I am starting a new job where I will receive mileage reimbursement. I haven't owned a car for many years as I've always had a company car. Any suggestions on the car - length of loan, payment per month, etc? Obviously due to mileage, it makes sense to get a slightly used car vs a new car. But what about buying vs. leasing? I will drive approximately 2000-2500 miles per month. Thanks!
I have had both company cars and car allowance over the years and I currently have a car allowance(which I prefer greatly). First I need to know a few things. What is your mileage reimbursement? 30 cents, 51 cents, etc.? What is, or do you get, a car allowance each month and for how much? There is almost no way a lease would be advantageous as you will most likely have a mileage overage at 2500 miles a month. If you get the standard $700-$800 a month plus 51 cents a mile you may want to consider buying new, so you can get a very low to 0% interest rate with a great maintenance program. Over the years I have had very nice cars completely paid for by the companies I worked for. Take a look into 2010 model year Audi and BMW as they have some insane deals right now with very good service/maintenance programs, as well as very low financing, if you have good credit. The other option that a few of my colleagues are doing and pocketing some decent cash on is they bought hybrids and are paying a lot less in fuel each month so they are pocketing more of the 51 cents a mile, thus paying their cars off faster. Food for thought. Also if you get less than the IRS allowable which I think is 51 cents a mile you will be able to deduct the difference off on your taxes. For instance if your company gives you 30 cents a mile you will be able to deduct 22 cents for each mile. In addition you get to deduct the depreciation on your car from your taxes as well, which I don’t think you can do if the car is leased. Check on that though as I’m not certain. If you’re not all that into cars get something you like that is reliable and affordable for your situation. I have never “lost out” on a car allowance and have two very nice cars 100% paid for to show for it. Best of luck.
The other posters advice is pretty good. Another option to consider is buying a good used car from CarMax. That is what I did. It all depends on what you want. I am past worrying about what car I drive and I am definitely over used cars. To me whether the company is paying for it or not, it makes no sense buying an asset that depreciates so quickly. But, that is just my opinion. Good luck.
Although I didn't start this thread, your help is greatly appreciated. I'm also new to a car allowance vs. company car, and would buy for the the reason you noted. An Audi is a great suggestion, but I may need to consider an SUV due to winter driving conditions. Any ideas?
You're welcome. Do you need an suv for 4 wheel drive and/or space for family or just the snow? If it is just the snow Audi's have an all wheel option and are generally good in the snow. If you need/want an SUV you will be eating into your per mile amount as they generally get less MPG. I like the new Jeep GC, but if you need a third row for family the Toyota Sequoia is a great Suv. Either way you will end up having a car paid for by someone else. Whenever we hire reps who previously had company cara they are usually excited about going out and picking car. For some it is the first time in their life they are going on to a lot and picking out the car they want. So have some fun with it!
Actually, IRS allows you to choose between two options ... tolls and parking are extra in both cases. 1. Actual cost of operating your car (fuel, repairs, etc., insurance, depreciation, etc.). Means you have to keep accurate records of expenses and apportion them between business and personal use ... for example if you spent $8,000 on auto expenses and 60% of your mileage was business, you could deduct $4,800 plus tolls and parking. 2. Total business miles at current IRS rate (which for 2011 I believe is 55.5c per mile). Again, you have to keep accurate mileage records, but let's say you drive 20,000 business miles. Your deduction is $11,100 plus tolls and parking. I think (but I'm not sure; check with your tax advisor) you can go back-and-forth and use the best of the two each year. That means if you had high repair bills one year, you could use the first scenario. If the next year, repairs and other expenses were modest, you could use the mileage scenario. From either amount, you reduce the deduction by the amount of any reimbursement from your employer. So, in the second scenario, if you received $9,000 from your employer, you could deduct the remaining $2,100.
You examples work if you are not receiving a mileage reimbursement from the company. At my company we are reimbursed at the maximum IRS reimbursement per mile so we cannot deduct any of that from our taxes. At a previous company we received only 21 cents a mile so then I could deduct the difference between, back then, 51 cents and the 21 cents. Our tolls and parking are reimbursed by the company so I’ve never had a basis to deduct that. From the $9000 I receive in a car allowance I could only deduct, as you stated, the amount north of that for operating expenses.
I think you do have to report it (form 2106) even if it is a wash, but I'd defer to your tax advisor on the correct procedure. And, of course, if your company reimbursed you more than your actual costs or more than the current IRS rate, that amount would be considered taxable income ... and that could happen if you had a monthly stipend plus a mileage rate and only drove a limited number of miles, probably not applicable in the sales field.
I was just offered a position where it is .56 a mile.....and that's it. No allowance with it. Is this negotiable for anyone? Is there a typical norm?
.56 cents per mile is the government standard. this money comes to you tax free, meaning if you drive 2000 miles per month that would be $1,100 in your pocket, tax free. having said that you need to take into consideration MPG in the car, because if you are driving a hummer and get 15 MPG then you will need to use a considerable amount of that $ for gas. Obviously that is a very exaggerated example but just something to keep in mind. Basically when you get reimbursed by the mile, that is it. meaning the company will not pay for anything else, not for repairs, not for tolls, not for parking, nothing. so think about all of these things and of course the most important variable which is how many miles will you realistically be driving every month? if you completely over estimate and buy a car with a large monthly payment, and you find yourself not driving a lot, then you could be in a jam.
