Originally Posted by
Todd Helme
Ultimately, from a cost analysis stand point you have to factor in the hard facts with the intangibles...
Let`s say you have to put 2k down and your lease payment is 250/mo for the 36 months. Total outlay is 11k, all of which will be a tax write-off. (I am not sure if you can write off mileage on leased vehicles).
Now amortize the 2k down over the next 3 years, which is 56 dollars a month. Your total expense for driving a new vehicle is going to be 306 per month.
Now deduct maintenance and project repairs on your current vehicle over the next 3 years: 2k to get it some what nice looking, at least 400 in fluid changes (most lease options cover this), and lets say 1k in repairs, for a total over 3,400. This is a conservative estimate as it will likely cost more in every regard. If something large like a transmission goes out, then you are WAY over budget, not to mention the down time (and potential lost revenue and customers). Subtracting your 3.4k from the initial 11k drops your cost to $211.11 per month. Now, since you are putting 2k down up front you want some ROI, (basically you are loaning yourself 2k over the next 3 years) so lets just say 230 per month (a return of 20 per month on your 2k, not much but its fair).
Will having a new, shiny vehicle, which costs 230 a month (tax deductible) equal at least 230 dollars a month in new good business? Again intangibles include new customers you may reach that become life-long customers who provide consistent good business for years. If the answer is yes, then it is a no-brainer, since you will not have to pay taxes on that 230 per month anyways.
Ultimately it does cost money to make money, any good business person knows this. The trick is putting money into areas that will maximize ROI and provide stable income.
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