# Is vehicle depreciation a real cost to be considered if you never planned on selling your car?



## Mordred (Feb 3, 2018)

I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


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## Merc7186 (Jul 8, 2017)

For tax purposes, depreciation is a real thing. But once you have fully depreciated your vehicle and your resale value is less than $3000 (IMO) then I dont consider it a real cost anymore.

I have people play devils advocate to my thinking all of the time and they are entitled to their opinion. In my situation, I bought a $5000 minivan, put in a $800 radio and $1850 in repairs so far. Since I purchased said van for doing Uber, I have made almost $30000. The Beast owes me nothing to this point and everyday I keep it running is all white meat....

I consider $5/hr for my gas, repairs, insurance as my depreciation.


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## ANT 7 (Oct 14, 2018)

Your vehicle will devalue over time even if you do not mile it out.

So, having said that...............


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## Coachman (Sep 22, 2015)

An asset is an asset whether you have plans to sell it or not. While you may not now intend to sell the vehicle, it could be damaged or lost. In that case the value would be important.


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## Mordred (Feb 3, 2018)

Coachman said:


> An asset is an asset whether you have plans to sell it or not. While you may not now intend to sell the vehicle, it could be damaged or lost. In that case the value would be important.


Exactly. So unlike taxes, gas, and repairs, it's a potential cost. But not necessarily a cost. If none of that happens and you keep your car, it's monetary value means nothing.


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## doyousensehumor (Apr 13, 2015)

What is a very long time? Let's say it is 10 years. You buy the vehicle for $10,000. And let's just say there's five hundred thousand miles on it. If it still runs and has cold AC you might get $1,000 for it. It still has depreciation.


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## Christinebitg (Jun 29, 2018)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


Okay, so here's how I view this. There are two separate issues involved:

- Your cost
- Your tax return

If you keep the car until it's worthless... Let's you assume, say, 10 years time. In 10 years, you'll have to buy another one. That's a real cost. And it's *different* from the outcome if you didn't drive for U/L. If you didn't, you'd probably be able to keep your car longer, and so your cost of ownership per year is lower. (For example, you might keep your car for 15 years instead.)

This is a real possibility. I bought a brand new Toyota in 1985 and sold it to a dealer when I bought the next one in 2002.

The other issue is taxes. The 54.5c per mile figure from the IRS is just to make doing your tax return easier. That's all it is.

You just keep a good mileage log, and they give you the option of using their figure, rather than trying to figure out exactly how much you paid for maintenance, and precisely how much of the usable value of the car had been used up.

Don't confuse the two issues.


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## IthurstwhenIP (Jan 12, 2018)

If you didn't do Uber would you own a car? You only add incremental depreciation.


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## 1.5xorbust (Nov 22, 2017)

Yes. Yes it is unless you got it for free.


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## dirtylee (Sep 2, 2015)

*YES
*
When some wrong way drunk driving asshole takes your car out, their insurance {if they even have it} will ONLY pay you out the current value of your vehicle {which mileage is a huge factor} + sales tax.


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## rideshare2870 (Nov 23, 2017)

The best way to do this gig is to have a car that’s 2-3 years newer than the minimum year allowed on the platform. Depreciation is not a big factor when you do it this way.


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## doyousensehumor (Apr 13, 2015)

rideshare2870 said:


> The best way to do this gig is to have a car that's 2-3 years newer than the minimum year allowed on the platform. Depreciation is not a big factor when you do it this way.


Golden. This is the way to do it!!!

My market is 16 years. You can get a 12 year old car $3000. Craigslist. There are a lot of 4cyl Fusions and Pontiac G6 in that price range. I know someone who just got a 2008 Prius $2900. Good for 5 years. (Assuming they dont change year requirements, which they could at anytime if they wanted too)

It will probably need some reconditioning. Shampoo interior, check brakes and suspension. Fix leaks and change all fluids, filters and belt. Buff out or clear the headlights.

If the engine or transmission dies, all three of my examples used engines are $500. Change it out and keep using the car.

It is possible to have $300-400 per month in actual vehicle costs.

$100/mo depreciation
$100/mo preventive maintenance and wear items, (tires, oil changes, brakes) 
$100-200/mo *average *repair fund. 
Meaning you could go 6 months without needing repairs. Then 2 things break on car in one week. After that i may problem-free for another few months.


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## rideshare2870 (Nov 23, 2017)

doyousensehumor said:


> Golden. This is the way to do it!!!
> 
> My market is 16 years. You can get a 12 year old car $3000. Craigslist. There are a lot of 4cyl Fusions and Pontiac G6 in that price range. I know someone who just got a 2008 Prius $2900. Good for 5 years. (Assuming they dont change year requirements, which they could at anytime if they wanted too)
> 
> ...


16 years? Wow, you got me beat. We got 15 years here in Buffalo NY. Also, that's exactly my point right here, cheap car will come with cheap used parts. It's not worth new parts when it's destined to die from the wear and tear anyways.


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## doyousensehumor (Apr 13, 2015)

rideshare2870 said:


> 16 years? Wow, you got me beat. We got 15 years here in Buffalo NY. Also, that's exactly my point right here, cheap car will come with cheap used parts. It's not worth new parts when it's destined to die from the wear and tear anyways.


