An Advertising Supplement to the San Fernando Valley Business Journal
December 10, 2007
Should You Buy or Lease a Car?
“Is Your Business Tax Exempt?” “Is Your Business Tax Exempt?”
By: Nancy Chandler-Wheeler, CPA
By Oren Weintraub any car buyers wonder whether buying or leasing is the right choice. Both methods have their advantages—which option you choose should depend upon your budget, your lifestyle and future considerations.
car for a long time--at least four years--we recommend that you purchase, not lease. Our recommendation is based on the buyer financing their car for 60 months or less.
No mileage limitation
When you lease a car, your annual allowable mileage is limited, although you can customize the lease to incorporate the amount of miles that you need. When you buy a car, there is no mileage limitation. You can drive it as far and as often as you choose, without penalty. Keep in mind that a car that is driven many miles will depreciate faster.
Who is Required to Register Every person engaged in any trade, occupation, vocation, profession or other means of livelihood in the City of Los Angeles must obtain a Tax Registration ficate (TRC). You Certificate (TRC). You are considered to be engaged in business in the city of Los in the city of Los Angeles when you physically perform work within the City of Los Angeles 7 or more days per year. Due Dates Annual Business Taxes are due the first day of January each year and delinquent delinquent after the end of February. New Business Owner Exemption A new business (excluding certain construction businesses and previously existing businesses outside or inside of the city) can qualify for a new business exemption for up to the first two years of operation if its taxable gross receipts are less than operation if its taxable gross receipts are less than wo $500,000. To obtain the exemption, an application must be filed with the City of of To obtain the Finance in a timely manner. Upon qualifying, a TRC and a letter of exemption will be mailed.
Benefits of Leasing
Leasing continues to be a popular choice for many people. Here are a few reasons why leasing a car is so appealing:
Lower monthly payments
In most cases, a lease payment is considerably lower than what you would pay to purchase a car. This gets you more car for your money or provides a lower payment that better matches your budget.
A purchase will usually cost less than if you were to lease a car and buy it out at the end. It is common for automobile manufacturers to offer low interest rates, which will save you money over the term. Beware of super-long-term financing such as 72 or 84 months. The payments may seem attractive, but you will pay more interest and be at risk of owing more money than what the car is worth if you want to sell it before it is paid off.
When you buy a car, you pay tax on the entire purchase price. When you lease, only the down payment and monthly payments are taxed. This works out to nearly 45% tax savings if you walk away from the car at the end of the lease. If you purchase it instead, you’ll end up paying tax on the residual value.
s Small Business Owner Exemption A small business with $100,000 or less of taxable and nontaxable gross receipts within and without the City of Los Angeles, may qualify for a small Business Exemption. To obtain the exemption, a renewal form must be filed with the the To obtain the exemption, Office of Finance in a timely manner. Upon qualifying, a letter of exemption will timely manner. Upon qualifying, a letter of exemption will of be mailed.
Creative Artist Exemption No tax is required to be paid by a person for gross receipts attributable to “Creative iness as a “Creative Artist” Activities” earned when that person is engaged in business as a “Creative Artist” unless the total taxable and nontaxable gross receipts from within and without the City exceed $300,000 annually. Creative Activities shall mean activities performed Creative Activities shall mean by Creative Artists primarily for entertainment and/or aesthetic purposes, including etic assistants or professional trainees performing those same Creative Activities. Entertainment and Multimedia Business Tax Limitations For every person engaged in an entertainment or multimedia business, which business is located in either the Hollywood Redevelopment Area or the North North Hollywood Redevelopment Area, the total tax due at each such business shall not exceed $25,000 plus 10 percent of the amount in excess of $25,000. Empowerment Zone – City Business Tax Reductions, Limitations, and Exemptions After payment of a minimum business tax of $25, the amount of business tax relief to a person engaged in business at a location in the business tax economic incentive iability. area shall be an exemption from the next $500 in business tax liability. Tax Exempt Registration Certificates Certain organizations, which are conducted solely for charitable or religious -exempt purposes, may be entitled to receive tax-exempt registration certificates upon application and qualification. The payment of tax is not required for engaging in is not required for engaging in such activities. Visit www.lacity.org/finance/index.html for more information regarding www.lacity.org/finance/index.html for more information regarding Los Angeles City Business Tax.
Freedom from payments
Once you have paid off your car, you own it free and clear. Although your maintenance costs may rise as the car ages, it is still satisfying to have extra money at the end of the month to pay off bills, save up for a vacation or buy extra-special holiday gifts for your loved ones. And when you are ready for a new car, your car will have a dollar value which you can use as a down payment.
Guaranteed future value/residual value
The guaranteed future value, or residual value, is a very important component to leasing. It can save you thousands of dollars if your car depreciates more than expected. Here is a perfect example: Large SUVs have lost some of their popularity with gas prices rising over the last couple of years. The value of SUVs has taken a huge depreciation because the used car market has been flooded with people trading in their SUVs for a more fuel-efficient car. A person who leased an SUV can give up the car at the end of their lease without losing any money, because the bank guaranteed the residual value. Someone who purchased with little money down now owes more on their SUV than what it is worth after a 3year period.
Buy or Lease?
Getting a new car is always very exciting. Avoid getting caught up in your emotions and making a quick decision without thinking it through. Clearly, the choice whether to lease or buy goes beyond the new car deal you are getting right now. You also need to consider what position you will be in when you are ready for your next car down the road. By keeping the above benefits and your lifestyle in mind, you are sure to make the right decision. Oren Weintraub is the founder and president of AUTHORITY Car Buying Specialists, a car-buying consulting agency that locates, negotiates and delivers an extremely competitive price on new or pre-owned cars for its customers
Always under warranty
When you lease a car, we recommend choosing a term within the car’s warranty period. This will keep you from having to purchase an extended warranty.
Benefits of Buying
If you are the type of buyer that keeps a
All That Dazzles Is Not Gold
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bilities incrementally while paying him executive compensation until he was ready to be VP. This plan laid the solid foundation that ensured his future growth and success. For new executives who are floundering, learning style flexibility is a critical tool. People learn in one of three ways: from information, such as books; from people who share expertise and experience; or by taking action. For instance, if a new VP has always learned through action, which is now leading to failure, the key may be to become a people learner, as by establishing a dialog with more experienced peers.
people advance in the organization, current peers will eventually be peers at a higher level. Isn’t it better to have teammates rather than opponents when one is running the ship? For similar reasons, smart executives build positive relationships with direct reports. They know that true success is built on a foundation of success of the people below. As they champion their team’s successes and highlight its accomplishments, they create undying loyalty. Stephen Xavier, America’s Top Coach™, is President/CEO of Cornerstone Executive Development Group, Inc., a global firm specializing in executive coaching and related leadership development. For further information call 805 492-8263, email Xavier@cedg.com or visit www.cedg.com.
Mrs. Wheeler-Chandler is a Senior Vice President with Kellogg & Andelson. Her expertise is in the area of accounting, tax and consulting services to high net worth individuals and closely held businesses. She works in all areas of tax and serves as trustee and executor to clients. Mrs. Wheeler-Chandler served as Chair of the California Society of CPAs (CALCPA). Some of her many accolades include being awarded Women Business Owner of the Year for American Women’s Society of CPAs and Top 25 CPA’s in the San Fernando Valley.
The Power of Relationships
Taking the time to build peer relationships is critical for talent at any level. As
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