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How hard to lease a car after BK 7 discharge?

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  • #31
    It's personal. All of us have different personal styles, objectives, and priorities — in cars, life, and in finances. Car lease-versus-buy decisions must be made with your own lifestyle and priorities in mind. What's right for one person can be totally wrong for another.
    That is just an excuse for rampant consumerism and plays right into the hands of the leasing companies.

    You could prefer (and many people do) to eat a dozen donuts a day...but that doesn't make it a good or the right choice.

    Your argument is simply fallacious.

    The main issue I haven't bought up is the "opportunity cost" Opportunity cost is why buying or leasing new always loses. Opportunity cost asks what is the optimal use of the money, all things considered.

    1st issue....transportation is a need, so that need must be met in some manner, but does it really need to be met with a $600 per month new car? Never.

    So, if the choice is $600 per month for new, or $220 per month for used. Opportunity cost asks you should you do with that $380 difference. Is it really "better" to put it toward the new car...or something else (savings, etc). Better to have $22,800 in the bank after 5 years.

    Also, the same argument even works against the "business" lease. Generally, the savings between a $2,000 per month BMW and a $300 per month "sensible" vehicle will off set any tax advantage that you "perceive." Especially in the case of a luxury car, it is not a dollar for dollar tax deduction. You must factor in the percentage of business use and then there is the IRS inclusion table that reduces (although, that is fairly minor). Moreover, the vehicle deduction only offsets income, as you know, it is not that you pay $25K less in tax, it is only that you get to reduce your taxable income by $25,000, so the tax savings only amounts to the marginal tax rate. Too keep the math simple, if you earned $250,000 without the vehicle deduction, and would earn $225,000 with the deduction. That puts you in the 33% bracket (married filing joint), either way. That means you only save $8250 in taxes (actually, the number is less, but for the sake of illustration, just keeping the math simple), that is $33,000 over 4 years in tax savings. Now, if you bought or leased a car for 300 per month, over 48 months (vs $2000), that is a savings of $20,400 per year, or $81,600. As such, it hardly seems reasonable to SPEND an additional $81,600 over 4 years to receive a tax savings of $33,000.

    But, the argument that it is all "personal" preference is merely an admission of a fact. I agree, people have preferences and have choices. But that does not imply that it is right or smart to engage those preferences.
    Last edited by HHM; 07-02-2012, 01:00 PM.

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    • #32
      Originally posted by HHM View Post
      That is just an excuse for rampant consumerism and plays right into the hands of the leasing companies.

      You could prefer (and many people do) to eat a dozen donuts a day...but that doesn't make it a good or the right choice.

      Your argument is simply fallacious.

      The main issue I haven't bought up is the "opportunity cost" Opportunity cost is why buying or leasing new always loses. Opportunity cost asks what is the optimal use of the money, all things considered.

      1st issue....transportation is a need, so that need must be met in some manner, but does it really need to be met with a $600 per month new car? Never.

      So, if the choice is $600 per month for new, or $220 per month for used. Opportunity cost asks you should you do with that $380 difference. Is it really "better" to put it toward the new car...or something else (savings, etc). Better to have $22,800 in the bank after 5 years.

      Also, the same argument even works against the "business" lease. Generally, the savings between a $2,000 per month BMW and a $300 per month "sensible" vehicle will off set any tax advantage that you "perceive." Especially in the case of a luxury car, it is not a dollar for dollar tax deduction. You must factor in the percentage of business use and then there is the IRS inclusion table that reduces (although, that is fairly minor). Moreover, the vehicle deduction only offsets income, as you know, it is not that you pay $25K less in tax, it is only that you get to reduce your taxable income by $25,000, so the tax savings only amounts to the marginal tax rate. Too keep the math simple, if you earned $250,000 without the vehicle deduction, and would earn $225,000 with the deduction. That puts you in the 33% bracket (married filing joint), either way. That means you only save $8250 in taxes (actually, the number is less, but for the sake of illustration, just keeping the math simple), that is $33,000 over 4 years in tax savings. Now, if you bought or leased a car for 300 per month, over 48 months (vs $2000), that is a savings of $20,400 per year, or $81,600. As such, it hardly seems reasonable to SPEND an additional $81,600 over 4 years to receive a tax savings of $33,000.

