Buying a Car? Make an Informed Choice.


Used vehicles are often the best values you'll find in the automotive market. This is especially true for models just two or three years old. Not only is the price lower than a comparable new car's, but continuing ownership expenses such as collision insurance and taxes are lower, and a two- or three-year-old used vehicle has already taken its biggest depreciation hit. In addition, buying used is a way to get a nicer car than you'd be able to afford new.

 

Whether you are looking for a certified pre-owned or a private sale, or are buying from a dealer or neighbor, Consumer Reports can help lead you through the used car buying experience. This guide provides the essential information you need to choose a used car with a good reliability history, sell your old car, and get the best price.

 

If you are in the market for a new car, see our advice in the new car buying guide


https://www.consumerreports.org/buying-a-car/used-car-buying-guide/

 

Last Updated: Feb. 25, 2019


Should You Lease or Buy Your Fleet Vehicles? - via

when-to-lease-or-buy-infographic


The Difference Between Bonus Depreciation & Sectio

Micala Ricketts
MICALA RICKETTS

Bonus depreciation is a tax incentive that allows small- to mid-sized businesses to take a first year-deduction on purchases of qualified business property in addition to other depreciation. The Section 179 deduction is also a tax incentive for businesses that purchase and use qualified business property, but the two are not the same. In this post we take a look at how both bonus depreciation and Section 179 work and how they differ from each other.

How bonus depreciation works

Generally, the point of depreciation is to spread out the cost of an asset over the life of the asset, rather than take the full cost of the asset in the first year. Bonus depreciation is a kind of accelerated depreciation. In the year qualified property is purchased and put into use, a business is allowed to deduct 100% of the cost of the property in addition to other depreciation that is always available.

Qualified property (or assets) includes:

  • Property depreciated under the Modified Accelerated Cost Recovery System (MACRS) that has a recovery period of 20 years or less
  • Computer software
  • Water utility property
  • Qualified film or television productions
  • Qualified live theatrical productions
  • Specified plants
  • Qualified improvement property
  • Some listed property

More specifically, property depreciated under the MACRS that has a recovery period of 20 years or less is generally tangible, personal property such as vehicles, office equipment, heavy equipment, machinery, etc. Land does not count as qualified property. 

Graphic_1 

Qualified improvement property is defined by the IRS as “any improvement to an interior portion of a building which is nonresidential real property if such improvement is placed in service after the date such building was first placed in service.”

Listed property, or property that can be used for both business and personal use, must be used 50% of more for business to qualify for bonus depreciation.

Keep in mind, to be depreciable, property must have a “determinable useful life,” meaning that it wears out, loses value, etc. It also must last more than one year. It’s not considered depreciable if it is put into use and disposed of in the same year.

IRS Form 4562 should be used to claim bonus depreciation and Section 179. Keep in mind, for each business or activity on a tax return that requires Form 4562, a separate Form 4562 must be submitted.

What is bonus depreciation for 2019?

Under the Tax Cuts and Jobs Act, bonus depreciation has been increased to 100% (up from 50%) for purchases of qualified property made between September 27, 2017 and January 1, 2023. Additionally, now used, qualified property acquired and put into use after September 27, 2017 can be depreciable if it meets certain requirements. Previously, only new purchases were eligible for depreciation. The requirements as stated by the IRS for used, qualified property are: 

  • The taxpayer or its predecessor didn’t use the property at any time before acquiring it.
  • The taxpayer didn’t acquire the property from a related party.
  • The taxpayer didn’t acquire the property from a component member of a controlled group of corporations.
  • The taxpayer’s basis of the used property is not figured in whole or in part by reference to the adjusted basis of the property in the hands of the seller or transferor.
  • The taxpayer’s basis of the used property is not figured under the provision for deciding basis of property acquired from a decedent.
  • Also, the cost of the used property eligible for bonus depreciation doesn’t include the basis of property determined by reference to the basis of other property held at any time by the taxpayer (for example, in a like-kind exchange or involuntary conversion).

Graphic_2 

Is bonus depreciation the same as Section 179?

Sometimes the Section 179 deduction is confused with bonus depreciation. After all, they serve similar purposes. But one key difference between the two is that Section 179 allows a business to expense a cost of qualified property immediately, while depreciation allows a business to recover that cost over time. In other words, the Section 179 deduction is taken (unless the business has no taxable profit) first to reduce the cost of the qualified property that was purchased, then bonus depreciation is taken after to decrease the remaining cost of the property over its useful life. Businesses that go over the spending limit for Section 179 can still benefit from taking bonus depreciation.

