View Poll Results: What do you do?
This is my car and I'm driving it into the ground!
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38
86.36%
Leasing is delicious because I always get a new ride every few years!
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5
11.36%
What do I do? I ask for rides so I don't have to pay for gas.
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1
2.27%
Voters: 44. You may not vote on this poll
Do you LEASE or OWN?
#1
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I'm starting up my business this coming November and am torn between keeping my GS or selling it and leasing a vehicle for the business.
What would you do?
What would you do?
#2
Cycle Savant
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You can probably get more tax breaks if you keep leasing a vehicle for a business because you can claim the tax exemption frequently (as in every 2-3 years).
However, if you drive a lot for your business (like a real estate agent), leasing may not be a good option because of the migh mileage.
As for myself, I own. I drive about 25k a year. My company pays for my gas, so I just deal with the car payments.
However, if you drive a lot for your business (like a real estate agent), leasing may not be a good option because of the migh mileage.
As for myself, I own. I drive about 25k a year. My company pays for my gas, so I just deal with the car payments.
#3
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Originally Posted by kevs
I'm starting up my business this coming November and am torn between keeping my GS or selling it and leasing a vehicle for the business.
What would you do?
What would you do?
#4
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I chose a lease for lower payments, easier to get rid of in three years if I don't want it anymore, and lower taxes (taxes on monthly payments only vs. full price of the car).
#10
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Here was my thinking:
1. For example, purchase a vehicle for $30K.
2. Sell it in 3 years for $21K.
3. Money paid was $9000, which is $250/month (essentially) for the purchased vehicle.
If I'm going to pay that out, that's right around what...$360/month if it's a write-off...
1. For example, purchase a vehicle for $30K.
2. Sell it in 3 years for $21K.
3. Money paid was $9000, which is $250/month (essentially) for the purchased vehicle.
If I'm going to pay that out, that's right around what...$360/month if it's a write-off...
#11
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And, here's a few questions:
1. How much (on average) is the bump-up mileage option for you?
2. What happens if you get in an accident with a leased vehicle?
1. How much (on average) is the bump-up mileage option for you?
2. What happens if you get in an accident with a leased vehicle?
#13
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Well if you want advice from a business owner here goes...
First off, keep your current car and take the mileage credit for every mile you drive (45 cents a mile or so right now). Unless of course you are making big payments. The first couple of years in business you want as much cash available as possible. For some reason the income never quite matches the business plan.
If you want or need the new car ... then you need to look closely at what you want to get. A vehicle with over 5,000 GWR qualifies for a large write-off ($25K every year I believe). So in the Lexus family that's the GX470 and the LX470. In the BMW family that's an X5 V8. Also consider a Navigator and/or Tahoe - you get the idea. Leasing these cars does not make sense compared to buying them because of the huge depreciation you can take on them.
Now in terms of cars, it is NOT always better to lease than buy. It is true that the write-off on a car is terrible (something like $2,800 first year, $4,100 second year and then $2,100 each year after that.). However, provided you do not trade the car in and sell it outright, you get to write-off the difference between what you have it on the books for vs. what you get for it. So you have to look at the full three year picture not the first or second year. In my case, purchasing my 550 was cheaper than leasing it. The next two years I will get nowhere near the write-off I would have received had I leased it, but in year three when I sell it, I will get a very nice write-off. But remember, you can't trade it in! If you do that, the book value gets added on to the new car and you are toast! (PS - it has to be an arms length transaction too - no selling it to your brother)
I should add that the money factor and residuals on the 550 went down and up respectively in February vs. December when I got my car and leasing it in February might have been cheaper than buying. You need to check with your accountant.
Last but not least, remember, you can only write-off the percentage of the car that you use for business. So if you put 15K per year on your car, but 5K of that was driving to and from work, then you only can write-off 66% of the lease/car.
Ok, so final advice....
1. Maximize cash in the first couple of years. Don't stick yourself with a huge car payment when you are trying to get the business off the ground. The business comes first.
2. People are going to look very carefully at what you drive depending on your business. Sometimes a very nice car actually hurts you in the sale. Consider a Camry or Accord or Fusion as cars that will not get you in trouble. However, even the Camry/Accord can get you in trouble if you are making calls to something like a Ford plant.
3. Ask your accountant to run the numbers for you. Don't assume the lease is the way to go until you have had someone run the numbers for you.
PS - make sure you have GAP insurance on your car. Some leasing companies include this at no charge (Lexus Financial and BMW Financial to name two). If you don't have this insurance and you total your leased car you have a problem on your hand. This is because the buyout on your lease is almost always higher than what the car is worth. So you will be writing a check to the leasing company to cover the difference if you don't have this insurance.
