Baby Fawkes
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Post by Baby Fawkes on Apr 11, 2011 22:55:33 GMT -5
I asked our CFO and VP of Operations why not buy them, they all them me the same: make more financial sense to lease them. I guess business wise it does but in my head I don't see why you would want to lease a building when you can own it. I'm sure there are a number of other reasons related to tax accounting, etc. but one of the reasons a company I used to work for leased the buildings was that it afforded them more flexibility to up and leave the area to set up shop somewhere else. They wanted the flexibility for a couple of reasons: - They were hoping/planning to expand in the short term and there wasn't much extra space in the business park they were at - The flexibility of being able to leave apparently kept the landlords and local government attentive enough to keep providing the incentives for them to stay and support the local population. Some may consider this slightly unetical I guess, but financially it made sense.
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cronewitch
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Post by cronewitch on Apr 12, 2011 0:21:21 GMT -5
I have known businesses that rent or own and each has advantages. The main advantage to owning is you might have property appreciation. The disadvantages are if your business grows or shrinks you have the wrong building. Owning for a small business means you never expect to grow or go out of business. So say you were a CPA firm with 5 employees you might have a just right building but then if you were over crowded when you hired extra help for tax season and you can't hire more and hire extra tax season help. You would need to stay small or perhaps rent out your building and rent somewhere else. I did work for a little CPA firm but the owner owned the entire office building with many one person offices. Our office offered the single business people things like typing or faxing when faxing was new. We had 3 offices and reception area and one office was rented to another CPA so he could have evicted him and taken that space to grow.
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Happy prose
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Post by Happy prose on Apr 12, 2011 15:56:29 GMT -5
Ok, here's my math. My car (this lease, the others were less) costs $3300 per year. No money down. I've never had to pay for tires, miles, dents, etc. So for 10 years, a high ball number would be $33,000. My cars usually sell for about $24k. So $9k more over 10 years. If I bought, I'd have to buy tires, replace brakes, hoses, belts, etc. I still don't see it as a bad deal. But truth be told, I'm too lazy to properly maintain it, and I love having peace of mind. For a "tiny" bit more money!
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8 Bit WWBG
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Post by 8 Bit WWBG on Apr 12, 2011 16:15:24 GMT -5
...:::"they all them me the same: make more financial sense to lease them":::...
I've heard the same thing... buying those properties ties up a lot of capital and costs flexibility.
...:::"I don't see why you would want to lease a building when you can own it.":::...
The same reasons that hold true with a home. If you own the building, you have to deal with all the stuff involved in owning and maintaining a building. If you lease, its all teh landlords problem. In a situation like yours (owning lots of locations) it could make trimming expenses very tough in hard times. If you suddenly have to slash costs, then you can always move to another location, or close the location altogether. But if you still have to carry a building because it is not selling, then you could be carrying dead weight for a long time.
...:::"I've never had to pay for tires, miles, dents, etc. So for 10 years, a high ball number would be $33,000. My cars usually sell for about $24k. So $9k more over 10 years. If I bought, I'd have to buy tires, replace brakes, hoses, belts, etc. I still don't see it as a bad deal.":::...
I did not think this type of deal was common. I thought that the driver still had to eat a lot of maintenance. It is good that you never exceeded your miles, or had to pay for dents though.
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thyme4change
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Post by thyme4change on Apr 12, 2011 16:47:37 GMT -5
When companies lease it is usually a cash flow/ROI issue. Sometimes business rules don't always make sense in personal finance.
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RoadToRiches
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Post by RoadToRiches on Apr 12, 2011 16:49:32 GMT -5
Here is my math. Check this out. Bought 4 year old 25k miles car for 22k and some change, let's make it 23k. Still under factory full warranty. This same car, but 4 years newer, costs 64k. It also comes with same 5 years full bumper to bumper warranty from the factory. Anything goes wrong, you drop it off and they fix it.. no questions asked. Hell, my cup holder busted and I dropped it off to the dealer. They installed new one..and I got to drive nice courtesy car I could rebuild that car over and over and over again for the remaining 42k. Or hell, buy 2 other ones! Not to mention, I can SELL the previous car! For some, lease is good. If you don't go over your miles, park away from other cars, yada yada yada. But I still think, that at the end, you don't have anything. So basically, you paid 9k over 10 years and end up with nothing at the end. Not to mention, I doubt you would have to put 3k every 3 years into a Honda, especially, since looks like you don't drive much then your tires would last for years... and brakes...and hoses....and belts lol But hey, works for you! That's what's important.
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thyme4change
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Post by thyme4change on Apr 12, 2011 16:56:25 GMT -5
10 year old accords are selling for $5k - $7k. The net cost of the $24k car is actually $24 - $6 + maintenance. Let's say the maintenance was actually $9k (which would be really high.)
The cost of ownership over 10 years is $27k vs. $33k. That is an 18% difference. I don't consider that "tiny."
You are allowed to make the choice - but I wouldn't say that is a good choice financially. It is just the choice you want to make. Don't lie to yourself and say you are even, because you aren't. I'm going to run out and buy a new car. It isn't the best financial choice I could make - but I am going to do it for other reasons. I won't try and convince you it makes sense financially. Choices are fine, as long as your eyes are wide open.
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Post by commentator on Apr 12, 2011 17:25:42 GMT -5
Leasing must make economic sense sometimes. I am temping at a company that uses nothing but leased trucks, owns few or none of them, and several hundred trucks are involved. I am still trying to figure that one out. The only thing I can imagine is that it helps them get a replacement fast if one breaks. Leasing makes financial sense if you're going to drive a personal use vehicle less than 12,000 miles a year OR if the vehicle is close to 100% (deductible) business use.
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Deleted
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Post by Deleted on Apr 17, 2011 1:19:22 GMT -5
We just leased our first car last month. We sold outright a 2009 Infiniti G37 for $27,000 - owed $15,000. We leased a 2011 Honda Accord EX-L Coupe. Sticker was $27,8xx and we "paid" $23,700. Zero down lease, 15,000 miles a year, 36mo lease, .00052 MF, $348/mo..
So why did this make sense for us? We needed to unlock the equity in our previous vehicle to help make 20% on a property. That meant going into something else with no out of pocket. Since we knew that we use 15,000 miles a year, we had the payment worked against that number. It was 40% less to "buy" the 15,000 miles up front versus paying the .15/mile on the back end. We could have bought a new car with nothing or little down, but the payment would have been much higher. We looked at 2-3 year old Accords and found them holding their value "too well" to justify going the used route. We didn't want to go older - personal preference.
I went through the math before purchasing and found that if I bought out the lease at the end of 36 and financed the balance over 2 years - then compared it to puchasing the car up front and paying over 60 months, the lease cost $1700 more.
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