In reply to codrus (Forum Supporter) :
In DE, you pay sales tax on the new car, but if you trade in, they deduct the trade in value from the taxed value of the new car. I think if you sell your old car outright, there is a similar credit, but of course it requires you to file more paperwork yourself.
codrus (Forum Supporter) said:This doesn't really fit the typical GRM demographic and it depends on what state you live in, but one potential big advantage to a lease is sales tax. Here in California you pay sales tax on a car purchase and it's basically 10%, so a $47,000 average new car is $4700 in sales tax. If you go trade it in 3 years later to buy another $47K new (or even used) car you'll pay $4700 in sales tax again, you don't get the difference back.
But with a lease, because you're only ever buying 1 months' use of the car, you only pay sales tax on that month. So if your payment for that $47K car is $500/month (I have no idea if that's a reasonable lease rate, I'm just making this number up), then you're paying $50 (included) for sales tax every month. If you keep it six months and then decide to end the lease early and get something else, you only paid $300 in sales tax instead of $4700.
In MD you pay 6% of the price of the vehicle, even on a lease. You do get a trade credit though, so it only hurts on the first one.
Massachusetts charges 6.25% sales tax on the purchase price minus trade-in when buying from a dealer.
When leasing you pay 6.25% sales tax on the monthly payment, so you only pay sales tax on the portion you use, rather than the total vehicle price.
The finance guy told me that when you finance a car, for a company, the interest is a write off. However, with a lease, the entire payment is a write-off.
just a little more info that might influence the decision for some.
In reply to jfryjfry :
Yes, business leasing makes great sense for most things that will age or wear out in under 10 years.
Duke said:Curtis73 (Forum Supporter) said:Financing is the best way to pay double what the car is worth only to have it be mostly worthless by the time you pay it off.
Ummm, what? That may be true if you have a 500 credit score, $50 to put down, and the only people who will talk to you are Dodge and Mitsubishi.
I think the most I've ever paid in total interest is about $2200, and that was on my V60, the most expensive new car we've ever bought, and for the longest term. I could have done better than that but I was trying to hold some cash reserves for our remodeling project, which ended up getting delayed anyway.
The car is far from worthless, and even if it was, it's got at least another 60,000 miles (or more) left in it, with no car payments.
I worked in auto financing for years. The number of deals that didn't soak the borrower for at least $10k I could count on one hand. We had to call a buyer once and tell them the "good news that we found better financing for you," but the reality was that we soaked her so badly that it was a violation of the law. The average credit score in the U.S. is around 700, but the average that auto lenders see is in the low 500s.
Keep in mind that auto lending rates are also in the 6% range right now. Not exactly a bargain choice.
I'm kind of flumoxed on how they determine lease rates. Hyundai currently has very attractive rates on the Ionic 5 and 6 models, but lousy ones on the Kona. They are all electric, and there's few 5s and 6s on local lots, so where does the crazy math come from?
Speaking of which, it seems that the EV credit shifts things significantly in the EVs favor if you're looking short term.
In reply to Curtis73 (Forum Supporter) :
I will take your word for it, but in 32 years I have had 7 car loans and for most of them I have paid a total of $1000-$1500 interest over the life of the loan. The worst was my most recent, the V60, at $2200 total over a 60-month note. That could have been half that, but I was trying to hold cash in reserve.
Our first 3 loans (Caravan, Neon, Grand Caravan) were 36 month terms. Our second 2 loans (TSX, 325i) were 48 months. The Volvos were both 60 months. The S60 was at 0% so there was no point in not using their money. The V60 was 3.5% or so for 60 months - I won't go that long again.
What about taking a loan against your 401K? If you're going to pay interest, you may as well pay yourself.
Kreb (Forum Supporter) said:I'm kind of flumoxed on how they determine lease rates. Hyundai currently has very attractive rates on the Ionic 5 and 6 models, but lousy ones on the Kona. They are all electric, and there's few 5s and 6s on local lots, so where does the crazy math come from?
Speaking of which, it seems that the EV credit shifts things significantly in the EVs favor if you're looking short term.
My wife leased an Ioniq5 a few months ago for a staggeringly low price. When we were in the midst of working the deal, I reached out to a friend at Hyundai (who is actually the brand manager for the I5) and told him what our offer was and asked him if he thought it was a good deal. He said it was literally cheaper than he could lease one for (although, to be fair, he gets to use one whenever he wants) with his employee benefit. He was like "yeah do it immediately before we figure it out."
This clearly doesn't answer your question, but I have to imagine it's all about inventory and model cycles. The 2025 Ioniq5 has a few key updates coming (like a rear wiper), and they likely overcommitted to building the '24s and sent them into a marketplace that wasn't as excited about them as they had hoped and they don't want them cluttering dealerships when the new ones drop.
In reply to Duke :
I get it. I'm tempted to try a loan one of these days just so I can stop the cycle of buying a $3000 hoopty every three years and running it into the ground, but then again, I have nearly perfect credit.
There is such a big money market for predatory loans. Most dealers go in with a monstrously huge offer to knock people's expectations down, and you'd be surprised how many people fall for it, or at least don't really negotiate. I sold a car to a college girl back in about 1999. It was a 1990 Mercury Tracer with faded paint and 120k that we picked up at auction for $1200. She signed on $339/mo for 24 months. She paid nearly $9000 on a car that could have been a $2000 cash deal.
As long as you're savvy, (and as long as you have stellar credit) it's not that hard to strike a good deal. I usually recommend you get your own loan and not let the dealer finance through one of their in-pocket banks, and for dam sure, don't do any buy-here-pay-here deal.
You'll need to log in to post.
