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

oldfart

Well-Known Member
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

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
 

tohunt4me

Well-Known Member
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

Well-Known Member
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

Well-Known Member
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
 

dctcmn

Well-Known Member
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

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.
 

jack1981

Member
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.
 

jack1981

Member
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.
 

oldfart

Well-Known Member
Expenses.

gross rev - expenses = net revenue



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.
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"
 

Seamus

Well-Known Member
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.)
 

oldfart

Well-Known Member
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
 

UberLaLa

Well-Known Member
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...
 

oldfart

Well-Known Member
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
 

weykool

Well-Known Member
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.

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.
 

dmoney155

Well-Known Member
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.
 

UberLaLa

Well-Known Member
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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