Lease agreements: Tips, questions, and experiences

placidhawk12 said:Let me bump this thread back up for a second...

A few days ago, my company pulled the trigger on a finance lease for a new vehicle.
The total price including sales tax came to $69850. We had to put down a 30% down payment, and the lease term is set for one year, plain and simple.

The company received an invoice for the deposit and the first installment, which had to be paid together, totaling $26375. That includes $89 in sales tax, which I’m going to write off immediately...

Now, there's something else I'm wondering about (sorry, I haven't asked anyone yet, so it's been bugging me, so I figured I'd ask here—someone surely knows the deal...).

Am I going to get one single massive invoice for the whole car (minus the deposit), or will I receive individual invoices for every single monthly payment showing the sales tax, interest, and the tax on that interest?

Also, I've got another question. I was digging around online and found this:
Basically, the law states that all expenses for passenger vehicles are 100% tax-deductible if they are used to generate income.
The trick is that the legislature hasn't actually specified how much income needs to be generated or exactly how much the car needs to be driven for business versus personal use to qualify for that 100% deduction.
So, you lease a car to an employee via a management decision (for example, Goldman Sachs approves an executive to use a company car for personal use from April 15th to April 17th for route X covering Y miles). You take that mileage and multiply it by $0.67 (that $2 figure includes sales tax, so you have to strip it out rather than add it) and then report that amount to them as taxable income. Essentially, you pay all the standard payroll taxes and withholdings based on
.
Once you've established that income tied to the vehicle, all the costs become fully deductible. No disallowed sales tax, no extra corporate income tax on top of the 30%+ margin.

It's a neat little loophole in the tax code.
I've double-checked this with several sources—auditors, tax consultants, and even some pretty decent IRS agents.

So, from what I gather, I just lease the car to the director, treat it as supplemental income, pay the required payroll taxes on that amount, and call it a day. From there, you just keep running the expenses through.

Where are you getting that nonsense?
You have to use 20% of the lease payment as the base for calculating those taxes.

Charles Ramos7 said:Where are you getting that nonsense?
You have to use 20% of the lease payment as the base for calculating those taxes.

Fine, I’ll respect your opinion. But those "nonsense" claims came straight from the PayPal forums.

Regardless of whether I use 20% as the base—which, by the way, I’d love to know the logic behind if I were just renting a car for a single day—it’s still 100% deductible.

Do me a favor and actually explain yourself if it isn't too much trouble. Thanks in advance.

When an employee uses a company car for personal trips, it counts as a fringe benefit under the Internal Revenue Code. You can see the details here:

http://www.irs.gov/content...PROSPECTUS_70.pdf

It doesn't specifically mention one-day rentals, but rental car expenses are 70% deductible per the Corporate Tax Law.

In practice, let's say your monthly lease payment is $1000 (including sales tax). If only 70% is deductible at a 20% rate, $300 you'll end up paying $60 corporate tax, though you can still claim $126 the input tax credits.
If 100% is deductible at a 20% rate, $200 you'll just pay the payroll taxes and still get to use $180 the input tax credits.

Yeah, that’s exactly how the contributions are calculated.

But here’s the kicker: the law doesn't actually specify how much you have to use the car (during the window where those contributions are being paid) to justify claiming 100% of the associated costs.

So, you rent a car for an employee for a single week, calculate the contributions using the method shown above, and then claim the full expenses for the entire duration.

Legally speaking, that's how it works. It's just a convenient little loophole waiting to be exploited. The IRS might have a different opinion, but you'd need a damn good reason to fight it. Or am I wrong here?

Hmm, I’m not seeing any loophole in the law here, and I’m honestly not sure what you're getting at 😕
You have to account for that 20% contribution on every single lease payment and then book it as 100% of the expense. It isn't just a one-time thing; you do it for every installment.
Naturally, you'll need a formal sign-off from a manager to back that up, and that document should specify a clear timeframe.

