Hello Frank,We have our truck financed through a track lease.We paid a down payment and are making a payment every month.When this track lease is up and all payments are made,what happens from here?We were told that we had to pay so much more money to them,if we wanted to buy the truck.Keep in mind that we already paid a good down payment to get the truck from this dealership.Thanks for any reply.
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Truck Lease
- Thread starter truckwife
- Start date
Truck Lease"
Oct-09-06, 02:16 PM (EDT)
Hello Frank,We have our truck financed through a track lease.We paid a down payment and are making a payment every month.When this track lease is up and all payments are made,what happens from here?We were told that we had to pay so much more money to them,if we wanted to buy the truck.Keep in mind that we already paid a good down payment to get the truck from this dealership.Thanks for any reply.
Truckwife;
I do not know what exactly the words of what your lease states, but from what you are saying it looks like an operating lease, and you will not own the truck when the lease is up.and have to return it to the dealer. So if you still want the truck you will have to purchase it at the end of the lease for the amount stated. if it is less than 10% of the fair market value, then it is a Capital Lease,
Example, Fair market Value is lets say 25,000, then less than $2500. would be the buy out.
if is is an operating lease you would be talking the full amount to purchase at the end of the lease, this would be strickly a operating lease. and if you do not want to pay that much I would suggest to turn it in, It is not a capital lease of which the truck is not worth the amount they are asking at the end.
See the explanation of what the differance is.
Is Your “Lease Purchase†a Lease or a Purchase Knowing the Difference Makes a Difference
[b}This is a question that I have received from my clients and potential clients and is used as a gauge of what kind of information that may be helpful to other drivers as well. To those of you who have been reading my posts may have seen the posts on this topic before, just bear with me and your fellow truckers , because there are many who still are uninformed abut this important subject. Or have signed a lease inwhich they have found that they do not own the truck at the end of that lease.
Since not everyone is fortunate enough to be in a position to pay cash for their truck and /or trailer, many owner/operators enter into what is commonly known as a lease/purchase agreement. But which is it- a lease or a purchase? Maybe you are thinking, “What difference does it make?†The biggest difference is in the two is when and how payments are deducted on your tax return. This is the way it would work
There are actually two types of leases: operating leases or capital leases (also called financing lease). The terms of the lease regarding who owns the equipment during the life of the lease agreement or how ownership of the equipment passes at the end of the agreement is the main way to determine which type of lease you have.
If at the end of the lease the equipment belongs to you or you have the right to purchase it at a “bargain purchase price� A bargain purchase price is defined as an amount that is less than 10% of the fair market value of the equipment at the end of the lease. Fair market value is what an unrelated third party would be willing to pay for the equipment. If titles passes with no additional payment at the end of the lease, it is a capital lease.
If there is no bargain purchase price at the end of the lease, it is an operating lease and you are paying for the right to use the equipment for a specified period of time; you are simply renting the equipment. Payments for operating leases are fully deductible to you as a deduction on your tax return in the year for which they are actually paid.
For capital leases, you do not get to deduct the payments as “lease payments†and they are not deducted as you pay them. This is because you are actually paying for the right to own the equipment at the end of the lease. In other words, the leasing company is financing the purchase of that equipment for you, like a bank loaning you the money to buy a truck or trailer. (That is why a Capital Lease is sometimes referred to as a “financing lease.“) Because you own the equipment you have to take depreciation over the life of the equipment, not over the life of the lease. Your are also entitled to deduct interest paid to the leasing company over the life of the lease in the year the payments are made.
