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man dearly loves his car but how does he pay for it economist sun7tribune april 9 1986 b5 it has been said that with spring come thoughts of love and one of mans strongest love affairs is with his car all of the car dealers are bustling with prospective buyers the gleam in their eyes no less brilliant than the spring sunshine reflecting off carefully polished newmodels once the final proud choice is made prices must be finalized how do you know if you should buy bor row or lease some diehards al ways stick to one method and swear that its the best this article will give some pointers to help you de cide how you should handle your next car purchase first we should define terms by buying i mean simply using cash that you already own borrowing means using cash that somebody else owns and then paying them back with equal monthly install ments over a set period of time of course you pay principal plus in terest leasing means paying a fixed monthly fee for the use of the car over a- set period of time a lease usually also has an option to buy the car at a specific price at the end of ihe lease period one must remember that in jbuying a car there are many in teracting factors emotions may swing you one way while the num bers may pull you another try therefore to view the following as i part of the interaction rather than i the definitive answer advantages of baying i when you buy you have pride of ownership you also invest money that might have been attracting tax into something that wont attract ongoing tax buying allows you better future cashflow as no monthly payments are required it also gives you trade in value against a future car which will help to reduce future costs no matter when you want to you can trade cars with no con tracts to renegotiate you can take a capital cost allowance cca or depreciation on your taxes- if the car is used for busi ness disadvantages of buying buying takes a large amount of cash up front that might have been useful elsewhere for exam ple if you pay cash you may later have more difficulty borrowing for some other reason since used cars dont make good loan secur ity while banks and trust com panies are quite happy to take only the new car as security for a new car loan buying also takes away from your ability to invest elsewhere to possibly earn high returns advantages of borrowing borrowing lets you buy a more expensive car with the ability to pay for it over time it gives you a known nonvaring monthly pay ment for the term of the loan it is a method of forced savings in that since you pay more than a lease you own the car at the end of the period loans can fix your maximum interest charge but most can be renegotiated at a lower rate if in terest rates fall significantly after you borrow and buy interest charges and cca are deductible to the extent that the car is used for business purposes disadvantages of borrowing the car may depreciate faster than you loan balance declines for example on a fouryear loan you may owe more after the first year of payments than the car can be sold for if you do sell it in that situation you will have no car but still owe the lender the balance of the loan it should also be remem bered that since you are paying loan interest that the total cost of the car may be more than paying cash i say may be more because it depends on interest rates your opportunity cost what interest rate you can invest money for taxes and possible business usage advantages of leasing leasing requires the lowest cash flow and therefore allows you to buy a car with more options suited to your needs leasing takes away worries about future depreciation rates as you usually ha ve an option to buy the car from the dealer at the end of the lease for a predetermined price if you car has a low resale you can give it back to the dealer but if it has a high resale value you can buy it according to the terms of your lease for less than the cur rent market value buy back price and the possible future popularity of your model become an important part of the equation leasing also allows the full deduction of lease payments to the extent of business usage of the car and can result in some ex cellent tax savings disadvantages of leasing with leasing you never own the vehicle and that can bother some people at the end of the lease there is no tradein value and a new car at the new prices could create some cash flow problems leases can be broken but there can be charges involved and so you may end up keeping a car that you are not really thrilled with to save the penalties if interest rates fall significantly after you start the lease then you usually cant renegotiate the terms of the lease in the same way you can with an open car loan lease pay ments are based on current in terest rates at the time of purchase whats the answer from the above you can see that there is no straight answer let me finish with a numerical ex ample olivetti announces major deal olivetti canada limited has announced that it has been awarded a contract to supply the royal canadian mounted police with 2000 m24 person al computers the