I just checked, Uber says 15 years here too. But last year 2002 was okay. I think I have another year left. Mine is a 2003


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## MadTownUberD (Mar 11, 2017)

You cannot fix a vehicle forever. At some point you will need to buy another vehicle. Depreciating it through mileage etc. hastens the day of reckoning. Yes you need to consider depreciation. Cars have market values for a reason. If you could fix them forever cheaply they wouldn't depreciate down to near zero.

The above is compounded by northern climates in which vehicles are subjected to road salt.


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## New2This (Dec 27, 2015)

ANT 7 said:


> Your vehicle will devalue over time even if you do not mile it out.


This is so true.

I went with a friend of my mom's to buy a new Lexus SUV. She paid cash for it, almost $50,000 IIRC.

It currently has less than 7,000 miles on it ( yes *7,000 miles*, she is the quintessential little old lady who rarely drives), is in pristine condition and according to KBB is worth $25,000-$28,000.


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## dctcmn (Sep 21, 2017)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


Yes, but the more miles you put on it, the quicker you will need to replace it. 1.2% of vehicles last until 200k and .2% of vehicles last until 300k, so every mile you put on your vehicle brings it closer to death and the need for replacement. You need to account for that to have an accurate measure of how revenue much you are truly netting by doing this.


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## Dammit Mazzacane (Dec 31, 2015)

Your depreciation value may have a big factor for an insurance total claim.
Insurance adjuster: "So usually these 2015s are worth $10,000, but you have about 60,000 more miles than usual on this one, so we see on the market for these cars with that mileage it's worth $4,000... so that's what your payoff is." "Uh, wot? I paid $19,000 for it!" "Don't worry, you earned like $20,000 doing Uber right - I heard you guys make decent money!"



dctcmn said:


> Yes, but the more miles you put on it, the quicker you will need to replace it. 1.2% of vehicles last until 200k and .2% of vehicles last until 300k, so every mile you put on your vehicle brings it closer to death


 Insane throwaway society.


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## Christinebitg (Jun 29, 2018)

dctcmn said:


> every mile you put on your vehicle brings it closer to death and the need for replacement. You need to account for that to have an accurate measure of how revenue much you are truly netting


Okay, you can say I'm being picky. But...

You need to account for that to have an accurate measure of how much PROFIT you are netting. We already know what the _revenue_ is. Revenue is what Uber sends you. Subtract your costs from that to get your net profit.


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## Dammit Mazzacane (Dec 31, 2015)

Good news, there is this calculator for partially identifying true net profit... https://uberpeople.net/pages/EarningsCalculator/

(mark "none" for Uber Commission if you are going off of after-commission take-home pay for the calculation)








i.e.

... and these are about right, I used two-fifths (under one-half) of a tank and that would cost me about 15 bucks at the pump to refill. The numbers would be lower if I didn't include some tips in the "fares" calculation.

Now this needs to be paired with a car costs estimator.


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## dctcmn (Sep 21, 2017)

Christinebitg said:


> Okay, you can say I'm being picky. But...
> 
> You need to account for that to have an accurate measure of how much PROFIT you are netting. We already know what the _revenue_ is. Revenue is what Uber sends you. Subtract your costs from that to get your net profit.


It's just terminology. I prefer Gross Revenue and Net Revenue for daily/weekly/monthly operational metrics. I don't think that actual profit can be accurately measured until all taxes are paid for the year, but it's important to have solid interim numbers-- that's where gross rev and net rev come into play for me.


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## NOXDriver (Aug 12, 2018)

MadTownUberD said:


> You cannot fix a vehicle forever.


Sure you can. My 1942 Ford, 1943 GMC and Chevvy are proof of that. My 2005 is needing some parts, but parts for a 2005 are 1/10th of a 2019 and the Internet is full of how to's and whats wrongs with a 2005, a 2019 is an unknown variable.

In the past 30 days:
front struts $60
rear springs $20
rear sway bar links $9
2 new tires and alignment $210

That's still less than a THIRD of a new car payment.. and that new car is depreciating faster than I am buying parts for my old car.

Of course this assumes you can do your own wrenching. If you have to pay a mechanic than none of this works out in your favor.



Dammit Mazzacane said:


> Good news, there is this calculator for partially identifying true net profit... https://uberpeople.net/pages/EarningsCalculator/
> 
> (mark "none" for Uber Commission if you are going off of after-commission take-home pay for the calculation)
> 
> ...


Your market has an average ride of over 16 miles???? 145miles/9rides???

I call BS on your numbers.


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## MadTownUberD (Mar 11, 2017)

NOXDriver said:


> Sure you can. My 1942 Ford, 1943 GMC and Chevvy are proof of that. My 2005 is needing some parts, but parts for a 2005 are 1/10th of a 2019 and the Internet is full of how to's and whats wrongs with a 2005, a 2019 is an unknown variable.
> 
> In the past 30 days:
> front struts $60
> ...


Do you have a body shop? I'm assuming it snows in Harrisburg PA.


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## oldfart (Dec 22, 2017)

dctcmn said:


> Yes, but the more miles you put on it, the quicker you will need to replace it. 1.2% of vehicles last until 200k and .2% of vehicles last until 300k, so every mile you put on your vehicle brings it closer to death and the need for replacement. You need to account for that to have an accurate measure of how revenue much you are truly netting by doing this.


no,you dont need to account for depreciation to have an accurate measure of how much you are truly netting... You will know that when the car finally craps out or when you sell it

what you need to keep track of is your reserve account so you have enough money set aside to unanticipated repairs and for the ultimate replacement of the car... Unless you dont intend to replace the car...I mean at my age I am likely to die before the car does


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## T&W (Feb 23, 2018)

Depreciation matters for accrual basis. Most drivers and individuals use cash basis, so a non-cash item, like depreciation, isn’t relevant.


