Dr. Love Posted February 24, 2007 Share Posted February 24, 2007 A business can take as a deduction the cost of lease payments. However, if a business buys a car (instead of leasing one) it can divide the cost of the car over its "useful life" (generally 5 years) and deduct that amount on an annual basis. That's the cliff notes version, at least. Therefore, a business gets tax benefits either way. However, from a non-tax perspective many businesses prefer to lease vehicles. Actually, the lease has financial advantages for a business due to the reasons you stated. Immediate deduction of every nickel spent on a lease versus a depreciation schedule. Quote Link to comment Share on other sites More sharing options...
Jimmy Neutron Posted February 24, 2007 Share Posted February 24, 2007 Figured! So the people here who have in general have a favorable opinion, and people that have never worked in a dealership nor ever leased a car are supposed to give them advice on something they have never done? Got it! I value your opinons on computers, but you are freaking dense when it comes to cars in general. Some people are smart enough to know that fire is dangerous without experiencing 3rd degree burns. If you want to waste money on a lease, knock yourself out. I just thought people ought to know there are better ways to procure transportation. Quote Link to comment Share on other sites More sharing options...
Bill Swerski Posted February 24, 2007 Share Posted February 24, 2007 (edited) :lol:I value your opinons on computers, but you are freaking dense when it comes to cars in general. Fixed Edited February 24, 2007 by Bill Swerski Quote Link to comment Share on other sites More sharing options...
Piles Posted February 24, 2007 Share Posted February 24, 2007 here's where I think us lease guys vs the buy guys get caught up. I never think about a car as an investment because it's a TERRIBLE one. Only way it works (outside of rare/non-driving cars) is to buy either moderately used, and get rid of while still relatively moderately used, or buy WAY used and then just sell for something. I consider it a real expensive appliance....and i like shiny new appliances with gadgets that I know I don't have to worry about. Not saying I won't end up there, but at least for now, I'm much happier with new cars under warranty and an ongoing payment than I would with no car payment but a 6 year old car with 70k on it... Just my take - for some, anythign that you are paying monthly for is looked at as an investment, so a car is an economic transaction, not something your picking up at the store. I will say this - I used to HATE when people that rented an apartment would tell me I was dumb for leasing a car - i know a lot of people can't necessarily buy a house, but a lot can and don't (I still kick myself for the years I waited to buy for stupid reasons). To each their own on that, but if you rent real estate (which should always be considered an investment as well as a dwelling), do not give me advice on leasing a car.... You are right, cars are not investments, they are a liability. While I won't call anyone dumb for leasing a car (to each their own), it's just not for me. As far as buying vs renting, I actually ran numbers where I live and you don't really lose anything by renting. In fact, it is preferable to rent where I am. Certainly, not that way everywhere but when you can rent a 1800 square foot place for $650/month and taxes on a 200k house are 8500/yr renting isn't a bad way to live!!! Maybe Wiegie can verify this for me.... Quote Link to comment Share on other sites More sharing options...
wiegie Posted February 24, 2007 Share Posted February 24, 2007 Maybe Wiegie can verify this for me.... Yep--it's not clear at all that buying a home makes more financial sense than renting one. It just depends on the particular situation. (I have a colleague who is convinced that for most people the main financial benefit of buying a home is that many people don't save enough money and the equity portion of people's mortgage payments is "forced saving".) Quote Link to comment Share on other sites More sharing options...
H8tank Posted February 24, 2007 Share Posted February 24, 2007 but you are freaking dense when it comes to cars in general. Thats like me calling frodo a hot chick. When you wear white pants, would you want me to tell you if you had a shart stain showing through? I've leased about 50 cars to your zero, but hey 'I just thought people ought to know'. You seem to not have read 'any' of the testimonials people have made in this thread... Quote Link to comment Share on other sites More sharing options...
Piles Posted February 24, 2007 Share Posted February 24, 2007 Yep--it's not clear at all that buying a home makes more financial sense than renting one. It just depends on the particular situation. (I have a colleague who is convinced that for most people the main financial benefit of buying a home is that many people don't save enough money and the equity portion of people's mortgage payments is "forced saving".) Thanks Wiegie. It's always good to get the professors perspective. I'll have to show this to members of my fam who call me crazy for not buying a home Quote Link to comment Share on other sites More sharing options...
Bill Swerski Posted February 25, 2007 Share Posted February 25, 2007 Yep--it's not clear at all that buying a home makes more financial sense than renting one. True dat. A lot of people in high-cost-of-living areas are spending 60% or more of their income on thier mortgages/property taxes these days. That's a recipe for disaster. Quote Link to comment Share on other sites More sharing options...
