The only debt I have is a home mortgage and a lease payment for my wife's vehicle. My company pays for my truck lease.
You have no idea as to my financial situation, but I'll just say that we could have bought her car outright but chose not to because I'd rather invest $25,000 somewhere and put it to work for me rather than fork over $25,000 in cash to own a car, something that's just going to lose value over time. Better to simply buy the depreciation on a monthly basis (which is what a good lease deal will do for you.)
Company paying my home mortgage is illegal. And no, paying off a 4% home mortgage "as soon as possible" is not the smartest thing to do, not if you can make at least 4% on your money elsewhere (pretty easy to do).
In Minnesota you pay sales tax only on that portion of the car's value that will be used up by the lease. You don't pay the full sales tax amount of the vehicle.
But you do realize that in that 10 year scenerio, you have $25,000 invested somewhere and spent $48,000.
So you are behind a net of $23,000.
However, I have purchased my car and at the end of the 10 years, now have $24,000 sitting in the bank (or invested if I wish, having invested over the course of the 10 years).
Still, who is ahead?
So what's wrong with a regular depreciation schedule?
The schedule on mine is the same length as the payments.
It gets deducted at about the same rate as the payments that go in.
The company is paying the lease. As owner, I write the checks. Sorry for the confusion.
Not necessarily $24,000 worth of repairs. But supposing your transmission flew apart on the freeway (like what happened to CornDoggy). That would be an "unexpected repair" and if it was beyond the warranty period it would be out of pocket.
It's nice to have $24,000 in the bank, but would you enjoy using $2,000 to fix your transmission? That's what I'm talking about.
Nothing wrong with it. The problem is the down payment. I don't want to fork over $15,000 as a down payment in order to make the monthly payment sensible. I'd rather use that money for other business expenses.
Except when you're spending nearly $5,000 a year like you are to avoid a hypothetical $2,000 transmission rebuild that may or may not happen at some random point, you're still going in the hole.
I like nice new cars as much as the next guy, but at least I admit that I just like nice new cars.
I'm not about to claim that I'm being frugal with my vehicle purchases.
I enjoy the peace of mind and flat out enjoy it period but acting like I'm a financial guru that's got it all figured out isn't exactly on the table.
I sacrificed a lot to get what I've got now and make no apologies for it.
Actually, there are two leases in play here. My company truck lease and my wife's personal car lease. The $25,000 invested elsewhere is in lieu of buying my wife's car. So, sticking to the company truck scenario, yes, I would be out $48,000 in ten years and have nothing but tax write-offs and no repair bills to show for it.
Apples and pineapples. Switching to my wife's example. We put zero money down (literally a sign and drive deal, plus they made our last payment on our minivan) and they paid for the first lease payment. We now pay $270 a month for the next 35 months, $9,450 total. We still have $25,000 sitting in conservative mutual funds. After three years we will have about $28,500 in those funds. We made $3,500. If that were used to offset the lease, my wife has driven a new car worry free for less than $2,000 a year, or about $165 a month.
So, who's ahead? In the long run, on paper, you are. But if I choose to have my wife drive a new car for $165 a month, I consider myself to be doing pretty darn good.
The Ram had a sticker of $46,200. I think the final number used for the lease after rebates and incentives was $42,000. However, this number is virtually meaningless in the context of the lease. The lease is a per month payment.
If you financed $27,000 over four or five years (or even six years) I doubt that your payments are as low as mine.
When did I say I was being frugal? I fully admit that continually leasing vs. buying and holding is less economical for INDIVIDUALS. For corporations there are a lot of other factors that come into play.
I'm not a financial guru and I don't have it all figured out. I do, however, have my particular situation and set of circumstances figured out. And they're not applicable to non-business owners. So, really this attempt at comparison is not fruitful.
Good going. I wasn't handed anything either and my company almost went under in 2009. I've been doing this for 27 years so I feel I have some knowledge on the subject.
I'd rather pay out $2000 than $23,000.
Realize that $2000 is just about 4 or 5 months' worth of payments on a lease.
I'd still be ahead of the game by the end of the year.