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## oldfart (Dec 22, 2017)

Christinebitg said:


> Okay, you can say I'm being picky. But...
> 
> You need to account for that to have an accurate measure of how much PROFIT you are netting. We already know what the _revenue_ is. Revenue is what Uber sends you. Subtract your costs from that to get your net profit.


Same thing., you dont need to to know net *profit, *in fact you cant know net profit until you sell the car
Factoring in a number for depreciation is only an estimate, because you dont know what you sold the car for until you sell it

Net profit is not an important number for me, except at tax time. and since i use the standard deduction net profit is only important to the IRS

whats important to me is cashflow and my reserve account... I add to savings on a regular basis so that Ill have enough for unanticipated repairs and another car when the time comes



T&W said:


> Depreciation matters for accrual basis. Most drivers and individuals use cash basis, so a non-cash item, like depreciation, isn't relevant.


Thank you



NOXDriver said:


> Your market has an average ride of over 16 miles???? 145miles/9rides???
> 
> I call BS on your numbers.


sounds about right to me... last week I did 48 uber rides for $921 and 29 lyft rides for $370

totals $1291 / 77 = $16.76

my new years resolution is to do more airport rides, so with a little luck these numbers should improve


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## Fozzie (Aug 11, 2018)

NOXDriver said:


> Your market has an average ride of over 16 miles???? 145miles/9rides???
> 
> I call BS on your numbers.


As a morning airport runner, my average is often comparable to that. (Same market too) My runs this morning were 17.93mi, 22.78mi and 19.38mi. At $1.11 /mile + $0.1875 /min my best money is made with a passenger in the back seat doing 70-75mph down the highway.


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## DrivingForYou (Aug 6, 2017)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


Not correct business thinking. If you drive Uber, you are an independent business.

When you are a business, you don't plan around "depreciation" you plan around the *AMORTIZATION* of assets.

I'm going to use a different business example to make it easy and clear. A plastic injection molded part might use only a couple pennies worth of plastic, say $0.02, and yet still have a "cost" of $5.00

The reason is the _TOOL_ cost. The steel mold can cost $20,000 to over $100,000. So lets say we need 5000 parts.This is how those costs might work out:

Cost of plastic: $100.00
Cost of machine time: $3000
Cost of tool (mold): $20,000

TOTAL: $23,100
*Per-part* cost for 5000 parts: *$4.62*​
Even though the actual material for the part is only 2 cents, we have $4.60 is tooling and operating expenses that are *amortized over the production run*. You can't ignore the tool cost for a plastic part any more than you can ignore the vehicle cost when driving Uber or Lyft.

When you are driving UBER, the same concept of amortization is true.

You have your _Gas_, your _Oil_, your other _repairs_ and _maintenance_. And your biggest cost is that of the _*vehicle*_. And let's not forget *licensing and insurance* - costs that are _*substantially higher* _for a new vs an 8 year old used vehicle.

If you buy a new vehicle, even if you plan on keeping it and running it into the ground, *you still need to calculate the amortized cost of purchasing that vehicle *into your per-mile and resultant per-hour profit. Thinking otherwise is magical fairy dust accounting.

And still, depreciation is a factor for unforeseen events. If you have an accident that totals the car, or end up having to sell sooner than expected, the depreciation part of the calculation WILL hurt more than expected.


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## reg barclay (Nov 3, 2015)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


Well, once it reaches the point where it's only worth scrap rate, then I guess it can't depreciate further. (Obviously the difference between what you paid and it's scrap worth will be your depreciation total, and will just get 'stretched out' over more miles). As it reaches the low depreciation mark (and further), your repair costs are likely to go up. Whether the extra costs of repairs will offset the depreciation benefits depends on a number of things, IMHO ability to do your own repairs will affect that a lot.


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## Dammit Mazzacane (Dec 31, 2015)

NOXDriver said:


> Your market has an average ride of over 16 miles???? 145miles/9rides???
> 
> I call BS on your numbers.


 Listed number of miles is cumulative, includes deadheading and positioning to action areas. Nine rides is correct, excluding cancellations. With cancellations it was about 13 rides from a quick run through the app.


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## jenijazz (Dec 27, 2018)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


What you "plan" and what life gives you are often quite different things...


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## Mordred (Feb 3, 2018)

DrivingForYou said:


> Not correct business thinking. If you drive Uber, you are an independent business.
> 
> When you are a business, you don't plan around "depreciation" you plan around the *AMORTIZATION* of assets.
> 
> ...


My point is that depreciation is a potential cost. Not an actual cost. If you never total your car and you never sell your car depreciation never actually costs anything.


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## MadTownUberD (Mar 11, 2017)

DrivingForYou said:


> Not correct business thinking. If you drive Uber, you are an independent business.
> 
> When you are a business, you don't plan around "depreciation" you plan around the *AMORTIZATION* of assets.
> 
> ...


Outstanding. You must be a fellow MBA.


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## Fuzzyelvis (Dec 7, 2014)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


I never planned on selling my last car. But then a drunk intervened and it was totaled.



Mordred said:


> My point is that depreciation is a potential cost. Not an actual cost. If you never total your car and you never sell your car depreciation never actually costs anything.


