C.J. Ichiban

Joe the high write down high mile lease then sell to yourself thing works REALLY well on trucks and SUVs. Can probably do that with raptors to max the weight credit as well.

Reality is that trying to get too cute to save 2-5k on a GT car deal is not worth the hassle unless you and your CPA have exit strategies planned.

One thing we can all agree on is that we feel like stretching for houses or cars is somewhat justified but not always safe based on the fact that you might be only able to pay X and it costs X+Y

I definitely used every method of lease/finance/cash/favor/LLC possible to obtain the cars I have, and so many factors affect which one at which time that there is no hard and fast rule.

The cash flow, tax rates, write offs, lease specials, etc all change - its very dynamic

usctrojanGT3

I'm a realtor so I could easily justify leasing and taking the deduction on a GT against my commission (I gotta drive something, right?). But I like to keep it simple....pay cash for the car and then put an auto loan on it later when I want liquidity.

C.J. Ichiban

How does your tax guy justify a 2 seat car like a GT3 as a realtor car?

"Gotta get to as many listings as possible NOW"

Hahaha. Every realtor I know wants a big four door

ChicagoWhale

Here is a real-world example to help clarify how a person experienced a GT3 for free. This does not work for buyers who want long-term ownership, and it only works on cars where the MSRP is less than the true market price. This example was done 9 months ago when the market price of slightly pre-owned CPO GT3’s was still $20k/$25k over MSRP, and the money factor was less than today.

Assume a GT3 MSRP of ~$170,000.
Inception fees of ~$4,400 were paid upfront.

Two year lease through PFS with monthly payments of ~$3,800.

After almost two months of driving, the payoff through PFS was slightly less than MSRP. To have a payoff below/near MSRP after this short of a period is only possible on a lease. Had the buyer financed the car, $15k/$17k in taxes would have been rolled into the loan.

At this point, the buyer has paid inception fees and one additional payment ($4,400 + $3800 = $8,200). So far, only $8,200 has come out of his pocket - not too bad for a $170k GT car.

Buyer then sells the GT3 back to the original dealer for $8,000 over MSRP. PFS is paid in full (payoff slightly less than MSRP) by the dealer and the buyer recoups the full $8200 he spent. He just drove a new GT3 for free, albeit for 2 months. Dealer then retails the GT3 for a second time, and collects additional profit. I’ve seen the same thing done for 6 months. If you make an arrangement with a broker/dealer to consign it, you could drive it for longer since you’ll collect more of the profits. For the record, I don’t advocate the broker route since it was the original dealer who sold it to you for MSRP. This is certainly better than having most your equity erased by ~$15k in taxes you incur when you write a check for the car. Some guys will lease for 6 months to a year, and the net cost to them is very little. As I’ve said before, leasing is not necessarily about affordability for some guys… it’s simply a smart way to maximize your equity in this very unique situation.

Regarding RS’s….. because the market price of the RS’s is much further over MSRP than the GT3, you could keep the RS for 6 months, get all your money back and make a profit alongside the dealer. I know of a few situations where GT2RS’s were leased (purely to minimize the tax burden), then sold to dealers/brokers the next month for $75k over MSRP. Of course, this was when GT2RS’s were retailing for $100k or more over MSRP, and it must be sold to a dealer/broker so the tax burden is not applicable. Instead of putting out nearly $375k (MSRP plus taxes), the buyer put out no money, only his good credit for a short period. Many buyers have caught onto this.

It goes without saying, always consult the advice of your accountant before you make decisions like this.

The residuals are ridiculously low. The residual on a GT2RS for three years (5k/year) is 56%. I have no idea what a GT2RS will be worth in 3 years, but I think it’s reasonable to assume it will not lose half its value. Chances are, anyone carrying a GT2RS lease to maturity will have a giant amount of equity at lease-end when the marketplace has finally distributed most of them to the garage of end-users. This equity will more than make up for the higher finance charges incurred on a PFS lease, plus the tax savings which is gigantic. Keep in mind, it was only recently that a 2016 GT3RS finally began selling under MSRP, and the quantity of those was many more.

Again, consult your accountant; do the math alongside him/her. But don’t categorically deny the possibility that a PFS lease is useless because the rate is higher or the residual is low. This situation with GT cars is very unique and, if done properly, you can make it work for your situation.

usctrojanGT3

I'm my own tax guy, I'm a CPA/MBA realtor remember? I'm not your typical realtor and my clients love that. All I have are GT cars and a Prius (designated as the personal car) so I can easily make the argument that one of my GT cars is used over 50% for realtor duties.

usctrojanGT3

You also have to deal with the sunk cost of the registration and insurance but those are small potatoes and I do agree with you that you are basically driving the car for free with not a lot of cash out.

ChicagoWhale

Registration in some states is nominal. In many other states, you get a pro-rated refund. If you lost the entire registration, it's a relatively small cost against a larger savings.

Yippiekiaye

usctrojanGT3

Very true, in CA the registration is a sunk cost while NV gives you a credit that you can use for the prorated remaining amount within the next 12 months.

signes

In CO reg is huge, well over $3-4K for a new RS. you can take the same plate in and roll the fee to the next car w/in 12 months but no refund.

CW's example is a thread the needle case that rarely will work and also depends on a dealer which sold you a car at MSRP to pay you more than that when you trade it. Good luck.

Most of the reactions are coming from the stereotype that leasing is used mostly by those to afford more car than would be possible to buy outright. As cited plenty example where that isn't the case.

I also note some hypocrisy from those using a sports car as a tax deduction while decrying MT LLCs used for the same purpose.

ChicagoWhale

Everyone knows about the tax savings on trades in some states.

The problem is, these GT cars are toys - not primary vehicles. In order not to lose the tax savings, it forces buyers to continually buy another toy. Sometimes buyers want to go a period of time without a car of similar value and then the tax credit is lost - unless you find a dealer who will keep it on their books; but then it makes you captive to them.

ChicagoWhale

I politely disagree. It works more than you think, especially on RS's. If you have a good relationship with your dealer, many dealers will pay you slightly over MSRP to make you whole - provided there is still significant upside for the dealer to resell your car and make a profit. With RS's, there is so much upside over MSRP that a dealer could easily pay you $10k over and still make a large margin. Remember, these RS's were selling at $100k over, and more. My point was fairly simple: leasing a GT car is not nearly as bad as you think, and if done correctly, it can even be profitable or result in no loss whatsoever.

Furthermore, many dealers will consign the car with the original owner and share in the profits when it sells. It all depends on your dealer relationship. If you have no relationship with your dealer, they will try to maximize their profits in the exact same way as you try to minimize your loss - nothing wrong with that.

It will not work all the time, and it certainly won't work as well as it did earlier this year. But don't dismiss the lease purely because the money factor is higher. With the right dealer arrangement, it might work for the both of you.

ace37

WantA997

The math makes sense. The rest, however, does not.

Factors being ignored include how the person got the allocation in the first place (what other cars they had to buy and take a loss on), why the dealer would agree to buy the car back for over MSRP when most dealers have a first right of refusal (at MSRP) clause written into the purchase agreement, etc.

As is the case with nearly everything, "free" is rarely free.

usctrojanGT3

Of course there's a bunch of "holier than thou" hypocrites on here, it wouldn't be RL without them. haha