What is lease financing?

**Altis6453** · April 13th, 2009 10:49 AM

Just to add my 2 cents on lease financing, I heard that at the end of the lease period, the balloon payment you have to pay the financing company at the end of the lease term is still substantial. So, there's really no advantage to you if you're buying it as an individual.

**Galactus** · April 13th, 2009 10:54 AM

^^^ Don't know about other leasing companies, but in our case, we don't have a balloon payment scheme at the end of the lease period.

In the US, there are strict standards leasing companies have to follow:

Treatment in the United States
Under US accounting standards, a finance (capital) lease is a lease which meets at least one of the following criteria:

ownership of the asset is transferred to the lessee at the end of the lease term;
the lease contains a bargain purchase option to buy the equipment at less than fair market value;
the lease term equals or exceeds 75% of the asset's estimated useful life;
the present value of the lease payments equals or exceeds 90% of the total original cost of the equipment.
Following the GAAP accounting point of view, such a lease is classified as essentially equivalent to a purchase by the lessee and is capitalized on the lessee's balance sheet. See Statement of Financial Accounting Standards No. 13 (FAS 13) for more details of classification and accounting.

http://en.wikipedia.org/wiki/Finance_lease

Yun nga lang, the operative phrase is "at least one of the following criteria..."

**willvill** · April 13th, 2009 01:06 PM

Originally Posted by Robenson

Lease financing has its advantage in terms of business perspective.

Kapag naka lease ang sasakyan mo na ginagamit mo sa business, pede mo siyang i-declare as expense sa BIR to get a tax deduction. Hindi pa subject sa depreciation ang leased property kasi hindi siya sa iyo.

Meron ilang lease agreement na pagdating ng expiration ng term ay mag-execute na kayo na deed of absolute sale para maging sa iyo. Yung down-payment mo will be considered as "deposit" or security for any damages pag katapos ng lease or you can apply it as the payment for the deed of sale after the expiration of the term para maging sa iyo na.

So in effect parang bentahan lang din ang nangyari, but you will get the advantage of tax deduction. Beneficial din ito sa nagpapautang kasi kapag hindi ka nakabayad, they can get the vehicle because technically, they still own it unlike in the financing.

Hope it helps.

Additional info ito sa akin. I'll just reiterate that I am specifically referring to the Toyota Phil promo for the month of April in which they offer free insurance, lto, chattel, etc.

I inquired at Toyota Bicutan with their sales Mr. LLoyd Guirindola asking thru e-mail concerning their lease financing or lease-to own and he confirmed that when I shall have completed payment of the 60 months installments, Toyota would transfer ownership to me. He did not mention additional payment for the residual asset.

I just wonder who will renew the insurance after one year__me or Toyota?
I suppose it would be me.

As of now I would presume that since Toyota has a financing arm, it would be similar to a bank financing in RP but very much unlike that of the US lease system.

**Robenson** · April 13th, 2009 02:38 PM

Originally Posted by willvill

Additional info ito sa akin. I'll just reiterate that I am specifically referring to the Toyota Phil promo for the month of April in which they offer free insurance, lto, chattel, etc.

I inquired at Toyota Bicutan with their sales Mr. LLoyd Guirindola asking thru e-mail concerning their lease financing or lease-to own and he confirmed that when I shall have completed payment of the 60 months installments, Toyota would transfer ownership to me. He did not mention additional payment for the residual asset.

I just wonder who will renew the insurance after one year__me or Toyota?
I suppose it would be me.

As of now I would presume that since Toyota has a financing arm, it would be similar to a bank financing in RP but very much unlike that of the US lease system.

If you dont mind sir, pls post the agreement here and maybe we can help translate the legalese or accounting gobbledygook for you, free of charge

As to the residue, usually, yung downpayment which is treated as "deposit" will answer for that.

