Leasing Advantages - Disadvantages

[Capt. Ray]

What are the advantages/disadvantages of leasing a vehicle (a small SUV) for your photography business. Any other input, pro or con, would be most welcomed.

[LSCSN.com]

Well unless the laws have changed the disadvantage for a SP is that you can write off your vehicle if it's over 6000 pounds. Or at least that is the way it was a few years ago. I had a friend of mine who's daughter wrote off her Humvee or however that is spelled :).

[RobyMD]

Well.. Dave Ramsey says it's wrong. So I don't do it.

In all seriousness, those that listen to Ramsey and agree with his advice may chime in also. But he says it's the most expensive way to own a vehicle. But I think that is also with the assumption what you don’t want to throw away money in a car payment forever.

[kenw]

the tax advantages are fading, you must use it darn near exclusively in business and not personal for it to count with the IRS.

[STP Images]

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[Capt. Ray]

Thanks for the replies everyone.

Paraquat - what are the legal and allowable deductions on a leased vehicle? It's just a DBA single proprietary business. Most of the mileage would be devoted to the business.

[LSCSN.com]

I'm not sure. But if you are using the vehicle as a business vehicle with a business tag on it it has to be 100% business use only from what I have been told.

Now if you don't tag it as a business vehicle (which I'm not sure is even possible as a leased vehicle, maybe so) then you just keep track of the business miles. Or you can keep track of all your receipts and go that route instead of mileage.

[DEMDeepEllumMusic]

Disadvantages: Insurance rates may be higher; need to replace when lease runs out (most buy it at end of lease options are not in the car leasees favor); if you exceed mileage limits on the lease terms penalties are high (this can be very negative to a photographer who may drive a lot), IRS may question deduction of full amount (say that you are also getting personal use out of the vehicle while if you buy a vehicle and do a mileage log and take the standard IRS Business deduction per mile they have less to argue about/over); may be more negatives out there.

[LadyShutterBug]

on a lease, you're basically betting that a vehicle will hold its value well.

on a lease that is favorable to you, the customer... the vehicle will be worth more than the balance/ballon payment at the end of the lease... in other words, you'll make money if you choose to sell the car at the end of the lease.

on some leases, the vehicles don't hold their value well (or you owe more moolah due to the terms of the lease.. high milesge for instance) and then the car dealer has made money on the deal.


this is why it's usually a better idea to lease a BMW 5-series than say... a camaro.


p.s. once you have processed a business vehicle by using mileage in a tax year... you can't ever decide later in the following years that it''s totally devoted to business and deduct all of the vehicle's expenses. i can't think of the term... anyway, you have to decide to do it one way or the other form the start.

[esi7esi7]

I'm with RobyMD. If you need a larger vehicle, just save up and pay cash.