How hard to lease a car after BK 7 discharge?

[justbroke]

JB, out of curiosity, where did you get that chart?

I found it somewhere in an extensive search of the Internet. I was considering leasing from Toyota (and was approved for lease or purchase). The guy told me I was Tier 2 so I was trying to figure out what that meant. I think Credit Boards has a version, but it only lists Tiers 1, 2 and 3. I'm not sure, but this list may have come from the MyFico forums and appears to date to 2009.

I like it because it shows how Toyota Financial Services (TFS) considers tiers.

(I don't know how long this link will be valid, but it's a Scion dealer that lists the Toyota Financial Services (TFS) tiers... http://fredhaasscioncountry.com/Pure...on=FinanceRate, It appears to be the same ranges.)

[ksgirl38]

We probably shouldn't start that issue here, but it is really isn't a DEBATE....focusing on the monthly payment is just stupid. Why wouldn't you focus on the total deal...also, leased cars are more expensive to insure.

I have to completely agree with this. Don't fall for the "how much would you like to pay each month" question that the car salesmen are notorious for. You could end up spending $300 a month over 4 years or 6, it's a huge difference.

Also, why would you consider a lease? The only people that ever benefit from a lease are people who put high miles on cars. It really is your best option to buy. You would get such a better deal buying vs leasing.

[IBroke]

I have to completely agree with this. Don't fall for the "how much would you like to pay each month" question that the car salesmen are notorious for. You could end up spending $300 a month over 4 years or 6, it's a huge difference.
Also, why would you consider a lease? The only people that ever benefit from a lease are people who put high miles on cars. It really is your best option to buy. You would get such a better deal buying vs leasing.

Unless you know the circumstances of the OP, you have to be very careful with general assumptions. And actually, it's the other way round: Leases are a better deal for people putting low to average miles on their car (10-12K miles a year, 15K is often considered the maximum).

I once leased a BMW 760Li (MSRP: $130K) with a monthly-lease-payment of about $2,300. Financing would have cost me the same - maybe even less because that vehicle was a V12 with a terrible resale value. However, I elected to lease because this way, I had an additional annual tax-deduction of more than $25,000. So why should I have purchased this car? To pay additional $$ to Uncle Sam?

I know that this is an extreme example but it shows the danger of general assumptions ("You should never lease..." etc.).

[HHM]

But we are not talking BMW and "excessive" consumption here...it is an extreme example, and a pointless example because the retort is easy...there is no purpose in getting such a car.

We are talking someone who just got out of BK who needs a car.

I am quite comfortable in stating that leases, and for that matter, buying a NEW car will ALWAYS be the more expensive than an alternative.

[IBroke]

But we are not talking BMW and "excessive" consumption here...it is an extreme example, and a pointless example because the retort is easy...there is no purpose in getting such a car.

"Excessive consumption" is not the point. If you have a certain income, you need certain tax-deductions or Uncle Sam is going to come after you. Plain and simple. You may not like the example - but it's valid.

However, if you want to exclude BMW and all other luxury cars from your claim, you should have done so right from the start because those are the cars where leasing really pays out. And to my knowledge, people leasing these cars often know exactly what they are doing - especially money wise.

We are talking someone who just got out of BK who needs a car.

Correction, you are talking about "always".

That's why I advised to stay away from general assumptions. Not "everybody" who's leasing a car is just coming out of a BK and there are even "some" people who might have to pay taxes on their income although they filed for BK at some point in time.

I am quite comfortable in stating that leases, and for that matter, buying a NEW car will ALWAYS be the more expensive than an alternative.

We were talking about either leasing or financing the exact same vehicle - not about "new or pre-owned".

You are certainly entitled to your opinion - but I trust the majority of financial experts that claim that the choice between financing and leasing is something to be made on a case-by-case basis - or in other words, there is no choice that is ALWAYS better.

[ksgirl38]

I don't mean this to come across rude here, but if you are leasing a BMW and filed bankruptcy then it sounds like you are in a whole world of financial problems. Wouldn't that fall into the living about your means category? I would hope that most people on this forum wouldn't be going around driving BMWs if they have financial problems. I guess I agree with HHM in that buying over leasing is still the better option. Even if you don't put a lot of miles on the car, wouldn't that help out your resale value later should you decide to sell? To me it just makes more sense.