How Section 179 works

As of January 1, 2018, businesses can deduct up to $1 million of qualified property (up from $520,000 in previous years) immediately, with a phase-out threshold of $2.5 million. Once a tax year exceeds the threshold amount, the Section 179 deduction is reduced dollar-for-dollar by the excess amount. Starting in 2019, the deduction and phase-out threshold amounts will be subject to inflation.

Unlike bonus depreciation, Section 179 is limited to taxpayer’s business income. Passive income, such as assets used in rental property, is not eligible for the deduction. Also, bonus depreciation can push the taxpayer into a net operating loss, but Section 179 cannot. Unlike bonus depreciation, any Section 179 deduction elected that is not allowed due to income limitation is carried forward to future years.

Graphic_3 

Qualified property for the Section 179 deduction includes:

  • Tangible, personal property
  • Computer software
  • Some listed property
  • Qualified improvement property

Qualified improvement property includes improvements to alarms, fire protection and security systems, HVAC, and roofing. It does not include improvements to elevators, escalators, internal structural framework of a building, or enlargement of a building. Notice that HVAC is an example of an asset eligible for Section 179 but not bonus depreciation. 

Business owners should document the date of purchase of qualified property, the date the property was put into service, and all costs associated with the purchase. They can elect to take the Section 179 deduction by completing Part I of IRS Form 4562. To elect the deduction for listed property, Part V of Form 4562 should be completed before Part I.

Looking for more information on tax deductions that were revised under the Tax Cuts and Jobs Act? Check out What You Need to Know About the 199A Pass-Through Deduction for 2019





New vs. Used Car – 6 Benefits of Buying a Slightly

Other than your home, your car might be the most expensive purchase that you ever make. I love nice cars, but I also try to manage my finances responsibly. As a result, I have reluctantly come to the conclusion that a new car is an unnecessary expense.

Sure, you can find overpriced used cars and bargain buys on brand-new vehicles, but it’s not just the sticker price that makes a new car a waste. The associated fees, subsequent costs, and losses in value (i.e. depreciation) add up to thousands of dollars over the first few years of new car ownership. This is especially bad news if you end up upside down on your car loan.

On the other hand, a “slightly-used” car – one that’s only around two years old and has under 30,000 miles on it – can help you keep cash in your pocket without sacrificing quality. Below are 6 benefits of buying a used car (in like-new condition) over a brand new one.

1. Used Cars: Lower Price Tag, Less Depreciation

Remember the old adage that a new car loses thousands of dollars in value the moment you drive it off the lot? It’s still true, and it’s why used cars are better bargains. It’s also why you can buy a 2007 Porsche for the price of a 2011 Honda. Someone bought the Porsche for $50,000 and now it can be yours for $25,000.

Think about the average price of buying new. Figures from CNW Marketing Research show that the average price of a new car in 2008 was $25,536 before taxes and fees. That car could now be worth around $13,000. Would you rather  be the original buyer, who lost $12,000 or $13,000, or the second buyer who saves that much?

If you buy a car that’s one or two years old, it’ll still depreciate, but you’ll lose less money less quickly. And you’ll avoid that big initial hit that the previous owner took.

2. Sales Tax on New Cars

Every ad for a new car glosses over the tax issue. Many state laws subject new cars to state sales tax, but not used cars. In Georgia, for example, if you buy a used car from a private seller, you won’t owe any sales tax at all. Comparatively, the sales tax that dealers have to add to the price of a new car can be thousands of dollars. Don’t underestimate the savings, and research your state’s laws on the subject before you make a decision.

3. Falling Registration Fees

In most states, the rate of your annual registration fee is based on your car’s value and its model year. In Colorado, for example, registration fees fall dramatically during the first few years after a car is manufactured. The rate is highest in the first three years, and then levels off after five years. If your state has similar rules, you can save about a thousand dollars by avoiding the new car registration fees and buying a car that’s at least three, or better yet five, years old.

4. Useless Extras on New Cars, Cheaper Features on Used Cars

car interior

The oldest trick in the dealer’s book is to install additional dealer options. They’ll add a pinstripe, a protective film, or the immortal “anti-rust coating,” but new car buyers who want these add-ons can easily get them for a much lower cost from an after-market installer. Regardless, these changes don’t add a dime to the car’s resale value anyway. When you buy used, you may not get every feature you want, but you certainly won’t end up paying extra for things you didn’t ask for.

