Should you buy or lease your business vehicle?

I see a upside to deducting all the cost of a lease and getting a new truck every few years ,, I have always just payed cash for work trucks and used them tell there ready for the scrap yard. but I only drive a work truck like 3 or 4K miles a year and its a huge depreciation and maintenance cost ,,

Since your truck should last 25 to 50 years at your usage, compare monthly lease payments times 12 months times 25 years to the price of a new truck. You will be adding tires as an expense, but everything else is the same operating cost as a lease vehicle. No brainer! Unless you just get tired of driving the same old truck . . .

For that few of miles your best route is used. Yes, with recent new purchase you have an expensive asset that is doing little work. You will be paying even more if someone else owns the asset and you pay for them to put the asset in your shop. To minimize lease cost, you have to return the vehicle with the permitted number of miles on the clock.

Have you considered renting? Sounds like a day every couple of weeks is all you need.

If you have a 4 year old truck with only 16K miles, why would you trade it off?

Leasing works for more expensive vehicles and if you are not going to waste time working on them.

The IRS used to have a limit on the value of the vehicle you could purchase, but none on the lease. SO buying a 30k car was too high but you could lease a Ferrari


For the OP, purchase sounds the best.


That may change if he gets to a point where he doesn't want to mess with a truck, where reliability becomes more important than cost

Remember of course, a 'write off' just means that the thing is 30 percent less expensive[or whatever your total tax rate is] than if you were not in business

You should be asking your accountant and your attorney. Take every deduction allowed and plan your business around making your tax deduction next to zero. Be prepared for audits.

A true story of a relative who was taken to court over taxes and had a written request from the IRS to provide records:

He brought in a box of vinyl records. The IRS objected and the judge threw the case out of court.

Teach them to be more specific!

The rumor has been that absent specific information[IOW a random audit] bring a literal box of receipts.
Takes you 15 minutes per receipt to find them, they run out of patience.

Something to think about is to reconsider how you use that company truck. Like driving it to and from work.

Why not personally purchase the truck and lease it to the business or sell it over a fixed term back to the business?

I make automotive products so my vehicles are literally just a big product development and advertising expense.

D.D.Machine said:

I see a upside to deducting all the cost of a lease and getting a new truck every few years ,, I have always just payed cash for work trucks and used them tell there ready for the scrap yard. but I only drive a work truck like 3 or 4K miles a year and its a huge depreciation and maintenance cost ,,

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More to that than tax considerations. At "business" usage that low, you should be none of owning, leasing, nor renting, new, old, or sideways.

Not with overheads, inch-hoorance, accounting costs, tax reporting and hassle and personal risk of health or just scheduling reliability for "old, old" trucks with safety gear not even reliable or even simple s**t like rotting tires or wiper blades, corroded lighting, flat batteries, and rodents colonizing the air-cleaner housing. DAMHIKT.

Repeat: "None of."

Hire a service, on-call.

Truck and driver come as a package. (S)he does their job. You keep doing YOUR job they CANNOT do for you.

All those overheads - plus keeping decently serviceable vehicles and competent operators roadworthy are THEIR rice-bowl and shared across a clientele that consumes tens of thousands of miles per year..

Plan it right, cut a regular-client deal, yah can have a wider variety of vehicles, each episode better suited to any given tasking.

Seems to work easily as well with air travel?

DIY dental work? Up to you... but don't go getting "anal" about it, even if "the money is THERE!" 'coz it could re-define "pain in the ass" altogether!

Or just own it personally and take the IRS standard rate as an expense.

Do they salt the roads in Washington? If not any vehicle should last 20 years or more with minimal repairs. Leasing is only a good idea if you can make more profit with that money then the interest you are paying for the lease.
the only reason they will lease anyone a car or truck is to make money. If they made more selling only for cash they would let other companies handle the leasing portion of the business.
Bil lD.
Bill D.

Pathogen said:

. . .Take every deduction allowed and plan your business around making your tax deduction next to zero. . .

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There's one downside to factor in.

