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Why Realtors Should Lease Their Cars

By
Mortgage and Lending with Platinum Home Mortgage Company NMLS #238304

 To all the Realtors out there who say this: "I would NEVER lease a car, because you don't OWN anything and you don't END UP with anything", I say this: YOU JUST DON'T GET IT. 

Let me first clear the air by answering this question: "Do I lease my car?" YES, OF COURSE. But this is not what qualifies me to make the above statement. I spent 20 years leasing cars, mainly to self employed and professionals.  I was eventually "recruited away" from this business because I bonded so well with my mortgage broker auto lease clients.

You see, mortgage people, by their profession, are "money people". They "get" what leasing is all about. Leasing is about these 2 things:

  1. You place your cash in assets that appreciate, not things that depreciate (like hunks of steel that lose 25% of their value the minute they roll over the curb) 
  2. Three words: AWESOME TAX BENEFITS

Quite frankly, you don't OWN anything when you purchase a car and place a loan on it. The bank owns the car until you pay it off. Same thing with LEASING...the bank owns the car until you pay it off. Leasing a car is NOT the same thing as leasing real estate. When you lease a car you have all of the same ownership benefits and responsibilities. 

Getting a loan on your car is finance plan A. Getting a lease is finance plan B. Getting a lease instead of getting a loan on a car is much more closely related to choosing a 100% loan on a 5 year adjustable rate mortgage instead of a 30 year FIXED rate loan, with a 20% down payment.

So what if I told you that by taking that 30 year mortgage, and paying $200,000 down, you would have a HIGHER PAYMENT, A MUCH LOWER TAX BENEFIT, and WOULD BE ON THE HOOK FOR THE VALUE OF THE HOUSE AT THE END OF THE 5 YEARS... OR......

You could do this by taking the 5 year adjustable rate mortgage (with 100% financing):

  • Keep your $200,000...invest it.
  • Have a much bigger tax write off assuming business use
  • Bank will assume entire responsibility for value of the house. If it is worth more at the end of the 5 years, you get the equity. If it is worth less, just give it back to the bank and walk away!
  • Oh yes, and even though you are not making a down payment, your payments are 30% LESS, and your "closing costs" are far less (because sales tax is not collected up front on a lease...it is paid on each payment)

A final rebuttal to those who say, "Yes, but once I finish paying for my car I will drive it without payments for years, so I will buy instead of lease!" Please, get real about this, and analyze whether you feel obligated to do this, or really WANT to do this (and always remember that the cornerstones of success in our society are really great real estate and really great vehicles...these things have a tremendous impact on our day to day lives).

A more likely scenario: You drive the car for 4 years. Your factory warranty has run out. little things are beginning to go wrong. Technology and safety features are more advanced now.  Your car is somewhat dated, and starting to show wear and tear. Your lifestyle has changed. Car no longer fits your "image". You start checking out new cars in the parking lot with a twinge of jealousy.

You never have to be in that space again if you take the time to understand how auto leasing really works, and the benefits an auto lease can bring to your financial table.

 

 

 

 

 

Kelly Sibilsky
Licensed Through Referral Connection, LTD. - Lake Zurich, IL

In Illinois, you have to pay sales tax up front on the total cost of the car...even when you lease. It's a huge chunk of change. My accountant advised me to buy (plus, I'm not prone to car jealousy and I need to have the car paid off and zero payments when my sons are in college). Leasing is not the right choice for everyone.