      But, the argument that it is all "personal" preference is merely an admission of a fact. I agree, people have preferences and have choices. But that does not imply that it is right or smart to engage those preferences.
      Paying cash for a pre-owned car is always the best financial decision, however knowing must people can not or will not do that leasing is a viable option for many people. Just had clients wanting to finance a used $6,000 car with high miles for a college student. Now in addition to their $200 payment they figured on spending another $50 per month on maintenance. after spending that every month for 36 months they would own a car that was most likely worn out and worth nothing, not to mention crossing their fingers and hoping daughter did not call with a breakdown on the side of the road. So instead of spending $9,000 on a used car, they leased a new 2012 compact for 189 a month for 36 months w/ 2000 down. It will cost virtually nothing to drive this car for 3 years. At that point she can keep the car and pay off the lease, turn it in and buy something else, or sometimes even sell it for a profit. It's funny, I have clients who wil buy car after car, finance for 60 months, then before it's paid off, trade and buy another. They would be way better off leasing. However they want to OWN the car, they don't realize they bank owns it till it's paid off, lol!

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      • #33
        Don't forget to factor in residual value.

        Also, the car maintenance issue is ALWAYS over blown. That is just fear. Granted, you need to be sensible in what you buy and do your homework.

        In your example, total acquisition cost, $8804.
        I assume the $200 a month payment on the used car was for 36 months? Acquisition cost $7200.
        The largest expense you will have on most used cars is tires. (generally, you want have a tire issue on new cars until after 3 years).

        In 3 years time, that used car probably has a residual value of $2,000 to $2,800. So, true, net acquisition cost is $5,200. Also, the used car is most likely cheaper to insure.
        They REALLY DONT come out ahead. They just need to become more savvy car shoppers when it comes to used vehicles.

        Any more, most cars will last at least 10 years with NO major issues. Pretty much anything made after 2002 will easily last 15 years and as so long as you do regular maintenance, your only major expense will be tires every few years, but that is no different than any other car.

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        • #34
          Originally posted by HHM View Post
          Don't forget to factor in residual value.

          Also, the car maintenance issue is ALWAYS over blown. That is just fear. Granted, you need to be sensible in what you buy and do your homework.

          In your example, total acquisition cost, $8804.
          I assume the $200 a month payment on the used car was for 36 months? Acquisition cost $7200.
          The largest expense you will have on most used cars is tires. (generally, you want have a tire issue on new cars until after 3 years).

          In 3 years time, that used car probably has a residual value of $2,000 to $2,800. So, true, net acquisition cost is $5,200. Also, the used car is most likely cheaper to insure.
          They REALLY DONT come out ahead. They just need to become more savvy car shoppers when it comes to used vehicles.

          Any more, most cars will last at least 10 years with NO major issues. Pretty much anything made after 2002 will easily last 15 years and as so long as you do regular maintenance, your only major expense will be tires every few years, but that is no different than any other car.
          Valid points, however for many people who have to finance a major car repair, they may well spend more, especially on older cars. Have a friend who would never lease a car, but his daughters 200k Accord which he paid $5,500 for, he has spent over $2,000 on it the last 2 years and it is probably worth $1200 now. And he still crosses his fingers every time she goes back to school. Not to mention the safety equipment that has made cars so much safer over last couple years. If you get a call at midnight that your child was in a wreck, would you rather them be driving a new Civic or a 1998 Grand Am, lol! Seriously I plan on paying cash for my daughter a nice $10,000 car when that time comes.

          Comment


          • #35
            Originally posted by HHM View Post
            But, the argument that it is all "personal" preference is merely an admission of a fact. I agree, people have preferences and have choices. But that does not imply that it is right or smart to engage those preferences.
            Well, there are people who spend several thousands of $$ to travel around the world although they could spend their vacation at a Motel 6 close by. And now?
            Filed CH7 9/24/2010, 341 on 10/28/2010, Disch.&Closed: 1/6/2011. FICO EX: 9/2: 672.
            FICO EQ: pre-filing: 573, After BK Public Record: 568, 10/3: 673.
            FICO TU: pre-filing: 589, After BK Public Record: 563, 9/2: 706.

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            • #36
              This thread has strayed far off topic and is now CLOSED.
              The information provided is not, and should not be considered legal advice. All information provided is only informational and should be verified by a law practioner whenever possible. When confronted with legal issues contact an experienced attorney in your state who specializes in the area of law most directly called into question by your particular situation.

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