Also, I'm not understanding the logic in buying an expensive car just to get the tax deduction. Wouldn't the initial cost outweigh the benefits of the tax deduction. I'm actually not familiar with this, but I just don't understand buying something excessive to get a tax deduction. How do you come out ahead here and by how much? To me it seems like it would make more sense to buy a less expensive, but sensible car whether you get the tax deduction or not. Sorry, I just don't get this. Maybe someone can explain.

[IBroke]

I don't mean this to come across rude here, but if you are leasing a BMW and filed bankruptcy then it sounds like you are in a whole world of financial problems. Wouldn't that fall into the living about your means category? I would hope that most people on this forum wouldn't be going around driving BMWs if they have financial problems.

This isn't only rude, this is flat out ridiculous and insulting. So YOU know my financial background?

I wasn't born in "financial troubles". I had a very, very good job and only lost it after many, many years due to the economical meltdown. But WHEN I had that high income, I had to structure my finances around it - just like anybody else. I'm single, have no children and no family to support and had a 6-figure income - so I had to show the IRS some expenses before being eaten alive..

So are you claiming that everybody who is leasing is living about his or her means? Interesting..

I guess I agree with HHM in that buying over leasing is still the better option. Even if you don't put a lot of miles on the car, wouldn't that help out your resale value later should you decide to sell? To me it just makes more sense.

It sounds to me that you have no idea about leasing in general. The higher the resale value and the lower your miles are, the lower the lease-payment is as well. That's the whole idea behind it. If leasing is the way to go or not often even depends on the car itself. Some have a good residual - others don't.

Also, I'm not understanding the logic in buying an expensive car just to get the tax deduction. Wouldn't the initial cost outweigh the benefits of the tax deduction. I'm actually not familiar with this, but I just don't understand buying something excessive to get a tax deduction. How do you come out ahead here and by how much? To me it seems like it would make more sense to buy a less expensive, but sensible car whether you get the tax deduction or not. Sorry, I just don't get this. Maybe someone can explain.

Leasing usually has a lower initial cost than financing. You don't even have to pay the entire sales-tax when obtaining a new car. Only your monthly payment is taxed. When financing, you often need a substantial down-payment to even get in rage of the lower lease-payment. The entire sales-tax is due as well - and often, you're even paying interest on that.
Every single $ you put down on a lease lowers your monthly payment more drastically than the same amount on a financed car.

And just to bring this back on topic: We are not talking about "expensive cars" in general. My case was an example - and a rare one. Leases can already start at $200/month, sometimes even lower.

Here is some info - a little "crash-course" so you know what we are talking about:

http://www.leaseguide.com/lease03.htm

[msm859]

I said virtually impossible, not actually impossible

The stars would really need to align to get a within a year after BK. Much will depend on the leasing company. Even though there is a FICO score for auto loans, it doesn't mean everyone uses it. It will just depend on the dealer, leasing finance company, and the car manufacturer.

I think the "proper expectation" to set is that you won't be able to lease within a year or 2 after BK.

Time frame seems about right 1 1/2 years post discharge I am 1 point off - Equifax score 669. Should be above that in 6 months when my current lease runs out.

As to the question lease vs buy there are a lot of variables. Is a business buying it? May be better to lease. Is it a Chevrolet Volt? May be better to lease if you don't have $7500 in tax liability so you get the full federal tax credit - the leasing company would and give you the benefit. But as a general rule, for an individual leasing is more expensive then buying in the long run.

[IBroke]

As to the question lease vs buy there are a lot of variables. Is a business buying it? May be better to lease. Is it a Chevrolet Volt? May be better to lease if you don't have $7500 in tax liability so you get the full federal tax credit - the leasing company would and give you the benefit. But as a general rule, for an individual leasing is more expensive then buying in the long run.

Absolutely right. It's a case-by-case decision.

