Re: Leasing is better for businesses than individuals unless the individual wants a new vehicle every 3 years, yada, yada, yada
Says who?
Dumb statement. Owning assets that decline in value sucks regardless of it’s a business (or personal). This is the key reason for leasing. Let the leasing company eat the loss.
Leasing isn’t just for cars. Until taxes are cut way more than current levels (or losses become more deductible), leasing will make a lot of sense if you anticipate that your equipment or autos/trucks will fall in value.
I did not invent this. It’s business 101
If you think that leasing companies operate at a loss, then I’ve got a bridge in Death Valley to sell you, LOL.
Anyone who talks about a vehicle as a "depreciating asset" should first consider that a vehicle is providing value as it is being used. There is always an intangible value of the convenience, the flexibility, and the mobility a vehicle provides in any situation.
Another thing to consider is that owning a vehicle for a long time works really well if you get a LOT of business use out of it. The beauty of the tax code is that the IRS establishes a fixed rate for tax deductibility for all passenger vehicles and light trucks. It's currently 54.5 cents per mile. Imagine owning a vehicle that is fully paid off and costs only fuel, insurance, and repairs to operate. Drive that vehicle 15,000 per year for business use, and you've got a mileage deduction in excess of $8,000 to report on your tax return. Even with $3.00/gallon gasoline and a low fuel efficiency of 15 mpg you're looking at no more than $3,000 in fuel expenses for the year. Add another $1,000 for insurance and you're up to $4,000. That leaves more than $4,000 from your $8,000+ deduction to cover the expenses of operating the vehicle. It would have to be a junkyard candidate in order to have more than $4,000 in annual maintenance expenses!
“Owning assets that decline in value sucks regardless of it’s a business (or personal). This is the key reason for leasing. Let the leasing company eat the loss.”
The expected depreciation is built into the lease terms. If the car depreciates less than expected (compared to the “residual value”) over the duration of the lease, and your lease agreement gives you the option to buy the car at lease end for that residual value, then in principle you can come out ahead by simply buying the car. In any case, the leasee always implicitly pays for the (expected) depreciation.