Discussion:Lease vs buy
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| Revision as of 14:04, 14 October 2009 JR1 (Talk | contribs) (Nearly identical) ← Previous diff |
Revision as of 14:05, 14 October 2009 JR1 (Talk | contribs) (And it should be) Next diff → |
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| {{ForumReplyPost|UserID=JR1|Date=October 14, 2009|Text=Nearly identical. Fair point.}} | {{ForumReplyPost|UserID=JR1|Date=October 14, 2009|Text=Nearly identical. Fair point.}} | ||
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| + | {{ForumReplyPost|UserID=JR1|Date=October 14, 2009|Text=And it should be noted that the internal interest rate used in computing the lease is generally higher than a loan as well. Cash buy is still cheapest.}} | ||
Revision as of 14:05, 14 October 2009
Discussion Forum Index --> Advanced Tax Questions --> Lease vs buy
Discussion Forum Index --> Tax Questions --> Lease vs buy
| 13 October 2009 | |
| I have a leased car which is 2 years old which I have been writing off. The lease is going up and I am thinking of buying the car. How does one determine which is better to lease again or buy .
I do not put a lot of mileage on the car. Is the first year depreciation the same for a car I leased and now I am going to depreciate? | |
| 13 October 2009 | |
| oh my, BlrgCPA, is that what you tell your clients who rent business equipment and office space? | |
| October 14, 2009 | |
| OK, Jordan. Seriously, this is what your clients ask...and you don't have an answer?
Short answer tho'...the bottom line is that over time, the write offs for leasing or buying are identical unless you're an employee where you can't write off interest on a loan. Now, leasing generally gets you quicker write offs unless there's some bonus deal in play from IRS. And if you like more expensive cars, you definitely get better write offs with a lease much much faster since the lease tables are a joke and don't come even close to balancing the luxury auto rules between lease and buy. | |
| 14 October 2009 | |
| of course, it would be good to have business use. Unless you travel from client to client it would be hard to see where you would get enough business use percentage in a traditional tax/accounting practice, though. Most of us use the standard mileage rate for taking deposits to the bank and picking up supplies at Office Depot. | |
| October 14, 2009 | |
| Well, many of us work from home, so leaving IS biz...I wonder what the percentage is that have an office away? | |
| 14 October 2009 | |
| over time, the write offs for leasing or buying are identical
Not totally true due to the income inclusion adjustment you must calculate on the lease; this is a permanent difference in your out of pocket costs that become tax deductions. It is not a consequential difference in my view. Leasing has the advantage of matching deductions with cash flow (execept for the above statement), and benefits those who want the more expensive vehicles plus tend to only use for two or three years. Leases keep you from absorbing all the hit to a vehicle's value that occur in the earliest years of ownership. Remember the old saying that a new car depreciates in value as soon as you drive it off the lot. In the end, your client must understand a lease is simply a rental agreement and you get no ownership in it. If your client tends to put high mileage on vehicles, or prefers more economically priced vehicles and intends to keep one for several years they are better off to purchase it outright. High mileage comes with penalties on leases. | |
| October 14, 2009 | |
| And it should be noted that the internal interest rate used in computing the lease is generally higher than a loan as well. Cash buy is still cheapest. | |