[ksgirl38]

This isn't only rude, this is flat out ridiculous and insulting. So YOU know my financial background?

I wasn't born in "financial troubles". I had a very, very good job and only lost it after many, many years due to the economical meltdown. But WHEN I had that high income, I had to structure my finances around it - just like anybody else. I'm single, have no children and no family to support and had a 6-figure income - so I had to show the IRS some expenses before being eaten alive..

So are you claiming that everybody who is leasing is living about his or her means? Interesting..



It sounds to me that you have no idea about leasing in general. The higher the resale value and the lower your miles are, the lower the lease-payment is as well. That's the whole idea behind it. If leasing is the way to go or not often even depends on the car itself. Some have a good residual - others don't.



Leasing usually has a lower initial cost than financing. You don't even have to pay the entire sales-tax when obtaining a new car. Only your monthly payment is taxed. When financing, you often need a substantial down-payment to even get in rage of the lower lease-payment. The entire sales-tax is due as well - and often, you're even paying interest on that.
Every single $ you put down on a lease lowers your monthly payment more drastically than the same amount on a financed car.

And just to bring this back on topic: We are not talking about "expensive cars" in general. My case was an example - and a rare one. Leases can already start at $200/month, sometimes even lower.

Here is some info - a little "crash-course" so you know what we are talking about:

http://www.leaseguide.com/lease03.htm

Well I'm sorry if I offended you, that wasn't my intention.

Leasing a BMW just seems like a luxury expense to me and I'm trying to understand why someone on a bankruptcy forum would be leasing a BMW rather than buying a Ford. It just seems like you'd pay more in the long run in lease payments without anything to show for it.

I've never come across anyone that put a lease payment on their taxes before. Was this a business expense? Maybe that's different.

I guess I'm thinking about the end period of the lease where you have the option to buy the car or hand it back without any equity to show for. To me it just seems like any car after 4 years would be worth something therefore help you out if you were wanting to trade it in on something else rather than walking away from a lease with nothing. I guess I'm looking at the big picture rather than the individual payment amount.

True, you do usually need a large downpayment, but most people usually trade off one car for another so they usually have something to apply to the new car, even if it's only worth $1000. Every little bit helps.

I guess it depends on where you buy the car, but last one I paid the sales tax at the time of registration. I think some states will allow you to roll it into the loan, but I believe it varies by state.

Maybe I'm different, but I've always bought and I've never had a car payment over $275. I'm thinking of it this way, you buy a car and pay it off in 4 years and then you have the option of taking the value of that car and applying it to a newer car or keeping it for the next 4-6 years without payments. Versus a lease where you make payments for 4 years and then have nothing to show for it after the 4 years and then have to start over making payments on another car. Sure you have the option of buying the car at the end of the lease, but typically you get screwed on those deals. I'm looking at the total value over the entire lifetime of the car and when you look at it that way it actually costs less to buy.

[IBroke]

Well I'm sorry if I offended you, that wasn't my intention.

Leasing a BMW just seems like a luxury expense to me and I'm trying to understand why someone on a bankruptcy forum would be leasing a BMW rather than buying a Ford. It just seems like you'd pay more in the long run in lease payments without anything to show for it.

I'm not suggesting that everybody should lease a BMW. In fact, the discussion about buying or leasing was a GENERAL discussion and was not focused on people who are and were in bankruptcy. As I said, when I leased the BMW, I was everything but bankrupt and financing the car at the exact same monthly payment - just without tax advantages - certainly wouldn't have helped me to avoid bankruptcy. My filing had actually nothing to do with my vehicle. I would have had to file even if I would have owned my car free and clear.

I've never come across anyone that put a lease payment on their taxes before. Was this a business expense? Maybe that's different.

For businesses and self-employed individuals, this is common practice.

I guess I'm thinking about the end period of the lease where you have the option to buy the car or hand it back without any equity to show for. To me it just seems like any car after 4 years would be worth something therefore help you out if you were wanting to trade it in on something else rather than walking away from a lease with nothing. I guess I'm looking at the big picture rather than the individual payment amount.

