Leasing a pre-owned.

I'm not leasing but I know Ferrari of North America will do a lease for Certified Pre Owned (CPOs) for up to 7 years at same rate as 5... 4.99 or 5.99%

 

There is Premier and Manhattan bank.

 

Also look into Putnam leasing...they lease a lot of exotics for the purpose you are looking for. You can PM me for info

 

Hahaha. I already told him to talk to the expert.

You recover yet?

 

How is the better than paying cash or financing?

 

While you should always seek advice of tax professionals, your company leases it and as such has 100% write off. At the end of the lease you buy it personally for the buy out amount.

If you pay cash for it personally you are really paying 30% more because that is after tax dollars (assuming a 30% tax rate) and you have no tax write off except sales tax and registration fees.

If your business pays cash for it you can only write off the depreciated amount over a 7 or 10 year period ( or whatever it is nowadays).

Do, there are compelling reasons when spending $100k-$350k on a car to examine the different tax issues and types of purchases.

I've always just paid cash personally when buying toys, but I may consider other options when it comes to the 458.

 

You can write it off a lot faster than 10 years. Pay cash out of your company.

Leasing a used car is outrageously overpriced. There is no benefit.

So just for giggles, when you get your lease quote, post it here.

Here's a couple great threads on the subject.
http://www.ferrarichat.com/forum/showthread.php?t=301601&highlight=Lease

http://www.ferrarichat.com/forum/showthread.php?t=254110&highlight=Leasing

 

The poster above quoted 5-6% interest cost for a pre-owned, that does not seem outrageous to me, unless I am missing something.

 

Please post the payment schedule and all fees and terms. I'll bet it's double the cost of traditional financing.

 

Even when taking into consideration the tax consequences?

How much are we betting?

 

To be clear, I am only advocating looking into leasing when spending over $100k and you own a business that can support that type of expense, and your personal tax rate is 30%

 

Leasing works for some people because you can write off the entire payment amount and the tax paid is prorated. So if you flip cars in a very short period of time, you pay less tax and your total cost can be used as a deduction.

When buying a USED car for business purposes, which is what I presume we're talking about here, the tax deductions are very minimal:

First year: $3160
Second year: $5100
Third Year: $3050
Subsequent years: $1875

It doesn't matter if the used car is $1 million dollars or $10k. The deduction schedule is unfortunately the same. AND you have to pay the full sales tax amount up front. Now if you finance it, the interest is deductible. After doing my calculations and talking to my accountant, it was still cheaper to BUY a used Ferrari if you are going to own it beyond a year.

 

But if your lease payment is double than traditional financing, where's the benefit?

 

That's not the case. It's depreciated on a percentage basis. Not a $ basis.

Used cars have no sales tax in Georgia and many other states. I can buy from private seller anywhere in the country and no sales tax. I've bought every car this way.

 

Not an expert here but this was similar to what was presented to me by my accountant:

As per the IRS 2010 update (note the bonus depreciation is for a NEW vehicle, the lower maximum of $3060 is what applies to a used vehicle for 2010; Chart for 2012 is below):

http://www.irs.gov/newsroom/article/0,,id=233824,00.html

"Depreciation limits on business vehicles

The total depreciation deduction (including the section 179 expense deduction and the 50 or 100 percent bonus depreciation) you can take for a passenger automobile (that is not a truck or a van) you use in your business and first placed in service in 2010 is increased to $11,060. The maximum deduction you can take for a truck or van you use in your business and first placed in service in 2010 is increased to $11,160. If you do not take any bonus depreciation for the passenger automobile, truck, or van you use in your business and first placed in service in 2010, the maximum deduction you can take for a passenger automobile is $3,060 and for a truck or van is $3,160."


And in a simpler table form (again note 50% bonus is for a NEW car):

Taken from: http://www.smbiz.com/sbrl003.html#lct12

"Depreciation Limits for Cars and Trucks 2012

Depreciation on cars and light trucks and vans is limited. There are two different limits--one for cars and one for trucks. In addition, for 2012 all new assets qualify for the 50% bonus depreciation (100% bonus depreciation expired at the end of 2011). (Special tables, not reproduced here, apply to pure electric vehicles.)

Depreciation Limits for Passenger Automobiles

Tax Year Standard 50% Bonus

First $3,160 $11,160
Second 5,100 5,100
Third 3,050 3,050
Subsequent 1,875 1,875"

I agree, the lease payment less tax savings for a lease ends up being higher than the loan payment over the long term. Not sure where the delta of when a lease becomes expensive but it is definitely less than 1 year.

Now I have heard some people pushing the limits and calling their business vehicle 'farm equipment' or some other 'equipment' in which case the maximum deduction limits wouldn't apply. But if you get audited, you're screwed.

All said, I would speak to your accountant for details.

 

In terms of it being a percentage basis, most accountants won't feel comfortable saying your 'business vehicle' is used 100% for business. So they won't depreciate 100% of what is allowable, even for a lease. Most reputable accountants will use 70-80% for business purposes to be safe from audit.

 

Any way you slice it, we need to see what the lease payment is from Putnam or someone else for a $100K used Ferrari.

What's the value of the Ferrari we're talking about?

 

You're very lucky! Sales tax in Kalifornia is 8.75% and last year, it was 9.75%! It hurt. Real bad. Especially when selling in 8 months.

 

That's why I don't live there. You're just encouraging them.

 

This would likely draw negative attention if it were noticed on audit. Not only is it highly questionable that it is a good business expense, but it may cause an auditor to dig deeper because anyone who would try this is probably pushing the envelope elsewhere.

I'm aware that people do it. Anything is deductible if you don't get audited, but that is not sound tax planning.

Your choice, but I wouldn't sign that return.

 

+1

If you're such own such a successful business, why do you need to buy a Ferrari this way?

 

This will be my third Ferrari purchase, and I've bought all my vehicles, boats, motorcycles, motor homes and other toys all with cash.

I doubt I will have the patience to wait 2-3 years for a new 458, so I will most likely be spending $280k or so on a used one.

I expect to keep the car no more than 2 years.

I'm not sure what the value of the 458 will be in 2 years but lets say it will loose 30% of its value.

$280k Purchase price
$ 24k sales tax

$304k OTD (Yes I know I'm not counting DMV and other fees)

I have to pay 30% income tax, which is $91k.

$ 24k Sales Tax
$ 91k after tax dollars
$ 84k loss of value
$ 10k cost of resale (about 5%)
================
$209k to own the car for 2 years, not including DMV and cost of maintenance.

I guess you could recoup the income tax cost on the resale, so you could reduce the cost by $55k (assuming I was able to pocket $184k on the sale of it).

$209k-$55k= $154k

$154k/24 mos. = $6,416

If my lease payments are less than $6,416 I'm ahead, if they are more than that I am behind.

Plus, I don't have to deal with trying to see an exotic, which seems to be a several month long process.

I've never leased a vehicle, nor am I advocating it, but if I'm only going to keep the cars 2 years it may be a viable alternative.

Is my math or assumptions wrong?

Perhaps CNC Motors, or another dealer can let us know what a 24 month lease on a $280k vehicle has been running lately.

 

You're leaving out the fees to do the lease. Also, no buyout at the end of lease? Lease term is 2 years? Haven't seen that before. I'd bet your lease payment is much higher than what you post. Why would the leasing company take a hit?

We need th op to get his quote and post it up. I'm curious too.

My friends that have leased in the past did so because the have crap credit, no cash but high monthly incomes. Ends up being a 12 year lease that you can roll into another car after 2 years blah, blah. Next thing you know they have a 100 year, octopus arm, reverse mortgage and they don't know which way is up.