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Tax treatment..... Posted by Mike Lynch [Email] ![]() ![]() In Reply to: SmartBuy Vs SmartLease, JamesD, Fri, 7 Jan 2005 14:11:06 Members do not see ads below this line. - Help Keep This Site Online - Signup |
SmartLease and SmartBuy are GMAC names for leasing and balloon note financing respectively. The main difference in these two financial instruments is the sales tax treatment. With a SmartBuy or balloon note as with a normal installment sales contract, the full sales tax is charged on the purchase. With a lease only the monthly payment and any down payment is taxed. So the lease has large sales tax advantages, and screwing the government out of their sales tax is one of leasing's main advantages.
Lease or balloon notes both have payoffs and it seems to me that paying off a loan or buying out your lease are all the same thing.
Owing $22,000 on an $18,000 car is a fairly normal equity (negative) position for any automobile financial instrument, lease, buy or balloon note. As with any kind of financing or leasing the only way to avoid this is with a large, say 30% ish, down payment. Actually a lease is a little friendlier for the short term payoff as sales tax is not added to the contract balance.
I would change a little of your wording. All cars fall into the category of "quickly depreciating". Even cars with supposed good resale. Your just as likely to be upside down in a car with supposed excellent resale as a Saab or any other car.
posted by 63.197.222...
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