New member consider leasing

Great forum you guys have here. I know some aren't a fan of leases but it makes sense to me as I can write off the lease payment through my business. I drove a Tacoma limited today, double cab, 2wd. Here the specs and the lease specifics.
MSRP 39,555
negotiated price 36,475
36 month lease, 12k miles per year
$3k down payment and monthly payment is $425 per month including Florida state tax

Residual is 72% an money factor is .0199. This is my first time leasing. What do you guys think of the deal?

 

The MF is high but you can buy it down with MSDs I think they're called. There's an entire thread on leasing somewhere in here. Let me see if I can search it for you -- Oh here ya go: https://www.tacomaworld.com/threads/16-lease-residuals-not-for-everyone-i-know.391551/

 

Nothing wrong with a lease, especially if your gonna trade it back in on 3 years or sell it for more than the residual which is very possible. I would not have put any money down, let them pay the taxes, and get the service plan....NO worries no cash out of your pocket, cash is king, interest rates at Toyota Financial are at 4.5% or so and if you have used them before you usually get some added incentive...

So if it fits your financial picture and your vehicle rotation plan it rocks....I know some will disagree.

 

He's right ^^ don't make any down payment. Consider GAP at least for the first 6 months or so.

 

I lease my truck
Not for business but because I like getting a new car every couple of years.
Tacoma is a good candidate for a lease because it holds its value really well and you can usually come out ahead at the end.

I would try and put as close to 0 down as you could

 

Why is that different than a purchase? Can't you use depreciation, interest and operation costs?

 

Don't quote me on this but I think with a lease businesses can write off the full amount up to certain dollar amount.
I don't think the same is true for financing a purchase.

Again I don't know for sure.

 

Yes with a lease, the full amount of the lease can be written off as an expense rather than to depreciate the asset. For me the numbers work out better.

 

If I negotiate less or nothing down wouldn't the lease payment increase by $83.33 (3000/36)??

 

http://www.realcartips.com/leasing/0314-dont-put-down-payment-on-car-lease.shtml

 

Use this:

http://www.ridewithg.com/rwg-calculator/

Your MF is too high. Like someone else mentioned, look into multiple MSDs. I think you can do 9.

 

Yup definitely want to buy down that MF. Also get purchase price to inventory or below if possible. Then spring the MF talk on em'

 

He needs to add a 0 to the beginning of his MF number

 

Ooops, you're right. Money factor is .00199

 

Yes you are right. So take that 3k, put it in a savings account, and when you make your car payment scoop out 83.33 from this account to help you with your payment. The difference is if you give them 3k and wreck the car a day, week or year down the road, that 3k is GONE. But if you keep the cash in your own account and wreck the car then you have whatever cash in the account is left.

 

As others have noted, do not put money down on a lease; use that money to put down Multiple Security Deposits. TFS allows up to 9 MSDs (each costs your monthly payment rounded up to the next $50). Each lowers your MF by 0.00008, so all nine will reduce your MF by 0.00072 (a whopping 1.73% APR), lowering your payment by about $50. You get the MSDs back at the end of the lease, so they are a no-brainer (think of the MSDs like a CD that pays ~12% APR: beat that at your bank).

FYI, the MF of 0.02 you stated is incorrect; you probably meant to type 0.002 (0.02 is 48% APR, gulp). That is the current TFS "buy" rate, and it isn't marked up, so you can't do any better there.

Here is my current favorite lease calculator. It included MSD programs for Toyota, BMW, Benz, and others:
http://leasehackr.com/calculator/

With 9 MSDs and nothing down, your payment should be $305+tax. Something isn't adding up with those numbers you posted.

 

Depends on your exact situation, but I would lean toward buying personally. Disclaimer, this is not advice, speak to your tax professional for tax advice. If your business has a large enough income you could take the 50% bonus depreciation up front, or you could even 179 the whole thing in year one if you have enough income for it to offset. If you don't have that much income at the bottom line you can just take the normal 5 year on a vehicle, also not bad. Your interest will be deductible as well. Bottom line is both have similar tax benefits when it is all worked out, but in the end you can either own 3/5 of a truck for not much more money each month, or have nothing. Doesn't take long to get in the black on a Tacoma with how well they hold their value. You are betting against the house with a lease.

Don't mean to sound too negative on it, I am sure you have done your homework and will make the right decision for you any way around.

 

You also build equity on a lease.
Just not as much that is why the payment is lower.

 

Leasing is just a financing instrument where you pay a nominal fee ("acquisition fee") in exchange for the lessor absorbing the depreciation downside risk over the lease term. Nothing less, nothing more. It's basically just a small insurance policy against loss of value due to collision, market forces, recalls, etc.

You still retain all of the upside if the vehicle depreciates slower than the lessor predicted (you can buy out the lease any time and reclaim your 'bonus equity'). If you invest the extra cash flow freed up by leasing vs. financing, it's quite likely your investment returns exceed the acquisition fee, so you come out ahead after 3 years.

Obviously there are caveats; if you normally keep your vehicles for 15 years and/or modify the heck out of them, then no, leasing is not for you. But if you are savvy about the math involved, willing to invest the extra free cash flow, and/or able to take advantage of the business write-off, then leasing can be a very smart option for people that prefer driving cars that are covered by the manufacturer's warranty.

It's not some Ponzi scheme like some people make it out to be.