My insurance company offers coverage for the down payment

 

In my jurisdiction, the maximum you can write off for business purposes is $950.00/month plus taxes.So, you can put $20,000 down on a car and lease for that amount and write the lease payment off or put zero down, have a lease payment of $1,500/month and lose the write off on the whole amount. Or you can just buy the car outright and have no write off because the value of the car is higher than the maximum allowable. I'm sure the rules are different in the US.

As to the lease pull ahead, there must be a way for PCNA to factor this in in calculating you equity position considering market value and how much you've paid in total towards the depreciation of the car. I admit I have no experience with pull ahead leases though.

 

The concept you can read about is "gap insurance".

The insurance pays the owner (the car company) the value of the car. If you crash 1 year into a 3 year lease you owe money since deprecation is higher in year 1. For that there is gap insurance, which fills that gap so that you owe nothing and the car just goes away from your standpoint.

However, most gap insurance only cover up to the amount of money before cap reduction aka downpayment. Same concept, the leased car just goes away without any further payments from anybody. But your downpayment is gone.

 

I have experience with a pull ahead. We had a 39 month lease on a 2012 Cayenne Diesel. My wife loved it so much, she stopped driving her beautiul Z4 and only drove the Cayenne. We ordered a replacement Diesel and traded in the first one at 29 months. We were allotted 48750 miles on the 39 month lease. We had 48400 when we turned it in 10 months early, and the mileage isn't pro rated! We just walked away from it and into our new one.

If you can get a lower priced longer lease, and plan on replacing it with another Porsche, its a pretty good deal.

 

And $0.30/mile is A LOT less than typical depreciation on most Porsches, so from that perspective it's a bargain.

 

I also confused this with gap insurance. Lots of mixed messages online regarding insurance and taxes including mine. From what I understand, gap insurance covers the dealer, not you. If you total a leased car, and what you owe is more than what your insurance covers, then you would have to pay the difference unless you have gap insurance. PFS includes gap insurance last time I checked.

If you do a one pay lease payment, then the dealer doesn't care if you have gap insurance because your lease payment likely covers the depreciation for the term of your lease. I believe the difference between financing and leasing is that when you finance your car, you buy the car and use the car as collateral so if your car is totaled, then your insurance pays you back for the car. When you lease, the dealer/bank owns the car. From what I understand, your insurance company would have to reimburse the dealer/bank and have no obligation to fulfill the remainder of your lease. This is where I wonder why there isn't a big disclaimer that you sign when you do a one pay lease. I hope I have this all wrong. I assume dealers would like to keep a customer that can pay one time lease payments happy. Because the scenario where someone loses a huge down payment on a leased car is so rare is why this is so unclear.

Back to taxes. I don't believe you have to lease a car to write it off. At the same time, just because you own a business, don't think your leased 911 is going to fly when you have to talk to the IRS.

 

We need to say which insurance is in play here.

If you own the car then the situation is about the same. You crash after 1 year your own accident insurance doesn't give you the money for a new car, just for a 1 year old used one. Same difference. Some accident insurance companies do offer to pay for a new car, voluntarily or for a fee you pay.

On a lease that is annoying because you cannot lease a 1 year old car. To avoid constant fights the car banks include gap insurance in the lease payments, and it isn't even an option, it's just there. It is not an insurance you choose to pay, it is included in the lease.

The problem discussed here is the level of coverage for the gap insurance. The car banks have chosen to level gap insurance so that in the case of total loss the entire lease just goes away with nobody owing anybody anything. Simple.

But now the whole deal eats up your "cap reduction" which is your downpayment or trade-in. Sure, there isn't anything to haggle over and nobody has to pay anybody any money, but it is a raw deal for the leaser. Technically your reduced payments during the lease mean that you also pay less gap insurance premium, but that is little money and I think most people would opt for full gap insurance and the $5 or whatever higher premium.

 

On my current BMW I had the following insurance options:

Year 1 top up insurance - in the event of a total loss, gets you a brand new car.

Down payment protection - in the event of a total loss, returns your down payment

Maximum Insured Value - our government insurance covers $50,000 of car value. After thet is roughly $2.00/$1,000 of excess value

From BMW - gap insurance to pay BMW the difference between the market value of the car and the "equity/deficit" value based on the outstanding lease amount/payments made.

In my case, fully covered. Just not sure what happens with a down payment in a lease pull forward. How about I email the dealer and ask him?

 

Off topic, daddyscar, is that your macadamia metallic Cayman in your avatar? One of the best Porsche colors ever in my opinion.

 

So finally my car has arrived at the dealer today, a whole week early from designated arrival date. So now I have been haggling with the sales manager regarding the lease. Still 5% off msrp but they would not budge on the MF of .0026. Here are my deal options:

MSRP $121,461 C4S
Sale price: $115,391
12k miles/36 months
57% residual
$995 acquisition
MF 0.0026
Monthly: $1,913

Im probably going to try to get them to split the maintenance program with me to get the residual higher by 1%.

I drive a lot so I will need at least 12k a year which screws the residuals up.

 

MF should be 0.002 why are they stuck at 0.0026? That's over 6%

 

[QUOTE=aabueg2005;13523643]So finally my car has arrived at the dealer today, a whole week early from designated arrival date. So now I have been haggling with the sales manager regarding the lease. Still 5% off msrp but they would not budge on the MF of .0026. Here are my deal options:

MSRP $121,461 C4S
Sale price: $115,391
12k miles/36 months
57% residual
$995 acquisition
MF 0.0026
Monthly: $1,913



I'm not sure this is possible for you since it would require about $15K out of pocket (down payment), but a Penfed payment saver loan at $100K (their max loan amount) on a C4S is coming up at about $930 per month. That's nearly $1K less than you're looking at with the lease. That's based on a residual of about $71K, not too far from what your getting at 57% of $121K MSRP. So about $15K down to save $36K over 36 months sounds pretty good to me

 

Stick to your guns. Don't pay over the current lease buy rate which is probably 0.0020. Also may want to run the numbers with lower months and miles and calculate the overage cents/mile into the equation.....you may end up ahead. The current deal you are quoting is not very good at all.

 

[quote=Cayman7]I was thinking about that but my problem with these balloon payments since I am only paying for interest on the balloon payment and not the principal, I will be upside down on the car if I decide to sell it after the 60 months is over. Buying it traditionally will make more sense at a lower interest rate.

 

[QUOTE=aabueg2005;13523720]sorry, not following you. Penfed will do terms of 24, 36, 48 or 60 months. The amount I quoted was for a 36 month term. The residual amount they based that payment on is about $71K. Certainly you could end up upside down if the car is worth less than that, but then again it could be worth more. Plus you have a car to trade at the end of the term, which could help you on sales tax on your next car depending on where you live. Where I live, with a 6% tax rate, I'd save $4,200 in tax on a trade worth $70K. For me personally, I would not do the deal you've been presented.

Here's a link to the page if it'll help - https://penfed.org/Payment-Saver-Auto-Loan/
scroll down to the calculators in the lower right corner of this page and select "auto payment saver calculator". You can run a bunch of scenarios

To be clear, the way Penfed works (I've done several of these) you just owe the residual amount at the end of the term (in this case about $71K). At that point you can trade the car, sell it yourself or pay off or finance the balance due. It's pretty simple, and their 36 month interest rate is 1.74%