PPS - taxes vary by state. Here in IL you pay taxes on the FULL purchase price of the car even if you lease it and then you pay taxes AGAIN if you buy it out at the end or any time during the lease. Our state treats it as a sale to the leasing company for the purchase price and then a sale to you for the buy out price.
PPPS - remember, getting out of a lease is very very painful. So if you go this route and have money problems with the business, it’s going to hurt like crazy to get out.
PPPPS - Good luck with the business!
First off, keep your current car and take the mileage credit for every mile you drive (45 cents a mile or so right now). Unless of course you are making big payments. The first couple of years in business you want as much cash available as possible. For some reason the income never quite matches the business plan.
If you want or need the new car ... then you need to look closely at what you want to get. A vehicle with over 5,000 GWR qualifies for a large write-off ($25K every year I believe). So in the Lexus family that's the GX470 and the LX470. In the BMW family that's an X5 V8. Also consider a Navigator and/or Tahoe - you get the idea. Leasing these cars does not make sense compared to buying them because of the huge depreciation you can take on them.
Now in terms of cars, it is NOT always better to lease than buy. It is true that the write-off on a car is terrible (something like $2,800 first year, $4,100 second year and then $2,100 each year after that.). However, provided you do not trade the car in and sell it outright, you get to write-off the difference between what you have it on the books for vs. what you get for it. So you have to look at the full three year picture not the first or second year. In my case, purchasing my 550 was cheaper than leasing it. The next two years I will get nowhere near the write-off I would have received had I leased it, but in year three when I sell it, I will get a very nice write-off. But remember, you can't trade it in! If you do that, the book value gets added on to the new car and you are toast! (PS - it has to be an arms length transaction too - no selling it to your brother)
I should add that the money factor and residuals on the 550 went down and up respectively in February vs. December when I got my car and leasing it in February might have been cheaper than buying. You need to check with your accountant.
Last but not least, remember, you can only write-off the percentage of the car that you use for business. So if you put 15K per year on your car, but 5K of that was driving to and from work, then you only can write-off 66% of the lease/car.
Ok, so final advice....
1. Maximize cash in the first couple of years. Don't stick yourself with a huge car payment when you are trying to get the business off the ground. The business comes first.
2. People are going to look very carefully at what you drive depending on your business. Sometimes a very nice car actually hurts you in the sale. Consider a Camry or Accord or Fusion as cars that will not get you in trouble. However, even the Camry/Accord can get you in trouble if you are making calls to something like a Ford plant.
3. Ask your accountant to run the numbers for you. Don't assume the lease is the way to go until you have had someone run the numbers for you.
PS - make sure you have GAP insurance on your car. Some leasing companies include this at no charge (Lexus Financial and BMW Financial to name two). If you don't have this insurance and you total your leased car you have a problem on your hand. This is because the buyout on your lease is almost always higher than what the car is worth. So you will be writing a check to the leasing company to cover the difference if you don't have this insurance.
PPS - taxes vary by state. Here in IL you pay taxes on the FULL purchase price of the car even if you lease it and then you pay taxes AGAIN if you buy it out at the end or any time during the lease. Our state treats it as a sale to the leasing company for the purchase price and then a sale to you for the buy out price.
PPPS - remember, getting out of a lease is very very painful. So if you go this route and have money problems with the business, it’s going to hurt like crazy to get out.
PPPPS - Good luck with the business!
Last edited by doug_999; 04-07-06 at 08:00 PM.
#14
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Thanks for the tips, Doug! They were really helpful.
I'm driving a 1998 GS400 right now (see below)
I was thinking of getting something like a 92 Camry to drive that to clients' homes.
I've always went for the clean look, so that peeps can tell it's different, but not anything outrageous.
Is my car too shnazzy? Or do ya'll think this isn't threatening?
I'm driving a 1998 GS400 right now (see below)
![](https://www.clublexus.com/gallery/data/500/eAngle.jpg)
I was thinking of getting something like a 92 Camry to drive that to clients' homes.
I've always went for the clean look, so that peeps can tell it's different, but not anything outrageous.
Is my car too shnazzy? Or do ya'll think this isn't threatening?
#15
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Originally Posted by kevs
Thanks for the tips, Doug! They were really helpful.
I'm driving a 1998 GS400 right now (see below)
I was thinking of getting something like a 92 Camry to drive that to clients' homes.
I've always went for the clean look, so that peeps can tell it's different, but not anything outrageous.
Is my car too shnazzy? Or do ya'll think this isn't threatening?
I'm driving a 1998 GS400 right now (see below)
I was thinking of getting something like a 92 Camry to drive that to clients' homes.
I've always went for the clean look, so that peeps can tell it's different, but not anything outrageous.
Is my car too shnazzy? Or do ya'll think this isn't threatening?
![Smilie](https://www.clublexus.com/forums/images/smilies/smile.gif)