Jimmy Neutron Posted February 25, 2007 Share Posted February 25, 2007 You seem to not have read 'any' of the testimonials people have made in this thread... I read plenty. I also know that people tend to smooth over bad experiences to relieve their own angst - we all do it. "She wasn't that fat." Quote Link to comment Share on other sites More sharing options...
H8tank Posted February 25, 2007 Share Posted February 25, 2007 I also know that people tend to smooth over bad experiences to relieve their own angst Dude, you're like squezzie and her smoking/meso denial. Quote Link to comment Share on other sites More sharing options...
MikesVikes Posted February 25, 2007 Share Posted February 25, 2007 I worry about the American 'bigger is better mentality'. Its not like she is going to be towing anything. She mentioned an interest in a V6 because she loves power - but its just seems irresponsible. I've seen in some book values that there is a deduction for having a 4 cyl instead of a V6. The difference was in the $1500 range. If you can get a V6 for a few dollars more, I'd do that as well. Quote Link to comment Share on other sites More sharing options...
MikesVikes Posted February 25, 2007 Share Posted February 25, 2007 It's hard to see any value in owning a car if your making payments for 5, 6, or 7 years. You'll usually have negative value in your vehicle in those deals where you owe more that what the car is worth. Quote Link to comment Share on other sites More sharing options...
xMRogers Posted February 25, 2007 Share Posted February 25, 2007 ok, don't care that much, but explain to me how renting your living place is better than buying - i know some situationts (crappy credit so can't get a mortgage / under 15% / move so often that quick changes in market can kill you / roomate situation where neither is able or willing to buy something) will play in, but in general, if you can rent a place for $650, you can find something for sale that you can afford, and while yes, taxes and insurance are in place, you have an asset that is going to appreciate, probably better than anything else you could invest in. (not to mention the fact that interest and taxes are then deductions so so a portion of them end up back in your pocket - not a major reason to me, but has to be looked at) I'm not an expert, so willing to listen to arguments, but outside of situations of either inability to get a decent mortgage or overall instability in life and location, i would always recommend buying (not overbuying - agree on that - and if you live in San Fran or somewhere else just ridiculous, sometimes you just "can't" buy, and I understand that) Quote Link to comment Share on other sites More sharing options...
Piles Posted February 25, 2007 Share Posted February 25, 2007 ok, don't care that much, but explain to me how renting your living place is better than buying - i know some situationts (crappy credit so can't get a mortgage / under 15% / move so often that quick changes in market can kill you / roomate situation where neither is able or willing to buy something) will play in, but in general, if you can rent a place for $650, you can find something for sale that you can afford, and while yes, taxes and insurance are in place, you have an asset that is going to appreciate, probably better than anything else you could invest in. (not to mention the fact that interest and taxes are then deductions so so a portion of them end up back in your pocket - not a major reason to me, but has to be looked at) I'm not an expert, so willing to listen to arguments, but outside of situations of either inability to get a decent mortgage or overall instability in life and location, i would always recommend buying (not overbuying - agree on that - and if you live in San Fran or somewhere else just ridiculous, sometimes you just "can't" buy, and I understand that) I can't speak for any other area other than my own (Rochester, NY). But I actually ran numbers to see whether buying or renting made more financial sense. I took a 200k house vs my current rent of 650/month. If I put 20% down on said house (40k) and took a 30 year fixed mortgage at 6.25% then my monthly payment is 985.15/month. In addition to that I also have to pay 700/month just in taxes so my total monthly cost is 1685.15/month excluding any maintenance costs. Of that 1685.15/month I figure I can claim 1240.71 (540.71 (interest on mortgage) + 700/month taxes). I can probably receive ~35% of that 1240.71 so my overall true cost to buy would be 1250.90 per month less maintenance costs. If I subtract 1250.90 from my current rent of 650 I have an extra $600 per month cash flow. If I invest the original 40k downpayment and the 600 dollars extra a month and get 10% a year then at the end of 30 years I have a total of $2,000,768. Of course I will have to pay tax on that money so if you take 35% you would have 1.3 million dollars. If the house appreciates by 4% a year which is average in Roch the 200k house would be ~650k. So based on my numbers it pays to rent vs own. I did make some assumptions however. I assumed that my rent and taxes would go up equally. I also assumed I could get 10% investing in the market and that i would be taxed at 35%. I also did not include maintenance costs in owning a home. Furthermore I took the average interest over 30 years to deduct when actually I would have more to deduct now so my extra cash flow will be less than 600/month now and more later. I figured this was a wash with maintenance costs on a home. I also assumed my numbers are right too But that is why I rent.... Quote Link to comment Share on other sites More sharing options...
