Car Lease For Business
There are a lot of things that must be taken into consideration when deciding to take a car lease for business. With this article we will try to go through some of the aspects that you need to think of before making such an important financial decision.
First of all, the overall cost of your lease will depend greatly on the residual value, which is the value that the vehicle will have at the end of the contract. You need to know that the higher the residual value is, the lower the price for the lease will be. Taking into consideration the fact that this residual value represents depreciation, you should understand that the smaller depreciation is on that car, the more affordable the lease will be. This residual value is the result of a percentage of the manufacturer’s suggested retail price (MSRP) so make sure that you ask the dealer to inform you regarding this important figure.
Second of all, you’ll have to choose between an open or closed lease. The first one is considered to be better in regards to the tax deductions in comparison to the closed lease as you pay all of the expenses which are deductible whereas in a closed lease you can’t deduct any of the expenses.
Next order of business would be to think about the lease term. You need to understand that in most cases, the short term leases are more expensive than the long ones. The reason for this is due to the fact that the residual value drops significantly in the first two years. Most of the lease terms are for 24, 36 or 48 months. It is advisable not to extend the lease past the pre-established period and make sure that you check out the “bumper-to-bumper” warranty.
Prior to deciding to take a car lease, you will have to make an estimation regarding the annual mileage that you will make with the car. A regular lease will limit you to 12,000 miles per year, but for those that know they’ll make more than that, this limit can be extended but there are extra costs involved. If you go pass this limit, prepare to pay fees for the additional miles that you’ve made.
You cannot get rid of those sales taxes but you can negotiate those with the dealer and come up with a good reduction. Speaking of fees and taxes, these dealers have a bad habit of imposing an acquisition fee or other similar fees. It would be best to negotiate these fees out. Other dealers will also ask you to make an advance payment which isn’t a down payment or a deposit; it is part of the total payment.
Depending upon the size and the type of the vehicle that you want to lease, the depreciation level which you will be able to deduct depends on these characteristics so choose wisely.
There are many lease cost calculators online where you will be able to get a rough estimation about how much are you going to pay. To obtain these figures, you will have to know the following facts: the aforementioned MSRP, the final price tag of the car, the amount of down payment that you are going to make (if any), the sales tax rate applicable in your area, the term of the lease, the new car lending rate as well as the residual value (the value of the vehicle at the end of the lease).
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