leaseing sucks here is why!!!

[steve g]

someone PM'd me challenging me on my anti leasing position, although this was my response to his PM on second thought I thought it was valuable enough information to share with the whole group here, if I can help a guy and keep him from wasting thousands It will have made my day or possibly even week!! here is why leaseing sucks!!! I will get a little personal and show you my example flat out, I bought a dodge 3/4 ton cummins back in '02 decided to do a 48 month lease with a buyout of 16k, payments on this lease was 600 a month, then when everything was agreed to I found out I also had to pay sales tax on each payment totaling nearly another $40 a month, I payed a total of $30528 in lease payments of which $1728 was sales tax, then when I did the buyout, even though I transfered the title in less than 3 days, I got hosed for another $1059 in sales tax by having to pay sales tax on the buyout. just to get the title, which made the actual buyout $17059.

now if I would have bought the truck for the 31,300 that the lease was based on and what I could have bought the truck for as a buy with tax that would have been 33,178 total out the door fineato, next finance this for 4 years, total of those payments would have been 37,987.68 with a payment of $791.41 a month. but here is the kicker I own the truck!!!! no buyout no f---ing sales tax on buyouts, don't you see I got charged sales tax on over 47,0000!!!!!!! anyway you slice it I got hose for about 1k in extra sales tax. its the law,but I call it confiscation. instead of paying a total of $37987 to own the truck, I payed $47587 to own the truck, talk about bending over and taking it without vaseoline, I got it. I also tried to negotiate my buyout down, I even lied to them and told them I was turning the truck in, Louisiana, the lowest book price for the truck across the country. they said no would not budge, I tried offering them 14k to buy the truck still NO. to put it bluntly I got screwed over for thousands of dollars, sorry to be somewhat emotional I think until I to finally sit down and run the exact numbers and how bad it really was makes me even madder. to see how much you are getting f---ed on a lease go to bankrate.com and use the loan calculators work the numbers as a buy see what you pay in total payments and what is or isn't left to buy the truck after a certain period of time, then run the numbers as a lease total those payments then what is left over to buy the vehicle after a certain period of time. numbers don't lie, smoke and mirrors can't confuse.

 

[Fred Homan]

In other words you are saying that guys who lease unknowly bend over Feels good at first....In the end it does not feel good

 

[Jim Martin]

we had the same position with the cds we leased. We had to pay the sales tax on the payment amount and the buyout. Not only did we have to pay the sales tax, ended up paying much more in "finance" charges but we also had to pay business property tax because the lease was held by a company which held more than the allowed $250k business property exemption, which was an additional $400 a year.

but with the vortex we paid sales tax on the purchase price, make monthly payments and at the end of 5 years we own it outright with no buyout or balloon payments. Since we own it we do not have to pay the business property tax since our assets fall below the $250k threshold.

Now, with that said the leasing option has it spot in the market. For us, we would not have been able to get into the business as financing was not an option. Also, if you plan on trading in your equipment every few years than leasing in a potential option (be wary of mileage restrictions). Overall, if you can finance it generally works out to be a less expensive, long term option.

 

[TimP]

I currently lease my equipment. However like Jim said it's easier to get started leasing. I know I'm paying more than financing. I was actually going to buy a van under financing from gm and lease the equipment but my distributor pitched a fit....don't believe them when they say they don't make squat on the van from interlink. Anyhow I weighed and checked the difference and found I was paying a few grand more, I opted for a 100 buck buy out. The way I saw it I wasn't putting it on my credit file and if my business didn't work out I could tell them and still can tell them to have the equipment back and not worry about finding a buyer and defaulting on a personal guaranteed loan. They made sure I paid enough ahead so that the value of the equipment was higher than what I owed too. Anyway the way I see it buying through a business at apr rates it's like 7%+ interest rates. Leasing through butler is 7.9 right now so I don't see a whole lot of difference other than paying taxes on the finance charges. I probably will finance next time though if I can.

 

[Ron Lippold]

the vortex makes the payment for you, i just have to go do the job 1147 a month and then i own it. If 400 a month scares you go get a regular job.

 

[Ken Snow]

It rarely makes sense to lease if you plan to own the item eventually, not only for sales tax reasons but usually the lease factor is higher than prevailing bank rates. Leasing makes the most sense when wanting the item only for the term of the lease payments, whereby you are effectively renting the portion of its life you want to use.

Ken

 

[Scott]

Steve -

Yep, the longer you lease, the less sense it makes. It makes even less sense with a buyout.

But if you lease for 3 years or less, you will always pay less. (unless you get scammed by a lease shark)

The purpose of a lease is not to own equipment; it's used for several other reasons like lowering payments, which can improve cash-flow, always having a newer vehicle and tax purposes.

