Leasing verses buying

[bucket]

If you lease bins pay for them with token 10 percent buyout, then keep them for 20 more years and sell them at the auction, I am sure you will end up with a sizeable recaptured depreciation.

The RCMP will always get their man and the government will always get their money. Death and taxes - the only sure thing in life.

[dmlfarmer]

You don't have to wait for someone to get audited to know for sure. Contact CRA and ask them. I did when I was wanting more storage and they made it very clear what the difference of capital leases and operating leases are, how they handle them, and the penalties for purchasing a capital asset under an operating lease.

You want it in writing. Ask for a ruling from CRA before you lease and not only will you have the peace of mind knowing that what you are doing is acceptable, but you are protected from tax problems later.

[wd9]

Peace of mind from CRA? Judges do
ruling, not CRA.

My tax lawyer says the most important
thing to remember is that in Canada you
don't go to jail for filing incorrectly,
you may only receive a penalty. At the
worst case you have to pay what the law
says or at least how it is interpreted
that particular time. But most of the
time smart filing you can s t r e t c h
the law to benefit you.

[bucket]

The tax man can chase around looking for nickels on these bin leases - why not go chase the billions of taxes owed by bailed out banks in Canada?

[mbratrud]

I agree mostly to what is being said here, Bins are desirable lease option but also pose the most danger as far as tax consequenses later.

As for you Drill Leasing it is a great way to get yourself into a peice of equipment with less cash laid out. You can finance the price less the residual, the only thing is make sure you shop for rates, you should be able to find lease rates within .5% of Finance rates.

If you have no need to preserve cash flow then leasing doesn't make much sense.

[poorboy]

There are situations where leasing makes sense.
Sometimes the residual value of the lease is
much higher than you may think the actual value
will be at the end of the lease. If you plan to turn
it back at the end of the lease it guarantees a
value.
For example years ago I leased a minivan for 4
years. I put on 40,000 km per year and wanted a
new van at 160,000 km. No intention of keeping
the van. My residual on lease was 2x the actual
value of the van at the end. I did not have to try
and sell my high mileage van, so lease was
excellent.
We may see the same thing today with used
equipment. It is very possible that resale could be
much lower than real price at the end of the lease.
Or if you are buying an oddball or one of you don't
have to worry about resale should the dealer
close or machine turn out to be a turd. If you like
it you could buy the lease out. In the mean time
you have some protection from a recession in
which machine prices would tumble.
So yes there are some very valid reasons to
lease.

[poorboy]

There are situations where leasing makes sense.
Sometimes the residual value of the lease is
much higher than you may think the actual value
will be at the end of the lease. If you plan to turn
it back at the end of the lease it guarantees a
value.
For example years ago I leased a minivan for 4
years. I put on 40,000 km per year and wanted a
new van at 160,000 km. No intention of keeping
the van. My residual on lease was 2x the actual
value of the van at the end. I did not have to try
and sell my high mileage van, so lease was
excellent.
We may see the same thing today with used
equipment. It is very possible that resale could be
much lower than real price at the end of the lease.
Or if you are buying an oddball or one of you don't
have to worry about resale should the dealer
close or machine turn out to be a turd. If you like
it you could buy the lease out. In the mean time
you have some protection from a recession in
which machine prices would tumble.
So yes there are some very valid reasons to
lease.