If you never have an accident you don't need insurance. Accidents are only a POTENTIAL cost. So why plan for them with insurance?

You're still wrong, anyway. The car will be useless faster than it would otherwise be. So the cost will come in when you have to buy another car sooner than you would have.


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## Crosbyandstarsky (Feb 4, 2018)

Merc7186 said:


> For tax purposes, depreciation is a real thing. But once you have fully depreciated your vehicle and your resale value is less than $3000 (IMO) then I dont consider it a real cost anymore.
> 
> I have people play devils advocate to my thinking all of the time and they are entitled to their opinion. In my situation, I bought a $5000 minivan, put in a $800 radio and $1850 in repairs so far. Since I purchased said van for doing Uber, I have made almost $30000. The Beast owes me nothing to this point and everyday I keep it running is all white meat....
> 
> I consider $5/hr for my gas, repairs, insurance as my depreciation.


Are you kidding ? You still need matinee and it goes down in value. It's alwas depreciating. Where is the money for the next car after that one don't run anymore? From the depreciation. Some people have such a hard time understanding money they can't see


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## Mordred (Feb 3, 2018)

Crosbyandstarsky said:


> Are you kidding ? You still need matinee and it goes down in value. It's alwas depreciating. Where is the money for the next car after that one don't run anymore? From the depreciation. Some people have such a hard time understanding money they can't see


Can't the engine be replaced and just keep driving? Why do you have to buy a new car? Replace engine every 4-5 years.. Trans too. Both of which I categorize as maintenance. Never total the car out... What does it matter what the value of the car is? Depreciation means nothing


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## Fuzzyelvis (Dec 7, 2014)

Mordred said:


> Can't the engine be replaced and just keep driving? Why do you have to buy a new car? Replace engine every 4-5 years.. Trans too. Never total the car out... What does it matter what the value of the car is? Depreciation means nothing


But now you're replacing parts instead of the car...sigh.

That's not how it works.

That's not how any of this works.


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## Mordred (Feb 3, 2018)

Fuzzyelvis said:


> But now you're replacing parts instead of the car...sigh.
> 
> That's not how it works.
> 
> That's not how any of this works.


Yes. Chalk that up as routine maintenance. I say roughly 6k a year covers everything.


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## MadTownUberD (Mar 11, 2017)

At some point it becomes less expensive to buy a newer car (assembly line, efficient production) than an older car (blood sweat n tears, inefficient repairs).

Not that I know anything about economics.


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## B - uberlyftdriver (Jun 6, 2017)

my last two toyota prius were worth beer money when i was done with them, so yeah it matters

you are simply monetizing an asset until its worthless


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## Fuzzyelvis (Dec 7, 2014)

Mordred said:


> Yes. Chalk that up as routine maintenance. I say roughly 6k a year covers everything.


For $6000 a year I could be buying a new car.

I don't consider replacing the engine and transmission routine maintenance.


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## Christinebitg (Jun 29, 2018)

dctcmn said:


> prefer Gross Revenue and Net Revenue for daily/weekly/monthly operational metrics.


Revenue that is net of what? In other words, what are you subtracting from gross revenue to get "net revenue"?


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## oldfart (Dec 22, 2017)

Fuzzyelvis said:


> I never planned on selling my last car. But then a drunk intervened and it was totaled.
> 
> If you never have an accident you don't need insurance. Accidents are only a POTENTIAL cost. So why plan for them with insurance?
> 
> You're still wrong, anyway. The car will be useless faster than it would otherwise be. So the cost will come in when you have to buy another car sooner than you would have.


The accident is a potential as well. the insurance is real... and FYI some of us dont carry collision insurance



Fuzzyelvis said:


> But now you're replacing parts instead of the car...sigh.
> 
> That's not how it works.
> 
> That's not how any of this works.


Thats exactly how it works,, You replace parts as they wear out. brakes, tires, engines, transmissions, etc.. The idea is to be prepared for this stuff with a reserve account


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## tohunt4me (Nov 23, 2015)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


You better start collecting engines, transmissions, suspension parts . . .

I suggest becomming friends with a few carjackers . . .

You may find yourself stranded
Far from home . . . .


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## oldfart (Dec 22, 2017)

Crosbyandstarsky said:


> Are you kidding ? You still need matinee and it goes down in value. It's alwas depreciating. Where is the money for the next car after that one don't run anymore? From the depreciation. Some people have such a hard time understanding money they can't see


Its not always depreciating; you cant get to less than zero


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## Robert Larrison (Jun 7, 2018)

Ok.
to the original question vehicle depreciation it's got a few variables you didn't mention the particulars like the vehicle it's usage, earnings, costs etc.

First off this is an important subject if the advice doesn't include going to and paying for professional income tax peeps (I use H&R Block) then your getting bits of hear say.

For you there are 3 tax deduction options.
1:Special Depreciation Alowence 2:Modified Accelerated Cost Recovery System (MACRS) 3:Section 179

Don't listen to anyone who can't tell you what these are without googling it


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## dctcmn (Sep 21, 2017)

Christinebitg said:


> Revenue that is net of what? In other words, what are you subtracting from gross revenue to get "net revenue"?


Expenses.

gross rev - expenses = net revenue



oldfart said:


> no,you dont need to account for depreciation to have an accurate measure of how much you are truly netting... You will know that when the car finally craps out or when you sell it
> 
> what you need to keep track of is your reserve account so you have enough money set aside to unanticipated repairs and for the ultimate replacement of the car... Unless you dont intend to replace the car...I mean at my age I am likely to die before the car does


Having a reserve account is certainly a good business practice and something that should be tracked. That's really a different topic than tracking vehicle depreciation in order to determine accurate net revenue.