**ejaydpogi** · April 13th, 2009 03:53 PM

toyota's lease to own scheme is almost the same as a bank loan. their scheme is like rent to own. there is a lower interest assumption based on diminishing balance and depreciation factor since it will be under toyoto's ownership still.

but still, it would still be priced almost the same as a normal bank loan rate since there is the "rent" factor. i don't see any advantages since the lessor will still carry the expense of insurance and registration costs.

**willvill** · April 13th, 2009 06:07 PM

* Robinson: I have not yet jumped into the "frying pan"...still looking into the
contract. I'll really try to squeeze more info from Toyota.

Here's from Joanne Rellores, Toyota customer Service:[SIZE=2]
Thank you very much for visiting our Toyota website! We truly appreciate your interest in our products and services.

We are very pleased to know that Toyota Innova has drawn your favorable attention. In line with your inquiry, we wish to inform you that our Innova model is included in our promo for this month. You may either purchase the vehicle through lease or retail financing. We offer the lowest down payment for 10% for both financing plans; the only difference is for lease financing you may choose your monthly terms starting from 24 months up to 72 months or 6 years. However, for retail financing it starts from 12 months up to 72 months. You are also entitled for free comprehensive Insurance, no chattel mortgage (lease financing), free LTO registration and free 5, 000 gas cards plus Php 10, 000 discounts for buyers of Vios 1.5 variant. The promo will run until April 30, 2009 only. Below is the financing scheme for Innova models.
[/SIZE]

**Robenson** · April 14th, 2009 09:47 AM

Originally Posted by willvill

* Robinson: I have not yet jumped into the "frying pan"...still looking into the
contract. I'll really try to squeeze more info from Toyota.

Here's from Joanne Rellores, Toyota customer Service:[SIZE=2]
Thank you very much for visiting our Toyota website! We truly appreciate your interest in our products and services.

We are very pleased to know that Toyota Innova has drawn your favorable attention. In line with your inquiry, we wish to inform you that our Innova model is included in our promo for this month. You may either purchase the vehicle through lease or retail financing. We offer the lowest down payment for 10% for both financing plans; the only difference is for lease financing you may choose your monthly terms starting from 24 months up to 72 months or 6 years. However, for retail financing it starts from 12 months up to 72 months. You are also entitled for free comprehensive Insurance, no chattel mortgage (lease financing), free LTO registration and free 5, 000 gas cards plus Php 10, 000 discounts for buyers of Vios 1.5 variant. The promo will run until April 30, 2009 only. Below is the financing scheme for Innova models.
[/SIZE]

Siguro ang tanong na lang dito ay saan ka mas makakamura lease vs. financing. Basta make sure na pagkatapos ng lease term ay ibebenta rin sayo yung unit. Get a calculator and start computing then update us, if you dont mind

**willvill** · April 17th, 2009 09:43 AM

Mas mura ang lease financing dahil wala na ang chattel mortgage costing mga 20T. But IMO you have to pay it after 5 years after paying the duration of your monthly amortization when ownership is turned to you by Toyota.

**tidus1203** · December 30th, 2009 04:56 PM

Yeah wala ng Chattel fee but at the same time since its under Toyota's name, di rin pwede basta basta ibenta yung car until your term is done and the car is now under your name.

Useful lang to be honest for companies but for individuals I would go for traditional financing. Of course cash trumps both!

**alwayz_yummy** · December 30th, 2009 05:54 PM

ang explanation sa akin ng mga kakilala ko sa toyota balintawak ay: ung name will be under "TFS/<your name>"

nung pinacompute ko, sa CMF at release of mortgage palang save ka na...iba din rate ng lease-to-own financing, mas maliit than bank... kaya mas makakamura ka...parang may nagpahiram lang sayo ng pang-cash..

disadvantage lang is that, you are stuck with the car... meaning di mo pwede ibenta ung unit while under ka pa ng lease term...unlike retail financing(aka bank)

and its a "lease to own" financing, and only toyota offers it...pag bayad ka na, ittransfer na sa name mo..

about sa "other charges" ikaw na magsshoulder ng registration and insurance renewals.. and siyempre comprehensive yan