Scott

 

[steve g]

400 dollars scares me to death



T

yeah no kidding it takes 10 $39.95 whole house specials for you to make that payment

 

[Ron Lippold]

would not even consider turning on the truck for less than 134.60 and that happens very rarely and usually I end up going back when they have more money to finish the rest.

 

[rhyde]

Everyone’s situation is different. I'll say it again everyone should have a CPA to run big purchases through. IF you had asked for a Capitalized cost & adjusted capitalized cost you would have seen what you where getting… beyond that I don’t understand why you would lease and then do the buyout at the end in the first place it’s never really cheaper.

That said My methodology with a lease.
1. I’m not planning on keeping the vehicle after the term of the lease, I’ll move on to something else.
2. Working capital, the lease I have (outlined below) lets me keep from 200.00-766.00 a month more capitol in the business Vs. buying @ 36,48,60 or 72 months that money can go to my paycheck , retirement account or other business related needs my business exist to make me debt free not the other way around .
3. Open ended leases can be terminate early the lease early yes it would cost me more money about 5K

We have no sales tax in Oregon. Banks generally try to stick it to small businesses we were getting quotes around 9- 11% to buy so for argument sake I’ll say 8.0% you can go to bankrate.com and play with the numbers the first line is my actually vortex lease . Countrywide has/had the best leases available. IF I was planning on owning the equipment at the end of the lease it wouldn’t make sense for me

There are about 2K in miscellaneous fees feel free to tack it on the numbers

My lease …85K 72 months 8% w/ a 24K buyout 1309.00 a month… $94,248 for 6 years


Buy..85K 48 months 8.0% no residual 2075.00 a month …….$ 99,600 for 4 years

So, I can own it in 4 years 99K or I can lease it for 2 more years for $5,352 less? IF was to pay the 24K at the end I’d pay 118,248 …makes no sense but I’m not going to do that I’m using equipment for a duration below the market rate of owning that equipment

 

[steve g]

Everyone’s situation is different. I'll say it again everyone should have a CPA to run big purchases through. IF you had asked for a Capitalized cost & adjusted capitalized cost you would have seen what you where getting… beyond that I don’t understand why you would lease and then do the buyout at the end in the first place it’s never really cheaper.

That said My methodology with a lease.
1. I’m not planning on keeping the vehicle after the term of the lease, I’ll move on to something else.
2. Working capital, the lease I have (outlined below) lets me keep from 200.00-766.00 a month more capitol in the business Vs. buying @ 36,48,60 or 72 months that money can go to my paycheck , retirement account or other business related needs my business exist to make me debt free not the other way around .
3. Open ended leases can be terminate early the lease early yes it would cost me more money about 5K

We have no sales tax in Oregon. Banks generally try to stick it to small businesses we were getting quotes around 9- 11% to buy so for argument sake I’ll say 8.0% you can go to bankrate.com and play with the numbers the first line is my actually vortex lease . Countrywide has/had the best leases available. IF I was planning on owning the equipment at the end of the lease it wouldn’t make sense for me

There are about 2K in miscellaneous fees feel free to tack it on the numbers

My lease …85K 72 months 8% w/ a 24K buyout 1309.00 a month… $94,248 for 6 years


Buy..85K 48 months 8.0% no residual 2075.00 a month …….$ 99,600 for 4 years

So, I can own it in 4 years 99K or I can lease it for 2 more years for $5,352 less? IF was to pay the 24K at the end I’d pay 118,248 …makes no sense but I’m not going to do that I’m using equipment for a duration below the market rate of owning that equipment

Rhyde, I still think you are getting hosed and here is why, I will prove it with your own numbers, if you did the buy and paid the 2075/month and you own the truck in 4 years, that means the remaining 2 years that you would have leased in the above case you are saving $31416 in lease payments (the 1309/mo)or netting $26064 THAT YOU DID NOT HAVE TO PAY IN PAYMENTS YEARS 5 AND 6, PLUS YOU OWN THE TRUCK AFTER 4 YEARS!!!!!! no buyouts or other bullshit, a title in your hands and hopefully a well maintained truck WORTH SOMETHING

I see where you are coming from if you wanna keep the payments down, so lets figure it another way, do a buy, lets finance the truck for 6 years instead at 8% like you said, 1490/mo that is a total of $107280 after 6 years that you will have payed out, there is no residual no anything just a title you will have payed an extra 13k and some change over your lease, however you own the truck the real question is would a well maintained 6yr old vortex be worth more than 13k, I sure would hope so!!! give me real numbers, real facts and figures on a lease and I will shred that sum beetch to chit

 

[Jimmy L]

So to simplify you lease because you think you can't afford to buy.

Its the old BDCC syndrone.

 

[Guest]

And then there are some of us who like to use our cash.