On the other hand, when you search for specific features that you do want in a used car, like a sunroof or navigation system, you’ll pay far less than the original owner did. Instead of needing to decline a dealer’s expensive navigation package with fees and surcharges, you’ll be able to afford the built-in features.

5. Dealers and Their Crazy Fees

As if paying $500 for rust-proofing isn’t bad enough, dealers hit new car buyers with shipping charges, destination fees, and “dealer preparation.” These fees feel even worse because unlike the unnecessary, unwanted pinstripe, owners have absolutely nothing to show for these charges except a lower bank account. When you buy a used car, you’ll have to visit the DMV to pay tag, title, and registration fees, but you won’t deal with any of the nonsense that dealers add.

Instead of caving to dealer fees and buying new, you take on a more powerful role when you’re in the market to buy a used car. You have a much better case for negotiating when you can tell a private seller you might just walk away from their old car. If they bought new, they’re not going to know everything you know about the benefits of buying used. They’ll be eager to keep you at the negotiating table.

6. Condition

Nowadays, cars are built to last for at least 100,000 miles, so you don’t have to sacrifice reliability and overall condition just to get a good deal on a used car. You can get a used (or “pre-owned”) car that’s scratch-free and in excellent mechanical shape. In fact, if you know anything about cars, you should be able to find one that is in “like new” condition.

However, if you’re not comfortable under the hood, you can rely on the certification programs and extended long-term car warranties that most car makers offer. When you buy a used car at a manufacturer’s dealership, you’ll know that they’ve inspected the vehicle and that it meets the strict requirements for certification. The biggest benefit you might find is the manufacturer’s warranty for used cars. Toyota, for example, offers a seven-year 100,000-mile warranty on certified used vehicles. This kind of peace of mind is crucial when buying a used car.

Final Word

New cars smell great, but how much is that scent really worth? By looking beyond the sale price and considering the total cost of buying new, you can get a better idea of how much you are really going to pay for the privilege of being the first owner of your next car. You might have to spend a little extra time on research, but from the initial price to the long-term costs, you’ll thank yourself for buying a slightly-used car that’s in good condition.

What are the pros and cons that you see to buying new or buying used? Share your success stories or nightmare deals in the comments below.

https://www.moneycrashers.com/benefits-of-buying-a-slightly-used-car/



5 Ways Equipment Financing is Empowering Small Con

“Equipment leasing and financing help all types and sizes of commercial businesses to acquire the equipment they need to conduct their business operations,” said Ralph Petta president and CEO. “For small businesses in particular, which may not have access to many funding options, equipment financing offers flexible, budget-friendly options that can help with cash flow and keep their equipment up to date.”
ELFA highlights five key benefits that make equipment finance an advantageous option for small businesses: 

1.  Get 100% equipment financing with no down payment. This allows the business to hold on to cash, or working capital, and use it for other purposes like financing project start-ups, expansion, improvements, marketing, or R&D. 
2.  Eliminate the risk of ownership.  A business just starting out can use equipment financing to help lessen the uncertainty of investing in a capital asset until it achieves a desired return. Advantages include increasing efficiency, reducing costs or meeting other business objectives. 
3.  Keep up-to-date with new technology. To be on the cutting edge and be competitive, businesses often need access to new technology. Leasing, loans and other financing help small businesses get more technology and better equipment than they would have gotten without financing. Businesses that use lease financing can avoid the risk of owning obsolete technology and equipment, since many agreements allow for easy and fast equipment updates. 
4.  Plan expenses for cash flow and business cycle fluctuations. Equipment financing helps budgeting by setting customized rent payments to match cash flow, and even to match seasonal cash flows. 
5.  Obtain the convenience of product and service bundling. Certain financial products allow businesses to finance the entire cost of equipment, including installation, up-front maintenance, training, and software charges. That puts packaging systems, and ancillary products and services into a single solution so the business is freed to focus on its core operations. 

For more information about how equipment financing helps businesses succeed, visit www.EquipmentFinanceAdvantage.org. This site includes a digital toolkit, articles, informational videos, definitions of the various types of financing, a lease vs. loan comparison and questions to ask when financing equipment.

Tips for Equipment Leasing

 
·        Get a flexible payment structure to fit your business needs. If your business has a slow season, ask for seasonal payment plans. 
 
·        Consider a leasing program that provides for lease expiration at or near warranty expiration. 
 