In the scope of net revenue, "vehicle depreciation" is really "(net) purchase price per mile" of that vehicle. Say you buy a vehicle for $11,000 and use it for Uber/Lyft for 100,000 miles, then sell it for $1,000. That "purchase price per mile" was 10 cents per mile. I don't see how you can have anything close to an accurate net revenue number without accounting for the purchase price of your vehicle.

By driving Lyft, you are essentially selling your labor and your vehicle to a passenger (through a broker) on a mile by mile basis. Therefore, it makes the most sense to account for the labor and vehicle expenses on a mile by mile basis. Part of the vehicle expenses is the purchase price and it should be accounted for on a mile by mile basis.

Of course, there are other ways to account for it, but none of them seem to make as much sense to me.


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## Christinebitg (Jun 29, 2018)

dctcmn said:


> gross rev - expenses = net revenue


I believe the correct description is EBITDA

"Earnings before interest, depreciation, amortization, and amortization." Someone can correct me, though. It's been a while since used that.

Christine


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## dctcmn (Sep 21, 2017)

Christinebitg said:


> I believe the correct description is EBITDA
> 
> "Earnings before interest, depreciation, *amortization, and amortization*."


This is how you get an actuary to fall in love with you.


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## jack1981 (Dec 27, 2018)

Yes, of course it is a real loss because your car is worth less money after the rideshare miles. Keep in mind:
- the loss is limited to the lost value for the miles you driver for rideshare (not the miles you driver for personal purposes)
- with old cars or cars with a lot of mileage, the depreciation may not be much.


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## Christinebitg (Jun 29, 2018)

dctcmn said:


> This is how you get an actuary to fall in love with you.


Oh sorry. The T is taxes.


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## jack1981 (Dec 27, 2018)

Mordred said:


> My point is that depreciation is a potential cost. Not an actual cost. If you never total your car and you never sell your car depreciation never actually costs anything.


Depreciation is an actual cost but one that is "realized" at the time of selling/disposing the asset.


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## oldfart (Dec 22, 2017)

dctcmn said:


> Expenses.
> 
> gross rev - expenses = net revenue
> 
> ...


Im saying depreciation is not important.,the ability to replace the asset when its worn out ; is. And knowing exactly how much you made isnt important either... as long as I stay a few dollars ahead of my wife's spending is all that counts

the way you calculated your cost due to depreciation per mile is correct, which goes to what I said in a post above... You cant know what your cost due to depreciation is, until you retire the asset

What is important for business continuity is the ability to buy the new car when the old one craps out I dont care that my current car is wearing out at the rate of 10 cents a mile. whats important is an estimate of what the new car will cost, and an estimate of the remaining economic life of my current car..

For example, in my case, I plan on spending $40000 on a used car in two years, and I have $25000 in the bank, I need to save another $15000 over two years and I will drive 75000 miles a year... so 10 cents a mile is my "cost"


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## Seamus (Jun 21, 2018)

Besides all the hypothetical blather, Depreciation is important for tax purposes only plain and simple. The IRS has rules on depretiation such as limits on yearly amount and number of years.

Since for most people the standard mileage deduction is by far more beneficial you most likely will not be depreciating anything on your taxes. (unless you don't use standard mileage deduction.)


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## oldfart (Dec 22, 2017)

Fuzzyelvis said:


> For $6000 a year I could be buying a new car.
> 
> I don't consider replacing the engine and transmission routine maintenance.


a new car like mine is over $40000. I paid $25000 for mine (it was 5 years old when I bought it) I didnt buy it for rideshare, but when I decided to do rideshare it was what I owned, so thats what Im using.. When the time comes to replace it Im giving serious consideration to a new engine... $6000 vs $25000-$40000 seems like a no-brainer to me


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## UberLaLa (Sep 6, 2015)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. *Seems kinda like considering the value of my half eaten cheeseburger.* It doesn't matter I have no plans on selling it.


That cheeseburger depreciates in it's _Value to you_ with every bite. Why? Because once you've eaten it, you're gonna need to buy another one, and another...


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## oldfart (Dec 22, 2017)

UberLaLa said:


> That cheeseburger depreciates in it's _Value to you_ with every bite. Why? Because once you've eaten it, you're gonna need to buy another one, and another...


You make my point.

Our cars really do lose value over time but more important than the value that the old car loses is the cost of irs replacement


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## weykool (Jan 13, 2017)

DrivingForYou said:


> Not correct business thinking. If you drive Uber, you are an independent business.
> 
> When you are a business, you don't plan around "depreciation" you plan around the *AMORTIZATION* of assets.


Depreciation and amortization are the same thing.
Depreciation is for tangible assets like a car.
Amortization is for non tangible assets like goodwill.



T&W said:


> Depreciation matters for accrual basis. Most drivers and individuals use cash basis, so a non-cash item, like depreciation, isn't relevant.


As Uber drivers we are independent contractors and are using a modified cash basis which means we deduct things like depreciation.
Think about it....we could use actual expenses instead of the 54 cents per mile.
If you buy a new car for $30,000 this year do you think the IRS will allow you to expense it on a cash basis or make you depreciate it?