Due to the fact that our space is limited. I will not be able to deal with the question of which type of lease may be best in different situation, but if you would like to see that issue covered in future posts. Give me a call. At (704) 739-4039
Franklin Katz, ATP
Frank’s Tax & Business Service
226 S. Cherokee St
Kings Mountain, NC 28086
(704) 739-4039
Fax: (704) 739-3934
E-mail: [email protected]
Web site: www.1040.com/frankstax
Oct-09-06, 02:16 PM (EDT)
Hello Frank,We have our truck financed through a track lease.We paid a down payment and are making a payment every month.When this track lease is up and all payments are made,what happens from here?We were told that we had to pay so much more money to them,if we wanted to buy the truck.Keep in mind that we already paid a good down payment to get the truck from this dealership.Thanks for any reply.
Truckwife;
I do not know what exactly the words of what your lease states, but from what you are saying it looks like an operating lease, and you will not own the truck when the lease is up.and have to return it to the dealer. So if you still want the truck you will have to purchase it at the end of the lease for the amount stated. if it is less than 10% of the fair market value, then it is a Capital Lease,
Example, Fair market Value is lets say 25,000, then less than $2500. would be the buy out.
if is is an operating lease you would be talking the full amount to purchase at the end of the lease, this would be strickly a operating lease. and if you do not want to pay that much I would suggest to turn it in, It is not a capital lease of which the truck is not worth the amount they are asking at the end.
See the explanation of what the differance is.
Is Your “Lease Purchase†a Lease or a Purchase Knowing the Difference Makes a Difference
[b}This is a question that I have received from my clients and potential clients and is used as a gauge of what kind of information that may be helpful to other drivers as well. To those of you who have been reading my posts may have seen the posts on this topic before, just bear with me and your fellow truckers , because there are many who still are uninformed abut this important subject. Or have signed a lease inwhich they have found that they do not own the truck at the end of that lease.
Since not everyone is fortunate enough to be in a position to pay cash for their truck and /or trailer, many owner/operators enter into what is commonly known as a lease/purchase agreement. But which is it- a lease or a purchase? Maybe you are thinking, “What difference does it make?†The biggest difference is in the two is when and how payments are deducted on your tax return. This is the way it would work
There are actually two types of leases: operating leases or capital leases (also called financing lease). The terms of the lease regarding who owns the equipment during the life of the lease agreement or how ownership of the equipment passes at the end of the agreement is the main way to determine which type of lease you have.
If at the end of the lease the equipment belongs to you or you have the right to purchase it at a “bargain purchase price� A bargain purchase price is defined as an amount that is less than 10% of the fair market value of the equipment at the end of the lease. Fair market value is what an unrelated third party would be willing to pay for the equipment. If titles passes with no additional payment at the end of the lease, it is a capital lease.
If there is no bargain purchase price at the end of the lease, it is an operating lease and you are paying for the right to use the equipment for a specified period of time; you are simply renting the equipment. Payments for operating leases are fully deductible to you as a deduction on your tax return in the year for which they are actually paid.
For capital leases, you do not get to deduct the payments as “lease payments†and they are not deducted as you pay them. This is because you are actually paying for the right to own the equipment at the end of the lease. In other words, the leasing company is financing the purchase of that equipment for you, like a bank loaning you the money to buy a truck or trailer. (That is why a Capital Lease is sometimes referred to as a “financing lease.“) Because you own the equipment you have to take depreciation over the life of the equipment, not over the life of the lease. Your are also entitled to deduct interest paid to the leasing company over the life of the lease in the year the payments are made.
Due to the fact that our space is limited. I will not be able to deal with the question of which type of lease may be best in different situation, but if you would like to see that issue covered in future posts. Give me a call. At (704) 739-4039
Franklin Katz, ATP
Frank’s Tax & Business Service
226 S. Cherokee St
Kings Mountain, NC 28086
(704) 739-4039
Fax: (704) 739-3934
E-mail: [email protected]
Web site: www.1040.com/frankstax
>Truck Lease"
>Oct-09-06, 02:16 PM (EDT)
>Hello Frank,We have our truck financed through a track
>lease.We paid a down payment and are making a payment every
>month.When this track lease is up and all payments are
>made,what happens from here?We were told that we had to pay
>so much more money to them,if we wanted to buy the
>truck.Keep in mind that we already paid a good down payment
>to get the truck from this dealership.Thanks for any reply.
