, 2018 3:32 pm
alfaspider wrote:
Fri Sep 14, 2018 12:06 pm


Finally, it's worth noting that leasing is tax disadvantaged in some states (Texas is one of them). In some states, you pay tax on the value of the entire vehicle, not just on the lease payments. In some cases (especially with some EVs) it can more than double the cost of leasing compared to a state that only taxes the lease payments.
I'm confused about what you're saying. Are you talking about sales tax? Texas collects sales tax on the entire leased vehicle price vs. the monthly payments? What brain cells are they using to come up with that?
Yes- sales tax. They are using the brain cells that tell them they collect more revenue that way. Keep in mind that Texas has no income tax, so they have to make it up in other ways.

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