If you buy some apartments to rent out the IRS will not allow you to expense what you paid for the apartments but will require you to depreciate it even though you are a "Cash basis" taxpayer.

100% you need to estimate what your depreciation is.
Do not fall for the "reserve account gimmick" or its only an expense when you have to buy a replacement car.
If you do not include depreciation you are only fooling yourself.


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## dmoney155 (Jun 12, 2017)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


Absolutely... from the point of keeping it, it means you will not be keeping it for long. Think of it this way, every item has a life. In cars you can think of milage as it's life. Suppose your vehicle will manage 300,000miles before it dies (becomes not practical to use it/ will need major overhaul to keep driving it).
Supposed that without uber you drive 20,000 miles a year, so the car will last you 15 years.
Now suppose with uber you put 75,000 miles a year, this time car only lasts you 4 years.

So with uber you will need to replace your vehicle every 4 years, without 15 years. Depreciation is the biggest misunderstood cost of this gig.


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## UberLaLa (Sep 6, 2015)

dmoney155 said:


> Absolutely... from the point of keeping it, it means you will not be keeping it for long. Think of it this way, every item has a life. In cars you can think of milage as it's life. Suppose your vehicle will manage 300,000miles before it dies (becomes not practical to use it/ will need major overhaul to keep driving it).
> Supposed that without uber you drive 20,000 miles a year, so the car will last you 15 years.
> Now suppose with uber you put 75,000 miles a year, this time car only lasts you 4 years.
> 
> So with uber you will need to replace your vehicle every 4 years, without 15 years. Depreciation is the biggest misunderstood cost of this gig.


I doubt anything you might be driving for Select will go 300k. More like 200k tops.


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## dmoney155 (Jun 12, 2017)

Mordred said:


> Can't the engine be replaced and just keep driving? Why do you have to buy a new car? Replace engine every 4-5 years.. Trans too. Both of which I categorize as maintenance. Never total the car out... What does it matter what the value of the car is? Depreciation means nothing


By this thinking...auto makers would be in a deep deep trouble.



UberLaLa said:


> I doubt anything you might be driving for Select will go 300k. More like 200k tops.


Let's hope not... I'm at 130,000kms so ~81,000 miles .


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## UberLaLa (Sep 6, 2015)

dmoney155 said:


> Let's hope not... I'm at 130,000kms so ~81,000 miles .


Oh, I'm talking 300,000 miles. If you are talking kilometers and I'm talking miles, we are on the same page then. 150,000 - 200,000 miles or 300,000 kilometers.


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## Christinebitg (Jun 29, 2018)

UberLaLa said:


> That cheeseburger depreciates in it's _Value to you_ with every bite.


Actually, the cheeseburger is an example of DEPLETION, rather than depreciation.

Depreciation is when something wears out. Depletion (think oil wells for instance) is when an asset is consumed.

And like depreciation, depletion also has statutory values that are allowed to be applied.


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## dctcmn (Sep 21, 2017)

oldfart said:


> the way you calculated your cost due to depreciation per mile is correct, which goes to what I said in a post above... You cant know what your cost due to depreciation is, until you retire the asset


Sure you can. There are at least two ways of doing it--

1. You set a target mileage (say 200,000 miles (or 250k or 300k)) and take the purchase price per mile against that number. If you exceed that target mileage, you stop accounting for purchase price on any future miles. If you do not reach that target mileage, you take the difference as a one time charge.

2. You just set your formula to adjust as you add miles. Using this method, the final total won't be set in stone until you retire the vehicle, but the running total will just adjust your purchase costs downward and your net revenue upward as you add miles. This wouldn't be as accurate on a year over year basis, but it would tell you overall how profitable that particular vehicle was during its lifetime. To me, that's a pretty powerful metric that can inform you on what you should buy for your next vehicle.


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## oldfart (Dec 22, 2017)

weykool said:


> Depreciation and amortization are the same thing.
> Depreciation is for tangible assets like a car.
> Amortization is for non tangible assets like goodwill.
> 
> ...


I have owned apartment buildings and I depreciated them. And as a result I had no tax obligation, UNTIL I sold the buildings... My cash flow was great, but then there came the day that I sold the buildings and I owed taxes on not just the difference between what I paid for the buildings and the sale price, but from the depreciated value and the sale price... A little thing called "recapture" rose up to bite me in the ass Depreciation is important when you do your taxes, and thats all

Your apartment example is a bad example for you to use to show how depreciation works for a car or other asset that really does depreciate

You will have a number that is exactly what you made, and if thats important to you, by all means do the calculation. But wou wont be prepared to buy another car unless you build a savings account at the same time as you depreciate the old one.. If you plan on buying a more expensive car you need to save faster than you depreciate, and if you plan on a cheaper car you can save less than you depreciate. Either way the cost of your old car (depreciation, has nothing to do with buying that new car and if you arent prepared your business is likely over

So Im not saying your car doesn't depreciate. and Im not saying depreciation isnt real, Its just that it doesn't. really matter. to your success. I wasnt prepared to pay my taxes when I sold my apartments and you wont be prepared to buy a new car, when your old one craps out

As I have been saying you dont know exactly what your depreciation is until you dispose of the asset. and so you dont know what your net profit or loss is until then either.

