Purchasing a boat that been leased in Ontario Canada

[Bobsuruncle]

I am currently looking to buy a Sea Ray that is under lease. The person who I am buying the boat from has indicated that I need to pay the lease off and it's mine.

Not sure of this and would like some input if possible.

Sincerely,

Bobsuruncle

PS Great site here!!!!!

 

[Gofirstclass]

Bob, I'm basically familiar with car leases but not boat leases. The first thing I would do to make sure I was protected financially and legally would be to contact and attorney to have them represent you through the purchase process.

I know attorneys can be expensive, but think how expensive it could be to not hire one and find out later you got screwed by someone in the process. Also, please keep us posted via this thread on what you find out and how you do.

 

[bahamabreisus]

I would think there is residual amount that would be owed to the leasing company. Find out who the lease is with, contact them. Very few leases would have $0 pay out.

 

[mwph]

First off - Welcome to CSR!

+10 on the attorney advice.
When the individual says "pay off the lease & its yours", what he probably means is "bail me out of my bad decision & the bank will then sell you the boat".
You plunk down your hard earned money, he walks away, next thing you know.... Bobs your uncle!

If its too good to be true.......

 

[fwebster]

Read and understand the original lease document.

The method/math for the pay-off should be clearly stated. In all likely hood, you cannot buy the boat directly from the lessor, the lease document probably imputes some value to the lessee as he retires the principle to arrive at a residual value, so only he can buy the boat out of the lease. I don't know about Canadian tax law, but in the US that transaction triggers double sales taxes on the boat.......one time when the lessee buys the boat out of the lease, then another when you buy the boat from the lessee. It can get tricky and even thorny, so proceed with caution.....at least you know to ask about the tax ramifications of the deal as well as how to structure advancing the lessee the money required to pay off the lease so you and your money are protected.

 

[Creekwood]

I am currently looking to buy a Sea Ray that is under lease. The person who I am buying the boat from has indicated that I need to pay the lease off and it's mine.

Not sure of this and would like some input if possible.

Sincerely,

Bobsuruncle

PS Great site here!!!!!

I have never heard of a boat lease. Is it a repo boat?

 

[skylark]

The leasing company owns the boat, deal with them directly to get a final payout then bobsuruncle

 

[Henry Boyd]

Read and understand the original lease document.

The method/math for the pay-off should be clearly stated. In all likely hood, you cannot buy the boat directly from the lessor, the lease document probably imputes some value to the lessee as he retires the principle to arrive at a residual value, so only he can buy the boat out of the lease. I don't know about Canadian tax law, but in the US that transaction triggers double sales taxes on the boat.......one time when the lessee buys the boat out of the lease, then another when you buy the boat from the lessee. It can get tricky and even thorny, so proceed with caution.....at least you know to ask about the tax ramifications of the deal as well as how to structure advancing the lessee the money required to pay off the lease so you and your money are protected.

Frank,

It is possible for the poster to buy the boat from the lessor if the lessor allows an early termination of the lease. That also does away with the tax issue. It would make the selling price of the boat the npv of remaining payments plus their residual value at end of lease plus potentially a profit.


There may be tax impact as well depending on the lease structure. If the lease is considered a finance lease there may be a charge if the payments made to date do not qualify as a finance lease. That would convert it to a rental transaction. Assets on a finance lease are accounted for differently then those on a rental arrangement. The difference is in how and when depreciation is taken. Converting from one structure to the other could end up creating an additional carve to the buyer.

If the lease was priced properly the buyer will probably see a selling price well above current FMV.

I've seen people try this on big equipment like fork trucks and cranes and the numbers never seem to work out.

Henry

 

[Creekwood]

Frank,

It is possible for the poster to buy the boat from the lessor if the lessor allows an early termination of the lease. That also does away with the tax issue. It would make the selling price of the boat the npv of remaining payments plus their residual value at end of lease plus potentially a profit.


There may be tax impact as well depending on the lease structure. If the lease is considered a finance lease there may be a charge if the payments made to date do not qualify as a finance lease. That would convert it to a rental transaction. Assets on a finance lease are accounted for differently then those on a rental arrangement. The difference is in how and when depreciation is taken. Converting from one structure to the other could end up creating an additional carve to the buyer.

If the lease was priced properly the buyer will probably see a selling price well above current FMV.

I've seen people try this on big equipment like fork trucks and cranes and the numbers never seem to work out.

Henry

Its a totally different tax regime in Canada. Interest on personal property is not deductible and unless the assets are used in a business, depreciation is not a tax deduction. Its pretty rare to see leasing for recreational boats. Loans are common, but not leases.

 

[Henry Boyd]

Its a totally different tax regime in Canada. Interest on personal property is not deductible and unless the assets are used in a business, depreciation is not a tax deduction. Its pretty rare to see leasing for recreational boats. Loans are common, but not leases.

That may be so for a consumer, but for the leasing company depreciation and acreation rules are the same. A boat owned by a lessor is a business asset. In both the US and Canada finance lease and rental agreements have different accounting treatment. Converting what was supposed to be a finance lease to a rental transaction might create an additional cost to the lessor (and a possible buyer).


Sent from my iPad using Tapatalk HD

 

[Bobsuruncle]

Thank you for all your great input. I've done some extensive research and spoke with Revenue Canada, Service Ontario. (Gov Agencies) They indicated that I need to pay the company who leases the boat. I can also do a lien search on this boat on-line for $8. I will have to pay the 13% HST and then transfer it into my name. I won't be dbl taxed as this HST covers the PST which will show on the bill of sale.

Great site!!!

Thanks again

Bobsuruncle
Sea Ray 340 Express-soon!!!!