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Originally Posted by doctorc4 By the way, the benefits of a lease is that you can get into a more expensive car for the same amount of money (since you're only paying for the depreciation over the time you own it). Most of the depreciation on a car is in the first two years. And, you don't own it, so you can turn it back in with no wories about selling it and being upside down on what you owe at the end of the lease term. If you only keep cars for a few years, then leasing is the way to go. If you keep cars longer term, then you'll likely make some money on it when you sell, if you take good care of it, etc.
The downside is you don't own it and you have to turn it back in as you took receipt of it. If you're a mod freak, then you need to buy. But if you just want to look like a baller because you're driving a more expensive car, then lease that puppy. |
Assuming it is used substantially for business, you are limited to a "capped" depreciation schedule of under $40k, spread over 5 years. So, a $100k car can only be deducted up to an IRS predetermined deduction table:
Depreciation Limits for Cars 2006
Depreciation on cars and light trucks and vans is limited. For 2003 and later years, the IRS has created two different limits--one for cars and one for trucks. (Special tables, not reproduced here, apply to pure electric vehicles.)
Depreciation Limits
Passenger Automobiles
Tax Year
First $2,960
Second 4,800
Third 2,850
Subsequent 1,775
Under the same business circumstances, a lease payment is viewed as an expense, without need for a depreciation schedule, since it is not an "owned" asset. Accordingly, the entire payment is deductible, up to the amount used for business. As an example, take a $2000 per month lease payment, with the vehicle used 75% for business. The deduction would be $1500x12 months or $18,000 for EACH year. Do the math and you'll see the results.