Your assumption is right that a vehicle that was financed for 4 years probably has some equity while a lease hasn't. However, the question is: How much cash would you have on hand after 4 years of lower lease-payments compared to what you would have already paid on your loan? If you get a new car every 4 years, I doubt that financing would put you in a better position. That's why HHM and msm859 were saying that financing is better in the long run - and by that, they probably thought about financing it until it's completely paid off and keeping it for a couple of years AFTER without any monthly payment. In that case, financing IS the way to go. But getting a new ride every 4 years? I have my doubts..

True, you do usually need a large downpayment, but most people usually trade off one car for another so they usually have something to apply to the new car, even if it's only worth $1000. Every little bit helps.

Again, you forgot about the (potentially) several thousand dollars you had to pay more over these 4 years in order to get that equity in the first place. Money you could have invested elsewhere - with dividends.

If you take some of the money you saved every month due to your lower lease-payment, your new lease will even be less. In most cases, you need a low interest 60 or 72-month loan in order to get anywhere close to compete with a lease. If you take the $1000 as downpayment on the loan, your monthly will be divided by 60 or 72 months (granted, you save some interest - but not that much). However, if you lease, the same $1K are only divided by your lease-term (36 or 48 months), resulting in a bigger saving/month.

I guess it depends on where you buy the car, but last one I paid the sales tax at the time of registration. I think some states will allow you to roll it into the loan, but I believe it varies by state.
Maybe I'm different, but I've always bought and I've never had a car payment over $275. I'm thinking of it this way, you buy a car and pay it off in 4 years and then you have the option of taking the value of that car and applying it to a newer car or keeping it for the next 4-6 years without payments. Versus a lease where you make payments for 4 years and then have nothing to show for it after the 4 years and then have to start over making payments on another car. Sure you have the option of buying the car at the end of the lease, but typically you get screwed on those deals. I'm looking at the total value over the entire lifetime of the car and when you look at it that way it actually costs less to buy.

When I buy in State, the tax is rolled into the deal.

Well, "nothing to show for it" is certainly not the right term. At the same monthly payment, a lease gets you a newer and/or better car - or it gets you the same car for less. If you never had a car-payment over $275 and pay off that loan over 4 years, I have to assume that you are generally buying pre-owned. This is a whole different scenario. It simply depends on your car buying habit. If you buy a new car every 3-4 years (and that car is in fact new), it is hard to argue against leasing. This is certainly not the mentioned "long run" it would take to claim that financing would be better.

I can only recommend that you read the article I posted before - it is very interesting and explains the details.

The main issue with cars is that they depreciate. This sad fact, however, has nothing to do with leasing or buying. If it's the same car, the depreciation stays the same.

BTW, I financed more vehicles in my life than I leased - I just evaluate the deal before I pull the trigger - each and every time. There are so many deciding factors out there. Depending on current offers, it can even make sense to lease one day while financing the same car the next day (changing incentives etc.).

[ksgirl38]

I'm not suggesting that everybody should lease a BMW. In fact, the discussion about buying or leasing was a GENERAL discussion and was not focused on people who are and were in bankruptcy. As I said, when I leased the BMW, I was everything but bankrupt and financing the car at the exact same monthly payment - just without tax advantages - certainly wouldn't have helped me to avoid bankruptcy. My filing had actually nothing to do with my vehicle. I would have had to file even if I would have owned my car free and clear.



For businesses and self-employed individuals, this is common practice.



Your assumption is right that a vehicle that was financed for 4 years probably has some equity while a lease hasn't. However, the question is: How much cash would you have on hand after 4 years of lower lease-payments compared to what you would have already paid on your loan? If you get a new car every 4 years, I doubt that financing would put you in a better position. That's why HHM and msm859 were saying that financing is better in the long run - and by that, they probably thought about financing it until it's completely paid off and keeping it for a couple of years AFTER without any monthly payment. In that case, financing IS the way to go. But getting a new ride every 4 years? I have my doubts..



Again, you forgot about the (potentially) several thousand dollars you had to pay more over these 4 years in order to get that equity in the first place. Money you could have invested elsewhere - with dividends.

