Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
OK, so we all know that a new car depreciates at a rate higher than a used car, and we know that the steepest losses in value are in the first 5 years (especially the first year)
the venerable Honda Civic which is known for the lowest depreciation rates still loses 41% of its value in 5 years (source: Edmunds)
Luxury cars are the worst... Lexus, Lincoln, Benz... doesn't matter, their values plummet faster than any other category regardless of country of origin or perceived reliability.
Q- so why do seemingly smart business owners run out and buy these luxury cars brand new?
A- because they deduct the depreciation on this luxury car (or they lease it and deduct pmts)
they also can deduct the depreciation on desks, computers, phones, light aircraft and just about anything else
they "use for business"
this is the clearest explanation of MACRS i could find, but i still don't fully understand it, but i like it
the deduction is even better if you choose an SUV or light truck which explains why those $60k pickup trucks loaded with leather & navi are selling so well
this sounds even sweeter than leasing and writing off the payments
write off the payments & Depreciation, and get to keep the car
so which is better?
Last edited by azsportpilot; 01-25-2016 at 01:39 PM..
OK, so we all know that a new car depreciates at a rate higher than a used car, and we know that the steepest losses in value are in the first 5 years (especially the first year)
the venerable Honda Civic which is known for the lowest depreciation rates still loses 41% of its value in 5 years (source: Edmunds)
Luxury cars are the worst... Lexus, Lincoln, Benz... doesn't matter, their values plummet faster than any other category regardless of country of origin or perceived reliability.
Q- so why do seemingly smart business owners run out and buy these luxury cars brand new?
A- because they deduct the depreciation on this luxury car (or they lease it and deduct pmts)
they also can deduct the depreciation on desks, computers, phones, light aircraft and just about anything else
they "use for business"
this is the clearest explanation of MACRS i could find, but i still don't fully understand it, but i like it
the deduction is even better if you choose an SUV or light truck which explains why those $60k pickup trucks loaded with leather & navi are selling so well
this sounds even sweeter than leasing and writing off the payments
write off the payments & Depreciation, and get to keep the car
so which is better?
You are going to give $10,000 to a lease company so that you don't have to send the government $2,500. Makes perfect sense.....or does it?
You are going to give $10,000 to a lease company so that you don't have to send the government $2,500. Makes perfect sense.....or does it?
Totally agree. This is exactly the reasoning that people use when they say that the rich give to charity to save money on taxes. It never makes sense to give 100% of a dollar to save 35% of a dollar- you always have less money than if you had done nothing at all.
In the case of a car or truck, a business owner who buys an expensive car will still have less money at the end of the day than a business owner who buys less expensive car, even after factoring in the tax savings.
Leasing can be charged as a business expense if it's structured correctly, 100% deductible.
As far as luxury cars go, in some areas and some businesses, for one reason or another, it's expected that the owners will show off. In this area real estate agents are "supposed" to drive Mercedes to show that they're successful.
As far as depreciation goes, why is everybody so worried about what other people do? As I've said more than once, if you buy a new car and keep it 10 years depreciation means absolutely nothing.
agreed, when i was in real estate i think i lost a lot of listings to agents that showed up in a new flashy car
its basic human psychology and likely carries over to other types of businesses too
my first 20 years of driving i stubbornly believed i was saving money by driving a jalopy
paying for brakes, tires, head gaskets, struts, ecu's... it was crazy
then a $2,800 tranny which had to go on a credit card at 29% interest,
my accountant woke me up to the concept of fixed payments of $199/mo to lease a new Accord and not getting hit with unexpected huge bills which must go on a credit card
adding up the receipts i think my "paid for" jalopies were costing me more than $300/mo when annualized
I need a car anyway, now i just need to figure a way to write off the payments
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