 

[rhyde]

I guess it’s glass half full or empty depends on your perspective.

I don’t think you understand … I’m comparing my 6yr lease with a 4 year buy the 6 yr lease is 5,352.00 less at 6 years than a buy at 4yrs run the numbers the way the lease is structured you not paying interest on the full value you could look at it as you owned it in 4 years or i used it for 2 more years for free or reduced price.

While you have no payment in year 5-6 you simply paid it sooner and 5+K more. Sure you own it but I’m not interested in running a 6+ year old TM I’m interested in making money ..the lease keeps more money in my pocket. The 766.00 a month @ 48 months is $36,768.00 it cost you 36K more to own it in 4 years you’ve wasted working capital on equipment that deprecates and will need to be replaced. There’s a lost opportunity here of 766.00 a month nearly 10K a year could have funded your retirement account kids college fund ..or whatever? Again, I have no desire to own the truck or run a 6+ year old TM any TM is a liability one that’s going to cost more the older it is and become more unreliable. Sure, leasing of this type is a bad idea IF you plan on owning the equipment after the lease..but i don't.

 

[steve g]

I guess its really all about ownership and equity verses simply just paying to use something, I compare it to renting a house. for me I will take ownership and equity every time, Rhyde, here are things as I see them, if you like to run new equipment which most of us do, why not pay more now, then in 4 years or so, you have a well maintained vortex that you sell for I dunno lets just say 35k, you in turn leverage this 35k equity towards a brand new HAT 10000 blueline vortex that is capable of running 4 wands. now you have lessened your payment for the future, this is the god aweful mistake I made with that lease on that '02 dodge, if I had just bought the damn thing and payed it off in 4 or 5 years, I would have had 18-20k in cash to go toward my new '06 that I now drive, instead of having to make full payments all over again, I would only be paying on a 13k note instead of a 34k note. 13k or 34k I pick 13k.

if you are worried about retirement accounts and all that, most vortex owners had to cash their 401k had to throw that in there. in all seriousness if retirement and savings are your goal, is owning a vortex really that smart for that kind of thing anyways??

Its been nice having a good debate on this

 

[rhyde]

Perhaps a little background would help.

I have a rug washing plant we added w/w cleaning I chose the Vortex because we can haul rugs (see pic) as well as provide cleaning duel tasks that I would likely need to employ additional help for providing the same tasks with a standard cleaning van (f250) it's worked out well so far.

I’m not trying to tell you leasing is always good it’s a tool for the right time and place lease are not always bad. A couple years after I started my business I had a bunch of money in the biz bank account, paid myself shit, drove an 9 year old truck and owned a home in a shitty crime infested part of town but I had no debt except the mortgage. It took me a few years to realize my business works for me exist to make me debt free & improve my life not the other way around. Paying cash isn’t always the smart thing to do

 

[steve frasier]

We did a lease with a $1 buy out, the IRS considers this a finance so the rules are different and I can pay it off at any time with a 4% of balance penalty

we pay the taxes up front, with a lease, the leasing company would pay the taxes monthly

the equipment is depreciated over a period of time where as a lease is written off month to month

If you plan to buy a big truck then you need to look at it as an investment

I would never lease a personal vehicle unless I planned to never own it

if you had that much cash, if you could invest it and make 8% then you would be $$$ ahead

 

[GRHeacock]

A lease works for some, not for others.

That said, when I bought my new van and new Truck Mount, I checked both leasing and purchasing, with several companies, dealer, etc. I spent about 2 weeks looking for the best deal either way.

I talked to 3 banks, and the Chev dealer, and 3 leasing companies.

The best deal for me at the time was a 5 year lease with a $1.00 buyout.

At the time, I could afford to be choosy, and was. But I realize not everyone is in that same boat.

My advice is check with several places, and your CPA if you have one, for tax advice.

Gary

 

[steve frasier]

I agree to shop around. Kip @ Country Leasing had the best deals and more choices then the other companies we talked to.

Even if you had the cash I don't feel it is the best deal. The question I would ask you is;

If you lease $80,000 for 6/7 years, it will probably cost more then $100,000 before you are done

Do you think you could save that much money, with interest, in the same time period?

didn't think so, so what are you doing wrong

 

[Tony Neville]

Lots to think about! Just a quick question why not buy the Equipment/shop and lease it back to the biz? Best of both worlds. You can then really screw yourself!!!

Tony

 

[Kevin]

Leasing is good for people who want new every X amount of years. It is also good for some with taxes.

You must pay tax on the vehicle but you only pay tax on the amount you lease. If you make the decision to buy it, you must pay your taxes on the residual amount. You're not getting double tax. You are paying the same amount of tax as if you were to buy rather than lease. But when you lease and return the vehicle, you have only paid taxes on the amount of vehicle used.