Oct 11, 2007 03:52 AM
Maureen Francis
Coldwell Banker Weir Manuel - Bloomfield Hills, MI
Coldwell Banker Weir Manuel
I rarely have a client in my car and drive very few miles because we list more than sell.  We bought my one year old cadillac with low mileage for about 12K under blue book at dealer auction.  I am OK with owning.
Oct 11, 2007 03:58 AM
Carolyn Galant
Coldwell Banker Residential - Madison, NJ
MBA - Coldwell Banker - New Jersey Real Estate
I have both owned and leased.  We have one auto lease, and one fully owned. I own my car, paid cash for it and that is the way I will be going forward. I will keep my '05  SUV at least four years.  I do agree that the choice between lease and car loan, the lease is better.  The problem is when your leases expire, and you hve to sign up for a new lease for 2 verhicles, you have to allocate  more money, probably  1200/month just to get from here to there PLUS everything else.  In real estate every vendor's justification of price on a product  is ...it is only 39/ month. Add all those " only xxx month " and they add up to thousands and thousands. You have to minimize your expenses whenever you can and figure out what you will spend over a 4 or five year period and analzye it.
Oct 11, 2007 03:58 AM
Chris Pollinger
Berman & Pollinger, LLC. - San Diego, CA
Consulting for Luxury Teams and Brokerages
I have seen a number of agents get way upside down with the lease.  12k miles a year seems to be very conservative for those that are working in the field and busy about town...
Oct 11, 2007 06:00 AM
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Carl: Good luck with your decision. Make sure to weigh all financing options before your new luxury car arrives in the driveway.

Elizabeth: No financing plan is ever going to compete with paying cash....HOWEVER some might argue you should keep your cash invested and not tied up in a vehicle. You make a good point that every situation is different. I also have cars I have paid cash for...those are for fun. But my work vehicle I always lease and write off.

Oct 11, 2007 06:10 AM
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Nick: I have analyzed that mileage situation hundreds of times. I usually advised my lease clients to NOT pay up front for miles, just because you never know if you actually WILL drive those miles. If you don't..the bank will not return the extra money you spent to buy them.

Brad: Hi! Hope all is well with you. You are not self employed (although you could be with Tech-Know-Babble, or as a photographer...if you do become self employed, or are already, you could write off your lease payments. I also had alot of clients who lease a little Corolla or Honda for their kids while they were in college. That way they had a new car, (safe). At the end of the lease, the kid is done with school and they can buy the little car, or turn it in.

Oct 11, 2007 06:15 AM
Ryan Martin
Pacific Continental Realty, LLC - Bellingham, WA
Bellingham Commercial RE Broker

Janet - I had a long conversation with my accountant about leave vs. buy and he told me that there are clear tax benefits. He also told me that it does not make sense to enter into a "bad" auto lease to "save" on taxes. I took a hard look at leasing and in the end decided to buy because of the amount of miles I put on a car (20,000 a year) put me into to high of an auto lease payment.

Oct 11, 2007 06:19 AM
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Kelly: Would completely agree. Leasing is definately NOT the choice for everyone. Although honestly, I ran into a lot of accountants who had no idea what leasing was about and simply advised clients to buy as a default.

Maureen: You only own if you paid cash. Otherwise you have financed on a purchase instead of a lease. Even if you "steal" a car at an auction, you can still place lease financing on it. The miles you drive has very little to do with a decision to lease.

Oct 11, 2007 06:20 AM
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

To those that have commented (and to you, Ryan, who just commented): The whole mileage issue could be the subject of another blog. Of course I understand why you are concerned. But there is a whole school of thought out there that those that drive high miles are exactly those that should be leasing...

Just for clarification....as long as you do not exceed 100,000 in any lease term (2yr, 3yr, 4yr, 5yr) you can write those miles into the lease. If you intend to buy at the end....the bank does not charge for excess miles.  The more miles you write into the lease, the less you owe for the car at the end. You are paying extra on your payments for higher miles because you are using more of that car's life.

Oct 11, 2007 06:27 AM
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Chris: Being upside down in a lease is not because you leased the car. It is because cars depreciate faster than they can be paid down. You would be more upside down in a purchase if you had 100% financing because you have the sales tax lumped in as well.