machines will be used as communicating terminals between rcmp offices across the country olivetti personal compu ters are also at work at sever al other federal government departments other depart ments using the m24 include supply and services revenue canada the department of correctional services parks canada and environment canada the m24 is the flagship of olivettis line of personal computers and office automa tion systems olivetti is one of the major suppliers of personal compu ters in canada its canadian head office is on steeles ave in markham assumptions 1 total cost 15000 2 purchaser is in a 40 per cent marginal tax bracket 3 car is used for business 75 per cent of the time 4 purchaser can invest money at net 10 per cent interest 5 a 48month loan or lease is taken buy borrow 15000 16147 2549 2549 0 1438 0 0 12451 12160 lease 16438 0 4856 11582 present value cost taxes saved by deducting depreciation taxes saved by deducting interest taxes saved by deducting lease total net cost in present value terms these only apply if car is used for business the results are very close making a better deal on one method of purchase or a change in the buyback price on the lease could change the rankings you should consider what type of arrangement makes you most comfortable and then discuss it with your accountant if it involves a business vehicle finally find a knowledgeable and helpful dealer and go get the car of your dreams editors note john near is a resident of markham and president of john near annuity insurance agency limited licenced through mutual life of canada in richmond hill the planning act town of markham take notice that application to amend the zoning order filed as ontario reg ulation 10472 has been received by the minister of municipal affairs the application is applicant george and edna clarke file no 19zo00286002 proposal lot severance to permit the development of a single family dwelling on lands described as part lot 29 cone 8 town of markham all submissions in support of or in opposition to the applications de scribed above and received by the ministry of municipal affairs 14th floor 777 bay street toronto ontar io m5g 2e5 on or before the 24th day of april 1986 will be fully considered before a final decision is made please refer to the file number indicated above in addition under section 4610 of the planning act 1983 any interested person may request a hearing by the ontario municipal board on an ap plication for amendment to a zoning order ministry of municipal affairs ontario bernard grandmaitre minister of municipal affairs new heights of luxury ne iew standards in design have been set new heights of luxury attained in this established community of exclusive estate homes at king heights the beauty begins with each architecturally controlled streetscape and runs fully throughout each spacious new home features range from dramatic skylighted entries huge living rooms with cathedral ceilings spacious family rooms with fireplaces and magnificent master retreats with sitting areas walkin closets and marble steeping tubs and only at king heights are these luxurious extras included as standard- an extensive landscaping package with underground sprinkler system clay brick exteriors with cedar shingle roofing high efficiency furnace air conditioning humidifier high quality europeanstyle cabinets and more the highest quality finishes the most innovative floor plans the most out standing value all set amidst king citys choicest countryside visit king heights this weekend and dis cover life at its most luxurious 0- from 259000 sales office model open saturday sunday 1 200 600 pm monday tuesday 100 600 pm north of king road on the west side of kcelc for information or an appointment to view call 8335399 markham softball association 1986 rep team contacts mite boys b0rn777 ken bell 2943376 squirt boys born 7475 davephilups 2946929 pw boys born 7273 paulsheppard 2940847 bant boys born 7071 fred crawford 2945361 jr boys born 6535 bob abbot 294-2480- squirt girls born 7475 ted taylor 2943241 bant girls born 7071 ted taylor 2943241 markham tennis club open registration saturday april 12th markham community centre hwy 7 48 9 am 12 noon intercounty team tryouts 1 pm 4 pm april 16 17 18 ladies major a april 21 22 23 ladies b c april 28 29 30 ladies independent april 26 27 mixed a may 3 4 mixed b jong park instjfuteof tae kwondo v- m register iow sprinc m f0r summer uiviivien asjr a wkl f jong park tae kwondo inc rt v fm a a 25 heritage rd z94hjooo a markham exclusive agents allenby realty inc jim drobyk or carmen ruffolo investment seminar especially for ibm personnel and their spouses topics financial and tax planning personal investment strategies market timing estate planning april 16 1986 730 sharp 930 pm new markham theatre highway 7 warden ave 171 town centre blvd markham admission is free held under the auspices of yorkton securities inc 72 main street north markham for further information and to reserve call 4714433 name i and phone members of my family will be attending the yorkton securities inc financial seminar mail to yorkton securities inc 72 main st n markham l3plxs