What you are not understanding is that I dont care what my net profit is.Thats only important for my tax preparation. I care that my business can survive when my car finally craps out, So its the size of the reserve account that's my concern


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## UberLaLa (Sep 6, 2015)

Christinebitg said:


> Actually, the cheeseburger is an example of DEPLETION, rather than depreciation.
> 
> Depreciation is when something wears out. Depletion (think oil wells for instance) is when an asset is consumed.
> 
> And like depreciation, depletion also has statutory values that are allowed to be applied.


Tell OP, not me...


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## weykool (Jan 13, 2017)

oldfart said:


> I have owned apartment buildings and I depreciated them. And as a result I had no tax obligation, UNTIL I sold the buildings... My cash flow was great, but then there came the day that I sold the buildings and I owed taxes on not just the difference between what I paid for the buildings and the sale price, but from the depreciated value and the sale price... A little thing called "recapture" rose up to bite me in the ass Depreciation is important when you do your taxes, and thats all
> 
> Your apartment example is a bad example for you to use to show how depreciation works for a car or other asset that really does depreciate
> 
> ...


Everything you said is completely wrong.
Every entity needs to know if they are profitable on an ongoing basis.
Yes, depreciation is an estimate based on assumption of useful life.
Anyone who ignores depreciation as an expense is doing it wrong.
Stop confusing tax accounting with financial accounting.


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## Immoralized (Nov 7, 2017)

I have a couple of cars in what one can consider "High Mileage" about 160 000 miles without any real mechanic problems with it. What a lot of people forget is that car engines and transmission last a lot longer then they usually do because the car is only been turned on usually once per day and the car remains warm for the whole time.

The biggest killer for the transmission and engine is short and quick trips. A lot of rideshare vehicles as long as they are properly maintained should in all essence last as long as any commercial vehicle on the road like a maintained taxi. I have a van that was used heavily and is quite high mileage at over 250 000 miles on the engine.

One can buy a good vehicle $6000-8000 2nd hand and run it into the ground with the first major component failing either the engine or transmission or anything else on it that going to cost multiple thousand dollars down the road where the cost of repair is going to exceed the cost of the car at which point it time to buy another one.

So let say you spent $8000 on that car put up 150 000 miles on it and the engine decided to die but in that time you made hundred thousand dollars out of it. Yes got oil, got insurance it got on road cost ect but that all fixed cost with new car or old car. If you can make ten times over what you bought the car for it and then it dies... In my books that worth running it into the ground. What more do you want? 

For me particularly rideshare is about making as much $$ i can with the cars I have and keeping them until they one becomes too expensive to keep on the road or two, they age out. In which case I resell it for whatever I can get for it. A car is just a tool for you to make money and that all you should think it is good for. I got one car that going to age out by 2020 and by the time it comes around to 2020 it would of done about 220 000 miles on it by the rate it is incurring them right now. It not going die or anything it simply going to be too old for Rideshare so I got to sell it. The thing is... That it paid for itself a dozen times over.

Everyone wants you to go out and buy a new car every year instead of using what you have because it feel absolutely amazing spending all that hard earned dollars into the latest greatest car. But that all the marketing and everyone fall for it. Buy that new car quick! Before your old car loses too much value! Sure... Only to be selling it to the next driver that is smart enough to realize a car is just a car and it supposed to be driven. Choose the car first that you want to drive in for the next 200 000 miles and you are happy with that purchase so you don't have the "Need" to buy that next shiny car.


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## oldfart (Dec 22, 2017)

weykool said:


> Everything you said is completely wrong.
> Every entity needs to know if they are profitable on an ongoing basis.
> Yes, depreciation is an estimate based on assumption of useful life.
> Anyone who ignores depreciation as an expense is doing it wrong.
> Stop confusing tax accounting with financial accounting.


yes I need to know if Im making money or not, but I dont need to know down to the last penny, and I dont need to account for depreciation to know what I need know to operate my business

I dont know the difference between tax accounting and financial accounting, but Im not confused.. I operate my business with an eye to cash flow.In Dec of 2017 I put my car into my rideshare business and at that time I estimated its value to be $18000. I know its going to have to be replaced at some time, and Im prepared for that, whether it happens tomorrow, or 2 years or 5 years from now.

Last year my net income was $36000 (after all expenses except depreciation) Lets assume that number holds for the next 2 years. So if the car blows up now my income for the one year was $18000 (36-18 =18) and if it lasts another year my income for the 2 years will be $54000 (36+36-18) or $27000 per year and if it last 2 more years my income for the 3 years will be $90000 (36+36+36-18) or $30000 per year

None of those numbers is important because I have been adding to my reserve account and I am able to buy a new car whenever I need one... I just dont need to know when the car is going to blow up(ie when it will be completely depreciated. to operate my business

Heavy duty accounting (tax accounting or financial accounting) just isnt needed for me to know that I have a positive cashflow and that I have enough in the bank to buy a new car when I want or need one.

In fact next year I dont need to consider depreciation or my reserve account at all, because I have enough saved to replace the car if it does blow up.


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## Immoralized (Nov 7, 2017)

oldfart said:


> yes I need to know if Im making money or not, but I dont need to know down to the last penny, and I dont need to account for depreciation to know what I know to operate my business
> 
> I dont know the difference between tax accounting and financial accounting, but Im not confused.. I operate my business with an eye to cash flow.In Dec of 2017 I put my car into my rideshare business and at that time I estimated its value to be $18000. I know its going to have to be replaced at some time, and Im prepared for that, whether it happens tomorrow, or 2 years or 5 years from now.
> 
> ...


As long as you put 10% of what you make gross away towards that next car you will be alright.