If you take some of the money you saved every month due to your lower lease-payment, your new lease will even be less. In most cases, you need a low interest 60 or 72-month loan in order to get anywhere close to compete with a lease. If you take the $1000 as downpayment on the loan, your monthly will be divided by 60 or 72 months (granted, you save some interest - but not that much). However, if you lease, the same $1K are only divided by your lease-term (36 or 48 months), resulting in a bigger saving/month.



When I buy in State, the tax is rolled into the deal.

Well, "nothing to show for it" is certainly not the right term. At the same monthly payment, a lease gets you a newer and/or better car - or it gets you the same car for less. If you never had a car-payment over $275 and pay off that loan over 4 years, I have to assume that you are generally buying pre-owned. This is a whole different scenario. It simply depends on your car buying habit. If you buy a new car every 3-4 years (and that car is in fact new), it is hard to argue against leasing. This is certainly not the mentioned "long run" it would take to claim that financing would be better.

I can only recommend that you read the article I posted before - it is very interesting and explains the details.

The main issue with cars is that they depreciate. This sad fact, however, has nothing to do with leasing or buying. If it's the same car, the depreciation stays the same.

BTW, I financed more vehicles in my life than I leased - I just evaluate the deal before I pull the trigger - each and every time. There are so many deciding factors out there. Depending on current offers, it can even make sense to lease one day while financing the same car the next day (changing incentives etc.).

No, I buy new with payments under $275 and usually a loan no longer than 4 years. Although this last time I got 0% interest so it really doesn't matter. And my sales tax was rolled into it this time so I'm not paying interest on that either. This is what I would advise to anyone buying, a loan no longer than 4 years (unless you can get 0% interest) and payments as low as you can get. You can always pay more each month and pay it off early which is what I would advise. That's what I did with my last car. I was able to shorten the loan term by one year by paying an additional $50 per month.

I think we're on 2 separate pages here.

Most people don't buy a new car every 4 years. I know I don't. A few days ago I saw something on the news about how Americans are hanging onto cars longer now, longer than ever before, which means you can probably get a better deal now on a new car than a couple of years ago. Keeping this in mind makes buying the better option. I think most people on this forum are looking to get something that's going to last them the next 8-10 years which is why I would suggest buying over leasing. If you are planning on keeping it that long you and can get a 4 year loan then you can easily have 4 years of no payments. From the posts I've read most people here just want reliable transportation and although it's nice to have a new car, (who doesn't love new car smell?), for most people it's more important to just have reliable transportation.

So how much did you pay over 4 years for the car you leased?

Another thing to the OP that I read about recently was a girl that determined what she wanted ahead of time and just called all the dealerships around her area to see who had what she wanted at the price she wanted. Do your research online and then make them come to you. You can probably get a better deal that way and waste a lot of time visiting every dealership if you know what you want.

[HHM]

Let's clarify a few things. The tax deduction in question relates to the use of a vehicle "in business" or as a "material, uncompensated instrumentality for your job." Not personal...otherwise known as the "real estate agents" vehicle deduction

So, you take that out of the equation, since it is NOT a personal expense, a lease at that point cannot be justified.

As such, I think it is highly unfair to come in here and argue that leasing makes sense or that it is a "case by case" basis when the ONLY scenario in which it "might" make sense is when the person is using the vehicle for business purposes.

Purchasing a used car, even only slightly used and holding will ALWAYS beat a personally leased vehicle. The problem with the article in question, is that it only compares ONE scenario...but there are many options for buying cars...here is a novel idea, pay cash and keep the car for a long time, you will beat a lease every time.

[IBroke]

Let's clarify a few things. The tax deduction in question relates to the use of a vehicle "in business" or as a "material, uncompensated instrumentality for your job." Not personal...otherwise known as the "real estate agents" vehicle deduction

So, you take that out of the equation, since it is NOT a personal expense, a lease at that point cannot be justified.

If I run a business, it should personally matter what I can deduct while doing so. After all, my business-tax DOES affect my personal financial health, right?

As such, I think it is highly unfair to come in here and argue that leasing makes sense or that it is a "case by case" basis when the ONLY scenario in which it "might" make sense is when the person is using the vehicle for business purposes.

