Automotive

Company paid Leased vehicle, with a twist!

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[OP]
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Apr 20, 2012
171 posts
9 upvotes
Montreal

Company paid Leased vehicle, with a twist!

I'm in the market for a new car. I work for a small company and they will pay $1,000 a month for a car. I have asked them to pay the lease directly so that I can get the benefit of the full $1,000 against the car and they will pay the sales tax. I know I will be dinged later on the standby charge. It is what it is.

My questions are as follows:

1. I found a car, negotiated the price down and over 36 months, it works out to about $750/mth pre-tax. I would like to keep the car at the end of the lease. Since my company is giving me $1,000/mth, can I "overpay" up to $1,000 and how does that affect the residual? I'm hoping that whatever I overpay will allow me to buy the car for cheaper at the end of the lease.

2. Since this will be a company car, how can i transfer the vehicle to me personally at the end of the lease? Since I am going to get taxed for the standby-charge over 3 years, I don't want another taxable hit when they transfer the car to me.

3. Can I have the car in both names? Personally and Company name?

I have a separate thread on trade-in values.

Thanks
13 replies
Deal Expert
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Jul 30, 2007
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Toronto
why don't you simply ask the company to give you a monthly car allowance cheque of $1000 and you go out and do your own lease instead. would this not be easier ?
[OP]
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Apr 20, 2012
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Montreal
It would be easier but with tax withholdings, I would get maybe $600 net and have to pay the sales tax on top of that. With the company paying directly, I'm able to get more bang for buck and the company can claim the ITC for the business portion of the lease.
Sr. Member
Oct 4, 2010
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Surrey
if you lease the car under the company name, I don't think you can't buy it directly at the end of the lease. The company would have to buy it, then sell it to you. In which case, double tax.
Deal Expert
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In many cases, you can buy it off from the leasing company. Just have to pay safety, residual buyout price + admin fee (if applicable) + taxes.

My friend's wife gets a company vehicle every 3 years and she always has the option to buy it out in the end.
Newbie
Mar 1, 2017
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Also this would be seen as a taxable benefit to you so the taxes could be even more.
The best bet is a car allowance and then you claim the income and the lease against it as an expense.
I would check with your accountant if you in a job role that this is allowed.
Company provided vehicles can get very risky and I have seen too many horror stories of people getting audited and getting huge tax penalties since they drove the car on the weekends and then they get hit with a $1000 a month taxable benefit.
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Jul 5, 2011
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With respect to the payment & residual buyout:

Yes you can.

If you add more KM on to the lease, it will lower the residual value and increase the monthly payment accordingly.

Increase the KM until you hit your desired payment, and enjoy the lower residual value at the end of your lease.

ie. Increase KM allowance from 24,000KM / Year to 40,000KM / Year

With respect to buying it out in the company name:

Yes you can do this - if you run into a difficult Finance Manager, they might give you a hard time. They would call it a 3rd party buyout and may charge you a higher fee.
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Apr 12, 2013
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you might be able to do a lease transfer at the end but your organization must allow it, and some companies do not allow transfers at the end of leases.
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If I understand OP's original query, correctly, he negotiated a car lease for $750/month. He gets a $1,000 allowance/month from the company. So, he's hoping to "top up" the car lease payments by $250, with the aim of (somehow?) decreasing the car's residual, ergo, paying less when he buys it off the leasing company.

A flat-rate allowance is a taxable benefit, as defined by CRA. So, that $1,000 allowance should be added to your income & taxed. If it's not, it will not be a pretty picture, if CRA gets wind of it.

I would strongly urge you to speak with a professional accountant, about what you want to do. You don't want to wake up 4-5 years from now with a surprise from CRA, that you owe tens of thousands in back-taxes, penalties and interest.

Edit: +1 to @xjesterxx
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[OP]
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Apr 20, 2012
171 posts
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Montreal
xjesterxx wrote: With respect to the payment & residual buyout:

Yes you can.

If you add more KM on to the lease, it will lower the residual value and increase the monthly payment accordingly.

Increase the KM until you hit your desired payment, and enjoy the lower residual value at the end of your lease.

ie. Increase KM allowance from 24,000KM / Year to 40,000KM / Year

With respect to buying it out in the company name:

Yes you can do this - if you run into a difficult Finance Manager, they might give you a hard time. They would call it a 3rd party buyout and may charge you a higher fee.
Thanks for the advice. I will speak with my sales rep. The exact solution I was looking for.
[OP]
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Apr 20, 2012
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Montreal
Micelli_Illuminatti wrote: If I understand OP's original query, correctly, he negotiated a car lease for $750/month. He gets a $1,000 allowance/month from the company. So, he's hoping to "top up" the car lease payments by $250, with the aim of (somehow?) decreasing the car's residual, ergo, paying less when he buys it off the leasing company.

A flat-rate allowance is a taxable benefit, as defined by CRA. So, that $1,000 allowance should be added to your income & taxed. If it's not, it will not be a pretty picture, if CRA gets wind of it.

I would strongly urge you to speak with a professional accountant, about what you want to do. You don't want to wake up 4-5 years from now with a surprise from CRA, that you owe tens of thousands in back-taxes, penalties and interest.

Edit: +1 to @xjesterxx
Thanks. To clarify, I am not trying to avoid tax and the payroll department where I work are aware of this. As I said in my original post, “I know I will get dinged at the end with a standy charge . It is what it is.”

I just want to get more bang for buck with a direct lease payment from the company so I get to negotiate a car using the gross allowance of $1,000. The payroll people are the one who told me they have done this before.
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Jul 26, 2007
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Danor71 wrote: Thanks. To clarify, I am not trying to avoid tax and the payroll department where I work are aware of this. As I said in my original post, “I know I will get dinged at the end with a standy charge . It is what it is.”

I just want to get more bang for buck with a direct lease payment from the company so I get to negotiate a car using the gross allowance of $1,000. The payroll people are the one who told me they have done this before.
Payroll people are CPA themselves so listen to them. Unfortunately, at the end of the lease, like few have already said you will be dinged with transfer charges. But it will be alot cheaper to do this way then increase your salary by $12000 and add more taxes, ei, cpp which might be good thing but as you calculated $4800 per year deduction is alot.
[OP]
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Apr 20, 2012
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Montreal
peteryorkuca wrote: Payroll people are CPA themselves so listen to them. Unfortunately, at the end of the lease, like few have already said you will be dinged with transfer charges. But it will be alot cheaper to do this way then increase your salary by $12000 and add more taxes, ei, cpp which might be good thing but as you calculated $4800 per year deduction is alot.
Agreed and they are sticklers for the details!
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Sep 8, 2017
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Can someone ELI5 what OP is try to do? And what a standby charge is?

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