A lot of people get caught up in perceive loss or perceived gains with the car they have instead of just focusing on what it is and what it should be is a throw away consumable. Once it gets too expensive to maintain it should have made multiple and quite often half a dozen or more times then what you bought it for.

False economy on cars depreciating because it not disappearing. The metal on the car is worth something when it was made and the parts on the car is worth something when it was made and quite often the car is worth a lot more in pieces then it does whole. The major components of a car should in all essence last 200k miles or more.

If you have a good reliable car that keeps on going and going... To me that a lucky car  Like a golden goose. Why kill it? The next car you might get maybe a complete lemon. If you have a lucky car that making you $$ not giving you any drama or problems that a good car that should be rewarded and looked after not toss to the side.


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## Christinebitg (Jun 29, 2018)

UberLaLa said:


> Tell OP, not me...


If the original poster isn't reading this thread, then it doesn't matter.


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## METRO3 (Sep 3, 2017)

I haven't read all the posts on here but I'm gonna make the point most cars won't live forever. If u do this full time ur gonna put a shit load of km on it. 300k to 400k ur car will experience really expensive problems where u will need to consider buying a new car. Now how are u gonna pay for that new car? I personally think it's stupid to finance or lease or even rent one. What u want to earn less each week aren't we already earning nothing so now u want to earn less? What ya gonna do when it's slow has shit as it is right now in my city? Use credit to pay for the lease payments. Nooo bad idea. So this is where depreciation as an expense comes in. U all should be putting some money away for the next car. Also most cities like mine have age restrictions so when ur car is too old u need to buy another one then you should be paying cash for it. Used or new.


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## weykool (Jan 13, 2017)

_Last year my net income was $36000 (after all expenses except depreciation) Lets assume that number holds for the next 2 years. So if the car blows up now my income for the one year was $18000 (36-18 =18) and if it lasts another year my income for the 2 years will be $54000 (36+36-18) or $27000 per year and if it last 2 more years my income for the 3 years will be $90000 (36+36+36-18) or $30000 per year
_
I am not saying you need to calculate depreciation down to the penny, but the $18,000 you spent on your car is a significant number.
If your car blows up now it is 50% of your income.
If you make it 2 years it is 25% and for 3 years it is sill 16%.

I don't prepare a formal financial statement but I do estimate what my cost per mile is and it includes depreciation even though I only paid $6400 for it.

What about the drivers who spent $36,000 for a new car?
The reason they would do such a stupid thing is because they ignore the cost of depreciation.
The 54 cents a mile IRS deduction includes depreciation.
If depreciation matters to the IRS is should matter to drivers as well.


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## oldfart (Dec 22, 2017)

weykool said:


> _Last year my net income was $36000 (after all expenses except depreciation) Lets assume that number holds for the next 2 years. So if the car blows up now my income for the one year was $18000 (36-18 =18) and if it lasts another year my income for the 2 years will be $54000 (36+36-18) or $27000 per year and if it last 2 more years my income for the 3 years will be $90000 (36+36+36-18) or $30000 per year
> _
> I am not saying you need to calculate depreciation down to the penny, but the $18,000 you spent on your car is a significant number.
> If your car blows up now it is 50% of your income.
> ...


We are looking at the same information and coming to completely different conclusions


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## oldfart (Dec 22, 2017)

METRO3 said:


> I haven't read all the posts on here but I'm gonna make the point most cars won't live forever. If u do this full time ur gonna put a shit load of km on it. 300k to 400k ur car will experience really expensive problems where u will need to consider buying a new car. Now how are u gonna pay for that new car? I personally think it's stupid to finance or lease or even rent one. What u want to earn less each week aren't we already earning nothing so now u want to earn less? What ya gonna do when it's slow has shit as it is right now in my city? Use credit to pay for the lease payments. Nooo bad idea. So this is where depreciation as an expense comes in. U all should be putting some money away for the next car. Also most cities like mine have age restrictions so when ur car is too old u need to buy another one then you should be paying cash for it. Used or new.


The money you set aside for that new car is not an expense, it's income. Depreciation is expense. Now you my save at exactly the same rate your car depreciates so the two numbers would be equal (but opposite)

But maybe not
My car was worth $18000 when I put it into ride share and I expected to get 200000 rideshare miles out of it (at about 70000 miles a year) so my depreciation schedule is about 9 cents a mile or $6000 a year. My plan is to buy a more expensive car when this one wears out. A Chevy suburban for about $40000 so to do this thing right I need to build a $40000 savings account in 3 years so my reserve account need s to grow at a little more than $1000 a month

My point is that depreciation is just not important to me (except to prepare taxes) what's important is adding to that reserve account on a regular basis

On the other hand maybe I'll take the advice of so many here and buy a pos Prius for $6000. If I do that I don't need to add to a reserve account at all. I already have more than that in savings

Again, I'm not saying depreciation isn't a reality. It is. But it's just not important to the future of my business. Cash flow and enough cash flow to save for that new car is what's important


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## TomH (Sep 23, 2016)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.[/QUOTE
> Replacement cost is more important than depreciation.


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## UberBeemer (Oct 23, 2015)

Mordred said:


> I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.


I think you get a one-time deduction of $18k, or can depreciate on a graduated scale over 5 years.


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## oldfart (Dec 22, 2017)

UberBeemer said:


> I think you get a one-time deduction of $18k, or can depreciate on a graduated scale over 5 years.


Or you can use the irs standard deduction


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