I never claimed that a potential tax-advantage is the "ONLY" scenario where a lease makes sense. The article lists other scenarios as well. The best example: If it's your PERSONAL CHOICE to obtain a new car every 3 or 4 years. While you might object to the idea as a whole, comparing leasing and buying in THIS PARTICULAR SCENARIO, leasing is the better choice - no matter if you consider tax-deductions or not. There are millions of people in this country alone who are doing just that. THEY WANT a late model car, THEY WANT a car under factory-warranty and THEY WANT a better car at a lower monthly payment. It's just mood to discuss if it makes financially sense compared to buying pre-owned or cash. That is a FUNDEMANTEL question and another PERSONAL CHOICE. And if they want what I just mentioned, they should lease - and rightfully so. If we throw that together, we are comparing apples to oranges.

It certainly is a case-by-case decision. The fact alone that personal choice and/or preference is part of the decision automatically defines it as such. You can't put a value on driving a new car compared to driving an older - simply because such value would be different to each and everybody.

Purchasing a used car, even only slightly used and holding will ALWAYS beat a personally leased vehicle. The problem with the article in question, is that it only compares ONE scenario...but there are many options for buying cars...here is a novel idea, pay cash and keep the car for a long time, you will beat a lease every time.

Only one scenario? I see several...and the bold part is basically to what it boils down to.

Lease or Buy? What's Important to You? What Are Your Priorities?

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.

LEASE - (1)If you enjoy driving a new car every two or three years, (2)want lower monthly payments,(3) like having a car that has the latest safety features and (4)is always under warranty, (5)don't like trading and selling used cars, don't care about building ownership equity, have a stable predictable lifestyle, drive an average number of miles, properly maintain your cars, are willing to pay more over the long haul to get these benefits, and understand how leasing works, then you should lease.

BUY - If you don't mind higher monthly payments at first, like holding on to your cars, prefer to build up some trade-in or resale value (equity), enjoy the idea of having ownership of your car, like paying off your loan and being payment-free for a while, don't mind the unexpected cost of repairs after warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, might have lifestyle or job changes in the near future, and don't like the risk of possible lease-end charges — then you should buy.

This section really reminds me of what I posted before.

[IBroke]

No, I buy new with payments under $275 and usually a loan no longer than 4 years. Although this last time I got 0% interest so it really doesn't matter. And my sales tax was rolled into it this time so I'm not paying interest on that either.

So the loan-amount for a brand new car at $0 interest, was $13,200 after taxes? May I ask what car that was? That sounds like a very high downpayment/trade-in.

Most people don't buy a new car every 4 years. I know I don't. A few days ago I saw something on the news about how Americans are hanging onto cars longer now, longer than ever before, which means you can probably get a better deal now on a new car than a couple of years ago. Keeping this in mind makes buying the better option. I think most people on this forum are looking to get something that's going to last them the next 8-10 years which is why I would suggest buying over leasing.

The fact that most people keep their car longer than 4 years doesn't mean that this applies to everybody. That's what I'm trying to explain and that's why I object to these "buying is always better than leasing". It might be for you - but that doesn't mean that applies to everybody. Why a better deal on a new car should only lead to an advantage when buying is a mystery to me. The lower price or better offer lowers your potential lease accordingly - so that doesn't make a difference. Manufacturers are offering incentives on both.

If you are planning on keeping it that long you and can get a 4 year loan then you can easily have 4 years of no payments. From the posts I've read most people here just want reliable transportation and although it's nice to have a new car, (who doesn't love new car smell?), for most people it's more important to just have reliable transportation.

This is a perfect example of my previous mentioned PERSONAL CHOICE.

So how much did you pay over 4 years for the car you leased?

In my case, the monthly payment was about $2,280 for 48 months. I could use this payment for tax-purposes. Even a 0% financing would have cost me $1,930/month for 72 months - but BMW didn't offer that kind of deal on that vehicle. So I made the personal choice and went for the lease. Since this wasn't my only vehicle at that time, I could claim a huge % for business.