# Does tax advantage on new car outweigh the benefit of low cost used cars?



## stevenh1975 (Aug 4, 2015)

Thinking about buying a new pacifica hybrid and I know its bad to depreciate your car on uber but I do get to deduct the car and get the extra 7500 tax credit and I might even be able to make a profit by selling the car after two years.

I did some simple calculation please let me know if it is reasonable. 
New car cost ~$38,500 (includes tax)
sale price after 2 years ~$25,000 (based off KBB 2017 model with 40K miles)
tax credit $7500
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so eventually I would be able to sell this car for a lost @6000, but in the meantime I can write off $22,330 along using MACRS depreciation 200DB method (1st year 0.2 2nd year 0.32) which is a saving of around $6700 in tax dollar. Seems like I get to use the car for free and just have to repeat this process every two year to make sure I always has a car to write off?


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## SEAL Team 5 (Dec 19, 2015)

Depends on which method you use for deduction, either SMR or accrual, depends on what percentage you drive your vehicle for rideshare compared to personal use, depends on how much revenue your vehicle accumulates per year. Depends on how much you depreciate your vehicle compared to the revenue you receive once you sell your vehicle. Don't forget that once you use the accrual method (actual cost) you can not switch to SMR (standard mileage rate) in following years.


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## UsedToBeAPartner (Sep 19, 2016)

If this will be used exclusively for rideshare (you better keep perfect records!) your car will be worth MUCH less as you will be putting close to 100,000 miles per year on the car. Redo that math and see what it's going to be worth 2 years later with 200,000 miles on it.
If this will be a part time driving situation and hoping to depreciate a vehicle with is also used for personal use you will not be able to use get that kind of depreciation.


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## stevenh1975 (Aug 4, 2015)

will be part-time use only, last year I was able to get about 86% of business use. My daily commute was short and I rented out when I don't feel like uber which kept my personal use down but this was on a used car. Might need to rethink for XL if they imposed the pricing floor for CA, it doest make sense to drive bigger car if you can make the same amount of money doing x with a Prius.


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## maverik5225 (Nov 24, 2017)

Your situation is closer to mine although I tend to buy mine at 40,000 and drive them to 150,000. 
Here is how i did it:
2011 Fusion Hybrid - $14K, 58K miles, avg 37mpg
Cost for miles driven (taking gas, oil changes, tires and depreciation into account) ended up being less than government's mileage deduction
Sold recently for $4K in "good condition" (had some body damage) to a private seller.

Bought 2017 Fusion Hybrid - $15K, under 50K miles, avg 43mpg

I get lots of compliments on my Fusion and it now qualifies for Select (go figure)

I dont really need to worry about fancy depreciation equations. The car is cheap to begin so I don't deal with the hassle of actual expenses.

I'm just praying I don't have a battery issue after my extended warranty expires


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## amazinghl (Oct 31, 2018)

$3000 car to Uber/Lyft.


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## UBER.1 (Jun 18, 2019)

I lease my car for Uber. That's all I use it for. I got A Honda CR-V. RELIABLE and holds it's value. When lease is done I'll swap it for another. I would not get a used car for this or use my personal car.


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## BlueNOX (Apr 3, 2016)

stevenh1975 said:


> Thinking about buying a new pacifica hybrid and I know its bad to depreciate your car on uber but I do get to deduct the car and get the extra 7500 tax credit and I might even be able to make a profit by selling the car after two years.
> 
> I did some simple calculation please let me know if it is reasonable.
> New car cost ~$38,500 (includes tax)
> ...


2017 Chevrolet Traverse. Purchase price $32,000. 187k miles after 2 years.


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## stevenh1975 (Aug 4, 2015)

amazinghl said:


> $3000 car to Uber/Lyft.


https://sandiego.craigslist.org/csd/cto/d/san-diego-2007-toyota-highlander-hybrid/6914684807.html
https://sandiego.craigslist.org/esd/cto/d/el-cajon-2008-prius/6909046504.html
Found. This two any suggestion? Going hybrid since cali fuel tax coming


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## amazinghl (Oct 31, 2018)

stevenh1975 said:


> Found. This two any suggestion? Going hybrid since cali fuel tax coming


Old hybrid car will most likely needs its hybrid battery replaced. Have you lookup the replacement cost for those?


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## Uber_Yota_916 (May 1, 2017)

amazinghl said:


> Old hybrid car will most likely needs its hybrid battery replaced. Have you lookup the replacement cost for those?


Aftermarket aftermarket aftermarket. Do not even call the dealership.


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## stevenh1975 (Aug 4, 2015)

Uber_Yota_916 said:


> Aftermarket aftermarket aftermarket. Do not even call the dealership.


Thank you, so I will guess a prius is better (more reliable) than a highlander?


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## Uber_Yota_916 (May 1, 2017)

stevenh1975 said:


> Thank you, so I will guess a prius is better (more reliable) than a highlander?


Better mpg.


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## EngineerAtHeart (Nov 8, 2018)

just pickup an $1800 SUV with 214000. Passed the Uber inspection with colors. I used a 2018 Elantra Sport beforehand. Now i will run this into the ground and it give to the junkyard for $600. So I'm transitioning to XL from Select rides.


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## PHXTE (Jun 23, 2015)

That seems like an overly complicated way of going about this.

Keep in mind this: if you capitalize this asset and choose to depreciate it in such a manner, you will have to record taxable capital gains income on this if you sell it for more than your salvage value.

Meaning, if you write off $22k of depreciation on a $38k asset, for a salvage value of $16k, and then you turn around and actually sell it for $26k after you're done with it and fully depreciated it, you're taking a capital gain of $10k, which is taxable income.