Writing above:
...all expenses can be 100% tax-deductible if they are used to determine income.
The trick here is that the legislature hasn't actually set any rules on how much income needs to be reported or exactly how much a car has to be driven for business versus personal use to qualify for those full deductions.
So, here’s the play: you lease a car to an employee by executive order—say, you let Google use a company vehicle for personal trips—and then you just report that benefit as part of their salary. You pay all the standard payroll taxes and withholdings on that amount, and

Since you’ve officially established income based on that vehicle, every single cent of the expense becomes tax-deductible. There’s no disallowed sales tax, and you don't get hit with that massive 30%+ corporate tax bill.

Basically, you lease a car for a week, a day, or a month—doesn't matter—and from then on, you claim 100% of the costs forever.

Get it? Once the payroll taxes have been calculated based on that car once (regardless of how long it lasted or how small the amount was), it immediately moves into the category where 100% of the expenses are deductible. That's what I'm talking about. A director's memo for personal use is all you need. As soon as those taxes are processed based on the use of that vehicle, you can justify 100% of the costs indefinitely.

rowdylynx38 said:Thanks, but I was looking for actual user experiences, not just a look at their websites.

YOU’RE BETTER OFF AVOIDING ANY DEALS WITH THEM; THEY’RE JUST A TINY OPERATION TRYING TO REPLICATE THE CLASSIC WASHINGTON POLITICIAN MOVE WHERE THEY HIT YOU WITH EVERYTHING THEY'VE GOT THE SECOND THEY GET INTO OFFICE!!
Honestly, you’d be better off picking a leasing company with some actual history behind it—though let’s be real, they’ll all bleed you dry eventually; it’s just a matter of which shark has the bigger teeth.👍

I’m wondering if anyone here has dealt with a situation like this—

Has anyone actually managed to secure an auto lease despite running a small business that looks pretty thin on paper? My revenue numbers just don't show much movement, but I have plenty of liquid cash available for a down payment or to sit in a bank account...

The issue is that the lenders keep demanding all these endless statistics, profit and loss statements, and various other documents. Of course, those figures look just as meager as my actual paycheck. 😁

But when it comes to having the cash on hand, I'm perfectly fine...😉...

Look, if you just started running everything through an actual business account and actually issued invoices instead of trying to fly under the radar, you wouldn't be finding yourself knee-deep in this kind of mess.🙂🙂🙂🙂

Who says I don't operate through a business account? Perhaps my revenue is just a bit modest for now, but I do have some savings set aside... ☕

Honestly, you’ve gotta hit up the leasing company directly and ask them exactly which documents they need, because let me tell you, the requirements change constantly from one firm to the next... Last time I went through this, I had to dig up my standard business filings, some official paperwork from the Secretary of State, my last three iPods, my last two GFI-PODs, and of course, those pesky tax forms... If you can swing a decent enough down payment, though, there’s a good chance they’ll approve you even if your monthly revenue isn't huge. Just keep in mind that leasing companies have become incredibly picky lately, mostly because they're stuck with a mountain of repossessed vehicles they just can't move, especially since so many businesses out there are totally broke and can't pay their bills...

With these newly announced corporate tax hikes looming, I’ve started brainstorming ways to dodge some of that profit.

So, here's the deal: when my car lease ends, I can buy it for the pre-agreed residual value plus the security deposit and sales tax. Since my company was the one actually paying the lease, I can just pick up the car personally at that price. Because I intentionally negotiated a 0% residual value, I’d basically just be shelling out the security deposit (which gets kicked back to the company) plus sales tax—which is essentially just about 20% of the value plus tax. If I signed a three-year lease, that car is definitely worth way more than just 20% plus tax of its original sticker price. So, if I become the owner as an individual for that tiny amount, isn't it basically like I'm laundering the difference out of the company? Has anyone noticed any rule or regulation that would stop this from working?

