I have new Jeep on order and am thinking of leasing this one. With current trade values so high my old Jeep is worth quite a lot. I’m thinking of putting 4,000 to 5,000 down on the lease and taking the balance of my trade value out in cash to pay for a new golf cart. It will mean a little more sales tax to pay and higher lease payments, I know. OTOH, if I take an extra $10K from my IRA I’ll pay 22% federal tax and 5% state tax. Any thoughts on my strategy?
I have new Jeep on order and am thinking of leasing this one. With current trade values so high my old Jeep is worth quite a lot. I’m thinking of putting 4,000 to 5,000 down on the lease and taking the balance of my trade value out in cash to pay for a new golf cart. It will mean a little more sales tax to pay and higher lease payments, I know. OTOH, if I take an extra $10K from my IRA I’ll pay 22% federal tax and 5% state tax. Any thoughts on my strategy?
Leasing is like an annuity. The devil is in the details and minutiae of the contract which was drafted by the very people trying to sell you their product and so favors their position in every regard.
Read up on all the things you can be charged extra for when you eventually turn in the leased vehicle.
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"I have new Jeep on order and am thinking of leasing this one. With current trade values so high my old Jeep is worth quite a lot. I’m thinking of putting 4,000 to 5,000 down on the lease and taking the balance of my trade value out in cash to pay for a new golf cart. It will mean a little more sales tax to pay and higher lease payments, "
If current trade in values are so high, why lease?
You pay high prices each month (Mostly depreciation and interest) to rent a car for 3 years. At the end, you no longer have a car. You turn it back it. Then what?
You pay an up front charge to lease – often thousands of bucks. You pay life insurance in case you croak and so the lease is paid off in full.
If you are cash poor, finance the car - check you local banks/savings and loans for lowest new car loan rates.
Often if you buy, you get either a big cash back incentive or zero financing (which means higher price to start of course - you always pay the interest).
Unless you use for business, there is nothing but $$$ loss in leasing. For business you can write off some of the expenses. (like 60c a mile now).
So ask yourself…you lease for 3 years - paying a lot of ‘depreciation’ for those years…and at the end…you wind up with NOTHING but a lot of receipts for payments for 3 years. If you put a ding in the car, YOU pay to get it fixed. Scratches? You pay big time. Any damage - you pay big time. Maybe things you wouldn’t fix if it was yours - but it is ‘theirs’ and they want it show room perfect after 3 years. Don’t spill stuff on the seats or carpets…
I assume you’re buying a Jeep for Jeep purposes. Not driving on 4 lane roads all the time only in nice weather and parking it in a garage 100% of the time? Or not? Otherwise, why buy a Jeep?
t.
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Leasing is expensive as compared to outright purchase, or at least it was last time I considered leaasing. However, leasing is convenient, particularly if you routinely change family automobiles every 3 years or so and you don’t want to be bothered by what to do with your old (3 year old) car.
I considered it when we got out current car…2016 Mazda CX-5. But the numbers were simply too big for the lease, particularly when with our credit score we could get a 3 year 1.2% APR loan with our CU with payments automatically deducted from out account each month.
I think leasing made a lot more sense when cars started becoming expensive to repair after a few years. But modern cars just seem much more reliable even with higher numbers on the odometer.
As to your $10K from your TIRA. The one thing I can think of is if you regularly give to charities and you are at least 70.5, you might consider using your taxable account cash towards the $10K and use your IRA to make the charitable contributions you’d normally make, using the Qualified Charitable Distribution which, tax wise, is the same as making a contribution then deducting it as an itemized deduction, which few retired person do as the vast majority use the standard deduction. Just seems expensive to lose 27% of your TIRA withdrawal to income tax.
BruceM
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