[Mickey]

I’ve read and read and I get the tax write offs but I guess I’m trying to decide how in the end this is still a good financial move when you Still had to pay all that money in the first place for the purchase or lease?

I’ve only ever owned cars I could pay cash for, usually under 10k.

I owned one new car, paid 21k cash and felt like it was such a waste- but I wasn’t a business owner then so didn’t benefit from tax write offs.

I see all these business owners saying they upgrade every 3 yrs for tax purposes and I’m trying to wrap my head around it.

[Lex]

The pros of leasing:
1. New vehicle every 1-3 years.
2. Vehicle is likely in warranty the entire time.
3. You have a better idea of total investment.
4. Entire cost (if 100% business) can be written off.
5. Lower investment.

The reasons/concerns why you listed are correct and explain why leasing is rarely a smart financial move. Joe Bruns gave a good summary too.

I never saw how leasing worked best either. The one exception is the federal government (in some cases). This is due to the laws on selling the “surplus” vehicles. And even for them it only makes sense for a portion of the fleet which is high use or high visibility. Note they do not get a “tax right off.”

[Ashley]

We found that for us using the mileage deduction just works out better. Yes if the vehicle is expensive enough it can be justified but we don’t have the need.

[Jonathan]

Could never make a lease work in any situation for me because I drive way past the mileage quota. Also, the Toyota finance rates are so low it didn’t make sense to lease.

One thing that does work for me is trading in a car the same place you buy a new one from. Let’s say the new one is 20 k and the trade in is 12 k. They only charge sales tax on 8 k.

Have you seen: So my husband and I are looking at possibly trading in our vehicles for something cheaper which would require getting slightly older ones than what we currently have

[Steven]

The thing you have to watch out for is personal use. A lot of people are saying it’s 100% business when it’s not.

[Allen]

Write off doesn’t mean it’s free.. It’s effectively discounted.

[Joe]

Assume have an adjusted gross income of 150k a year and pay 20% taxes- that is 30k due in taxes.

And assuming all that, let say you purchase a 60k vehicle for business purposes.

If you take the full deduction of 60k that would lower your taxable income to 90k and 20% would put you at 18k in taxes.

That 60k vehicle actually costs you 48k. AND the maintenance and repairs can be “written off” as in lowering your taxable income.

The opposite occurs when you sell it though. It adds to your income and you’ll pay some taxes on that “sale”

Now, the reality is most that see that say then “need to spend money or pay it all to taxes” really don’t understand it all and just use a business as an excuse to make poor decisions in regards car purchases. I’m not judging but that’s just what see in my business.

If you make a really high income, and pay 35-40% in taxes, the tax savings will be 35-40% that automobile purchase price.

There are stipulations and rules for getting all the depreciation or purchase amount to be able to be written off.

But that is the basic explanation.

I’ve always felt I’d rather the pay 20% of whatever and keep the balance in my pocket than blow it just because. That scenario above still has you spending 60k to save 12k. It may or may not be worth it to you. That said, we like cars and have nice ones so if we can get the benefit of our business owning them, it’s a bonus.

[Author]

Posts