Sugar Magnolia Posted February 25, 2007 Share Posted February 25, 2007 I can't speak for any other area other than my own (Rochester, NY). But I actually ran numbers to see whether buying or renting made more financial sense. I took a 200k house vs my current rent of 650/month. If I put 20% down on said house (40k) and took a 30 year fixed mortgage at 6.25% then my monthly payment is 985.15/month. In addition to that I also have to pay 700/month just in taxes so my total monthly cost is 1685.15/month excluding any maintenance costs. Of that 1685.15/month I figure I can claim 1240.71 (540.71 (interest on mortgage) + 700/month taxes). I can probably receive ~35% of that 1240.71 so my overall true cost to buy would be 1250.90 per month less maintenance costs. If I subtract 1250.90 from my current rent of 650 I have an extra $600 per month cash flow. If I invest the original 40k downpayment and the 600 dollars extra a month and get 10% a year then at the end of 30 years I have a total of $2,000,768. Of course I will have to pay tax on that money so if you take 35% you would have 1.3 million dollars. If the house appreciates by 4% a year which is average in Roch the 200k house would be ~650k. So based on my numbers it pays to rent vs own. I did make some assumptions however. I assumed that my rent and taxes would go up equally. I also assumed I could get 10% investing in the market and that i would be taxed at 35%. I also did not include maintenance costs in owning a home. Furthermore I took the average interest over 30 years to deduct when actually I would have more to deduct now so my extra cash flow will be less than 600/month now and more later. I figured this was a wash with maintenance costs on a home. I also assumed my numbers are right too But that is why I rent.... Two things I would add: 1. You can expect maintenance costs to be around 1% of your home's value per year ($2,000 on $200,000) 2. I would say your investment return estimate of 10% is high. Historically the stock market has returned 6% after inflation over a 30 year period. If you put those calcs into your spreadsheet what do you come up with? Quote Link to comment Share on other sites More sharing options...
xMRogers Posted February 25, 2007 Share Posted February 25, 2007 I took a 200k house vs my current rent of 650/month. This is the part I struggle with - do you rent a $200k house now for $650 a month? If so, then I'll buy the rest. If not, then the rest is somewhat "unfair" comparison (and if you can do that, I'm amazed - would tell me the rental market there is very depressed) Around my neighborhood, current housing prices are $250 to $300 for the sort of house I live in (non-waterfront). This is down 10-15% last 6 months, but up about 50% over last 4 years. Rental on these is about $1400 midrange. Now, you can go a few blocks away and buy for about 200k. Assume you have nothing to put down and go 80/20, could buy for about $1400 to $1500. Yes, you have tax/ins which adds at least $200-$300 a month...but you also get tax break at least equal to that for the first 5+ years where it's almost all interest. Guess I look at it as : it's the only investment that serves three roles : investment, tax break and offset of living expense. I rented for 12+ years. First few years out of schools, was moving cities every 6-12 months and living pretty much paycheck to paycheck, so "investing" itself was a foreign concept, and home ownership was out of the q. However, settled in to a rental house that I split the rent 2 or 3 ways for 5 years, and several times had the opportunity to buy condo's in Atl for nothing down and always had reason not to - I look back over that and kick myself. Then, moved in with g-friend (now wife) and was renting a townhome for 1700....again, 1700, we could have bought a nice condo...it's the pot calling kettle black with me I know, but just think it's mostly a no-brainer if situation allows it. Quote Link to comment Share on other sites More sharing options...
xMRogers Posted February 25, 2007 Share Posted February 25, 2007 also, one other thing - $700 a month in taxes on a 200k home? Is that right? That would be astronomical to me - Florida is bad (offsets no state income tax, and you do lock in with a cap in raises), but it would be less than half that on a new purchase right now. Quote Link to comment Share on other sites More sharing options...
Piles Posted February 25, 2007 Share Posted February 25, 2007 Well if I plug in 6% as an average return and figure on 1% (2K invested at 6%) as maintenance costs I come up with 1,000,715 taxed at 35% would be 650k which would be break even with buying a house. So, all things being equal I certainly would buy. I think part of the issue is that it just pisses me off to no end that I have to cough up 700/month in taxes. I cannot get over that for the life of me and I have kind of dug my heels in. Other than renting or moving there isn't much I can do though. XM, good question regarding can you rent the 200k house for 650? The answer is probably not. Houses go for 100-110/sq foot so I could buy an updated, nice 1800-2000 sq foot home for that. Right now I am renting an old 1800 sq foot duplex for that $650. So, I can come close but I have to accept the fact that I may not have the amenities that a newer home would have but that is fine by me. Sorry you missed out on the rising real estate prices in your area. We didn't really experience that here in Rottenchester but I would be kicking myself as well if that happened here. I guess hindsight is 20/20 though. Quote Link to comment Share on other sites More sharing options...
