[wakeboarder109]

Does anyone have any resources or advice for leasing vs. financing a vehicle for business use? The vehicle would either be a full size truck like a Silverado (Crew Cab) or a Tahoe. I am in sales so I would be taking out clients, hauling some equipment etc.

Thanks in advance.

[persian54]

Depends how much you plan to drive.

But leasing it allows you to write the entire payment off, while owning it allows for depreciation and mileage write offs (accountants please chime in)

[wakeboarder109]

Originally Posted by persian54

Depends how much you plan to drive.

But leasing it allows you to write the entire payment off, while owning it allows for depreciation and mileage write offs (accountants please chime in)

I'm currently driving around 20k miles/year so I would say that's a safe estimate. I was initially thinking the lease would be the way to go but it looks like purchasing under Section 179 could give some substantial deductions (i.e. $25,000 for the first year).

For any of the accountants out there, is there a worksheet or formula for this? I've been looking but haven't found one yet.

[jlstyle]

Originally Posted by wakeboarder109

I'm currently driving around 20k miles/year so I would say that's a safe estimate. I was initially thinking the lease would be the way to go but it looks like purchasing under Section 179 could give some substantial deductions (i.e. $25,000 for the first year).

For any of the accountants out there, is there a worksheet or formula for this? I've been looking but haven't found one yet.

I'm very curious as well. So you get deduct up to $25,000 for buying a car for your first year of business run?

I'm in a market for buying a car and I'm in my first year of running a business and this is very tempting.

[John 070]

I asked someone to tell me there truth, why leasing when you own a business? Buying is almost always better (unless you have a cash flow problem). This person gave me the low down and it's scrutiny by the IRS. Zero when you lease, not so when you buy.

[John 070]

Originally Posted by jlstyle

I'm very curious as well. So you get deduct up to $25,000 for buying a car for your first year of business run?

I'm in a market for buying a car and I'm in my first year of running a business and this is very tempting.

I often wonder how many people simply don't understand the difference between a deduction and a credit...

[Mr Tonka]

I've leased and purchased as a business owner. The lease is thought of as easier and cleaner. Depending on your vehicle's value at the end of the lease term and your negotiated residual, it may make sense for your to purchase it personally and then sell it for some extra cash. Of course if the above parameters are favorable.

Purchase is straight forward. You buy it and depreciate it over the years or in some cases, if it makes sense for your business, much of it all at once, depending on the current allowances made available by the govt.

I think purchasing it just as easy and clean as leasing, especially if you trade in a vehicle and get a new one. The vehicle is a perk as a business owner. There used to be a certain value allowed by IRS for a vehicle as a tax free perk to the business owner. I'm not sure how stringent the IRS is on this issue anymore. And unless your company owns a Maybach or Bentleys i doubt they care. My wife is an accountant and she didn't give a crap how the business acquired any of the past vehicles or current vehicles the business owns. Company has two officers and owns two vehicles. I'm sure if our company owned 14 cars they, the IRS would have issue with that.

[W Cole]

Originally Posted by persian54

Depends how much you plan to drive.

But leasing it allows you to write the entire payment off, while owning it allows for depreciation and mileage write offs (accountants please chime in)

I believe it's depreciation OR mileage write off and I forget which way it is but once you choose depreciation you can't switch to mileage but if you choose mileage you can switch to depreciation (I may have that reversed).

[Maestro]

Originally Posted by Mr Tonka

I've leased and purchased as a business owner. The lease is thought of as easier and cleaner. Depending on your vehicle's value at the end of the lease term and your negotiated residual, it may make sense for your to purchase it personally and then sell it for some extra cash. Of course if the above parameters are favorable.

Purchase is straight forward. You buy it and depreciate it over the years or in some cases, if it makes sense for your business, much of it all at once, depending on the current allowances made available by the govt.

I think purchasing it just as easy and clean as leasing, especially if you trade in a vehicle and get a new one. The vehicle is a perk as a business owner. There used to be a certain value allowed by IRS for a vehicle as a tax free perk to the business owner. I'm not sure how stringent the IRS is on this issue anymore. And unless your company owns a Maybach or Bentleys i doubt they care. My wife is an accountant and she didn't give a crap how the business acquired any of the past vehicles or current vehicles the business owns. Company has two officers and owns two vehicles. I'm sure if our company owned 14 cars they, the IRS would have issue with that.

Mr Tonka got it right.

From an accounting stand point Leases are cleaner and easier to deal with. When you start depreciate assets it get complicated and depend on the depreciate schedule you use, if you depreciate it too fast and then sell it and find that you sold it for more then what was left on the depreciate value you now have to show it as income. You do not have any of this with a lease it clean and a simple expense write off.