If this is actually legal, then I guess I've technically laundered some cash... though it’s not exactly a massive windfall since my company already took a huge hit on the car's depreciation, making this a pretty lousy money-laundering scheme, but hey, still coming out ahead on a sweet ride makes a guy happy.

But wait, things get really interesting if we're talking about commercial real estate leases—properties that don't exactly lose value over time, right? If the math works the same way, and I can buy a building personally at the end of a lease for just the security deposit and sales tax—while my company handled all the monthly payments—haven't I just laundered a mountain of cash? Given how good the market is for buying property right now, this seems like the ultimate way to suppress taxable profit if the IRS doesn't catch on.

Anyway, I think I’ll just shorten my current car lease from five years down to three... and pray to God that by the time those three years are up, they’ve scrapped this corporate tax extortion.🙂

Seriously, I am getting absolutely hammered by Corporate Tax Law... I'm paying taxes on over 60% of my revenue, so I have to find a way to offset this, and this extra 4% hike is giving me all the motivation I need.

Help me out here! 🙂

So, I’m about halfway through a car lease with two and a half years left on it. Right now, I find myself needing roughly $15,000, which naturally means looking into a loan. Since I’m already tied up with this lease, I have a feeling my debt-to-income ratio might disqualify me from getting approved.
Here’s how things stand. My take-home pay is around $4,200-$1667 a month, but that lease eats into a chunk of it. What I’m actually aiming for is a $22,000 personal loan over a 10-year term; the plan is to pay off the car entirely and use the leftover cash for some home renovations. My monthly lease payment is sitting at about $600—which is actually $67 higher than when I started because of those Swiss adjustments—so I suspect my creditworthiness is pretty much shot. The lease is currently held with JPMorgan Chase.
I’ve been with a government agency for three years now, following three years on contract. My girlfriend works at the same agency on a temporary contract, bringing in somewhere between $1833 and $6,000 a month, but since her position isn't permanent yet, she can't qualify for a loan on her own. However, I do have a potential co-signer who has a permanent role at a government office and earns about $2000 with zero existing debt.

What’s my best move here to get this loan approved? Is it possible for me to get approved if my own credit capacity is too low, provided I have a solid co-signer? Or could my girlfriend apply if she has a reliable co-signer despite her temporary status? Repaying the loan won't be an issue; the only hurdle is figuring out how we can actually secure the funds. She’ll eventually land a permanent position, but not for a while, as her company policy requires three years of service before they offer full-time contracts (unless you have the right connections, which we definitely don't right now).

What is the actual point of a co-signer? From what I’ve gathered reading bank terms, it seems like if you aren't creditworthy, having a co-signer allows you to bypass your own limitations. But looking through some discussions here, it feels like both the applicant and the co-signer need to meet certain credit standards. If that’s the case, then it seems a co-signer is just extra insurance for the bank rather than a way in. Any advice on what we should do?

P.S. I started a new thread because I asked about creditworthiness elsewhere and didn't get any traction. It looks like there are people here who really know their stuff, so I figured I’d try my luck one more time. Thanks.

I might be able to shed some light on this based on what I've seen happen before...

Based on your current income, you aren't going to qualify for a loan that massive on your own. You'd almost certainly need a co-signer with a $3.25 salary, and honestly, probably another guarantor just to be safe... However, you could potentially apply for it if you make it conditional on paying off that existing lease. Essentially, you'd have the bank settle the remaining balance of the lease directly, and then they'd cut you a check for whatever cash is left over. As for your girlfriend, since she doesn't have a permanent, full-time contract, she won't be able to help out with the application at all!