If you don't like that feeling of being "upside down", write the miles into the lease....see my comment above

Oct 11, 2007 06:30 AM
Catherine Myers
Windermere Bay Area Properties - Walnut Creek, CA
Walnut Creek, CA Real Estate
Janet, very timely as I'm about to get a new car and have been contemplating this very decision.  BMW tells me that you should start with a low estimate of your miles.. i.e. 10k, 12k.. and that at any time you can call them if it looks like you'll be going over and they'll adjust it for you then.  They say most people OVER estimate their miles and then pay over the life of the lease for miles they never use (not sure I believed that).  I will have to keep my SUV for the practicality it brings me with my family, kids, dog, snow, Tahoe, etc...  but I need something with better mileage and a little more practicality with clients i.e. a sedan of some sort.  I'll read more closely all the comments and your response to continue to ponder my dilemma - lease vs. buy.
Oct 11, 2007 10:54 AM
Ginger Wilcox
Sindeo - San Francisco, CA
My accountant analyzed it carefully for me and recommended I buy.  It probably is different for each person's situation just like there is not one mortgage option that fits everyone either!
Oct 11, 2007 04:40 PM
Eric Kodner
Wayzata Lakes Realty: Eric Kodner Sells Twin Cities Homes - Minnetonka, MN
Wayzata Lakes Realty: Twin Cities, Madeline Island

My accountant's mantra is "don't sink cash into anything that depreciates".  He feels buying a car is a waste of money and encouraged me to either lease or buy with as low a downpayment as possible. 

Oct 11, 2007 04:44 PM
Brad Andersohn
Retired Executive Director of Education at eXp - Boulder Creek, CA
ActiveBrad - 707.646.1876
Janet - now you have me thinking, since my sons at Cal Poly driving a beater...Hmmmm....    :-)
Oct 11, 2007 04:56 PM
R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

My problem with leasing is that I drive so much.  I pretty much service the entire St. Louis real estate market, so it's not unusual for me to drive from one of of St. Louis to the other (which can be a 50 mile one way trip).  So, you got any good lease programs for someone who drives 30,000+ miles a year?

 

Bob Mitchell

ValueList Real Estate Services, Inc. 

Oct 12, 2007 03:17 AM
Eric Egeland
RE/MAX SUBURBAN - Libertyville, IL
SFR, e-PRO, CDPE

Like others in this post I put too many miles on.  I think leasing is a great option for those who don't drive too much.

I'm putting over 20k miles on a year & leasing doesn't make sense for anyone who is driving a lot.  You could buy the car at the end of the lease, but you get stuck paying sales tax on the car twice...once for leasing & again for purchasing (at least we do here in Illinois, not sure how it works elsewhere)

Apr 30, 2008 09:21 AM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

What a great blog!

Thanks Janet for sharing this information. I'm right now looking for a car~ your blog helped me to make my decision. Thanks!

Jan 03, 2015 07:27 PM
Anonymous
Brian

Will you please tell me what the huge tax advantage to leasing is?

Apr 22, 2015 02:59 AM
#22
Anonymous
John A Spangler

What about the mileage restrictions? As a realtor, I put ALOT of miles on my cars.

May 15, 2015 03:13 AM
#23
Royalty One Mortgage
Royalty One Mortgage - Henderson, NV
Mortgage company in Henderson, Nevada

Janet,

 Great post filled with lots of valuable information & insight on the leasing process & the benefits it can provide! As someone who grew up in a Realtor household, I would always take note on how my Father would only ever lease a car, & would never buy, specifically for many of the reasons you outlined above. In certain cities it actually makes more financial & economical sense to lease over buying new or used cars. One of my long time friends & Realtor acquaintances in Las Vegas has leased the majority of his cars over the last 30 years & has only purchased some used INFINITI cars over that span, never buying new as he believes in leasing for many of the same reasons you do.

 Great post, thanks for sharing your experience with the AR community!

-The Royalty One Mortgage Team

Nov 10, 2017 10:44 AM