·        With an operating lease, if you think you’ll keep the equipment after the lease term, ask for a cap on the purchase price, such as “fair market value (FMV) not to exceed 20% of the equipment’s cost.”
 
·        Use your existing equipment to generate cash. With a sale and leaseback, a leasing company buys your existing equipment and leases it back to you. You get the cash that is locked up in your equipment while still continuing to use it.
 
·        Refinancing your existing equipment with a capital or finance lease can lower payments by as much as 50%. 
 
·        Understand the fine print. Most leases contain a termination value schedule, detailing the amount that will need to be paid to terminate the lease.
 
·        Don’t be afraid to ask for references when shopping for an equipment leasing company.
 

Eight Reasons Businesses Finance and Lease Equipme

8 REASONS BUSINESSES LEASE AND FINANCE EQUIPMENT

The vast majority (78%) of U.S. businesses lease or finance their equipment, and the Equipment Leasing and Finance Association has released a new infographic highlighting why this method of equipment acquisition is so popular. The "8 Reasons to Finance Equipment for Your Business" infographic provides a reader-friendly, visually inviting explanation of some of the key benefits businesses enjoy when they lease or finance the equipment they need to operate and grow.

This new tool is the latest resource from ELFA's Equipment Finance Advantage website for end-users, a one-stop resource designed to help current and potential end-users of equipment financing make the best possible decisions. The infographic showcases a variety of ways businesses can use equipment finance to their strategic advantage, including:

  • Finance 100% - Arrange 100% financing of your equipment, software and services with 0% down payment.
  • Save cash - Save your limited cash for other areas of your business, such as expansion, improvements, marketing or R&D.
  • Keep up-to-date - Keep up-to-date with technology by acquiring more and better equipment than you could if the financing option were not available.
  • Outsource asset management - Let your equipment financing company manage your equipment from delivery to disposal.
  • Accelerate ROI - Rather than paying one lump sum for your equipment, make smaller payments while the equipment generates revenue.
  • Customize your terms - Set customized payments to match your cash flow and even seasonal income fluctuations.
  • Benefit from bundling - Bundle the equipment, installation, maintenance and more into a single, easy-to-manage solution.
  • Hedge against inflation - Lock in rates when you sign your lease to avoid inflation in the future.

"There's a reason nearly 8 out of 10 companies lease or finance their equipment—it makes good business sense," said ELFA President and CEO Ralph Petta. "We are pleased to present this new infographic illustrating some of the important ways our industry 'Equips Business for Success.'"



Time to Change Your Mindset

Lease assets rather than buying?

Buying outright might not be the best use of your capital. Look at leasing and hire as an option for acquiring assets. When your business needs to acquire assets, buying them outright might sound like the simplest option; cash purchases can work out cheaper in the long run and the goods are classed as business assets and so can be used as security. However, this might not be the best use of your working capital. If you take out an overdraft or loan to cover the outright purchase of assets, build interest repayments into your calculations and compare that against hire or leasing costs before you make your final decision. If you don’t need to own the item immediately, consider leasing. Leasing allows businesses to use valuable assets – such as machinery, cars or furniture – without buying them outright. These items are instead bought and owned by a finance house and leased to you for a set period.

In Brief – Leasing

  • You get immediate access to the assets but pay back on a monthly basis, thereby easing your company’s cashflow
  • Leasing companies effectively lend you the total cost of items leased
  • Almost anything can be leased – cars; property; IT and telecommunications equipment; machinery; printers and photocopiers; or even furniture
  • There are various tax benefits – for example, you can deduct lease costs from your taxable income
  • It can take only days to organise

Pros

  • Cash that would have been spent on assets can be released to finance growth
  • You don’t own a depreciating asset and can return it, offering flexibility
  • You can lease almost anything from company cars through to computers, phones, photocopiers, machinery and furniture.
  • You can access the latest equipment and may receive maintenance and support as part of the leasing deal
  • There are tax benefits. For example, you can claim back VAT on lease payments and you can also deduct the lease costs from your taxable income.

Cons

  • If you lease the item long-term you’ll probably end up paying more for the asset than buying outright
  • Leased items are not classed as business assets and so can’t be used as security
Business Lincolnshire


Lease Options - Which is Right for Your Business?

Lease Options

 

Capital Leasefixed-term lease similar to a loan agreement for purchase of capital asset on installments.  Lessor’s services are limited to financing the asset, the lessee pays all other costs, including insurance, maintenance, and taxes.  Capital leases are regarded as essentially-equivalent to a sale by the lessor.  Must be shown on lessee’s balance sheet as a fixed asset.  Lessee acquires all economic benefits (such as depreciation) and risks (such as the loss of the leased asset) of ownership, but can claim only the interest portion (not the entire amount) of the lease payment as an expense.

