Wilkerson Cooley & Co PC


Tip of the Month for February 2004

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Auto manufacturers are anxious to help dealers move inventory, and auto leases -- a major trend in the late ’90s-- are back in vogue. If you think leasing might work for you, here are a few pointers to make your deal as lucrative as possible:
  • Do some research around town and check out prices for comparable models before you set out to make a deal. Some automakers are more anxious to off-load surplus inventory and are willing to provide more attractive subsidies to leasing companies than their competitors. Try to figure out which cars are likely to be the better bargain.

  • Negotiate, negotiate, and negotiate. Bear in mind that the advertised price is based on the full sticker price of the automobile and that the leasing company got a nice, fat discount. Ask for a price that is based on the lower price paid by the leasing company or for a quote based on capitalized costs.

  • Familiarize yourself with the leasing transaction process and its terminology. You may know your way around arranging car loans but the financial arrangements for leasing agreements are different. Interest on a car loan is quoted as a percentage, whereas the interest rate on a lease--called the "money factor" -- is quoted as a decimal. Find out if any acquisition, disposition or other incidental fees will be factored into the overall total. It makes sense to get quotes from at least three leasing companies to compare the money factor as well as any dealer fees.

  • Steer clear of long-term leasing arrangements. You may lower your monthly payments, but extending your leasing arrangement beyond four years may cost you more in the long run. A long-term arrangement may land you with expensive maintenance and service work on a leased vehicle--major outlays on a car you don’t own make no sense. Also bear in mind that "reasonable wear and tear" terms do not vary much, regardless of the length of the lease period. A longer lease sets you up for the possibility of more minor damage and for the likelihood you’ll be billed for the dings and scratches that accrue with time.
There are good deals out there... if you do your homework first. Remember to contact your professional tax advisor to determine if there are any tax implications for you to consider before you choose a leasing arrangement.

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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