GOLFCOLE

The primary difference between a lease or a balloon is who owns the car. On a lease the leasing company owns the car and is the registered owner on the title you are simply the leasee. A balloon is a retail installment contract with you as the registred owner. Generally the end or residual values are identical and with very few exceptions both are closed end contracts... meaning that the residual is fixed at signing. The end options are the same as well in that you can turn them in or keep and pay off or refinance the residual. The only difference with a balloon is that if you keep you do not have to pay sales tax again because there is no change in ownership. In Texas, a lease may be subject to property taxes that would not apply to a balloon purchase. ( note to Tx residents... texas repealed the tax on personal leases jan 01 but some cities opted out of the agreement and still charge property taxes... plano and houston are two cities I know for sure) One big issue that benifits leases is liability. Because yuor name is not the registered owner your liability is limited to your insurance limits. After that it goes back to the 'owner' of the vehicle. This can be a big deal if you have a business or large personal assets that someone could go after in a lawsuit. Hope this awnsers most of everyones questions.

chairman

The use of balloon financing is similar to a lease but the "intent" is a purchase. (regardless what your actual intentions may be) That means depreciation, with limitations on the amount deductable each year. When the car is sold there is a potential for a "gain".

A lease is simply a rental; no depreciation, no "gains" or losses, & no "intent to purchase".

This is very simplified and as others have said here discuss this with your CPA. Each situation is different.

Hope this helps

LMGotts

I think. You <i>must</i> consult your CPA to see what the best deal is...I don't know much about these things...just pass on the numbers and ask what the most beneficial method is...

Driver8

Like a lease, it has a guaranteed buyout clause at the end of the term. It's a nice deal.

April

since there was widespread abuse of the system with open ended or balloon leases.