 

Operating Lease short-term lease, equipment returned to lessor at lease end, lessor gives lessee the exclusive right to possess and use leased asset for a specific period, but retains almost all risks and rewards of ownership – full amount of lease payment is charged as an expense on the lessee’s income statement but no associated asset or liability (other than lease payment) appears on lessee’s balance sheet.

 

Sale and LeasebackOff balance sheet financing in which an owner sells an asset to a leasing firm and, at the same time, lease it (as a lessee) on a long-term basis to retain exclusive possession and use.  Although this arrangement frees capital tied up in a fixed asset, the original owner loses depreciation and tax benefits.  Also called a leaseback.

 

Loan vs Lease - A Side-By-Side Comparison

Loan vs Lease

 

Loan

Lease

Payment Terms

Borrower repays advance of funds with interest over a specific period of time.

Leases involve the payment of rent.

 

 

 

Terms of Ownership of Equipment

Borrower holds legal title to the equipment

Lessee may have a right to purchase the equipment at the end of the lease or during the lease term, but the lessor generally holds legal title to the equipment.

Lender has no expectation of return of the equipment and has no residual value at risk at the end of the term of the conditional sale transaction

In a true lease, the lessor retains significant residual value and tax advantages.  The lessee may return the equipment at the end of the lease term. This reduces the rent payment considerably below the cash requirement of a conditional sales contract.

A loan does not alter borrower’s full ownership of the equipment at the end of the loan term in the absence of any default.

A lease with a Fair Market Value purchase option allows the lessee to return the equipment without further obligation when the lease ends or purchase the equipment at its fair market value or other agreed price.

 

 

 

Down Payment Requirements

An equipment loan usually requires a down payment and finances the remaining cost of the equipment

None. A true lease finances 100 percent of the value of the equipment expected to be used during the lease term. A lease requires only a lease payment at the beginning of the first payment period which is usually much lower than the down payment.

 

 

 

Payment Scheduling

Loan payments are made in arrears of each loan period.

Lease payments may be made in advance or in arrears of each leasing period. Payments can be structured around your business – monthly, annually, seasonal, step-up, etc, and soft costs such as taxes, installation, training, and freight can be included in the lease.


 

Collateral Requirements

Depending on credit worthiness, a business loan may require customer to pledge current or fixed assets for collateral.  A non-recourse loan, however, limits customer’s liability to the equipment and related cash flows, insurance, and certain indemnity payments. Equipment can be seized in event of default. (Blanket liens)

Lease equipment usually serves as the collateral needed to secure the transaction. (No blanket liens)

 

 

 

Depreciation Allowance

Borrowers/owners may claim a tax deduction for a portion of the loan payment as interest and for depreciation, which is tied to IRS depreciation schedules.

In a true lease, the end user may claim the entire lease payment as a tax deduction. The equipment write off is tied to the lease term, which can be shorter than IRS depreciation schedules, resulting in larger tax deductions each year. The deduction is also the same each year, simplifying budgeting. However, equipment financed under a conditional sale lease is treated the same as owned equipment.

 

 

 

Obsolescence Risk

The borrower/owner bears the risk of equipment obsolescence and devaluation, due to development of new technology.

The lessee transfers risk of equipment obsolescence to the leasing company, since no obligation exists to won the equipment at lease end. Some leases contain provisions for upgrading equipment during the lease term for additional rent.

 

 

 

Assets Eligible to Borrow Against/Finance

Loans can be used to pay for a broad array of capital needs, including sales finance, inventory finance, and business expansion.

Leases tend to finance items of equipment, software, and services.  A “Master Lease” acts as an umbrella for financing multiple deliveries of equipment represented and documented by schedules to the Master Lease.

 

 

 

Inflation Impact

A larger portion of the financial obligation is paid in today’s more expensive dollars.

More of the cash flow, especially the option to purchase the equipment, occurs later in the lease term which inflation makes dollars cheaper.

 

 

 

Turn-Around Time

Commercial loans can take weeks and sometimes months to receive approval and funding and require mountains of paperwork.

Leasing is a fairly quick process and can be approved in hours, funded in just a couple of days with little paperwork required. We can also establish annual lease lines of credit, making future purchases easier and quicker.