I wouldn't do any of this as this is way too complicated for a guy driving his vehicle for Uber. I'd just go ahead and take the standard deduction and leave it at that. If you choose to pursue this, you're going to have the IRS up your ass every year and you will have to treat this like a real business including incorporation. This is way more trouble than it's worth.

More broadly speaking, buying new cars to Uber with is an epicly bad idea. You're not making any more money by driving a new minivan vs a used minivan, meanwhile you're vaporizing the value of a much more valuable asset than you would be if you bought something cheap and used - which, yes, is a real expense to you.


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## TheDevilisaParttimer (Jan 2, 2019)

stevenh1975 said:


> Thinking about buying a new pacifica hybrid and I know its bad to depreciate your car on uber but I do get to deduct the car and get the extra 7500 tax credit and I might even be able to make a profit by selling the car after two years.
> 
> I did some simple calculation please let me know if it is reasonable.
> New car cost ~$38,500 (includes tax)
> ...


If your dead set on a "new" car do yourself a favor and stay away from all Chryslers.


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## stevenh1975 (Aug 4, 2015)

TheDevilisaParttimer said:


> If your dead set on a "new" car do yourself a favor and stay away from all Chryslers.


Don't care about a new car honestly, just want that EV federal + state tax credit. Only reason with pacifica is XL and ability to use gas only. No range anxiety + full $7500 due to big battery pack.


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## NOXDriver (Aug 12, 2018)

maverik5225 said:


> Your situation is closer to mine although I tend to buy mine at 40,000 and drive them to 150,000.
> Here is how i did it:
> 2011 Fusion Hybrid - $14K, 58K miles, avg 37mpg
> Cost for miles driven (taking gas, oil changes, tires and depreciation into account) ended up being less than government's mileage deduction
> ...


So what was your net profit? You're at -$9k as you sold for $4k but bought a $15k. Mileage deduction lowers your income, which only partially reduces your tax bracket.

Just curious how you can justify an annual $9k 'investment' to drive for Uber.


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## UBER.1 (Jun 18, 2019)

PHXTE said:


> That seems like an overly complicated way of going about this.
> 
> Keep in mind this: if you capitalize this asset and choose to depreciate it in such a manner, you will have to record taxable capital gains income on this if you sell it for more than your salvage value.
> 
> ...


I got a leased Honda just for Uber in Canada. 100 percent worth it for me. Car is a 100 percent expense and fuel and I'm doing it part time. I can only imagine if I did it full time.


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## rideshare2870 (Nov 23, 2017)

I would never get a car payment for this gig. Even renting or leasing is considered debt to me since you owe something to someone at the end of the month. This gig is fun when you have a disposable cheap car. From what I read on here, those who bought an older Toyota Yaris have ran a few circles on what they made vs. what they owe on the car. One thing I hate is when people say cars that cost 3k or less have problems and will need $1,000 in the first year. So is that how you justify getting a car loan for 20k? I’ve bought cars in that price range that have needed $1,500 in repairs and maintenance. That’s why I don’t do car payments anymore.


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## UBER.1 (Jun 18, 2019)

So far so good on my end. All the mileage goes on that. Clients love the space. Tip well. I will say I'm lucky it's all working out thus far. My regular car stays home and no mileage is on it unless I have an executive client to pick up.


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## PHXTE (Jun 23, 2015)

Not to mention new car warranties don't cover commercial use. The best way to do this is to go buy a used minivan with 50k or so miles on it so you can drive xl without having to worry about it being a basketcase. Buying new cars or leasing cars is just pissing away money.


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## rideshare2870 (Nov 23, 2017)

PHXTE said:


> Not to mention new car warranties don't cover commercial use. The best way to do this is to go buy a used minivan with 50k or so miles on it so you can drive xl without having to worry about it being a basketcase. Buying new cars or leasing cars is just pissing away money.


Exactly. You should have a car that you have no emotional attachment to. If you got something that you don't care about being scratched up then you got the right car.


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## UBER.1 (Jun 18, 2019)

rideshare2870 said:


> Exactly. You should have a car that you have no emotional attachment to. If you got something that you don't care about being scratched up then you got the right car.


Might be different in the states. Here in Canada I'm all covered A-Z. No stress at all. When I'm done with it I'll just get another model. Helps I do all the time ups myself so the only mechanical fee I pay is that foolish inspection. But to each there own. For me it's a win win. Used car for me is inherited problems. If you even been to Quebec you need a tank for these roads.


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## rideshare2870 (Nov 23, 2017)

UBER.1 said:


> Might be different in the states. Here in Canada I'm all covered A-Z. No stress at all. When I'm done with it I'll just get another model. Helps I do all the time ups myself so the only mechanical fee I pay is that foolish inspection. But to each there own. For me it's a win win. Used car for me is inherited problems. If you even been to Quebec you need a tank for these roads.


I tend to focus on the type of problems that a used car might have. If it's something like engine or transmission issues, battery drain problems, a bad leak or a bad water pump; I tend to stay away from them. If it's something like brake issues, suspension work, cosmetics or a slow leak in the rack and pinion then I still consider that worth while and I actually buy cars if it has minor issues like that.


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## UBER.1 (Jun 18, 2019)

rideshare2870 said:


> I tend to focus on the type of problems that a used car might have. If it's something like engine or transmission issues, battery drain problems, a bad leak or a bad water pump; I tend to stay away from them. If it's something like brake issues, suspension work, cosmetics or a slow leak in the rack and pinion then I still consider that worth while and I actually buy cars if it has minor issues like that.


I have to agree. I've always bought cars just like that for myself ?.


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