The only time to buy and depreciate is when you know you going to hang onto the asset past is useful life or run it in to the ground.

[John 070]

Again, I asked someone to cut the bull, we all know purchases are very straightforward, leases have a lot of built-in fluff that costs more money.

Assuming you have no cash flow problem, why lease?

Answer was IRS scrutiny.

Do you have a transit authority leasing buses? Of course not, they buy them, going into it with a 12 yr. life expectancy and drive them 20. Because they are operating a business to make profits, not looking for status.

If you look at a co. like Greyhound, not only did they not buy new buses, they rebuilt old ones.

IRS scrutiny > the better option

[Mr Tonka]

Originally Posted by John 070

Again, I asked someone to cut the bull, we all know purchases are very straightforward, leases have a lot of built-in fluff that costs more money.

Assuming you have no cash flow problem, why lease?

Answer was IRS scrutiny.

Do you have a transit authority leasing buses? Of course not, they buy them, going into it with a 12 yr. life expectancy and drive them 20. Because they are operating a business to make profits, not looking for status.

If you look at a co. like Greyhound, not only did they not buy new buses, they rebuilt old ones.

IRS scrutiny > the better option

There is very little IRS scrutiny when it comes to a small business with 1 or 2 vehicles. If you have a fleet of 14 exotic cars owned by a plumbing company with 1 owner/officer; IRS will be interested.

As mentioned, you are correct with a lease being simple and staring forward. But the IRS will still be interested if a 1 owner/officer plumbing company is leasing 14 exotic cars. 14 cargo vans may even garner interest from IRS. Only because it would typically make more sense for a plumbing company to purchase those vehicles.

The whole lease VS buy thing is totally dependent on your situation. When we leased the 2006 E46 M3 i knew that i would likely be getting an E92 in 2009 or 2010. I didn't want the hassle of selling it or trading it so we leased it. I knew i would keep the E92 M3 for 5-6 years so we purchased it.

[wakeboarder109]

In previously talking with some people in car sales, they had mentioned that most companies will lease a vehicle, buy miles up front to reduce the residual and then purchase the vehicle at the end of the lease and either keep it or sell it to a family member. Since I would have a personal use for either of the vehicles I'm considering, this would seem like a decent route to take.

[Maestro]

John 070,

Here is what my accountant once told me and it may not be 100% true today due to the fact that IRS is so screw up today with all the stupid things they have to do besides collect taxes. The IRS only audits a small % of returns and most of them are small businesses why, they tend to cheat more or do not know the rules or do not have outside companies auditing their business practices.

With that said, there are certain things you can do on a tax return which sets off warning for the IRS, they may or may not check on you but once those flags are set they keep an eye on you. One of those items is asset depreciation. When you start listing cars for depreciation they keep an eye on you.

Reason being, first you can not expense the loan or the cash you laid out for the car, and some people try and do this. Next if you depreciate it over say 3 or 5 yrs and sell it on say 3 or 4 yrs and you fully or almost fully depreciate you now have to account for the difference in the depreciated value and the sell price. This is why some people do not sell the car they give it away (or so they say).

Anyway it all comes down to accounting and how you account for the assets. Most people find it beneficial to expense the lease amount verse doing all the accounting for mileage and usage and depreciation.

Everyone situation is different an I can tell you different accountants and tax people see these things differently.

[filip75]

Here is a situation: you own your small business and want to lease/buy a car, but you like to upgrade every couple of years. The choice that I would make is to lease it through the company, and then give it to myself as a job perk. In this situation, the company has a tax deduction for a car leased as part of the salary package to the president. I, on the other hand, don't have to pay the whole payment, and the total sum of the lease payments (by the company) get reported as part of my income on the W2, thus only being taxed at your personal income level. Let's say the payment is $1,000/mo. That means that my income gets increased by $12,000/year. I think it's a win-win for both me and the company.

I plan to get a Range Rover like this next year.

[persian54]

Originally Posted by wakeboarder109

I'm currently driving around 20k miles/year so I would say that's a safe estimate. I was initially thinking the lease would be the way to go but it looks like purchasing under Section 179 could give some substantial deductions (i.e. $25,000 for the first year).

For any of the accountants out there, is there a worksheet or formula for this? I've been looking but haven't found one yet.

That's a lot of miles. Buying seems to work out best cause you'll pay quite a bit.. I've never leased over 15k miles, but the higher the miles, the lower the residual….

Originally Posted by W Cole

I believe it's depreciation OR mileage write off and I forget which way it is but once you choose depreciation you can't switch to mileage but if you choose mileage you can switch to depreciation (I may have that reversed).

Interesting. I'm not sure as I've only leased. I've never bought…. so it would be best if a CPA chimed in.