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Questions about business lease/purchase of MS - how do big businesses do it?

Discussion in 'Model S: Ordering, Production, Delivery' started by PatD, Jan 12, 2015.

  1. PatD

    PatD Member

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    So not to beat a dead horse, but wondering if anyone has some insight on a slightly different topic.

    First off, I'm a small business owner. I've never leased a vehicle because, well - this will be my first vehicle I purchase while owning my own business. But I've never done it personally because I keep cars for a while. I feel like it's throwing money away.

    But in this case, I'm looking in to leasing the MS through my business for obvious reasons. Unfortunately, I don't drive a ton for work, so it may not be as advantageous as I'd like. Plus I'm losing $7500 for tax credits. So I have to do the math and see if it really works.

    To the question at hand - I have two friends that have company cars from LARGE companies. Neither was instructed to keep a mileage log, neither was told they can only drive the car for work.

    Thoughts? We're all told we have to keep mileage logs for the IRS (Which I do as I take the IRS mileage expense). But how do these big companies do it?
     
  2. 3s-a-charm

    3s-a-charm Active Member

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    Lots of factors to this decision. The first in my opinion being the length of time you plan to own. Longer than 3-4 years you are better off buying from my experience. I don't like having money tied up in a depreciating asset so prefer leasing.

    Large corporations generally ally deal with fleet managers at dealerships or 3rd party leasing companies that source cars at a fleet discount and lease them to the corporation for short-term leases.

    im in Canada so the rules will be different but here it is my understanding you can only write off $900/month on your vehicle lease so the rest becomes a taxable benefit so it's not like I can claim the entire lease payment as a write off. We have business and personal vehicles so we allocate mileage this way and do not log our trips. I typically don't leave the house unless I'm working! Also in the summer I use my personal vehicle to go to meetings so the mileage is offset regardless.

    A corporate vehicle may not require mileage logs however there may(?) be a taxable benefit portion that the employee has deducted if the vehicle can also be used personally. I'm not even close to an Accountant, though, so please get your own qualified advice before making a decision.
     
  3. David_Cary

    David_Cary Member

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    Certainly no $900 cap in the US.

    I don't know anyone who leases from a small business who keeps mileage logs. I'm sure somewhere it is written that they are supposed to. But I suspect the best way around this is to only drive for work. You would be best served by having a second car for personal use.:rolleyes:

    Mileage logs are for mileage reimbursement (in my layman experience).

    Leasing becomes advantageous for expensive cars. Say I drive 1000 miles for work a month (close to reality), there is currently a $.55 mile deduction so that is worth $550. I drive a Leaf and while I don't lease, the lease is usually less than $300 a month. Leasing this from my business would not make much sense since surely my other costs are not $250 - they are about $100 ($20 electricity, $40 insurance, $20 tax, $0 maintenance).

    Now with a P85D, the payment might be $1500. Overwhelms the $550 of course, and taxes and insurance are higher. I figured leasing for me was worth something like $30k tax credit ($60k in taxable income decrease).

    Over 3 years
    So P85D tax savings $30k
    Leaf tax savings $10k using mileage + $7500 tax credit.

    Cost over 3 years (including tax savings)
    P85D - $30k
    Leaf - $5k (assumption of $12k value at 3 years)

    Ouch.... But my one possible saving grace is that I think the private party resale of a P85D will be better than residual by $10k so perhaps I can reclaim some of that $30k.... Performance minded people will always see an advantage to the S over the X so I am hoping the P85D will actually do ok on resale.
     
  4. PatD

    PatD Member

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    So I've been reading about leasing and how that works with taxes (Through a business, etc.) Currently, I probably drive 60% business/40% pleasure (I drive 9k miles a year right now). I don't expect it to change much, other than pleasure probably going up for obvious reasons!

    Lease payment from the Tesla design studio is $1645 for three years. Using 60% for business, adding in the lease inclusion (Minor) and increase in insurance due to commercial and losing the $9500 federal and state credits (May not lose state), and it's probably a wash (Factoring in what I take currently for mileage from the business). I USUALLY keep cars (Current cars are 11 and 8 years old), but may not keep the Tesla that long for more obvious reasons.
     
  5. Ohm's Law

    Ohm's Law Member

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    PatD,

    If you like hanging on to your vehicles, you can get the first 3 years on lease and not worry about keeping track of mileage; then buy the car for residual amount after 5 years and write off by refinancing it for the rest of the 5 years of residual using the mileage method; I believe Tesla will give you the federal credit at that time if it still exists and roll it into the residual value.

    I have used this method twice on a couple of luxury cars and it is the best way to buy a personal(non-business) vehicle for yourself since you intimately know the previous owner of the vehicle :smile:. Mercedes was the only financing company which would not let me buy my own CPO pre-leased car but you can work around it by putting it in your spouses name.

    I am not accountant so please make sure you run it by your accountant first.

    There is no cap on the monthly payment of the vehicle.
    You can also use an automated phone software for tracking miles. I use an Android app called MyLog, it's a little expensive ($15) for a one time purchase, but definitely worth it. You can put in multiple vehicles if you have a 2nd car for personal use and the primary is for business use, as soon as it connects to the bluetooth it starts recording your tracks and captures a lot of detail. The detail includes mileage report for reimbursements, you can enter $$ per mile, gas mileage and you can also save the data to cloud. I am in no way affiliated with the developer of this app and make no money from it but it is a very nice app and the best I found so far because the others use up too much battery.
     
  6. PatD

    PatD Member

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    Thanks for the info. Good to know.

    But - you mention getting the first three years on lease and not worrying about keeping track of mileage. "Technically" aren't we supposed to track mileage if the business is covering it, unless of course we're 100% using the car for business (And even then I imagine the IRS wants "proof.")

    The app you mentioned sounds cool, I'll check it out. I track mileage for work already in a custom app we use for the business, but if I no longer take the mileage directly, would be nice to have an app that does 99% of the work for me. Thanks.
     

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