How Much Vehicle

Hello and welcome to this module, how much vehicle. So at this point, we’ve already identified the credit profile requirements. Now let’s talk about how much company vehicle you should be considering. Now here’s what we’re going to cover. The first thing is the top reasons why to purchase or buy a company vehicle, qualities to look for in a vehicle for your business, and then considering vehicle affordability. So that way you have a clear future about this and then buying versus leasing a company car. So either is fine. Now, the top reasons why to purchase a company car. Number one is the benefits from a tax perspective. Now there’s two different, there’s two different IRS tax codes. You have bonus depreciation, then you have section 179 of the IRS tax code, depending upon which one you’re using. Now, your accountant or CPA can definitely point you in the right direction, regardless of which one to take.

We have a separate company capitalize, which is a financial planning and tax planning company. So if you do want to consult on your individual situation and you’re looking for a financial CEO, feel free to reach out to us. We’re happy to do an individual consultation, discuss how this could help you from an overall financial planning perspective. Otherwise, the main benefit is section 179 and bonus depreciation, because you can deduct this on your annual taxes and to be clear, you pay taxes on profit. So you really want to do what you can do to reduce your taxable income as much as possible so that we don’t have to pay taxes on it. The other advantage is it’s not going to affect your personal auto insurance. So this is another thing. So because this is going to be a person who’s going to be a corporate lease.

When your business owns a car or use it for business use, any accidents will go towards, they won’t go to your personal insurance rates. The company vehicle is involved in that accident is not going to impact your personal insurance, which is another powerful thing. So, one thing to consider here is the, when you’re looking at it from the tax advantages, even though it is outlined, you want to be able to be at least 6,000 pounds. Okay? So the curb weight of the vehicle, the gross curb weight needs to be at least 6,000 pounds in order for it to qualify for that. Either section 179 or bonus depreciation tax loophole. Now, the other thing is you want to, you don’t want to consider is the vehicle size. Like I’m just saying you want it to be, at least if you’re trying to take advantage of that, the taxes, it needs to be at least 6,000 pounds.

And then you want to consider any type of add on. So any additional extras will be the beneficiary, you know, will they be beneficial to your business? So you want to think about the other thing, extras that can basically, you know, battle depreciation in lieu, proceeds and contribute towards your businesses tasks. So you want to think about, okay, if I’m getting extras on this vehicle and it’s increase in the overall ticket price, and I have the cashflow to make the monthly payment, then I’m not necessarily concerned with how much it costs, because I’m doing this from a tax planning perspective to reduce my taxable income. At the end of the day, it all goes to cashflow and you’re not paying for it. Your business is paying for which means you want to make sure your business has the opportunity to make sure that monthly need is going to be paid for in a month on a monthly basis.

So if it’s not going to take away from profit or potentially from growing, then get whatever add on or whatever vehicle you want. I said in the previous video, the different ones. I do know that Bentley also offers leasing and commercial financing in the business name at that 6,000 pound one. I know Lamborghini. I don’t know, I never looked into it, but I really wouldn’t look into getting a Lamborghini in the company’s name. I mean, you technically could, but I wouldn’t suggest it only because, I mean, I guess you could, but it’s not going to give you that it’s not 6,000 pounds, so it’s not going to give you the tax benefits, so to speak where you can write off typically the entire purchase. So those are just two relevant examples. I think the Rolls Royce Cullinan is 6,000 pounds. So that’s another one.

So just look at that, that, that 6,000 pound mark, in terms of the size. Now you want to also want to consider, you know, does this represent your business? Does it grab attention, especially beyond one, that’s like a brand logo. You want to also make sure it’s fuel efficient. If that’s relevant to you. I happen to know that Tesla is another one that I didn’t bring up previously that does offer commercial financing. So if you’re considering a Tesla and you don’t want to be necessarily responsible for the gas, then looking to getting a Tesla, right? So that, that not only, not only going to get the tax benefit, I think you even get a credit in some scenarios for the fuel efficient cars or electric vehicles. So that’s something else to consider. Now, when you’re looking at vehicle affordability, like I was saying, the biggest thing is going to be cashflow, right?

Can your business afford to buy and maintain this vehicle, right? And how much are you willing to spend on maintenance, fuel costs? Because a lot of people only consider can I afford the monthly? No, but they don’t consider the other things associated with the monthly payments. They don’t consider how much mileage they’re going to be doing, how much maintenance, fuel, insurance, parking, other related costs. You wanna be thinking about that. Also, we want to think about the value of the end of the lease versus the ownership period. So what’s the residual value going to be on this particular vehicle, right? And if your company is doing great purchasing a vehicle won’t be an issue because you can basically incorporate it as a business cost, keep in mind, however that there are extra costs associated with personal vehicle, not just the monthly note, whether it’s a lease or a loan.

We also got to consider this. So we got this information because it’s really, really relevant. So each vehicle is going to be different, but you know, they’re going to have the registration and insurance fees, plus any repair and maintenance expenses that you have to prepare for. So if you’re choosing between several models, you want to estimate how much you’ll spend on parts. I probably wouldn’t do Range Rover, professional, personally, fuel and repairs probably would stay away from Audi as well. Audi is another one that does vehicle financing, and they’re going to want to personally guarantee. I happen to remember that Audi is going to generally go through Volkswagen financial, who specifically generally pulls TransUnion, even though they’re in the report, that’s on your TransUnion report as an example. So according to AAA, cars that are driven about $15,000, 15,000 miles a year will costs on average $8,469 to ensure and maintain.

