Leasing cars

16 posts / 0 new

There is a simple reason that people now lease cars instead of buying them: interest on car loans used to be deductible. Among the many Reagan tax increases on the middle class was the elimination of the tax deduction for interest on things like automobile loans and credit cards. With the loss of this deduction, buying a car became a lot more expensive; and since people often trade in a car as soon as the loan is paid off, it now makes sense to to lease, never own the car, and turn it back in after the lease is up.

dorfman
Joined:
Jun. 20, 2011 10:05 am

Comments

When Reagan cut income taxes, as Thom reminds us every minute of his show, he also closed a lot of loopholes that previously were deductible. These changes did much to offset the actual reduction in income tax, and theoretically made the taxcode a little easier to understand.

BTW, your auto loan can easily be made deductible by having it a listed as a home improvement loan. That loophole is still open in most states.

Redwing's picture
Redwing
Joined:
Jun. 21, 2012 5:12 am
Quote Redwing:

When Reagan cut the taxes as Thom reminds us every minute of his show, he also closed a lot of loopholes that previously were deductible. These changes did much to offste the reduction in income tax and made the taxcode a little easier to understand.

BTW, your auto loan can easily be made deductible by having it a listed as a home improvement loan. That loophole is still open in most states.

Can you still lease the pussy Camaros of the world while you're ripping the Country off with your Home Improvement scam?

The Mormons would be proud of you!

anonymous green
Joined:
Jan. 5, 2012 11:47 am

Thanks for the 26-year-old tax law update.

It's also why we don't have as many strip malls built in the last 26 years as we did in the early 1980's.

You don't have to call your car loan a home improvement or anything else. You can deduct interest on any loan you have against two of your homes, whether it's on improvements, cars, trips to Bangkok, whatever. That's true for the IRS and California. Maybe there are states that disallow it.

This might have had something to do with the housing bubble and the phantom economy of the last decade...

And by the way, the tax code is also responsible for all these gas guzzling behemoths on the highways. You get significantly favorable treatment for buying a heavy truck as opposed to a light sedan (or even a heavy sedan), that's why Cadillac, Lincoln, Lexus, etc, started making SUV's.

Is it merely coincidence that you're raising a topic that was relevant in 1987, and your name is "Dorfman?" It occurred to me that that's a reference to Tim Conway's character, or from Chevy Chase in Fletch, both from that era... Did you just awake from a long slumber?

chilidog
Joined:
Jul. 31, 2007 4:01 pm
Quote chilidog:

T

And by the way, the tax code is also responsible for all these gas guzzling behemoths on the highways. You get significantly favorable treatment for buying a heavy truck as opposed to a light sedan (or even a heavy sedan), that's why Cadillac, Lincoln, Lexus, etc, started making SUV's.

The tax deduction is for vehicles over 6000#

Current Escalades and Mercedes SUV weigh in at approx 5500# and they would not qualify under section 179 for the deduction.

Redwing's picture
Redwing
Joined:
Jun. 21, 2012 5:12 am

I stand corrected. I'll take your word for it.

Don't buy a 5,500 pound truck, make sure it's the full 6,000 pounds.

Just one more thing people don't know about, and they bitch about irrelevant stuff.

Any politician that would dare suggest raising excise taxes on gasoline would lose reelection in this country.

chilidog
Joined:
Jul. 31, 2007 4:01 pm

That is intended for commercial vehicles, hence the weight, and is only with corporate taxes like any other equipment expense from my understanding.

WorkerBee's picture
WorkerBee
Joined:
Apr. 28, 2012 12:22 pm

Yes, but a lot of s-corps use it. Ever notice Hummers in mortgage broker's parking lots? Think they are paying for those trucks? Wrong! You the tax payer is.

Phaedrus76's picture
Phaedrus76
Joined:
Sep. 14, 2010 8:21 pm

Most people don't lease cars; fewer than 20% of new car "sales" are leases.

stwo's picture
stwo
Joined:
Jul. 31, 2007 4:01 pm

SUVs or light trucks got a 25,000 credit, not deduction. Credit is cash back from Uncle Sam. The credit came right away, then the finance wings of the auto companies like GMAC offered no interest loans for the first year or two, so you could make a profit by buying a car. There were also some creative addons to crest over the 3ton weight, bigger engines, aux power unit, jump seats behind the back seats etc, see your dealer for details, tell them mitt sent you.

douglaslee's picture
douglaslee
Joined:
Jul. 31, 2007 4:01 pm

No it wasn't a credit- it was (and still is) an accelerated depreciation deduction that is intended to encourage businesses to make capital expenditures. Its called Section 179 and is still in place (though there are limits on vehcles to address the SUV/luxury truck loophole) Section 179 allows business to deuct the full purchase price of qualifying capital purchases in the fist year of service.

stwo's picture
stwo
Joined:
Jul. 31, 2007 4:01 pm

The car I'm currently driving is 14 years old and fuel efficient. I was fortunate that I had the money to buy it new with cash. I also got a good deal on by walking into the dealership very casually dressed and I swear they handed me the owner's grandson on a summer job because the lead salesman figured I wouldn't be buying just wasting his time. Boy was he wrong and he was pissed not only when I went ahead and got the car but even more that I paid cash for it. The closer was very mean about what the penalty would be if I didn't pay the cash as agreed and steaming when I walked in a day later with the cashiers check from my credit union. No bank made any money on this car nor did the dealership in the finance kickback.

captbebops's picture
captbebops
Joined:
Jul. 31, 2007 4:01 pm

That's a BIGGGGGGGGGG stretch. Leasing allows people to drive more expensive cars. Here in Southern Cal, 80% of BMW and Mercedes are leased. Remember, people still need more than the standard deduction to make it worth itemizing.

DynoDon
Joined:
Jun. 29, 2012 10:24 am

There is a share economy program, I think in San Fransisco area and has rabbit in its name, which has been quite successful. Such programs are done on a cooperative basis with a group of people who put there cars up for rent individually but pay for the insurance collectively. I believe you can rent cars for just a few hours if you wish and the cost is a whole lot less than standard leasing. Perfect for those who just want cars on a very limited basis

Semi permeable memebrain's picture
Semi permeable ...
Joined:
Nov. 10, 2011 8:36 am
Quote Redwing:

BTW, your auto loan can easily be made deductible by having it a listed as a home improvement loan. That loophole is still open in most states.

True; but then you stand to lose your home if you don't keep up payments on the loan, which is not true with a car loan--all you can lose is the car.

dorfman
Joined:
Jun. 20, 2011 10:05 am
Quote chilidog:

Thanks for the 26-year-old tax law update.

...

Is it merely coincidence that you're raising a topic that was relevant in 1987, and your name is "Dorfman?" It occurred to me that that's a reference to Tim Conway's character, or from Chevy Chase in Fletch, both from that era... Did you just awake from a long slumber?

I probably should have mentioned (in addition to posting under "Thom's nationally syndicated radio show") that Thom discussed the trend to leasing on the Tuesday show. I meant only to give an explanation of the trend.

There was a "Dorfman" (the John Belushi character?) in "Animal House," and the engineer who got "Filght of the Phoenix" off the ground was "Dorfmann," but I don't recall Conway or Chase playing a character by that name.

dorfman
Joined:
Jun. 20, 2011 10:05 am

Currently Chatting

The GOP war on workers has killed again...

It’s time to stop the conservative's war on working people in America.

Since the birth of our nation, conservatives have always been wary of average working-class Americans having too much political or economic power. John Adams, the second President of the United States and a Federalist (precursor to today’s Republicans), was very wary of the working class, which he referred to as “the rabble.”

Powered by Pressflow, an open source content management system