I was just reading up on a loan JPMorgan Chase is offering where they calculate your creditworthiness based on your entire household's income. Basically, if you have a co-signer living under the same roof, they pool your incomes together, subtract all your existing monthly obligations, and ensure you’re still left with at least $833 after their loan payment is factored in. Under those terms, I should be able to qualify. The catch is the cap is $15,000, but since the interest rate is actually decent, I could manage both my car lease and this loan for about $1067 total per month, which would drop down to $467 after two and a half years. I'm just hoping the fine print on their website is somewhat accurate and that I can actually get approved. I suppose being with this bank for eight years—moving from my local branch to the regional office and finally to JPMorgan Chase—should count for something, especially since I've never had an issue. Plus, the company I work for is a very stable government agency. When I went to buy my car, they initially asked for a mountain of paperwork regarding my employer, but once I told them where I work, they basically waved me through, saying they just needed my average salary since working for the government makes me a safe bet...

I'm not entirely sure what people's experiences have been like with loans at JPMorgan Chase, though I've heard they're generally alright. I mean, obviously, the bank is looking out for its own bottom line, but I haven't heard much horror story territory regarding them compared to, say, Wells Fargo.

Look, your girlfriend isn't going to qualify for any credit until she lands a permanent, full-time contract. She won't be able to act as a co-signer either, so your plan regarding the household finances just isn't going to fly... In my opinion, your best bet is to take out a loan on the condition that they settle that lease of yours first. Otherwise, Chase offers unsecured loans up to $25,000; my sister-in-law actually just pulled that off last month. She works for a government agency making about $7,000 a month, has zero existing debt, and they approved her without a second thought... But you have to be their customer, though switching over isn't exactly a huge ordeal!

casualmoose14 said:Look, your girlfriend isn't going to qualify for any credit until she lands a permanent, full-time contract. She won't be able to act as a co-signer either, so your plan regarding the household finances just isn't going to fly... In my opinion, your best bet is to take out a loan on the condition that they settle that lease of yours first. Otherwise, Chase offers unsecured loans up to $25,000; my sister-in-law actually just pulled that off last month. She works for a government agency making about $7,000 a month, has zero existing debt, and they approved her without a second thought... But you have to be their customer, though switching over isn't exactly a huge ordeal!

I wasn't actually talking about my girlfriend, but rather my parents, since we're all under the same roof—which I assume counts as a single household. I'm looking to get a loan for home renovations so I can eventually move in, but on paper, I'll still be registered at the same address. A shared household doesn't necessarily mean marriage; I'm assuming it's enough just to be living with someone, right?

I've been looking into JP Morgan Chase too, weighing my options and hoping I can find a way through. I wonder if knowing someone at the bank makes a difference—not a big director or anything, but maybe a teller or a branch manager who could help nudge things along.🤷

If you’re living under the same roof as your parents, your household status should count for them—as long as you're both officially registered at the same address, they don't really need to know where you actually spend your time most of the week!
Having a friendly contact at the bank would be such a game-changer, too. You could just give them a casual call every single day to check on your loan status without feeling awkward... and honestly, if you actually knew the branch manager personally, getting that credit approved would be an absolute breeze.🙄
Your best bet is to just walk into a few different banks and get a feel for things. Their policies seem to shift constantly... what was impossible yesterday might be totally doable today, or vice versa!

It’s definitely a win for any household. I know the smartest move is probably just walking into a few local branches to see what they’re offering face-to-face, but I’d much rather do my homework online first so I actually have a clue what to expect. It’s way too easy to stroll into a JP Morgan Chase branch, listen to them pitch you something that sounds like a dream, and then realize two years later that you got totally played. I’ve been scouring the web for a few days now to gather some data, so I’m starting to get the lay of the land. Thanks for the help 😉

I don't see it mentioned here. Did you double-check if that lease actually shows up as a liability? For instance, if you were applying for a loan at JPMorgan Chase, you'd ask the FBI for a full report of your credit card debt and outstanding loans...

I have a lease on my car myself—as an individual, just like you—and it doesn't show up on my credit report. I actually called the leasing company; they told me that not all leasing firms report data to the FBI.

That said, it’s probably better if we don't try to juggle too many things at once. Good luck!