Buy Or Lease?

[Dante]

Need a pick up for new small business. Right now a sole proprietor. So a simple question. Buy or lease for any of you tax experts out there. Looking at F150's. Have owned three in my life and always happy with them.

Edited May 11, 2016 by Dante

[Saxum]

That partially depends on whether it will be sole used for business or also used for personal use. Also some states/counties/cities charge property tax and that affects cost of lease vs buying.

[Dante]

That partially depends on whether it will be sole used for business or also used for personal use. Also some states/counties/cities charge property tax and that affects cost of lease vs buying.

I would say 70 % business. And it's California. Thanks Koolaid

[BringBackFergy]

Dante - It sounds like you want to start a "fleet" of trucks (i.e. as your business grows you plan on buying more trucks).

 

With that in mind, I'd buy the trucks. Just my opinion but here's why:

 

1) When you buy a $20,000 truck, your accountant will depreciate that truck over the course of 10 years or so. As you accumulate more trucks, you will continue to depreciate each of those vehicles over the course of years (some years you'll see more of a depreciation deduction than other years).

 

2) If you sell your business, you'll have assets that you own (as opposed to leased vehicles that carry no value because they have to be returned). That gives you a better value having a fleet of trucks.

 

3) Insurance might be costlier with a fleet of leased vehicles (as opposed to owned vehicles).

 

4) You may want to create a separate LLC for the truck fleet ("Dante's Transport and Trucking LLC") separate from your business LLC. Then your business can rent the use of the trucks from the trucking LLC. Can't do that if they are leased .

 

5) If you have a really good year and want to buy a truck outright, you can expense the truck cost in that one year (Section 179 deduction...so if you make $100,000 and you don't want to pay taxes on $100,000, you can buy a truck for $20,000 and now you show $80,000 as income). You won't get to depreciate the truck over years (because you expensed it all in one year) but it will save you a bigger tax bill. Hope that makes sense.

 

Anyway, those are my quick thoughts (and I'm not an accountant).

[jr1]

http://sbecouncil.org/2015/03/16/buy-or-lease-your-next-business-vehicle/