equipment like a company vehicle? I'm debating between purchasing a used vehicle for $15,000 and leasing a new, comparable vehicle, for 3 years.
Thanks for any help,
Dj ________________________________________ Spam now accounts for 75% of all emails. Protect yourself with ChoiceMail.
The easy answer is it makes no difference if you paid cash for the vehicle purchase.
The complicated answer is if you lease, you have to set up a capital lease asset account and amortize the lease each month. If you prepaid the lease there is nothing else to do, if you are making monthly lease payments then you must account for them as each payment is made. These monthly payments are expensed each month as opposed to amortizing the prepaid lease.
If you are purchasing the vehicle for cash, then you must establish a vehicle asset account and depreciate it each month. If you are financing the vehicle then you must set up a vehicle loan liability account as well. Then you will have to account for the depreciation of the asset monthly, and the decrease of the loan with each monthly payment.
Lets not forget interest charges or financing fees in the above as well.
Thanks for speedy answer...
I see you are in Canada - is there any tax benefits to either option?
Dj ________________________________________ Spam now accounts for 75% of all emails. Protect yourself with ChoiceMail.
It's her choice of course, but I think Stephanie should advise you to consult your accountant because these questions are more complicated than they appear and depend on NUMEROUS factors about which you haven't yet provided information. Some questions that may be relevant:
- Canada? I assume so, since you remarked on it.
- Corporation, partnership, sole proprietor?
- If other than a sole proprietor, your relationship to the business - employee, officer, shareholder?
- Proportional business and personal use of the vehicle.
- Would the purchase be cash, or borrowed?
- Interest rates to borrow or lease.
- Alternate sources and uses of funds.
option?
It's her choice of course, but I think Stephanie should advise you to consult your accountant because these questions are more complicated than they appear and depend on NUMEROUS factors about which you haven't yet provided information. Some questions that may be relevant:
- Canada? I assume so, since you remarked on it.
- Corporation, partnership, sole proprietor?
- If other than a sole proprietor, your relationship to the business - employee, officer, shareholder?
- Proportional business and personal use of the vehicle.
- Would the purchase be cash, or borrowed?
- Interest rates to borrow or lease.
- Alternate sources and uses of funds.
option?
Of course I would definitely recommend the OP consult a TAX accountant.
And the benefits to leasing to anyone except a corporation are virtually nil since leasing companies tend to give the better prices to corporations rather than individuals, sole proprietors or partnerships. Specifically, your per kilometre charges and the allowable number of kilometres per year.
I did say that there were many answers, and it was a complicated issue. One should NEVER take advice given in a forum such a usenet or an elist at face value. ALWAYS consult your accountant.
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