2.7tDallas

April - can you explain the difference between a ballon deal and a lease???

2.7tDallas

OR ANYONE ELSE

ESN

where you make monthly payments followed by a single "balloon" pay-off at the end of the term. This allows you to pay smaller monthly payments. A lease, on the other hand, allows for smaller monthly payments because you are only paying for the actual usage of the car, and the car gets surrendered at end of term. If you were to buy out the lease at end of term by paying the "residual" this, in effect, would equate to a "balloon" purchase.

AudiByNature

that in a lease situation, you can give the car back, or buy it for the pre-determined price (the residual). Some dealers will work with you on price, but they certainly don't have to and sometimes they can't (depending on the leasing company)

In a balloon deal, you have to make the final payment or trade before it's due. Obviously, you could go out and finance the balloon payment.

There are definitely tax issues. Consult your CPA and see if there's an advantage one way or the other for you.

ESN

can be deducted if you have a legitimate business purpose, whether chacterized as a "lease" or "loan" payment.

April

You get the low payments of a lease, but have to buy it out at the end of the term. In some cases, the buy-out is not determined until the time the balloon payment is due - which leaves great room for leasing company abuse. This is an open ended lease. In some states it is out-lawed.

Basically you defer paying for the bulk of the car until the end of the term. Audi has a similar deal known as a Premier lease ( not open ended though ).

You know the drill with a regular lease, you pay for the amount/depreciation that you use, and walk away at the end of the lease.

Consider if you plan to keep the car long term, with cash flow tight now, but expected to be better later. If so, a balloon situation might work for you. However, I would be very wary of such a commitment.

AudiByNature

Actual expenses, mileage, depreciation. They absolutely can affect your write-offs. Are you doing it individually, through a corporation, are you a S Corporation shareholder, etc.... That's why I say consult your CPA if you plan on writing it off and find out what they advise.

Driver8

They were done through our credit union. It is essentially a regular purchase with smaller payments and a balloon amount due at the end of the term. The cool thing, though, is that I know the buy-out amount up front (closed-end), and I can keep it, sell it, or give it back at the end of the term. It works well for shorter payback terms. It is actually a nice setup, and my wife and I have used it a few times already. Of course, I can only speak about my own experience, but it's been a good one so far.

Mike

AudiByNature

Huh, I didn't know that you could just "turn it in" at the end on a balloon deal. Interesting.

April

Depends on lending institution and state laws.