>
>Truckwife;
>
>I do not know what exactly the words of what your lease
>states, but from what you are saying it looks like an
>operating lease, and you will not own the truck when the
>lease is up.and have to return it to the dealer. So if you
>still want the truck you will have to purchase it at the end
>of the lease for the amount stated. if it is less than 10%
>of the fair market value, then it is a Capital Lease,
>Example, Fair market Value is lets say 25,000, then less
>than $2500. would be the buy out.
>if is is an operating lease you would be talking the full
>amount to purchase at the end of the lease, this would be
>strickly a operating lease. and if you do not want to pay
>that much I would suggest to turn it in, It is not a capital
>lease of which the truck is not worth the amount they are
>asking at the end.
>See the explanation of what the differance is.
>
>
> Is Your “Lease Purchase†a Lease or a Purchase Knowing
>the Difference Makes a Difference
>[b}This is a question that I have received from my clients
>and potential clients and is used as a gauge of what kind of
>information that may be helpful to other drivers as well. To
>those of you who have been reading my posts may have seen
>the posts on this topic before, just bear with me and your
>fellow truckers , because there are many who still are
>uninformed abut this important subject. Or have signed a
>lease inwhich they have found that they do not own the truck
>at the end of that lease.
>
>Since not everyone is fortunate enough to be in a position
>to pay cash for their truck and /or trailer, many
>owner/operators enter into what is commonly known as a
>lease/purchase agreement. But which is it- a lease or a
>purchase? Maybe you are thinking, “What difference does it
>make?†The biggest difference is in the two is when and
>how payments are deducted on your tax return. This is the
>way it would work
>
>There are actually two types of leases: operating leases or
>capital leases (also called financing lease). The terms of
>the lease regarding who owns the equipment during the life
>of the lease agreement or how ownership of the equipment
>passes at the end of the agreement is the main way to
>determine which type of lease you have.
>
>If at the end of the lease the equipment belongs to you or
>you have the right to purchase it at a “bargain purchase
>price� A bargain purchase price is defined as an amount
>that is less than 10% of the fair market value of the
>equipment at the end of the lease. Fair market value is
>what an unrelated third party would be willing to pay for
>the equipment. If titles passes with no additional payment
>at the end of the lease, it is a capital lease.
>
>If there is no bargain purchase price at the end of the
>lease, it is an operating lease and you are paying for the
>right to use the equipment for a specified period of time;
>you are simply renting the equipment. Payments for operating
>leases are fully deductible to you as a deduction on your
>tax return in the year for which they are actually paid.
>
>For capital leases, you do not get to deduct the payments as
>“lease payments†and they are not deducted as you pay
>them. This is because you are actually paying for the right
> to own the equipment at the end of the lease. In other
>words, the leasing company is financing the purchase of that
>equipment for you, like a bank loaning you the money to buy
>a truck or trailer. (That is why a Capital Lease is
>sometimes referred to as a “financing lease.“) Because
>you own the equipment you have to take depreciation over the
>life of the equipment, not over the life of the lease. Your
>are also entitled to deduct interest paid to the leasing
>company over the life of the lease in the year the payments
>are made.
>
>Due to the fact that our space is limited. I will not be
>able to deal with the question of which type of lease may be
>best in different situation, but if you would like to see
>that issue covered in future posts. Give me a call. At
>(704) 739-4039
>
>Franklin Katz, ATP
>Frank’s Tax & Business Service
>226 S. Cherokee St
>Kings Mountain, NC 28086
>(704) 739-4039
>Fax: (704) 739-3934
>E-mail: [email protected]
>Web site: www.1040.com/frankstax
tenten
>Oct-09-06, 02:16 PM (EDT)
>Hello Frank,We have our truck financed through a track
>lease.We paid a down payment and are making a payment every
>month.When this track lease is up and all payments are
>made,what happens from here?We were told that we had to pay
>so much more money to them,if we wanted to buy the
>truck.Keep in mind that we already paid a good down payment
>to get the truck from this dealership.Thanks for any reply.