And when we say ensure, maintain, we’re not just talking about insurance, we’re talking about all the other little gotchas associated with that. So you want to be carving out at least about $8,500 on a monthly, on an annual basis to consider all things associated with that vehicle. Plus the monthly note. So if you’re looking at a note of $1,200, 1200 times 12 is going to be $14,400. You add the $8,400 on that. You’re knocking on the door of, I want to say that’s about $20,000 to $23,000 annually, which that, that would itself be a potential writeup, but then you have the actual cost of the vehicle that you’ll be financing. And generally speaking, if you’re paying about $1,200, you probably financing a $50,000, $60,000, $70,000 other vehicle, which depending upon how you set it up, that could be also a write off as well. So make sure you speak with a financial professional who can give you the implications of taxes.

I mean, just come to the Q&A, just bring it up again. I’m just gonna let you know upfront. You want to be looking at a 6,000 pound vehicle. Okay. And you want to be considering your cashflow and you want to also make sure that your business can afford this. And it’s not going to be an issue. Like you’re not going to be having to stretch to make this monthly payment, right? So if you’re making 10 grand a month in your business and your car note is 1,500, that’s kinda tough, right? That’s something you gotta really, you’re really stunning your growth in that scenario. However, your making like 30, 40, 50 grand a month, or even a 100 grand a month or 200 grand a month or whatever the case is and your, your notice 1,500 bucks again. I got it. Yeah. I’m gonna miss that.

I mean, it’s not a big deal, right? So you just want to make sure you’re not biting more biting off more than you can shoot. Right? So even with stable company, finances, you may want to consider financing a vehicle, especially if the interest rate is low. So again, financing versus leasing, you just want to consider that and just make a determination based off the best deal. Now, when we look at buying versus leasing a car, this is a really common one. So you can either purchase or lease a company vehicle, you know, which option depends based on your unique circumstances. And here’s what you need to know before buying or leasing a vehicle. No. So if you’re looking at buying a company vehicle, not all vehicles are going to qualify for tax breaks. So you want to make sure you consult, not even a dealer, you, you just, again, if the vehicle isn’t at least 6,000 pounds at all, I’ve repeated this it’s nine times out of 10, not going to qualify for the maximum tax break.

Will it qualify for some type of tax break? It will. But again, why would you do that? So this is going to be your first vehicle, right? Get an SUV. Heck, you want to go big boy, get a G wagon, get a GLS, right? Go for the X7 right? Get something. That’s going to be able to qualify that 6,000 pound scenario. Also, you can write out the actual cost or mileage as a business expense, but you’ll have to stay with that choice for the lifetime of the vehicle. And what I mean by that is you want to think about what’s the actual cost or mileage of the vehicle and figure out which one is going to be the best fit. This goes back to again, making this a tax planning conversation. But what I am saying is section 179 versus bonus depreciation, which one are you going to do?

And how are you going to take care of that from a tax perspective? Tax planning is forward looking. Also when we’re considering taxes, we’re looking to figure out which one of these scenarios is going to be the best fit for my situation today. Okay? Versus tax preparation is looking at the past. This should be a tax planning situation in which you’re considering all the other ongoing expenses and reduction of taxes. So that way you don’t have to pay this to the IRS. Also, you want to consider more control. So when your business owns a car, you can choose how much you want to drive upgraded as much as you want, add your logo, all that kind of stuff. So you can consider that as well, even if you lease it and you have intentions at the end of the lease, a personal vehicle doesn’t really matter, but you just have to consider the amount of miles that you drive.

And then buying is often a cheaper option when you consider taxes and payments, but cost savings kind of are going to occur over time. So even if you released the vehicle, depending upon how you lease, whether it’s 179 or bonus depreciation, that’s going to determine how much of a tax write-off you can get for this vehicle. Now, when we look at leasing a company vehicle. Businesses, commonly lease through an operating and commercial lease. Meaning you can immediately declare your lease payments as an operating expense and reclaim the money right away, thus lowering your taxable income. But in some scenarios increase in the cashflow. Now this is also going to give you a predictable monthly payment with leasing handling unexpected expenses, depending upon how you set that lease up. And you must, the other downfall though, is you’re going to have a mileage limit on, on how much you can use.

Now, if you go over the mileage, they’re going to charge you per mile. That it’s not that big of a deal, but they will charge you per mile. And that you need to examine the contract closely for any type of hidden fees, especially those related to residual value of the vehicle. Meaning how much would the value be worth at the end of the lease? Now, capital leases, you know, allow you to start to part own the vehicle with the option of buying it at the end of the term. It’s more expensive than buying it outright. But it has a lower upfront cost. So again, we’re considering cashflow and tax planning here. So all of these little nuances go into determining if you should buy or lease a vehicle now in full transparency, the Tahoe, I don’t own that. The company lease that. I mean, I wanted to get the entire write-off that year. Right? And now I’m considering buying it, but I might just go over to swap a lease and then just get another one. Right? So we’ll see what happens at the end of this year. Now this is gonna be the wrap up on this particular module. Hope this is helpful. I’ll see you the next one.