Piles Posted February 25, 2007 Share Posted February 25, 2007 also, one other thing - $700 a month in taxes on a 200k home? Is that right? That would be astronomical to me - Florida is bad (offsets no state income tax, and you do lock in with a cap in raises), but it would be less than half that on a new purchase right now. Yes, that is right. Most areas in Rochester you can expect to pay anywhere from 38-42 dollars/$1000 dollars assessed value with a majority of that going to school taxes. So a 200k house could easily see 7700-8400 in taxes. In some cases I've seen 10k in taxe on a 200k house.... It is disgusting.... Quote Link to comment Share on other sites More sharing options...
Sugar Magnolia Posted February 25, 2007 Share Posted February 25, 2007 Yes, that is right. Most areas in Rochester you can expect to pay anywhere from 38-42 dollars/$1000 dollars assessed value with a majority of that going to school taxes. So a 200k house could easily see 7700-8400 in taxes. In some cases I've seen 10k in taxe on a 200k house.... It is disgusting.... My husband spent a few years reading an Early Retirement message board before we retired. Many on the board recommended and chose to sell their existing home and rent. Many needed the equity from their home, but many considered a house a money pit as far as maintenance, and others felt renting offered more flexibility. Most relocated after retirement, and if they didn't like the place they lived, they could get up and move to a new city or town, flexibility not often possible during their working years. I like owning a house because I can do to it what I want. I can update it, relandscape, repaint the colors I want, etc. But, the flexibility is appealing. We almost moved after facing our first Bend, OR winter last year with 80 inches of snow, never saw the sun, and it was still snowing the first week of April. This year we've had about 12 inches and have played golf and tennis a few days this winter, so we are feeling mcuh better about our choice. Last winter my husband would frequently report the temps in Asheville, NC, the place he really wanted to move. We have budgeted $1,000 a month for long term maintenance on our house over the next 10 years, which is $120,000 over the period. This is to cover things like a new roof, painting the inside and out, new carpet, replacing the furnace, and or air conditioner, and unforseen repairs. This is definitely on the high side but wanted to make sure we had the money budgeted in retirement if we needed it. Another thing I can't remember if mentioned is the cost of buying and selling your home in the calcuations, although stock purchases have broker fees and loaded costs as well. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted February 26, 2007 Share Posted February 26, 2007 also, one other thing - $700 a month in taxes on a 200k home? Is that right? Yes, that is right. Most areas in Rochester you can expect to pay anywhere from 38-42 dollars/$1000 dollars assessed value with a majority of that going to school taxes. So a 200k house could easily see 7700-8400 in taxes. In some cases I've seen 10k in taxe on a 200k house.... It is disgusting.... well that simply can't be right, if you're comparing $650/month rent with a $200K home. because then your landlord would be losing money by the bucket on the place you live now. i mean, your $650 wouldn't even cover his friggin TAXES, if that is indeed $700/month. i have to think a lot of things in your calculus are somewhat askew. Quote Link to comment Share on other sites More sharing options...
MikesVikes Posted February 26, 2007 Share Posted February 26, 2007 also, one other thing - $700 a month in taxes on a 200k home? Is that right? That would be astronomical to me - Florida is bad (offsets no state income tax, and you do lock in with a cap in raises), but it would be less than half that on a new purchase right now. Where do you find landlords that will rent a place for 20 cents on the dollar of what the property taxes are? I'd like to meet this person. Quote Link to comment Share on other sites More sharing options...
H8tank Posted February 26, 2007 Share Posted February 26, 2007 He rents a dump, but would buy a nice place. Sure, he could rent a palace, but look at the money saved. Don't compare, some people have different priorities, many drive cars worth more than their home/apt. Quote Link to comment Share on other sites More sharing options...
Piles Posted February 26, 2007 Share Posted February 26, 2007 (edited) well that simply can't be right, if you're comparing $650/month rent with a $200K home. because then your landlord would be losing money by the bucket on the place you live now. i mean, your $650 wouldn't even cover his friggin TAXES, if that is indeed $700/month. i have to think a lot of things in your calculus are somewhat askew. I said I rented a duplex. So first off you have to multiply 650x2. Secondly, he has had the house for years so although it would sell for 200k now he certainly didn't pay that and I highly doubt the house is assessed for that. Hence he has lower taxes. Also, my comparison was on a square foot to square foot basis... I have 1800 square feet of living space and a new 1800 square foot home would be anywhere from 180-200k... Edited February 26, 2007 by Piles Quote Link to comment Share on other sites More sharing options...
Piles Posted February 26, 2007 Share Posted February 26, 2007 Where do you find landlords that will rent a place for 20 cents on the dollar of what the property taxes are? I'd like to meet this person. Again, I said I rented a duplex. Look, I know what I pay in rent and I know what a newer house costs. I'm not fabricating numbers here. Maybe I am overestimating what this house will sell for but I know what a 2000 square foot house sells for and what my rent is.... Quote Link to comment Share on other sites More sharing options...
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