>
>Truckwife;
>
>I do not know what exactly the words of what your lease
>states, but from what you are saying it looks like an
>operating lease, and you will not own the truck when the
>lease is up.and have to return it to the dealer. So if you
>still want the truck you will have to purchase it at the end
>of the lease for the amount stated. if it is less than 10%
>of the fair market value, then it is a Capital Lease,
>Example, Fair market Value is lets say 25,000, then less
>than $2500. would be the buy out.
>if is is an operating lease you would be talking the full
>amount to purchase at the end of the lease, this would be
>strickly a operating lease. and if you do not want to pay
>that much I would suggest to turn it in, It is not a capital
>lease of which the truck is not worth the amount they are
>asking at the end.
>See the explanation of what the differance is.
>
>
> Is Your “Lease Purchase†a Lease or a Purchase Knowing
>the Difference Makes a Difference
>[b}This is a question that I have received from my clients
>and potential clients and is used as a gauge of what kind of
>information that may be helpful to other drivers as well. To
>those of you who have been reading my posts may have seen
>the posts on this topic before, just bear with me and your
>fellow truckers , because there are many who still are
>uninformed abut this important subject. Or have signed a
>lease inwhich they have found that they do not own the truck
>at the end of that lease.
>
>Since not everyone is fortunate enough to be in a position
>to pay cash for their truck and /or trailer, many
>owner/operators enter into what is commonly known as a
>lease/purchase agreement. But which is it- a lease or a
>purchase? Maybe you are thinking, “What difference does it
>make?†The biggest difference is in the two is when and
>how payments are deducted on your tax return. This is the
>way it would work
>
>There are actually two types of leases: operating leases or
>capital leases (also called financing lease). The terms of
>the lease regarding who owns the equipment during the life
>of the lease agreement or how ownership of the equipment
>passes at the end of the agreement is the main way to
>determine which type of lease you have.
>
>If at the end of the lease the equipment belongs to you or
>you have the right to purchase it at a “bargain purchase
>price� A bargain purchase price is defined as an amount
>that is less than 10% of the fair market value of the
>equipment at the end of the lease. Fair market value is
>what an unrelated third party would be willing to pay for
>the equipment. If titles passes with no additional payment
>at the end of the lease, it is a capital lease.
>
>If there is no bargain purchase price at the end of the
>lease, it is an operating lease and you are paying for the
>right to use the equipment for a specified period of time;
>you are simply renting the equipment. Payments for operating
>leases are fully deductible to you as a deduction on your
>tax return in the year for which they are actually paid.
>
>For capital leases, you do not get to deduct the payments as
>“lease payments†and they are not deducted as you pay
>them. This is because you are actually paying for the right
> to own the equipment at the end of the lease. In other
>words, the leasing company is financing the purchase of that
>equipment for you, like a bank loaning you the money to buy
>a truck or trailer. (That is why a Capital Lease is
>sometimes referred to as a “financing lease.“) Because
>you own the equipment you have to take depreciation over the
>life of the equipment, not over the life of the lease. Your
>are also entitled to deduct interest paid to the leasing
>company over the life of the lease in the year the payments
>are made.
>
>Due to the fact that our space is limited. I will not be
>able to deal with the question of which type of lease may be
>best in different situation, but if you would like to see
>that issue covered in future posts. Give me a call. At
>(704) 739-4039
>
>Franklin Katz, ATP
>Frank’s Tax & Business Service
>226 S. Cherokee St
>Kings Mountain, NC 28086
>(704) 739-4039
>Fax: (704) 739-3934
>E-mail: [email protected]
>Web site: www.1040.com/frankstax
tenten