Above is the vehicle I will be leasing within the next few years. But probably in red. No, not in my dreams. That is real. A couple of members of the L&A team, as well as some of our clients are considering leasing a new car. Another financial life event coming at you. See we don’t just do taxes and accounting. We also consult people and businesses on various matters including their investments. And a car is an investment after all, right? Being that we dub ourselves expense and waste assassins, I feel it necessary to address certain investments to help people avoid wasteful expenses and costs. So when your going to look at that new Toyota Prius or Ford Raptor (these two cars cover both ends of the car taste spectrum) you can be a tad more informed when you’re discussing your new potential investment with the sales people. So here are 5 tips for leasing a car.
1. Be skeptical no matter what. Don’t believe the hype. The salespeople use sales tactics to ultimately get you to sign your name on the line and lease a new car. “We are losing money on this deal” or “I have coupons I can apply to this lease but they are only available until 2 minutes from now.” Yes, we have heard it all. Ask questions and be attentive. Understand the terms of the lease. The excitement of a new car can be distracting. But try to keep the excitement in check and be overly aware. As the great Dennis Sr says, ‘keep your emotions out of it.”
2. Don’t go overboard with the down payment. “Lease a brand new Mercedes-Benz for just $329 a month.” And deep down in the fine print says something about “due at signing.” That due at signing amount can often be an absurd down payment. $329 a month with $7000 due at signing. Plus taxes and DMV fees. But the real kicker is should a tractor-trailler plow into that brand new Mercedes-Benz mere weeks after you pull it off the lot, that $7000 down payment is likely totaled with the car. In other words, the $7000 is gone.
3. Calculate your miles. Low mileage leases are the norm today. Sam the Salesman can pitch that low cost $329 a month because it only allows you to drive the Benz 10,000 miles a year. No biggie. Turn the car in 3 years later and I’ve put 45,000 miles on it as opposed to the agreed upon 30,000 (10k a year). “You owe us $3750 for mileage overage.” Ouch. Best to calculate how many miles you intend on putting on the car. If you commute 52 miles roundtrip to work everyday, you will put at least 260 miles a week on the car just from work. Assuming 2 weeks vacation, that is 13,520 miles a year just from work. Safe to say you may want to invest in a 15k miles a year lease.
4. Avoid the lengthy lease. The standard is 3 years 36,000 miles. Keeping a car for a longer term can lead to additional maintenance costs and extended warranty requirements. Who the heck wants to replace breaks and tires on a car that is not even theirs? Consider purchasing the car as opposed to leasing if you want to keep it for a prolonged period.
The “Taxspect” of Leasing a Car (do you see what i did there?):
So where are my write offs or deductions regarding my new lease? Depends. If you’re a business owner and the lease is primarily for business use then yes, you may be able to deduct the monthly payments to the extent the vehicle is used for business. Other items may apply as well but this is a conversation best had with a professional, like the ones at L&A.
Hopefully now when you walk into that dealership to lease your brand new wheels, you’ll be a little more savvy. Maybe Sam the Salesman will know better than to mess with you with all of his fancy talk because you beat him at his own game. Don’t be afraid to use your new knowledge to negotiate a better deal. Oh and enjoy your ride.