I know small business owners who managed to do just that - officially paying themselves pennies per year. But they also never managed to save anything for retirement. Come old age - near zero in terms of Social Security and near zero in an IRA or 401K account.

And, yes, hard to say whether we'll be funding Social Security and Medicare in coming years.

I was considering a lease for a new car or truck. I've noticed that the cash due at the inception of the lease is getting higher and higher. They are asking $4,000, $5,000, $6,000 to start a lease for the nicer cars and trucks.That's also a consideration since it amounts to extra payments.

For example: Lease a car or truck for $250 per month plus tax for 36 months. Pay in $5,000 at the start. The $5,000 represents approximately $139 per month extra if amortized. That's really $389 per month plus tax.

I have a 1998 Dodge Dakota that's been paid off for 20 years and has only 125,000 miles on it. I just had it gone through for $1,200. (New timing chain, water pump, hoses, radiator and transmission service, Brake pads, spark plugs, oil and filters) Guess I'll keep it.

I am extremely dubious that any new truck made today is going to last 20 years.
What was true for a 1970 truck is not true any more.
The sheer amount of electronics for one thing. F150's have had a computer just for the transmission since the late 90s. The whole truck, be it Ford, Chevy, or Dodge, is made of plastic, aluminum, and electronics.
None of which are well known for long lifetimes.
I think its entirely possible that, 20 years from now, a 2020 pickup with 10,000 miles on it will still need a complete rebuild, because of plastisizer migration, synthetic rubber meltdowns, and dead IC's that are no longer made anywhere on earth.

I would just buy the new truck, if you can afford it, its always cheaper than leasing.
To Lease, you are paying a premium for the ability to easily give it back in two years, and the ability to write it off in a specific way that usually only benefits people with BIG tax bills.

With cars, you are much better off buying a lease return, which is usually 2 years old, with around 20k miles, and has been babied because they knew they would pay penalties if it was beat up.

But used trucks are usually different from cars- often much more heavily worn, as many people drive em like they were rented. Plus, people who finance new trucks always go for all the ridiculous expensive options, and then cant make those $1800 a month payments- so many of the available low mileage used trucks have silly high prices for stuff you wouldnt want anyway.

I have always found that buying a NEW, relatively stripped truck can save you huge amounts of money over buying the same truck used with 25k on it, which mysteriously smells of Axe body spray and raspberry capucino vape for the next 20 years, and has special Beverly Hillbillies limited edition upholstery and a digital tv in the dashboard the size of my living room window.

Good points Ries, the only problem is actually ~finding~ a new, relatively stripped-down truck!

The makers don’t sell many basic trucks, they don’t make much money on them when they do...that’s why most of new ones on the lot are more loaded than a rock star’s tour bus!

ToolCat

cnctoolcat said:

Good points Ries, the only problem is actually ~finding~ a new, relatively stripped-down truck!

The makers don’t sell many basic trucks, they don’t make much money on them when they do...that’s why most of new ones on the lot are more loaded than a rock star’s tour bus!

ToolCat

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You can get Ford Fleet trucks, you usually have to go thru a special fleet salesman. Not sure about Chevy or Dodge- I know, when I bought my current truck, I went to a dodge dealer and was told there were 5 dodge trucks on the entire west coast with an 8 foot bed, and without all the gimcracks. But if I had wanted, they would have gotten me one of em.

You have to be stubborn, but most dealers will swap and order in what you want. It might take a few weeks, but its usually possible. They dont WANT to sell you that cheap of a truck, but somebody will.

https://www.gmfleet.com/
Commercial
Ram Commercial | Work Trucks, Cargo Vans & Chassis Cab

In my town there's a little "dealer" that only sells work trucks. Not sure how or why, but just rows and rows of plain white fords. I've never stopped in to inquire why, I always assumed it was for government or fleet sales. The regular dealer wants to put you in an UltraKingRanchigator package for sure.

The only reason lease would make sense to me would be if you absolutely have to have 100% reliability. Say, if your business is 8 hour turnaround on repairs for a mill or a plant. If it's just typical "Buy some odds and ends, drop off some scrap, deliver Jimbob's widgets because he's local anyway" then there's no reason not to go used.