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

Discussion in 'Advice' started by Mordred, Jan 5, 2019.

  1. Fuzzyelvis

    Fuzzyelvis

    Location:
    houston
    Driving:
    UberX
    For $6000 a year I could be buying a new car.

    I don't consider replacing the engine and transmission routine maintenance.
     
  2. Christinebitg

    Christinebitg

    Location:
    Houston
    Driving:
    UberX
    Revenue that is net of what? In other words, what are you subtracting from gross revenue to get "net revenue"?
     
  3. oldfart

    oldfart

    Location:
    Fort Myers
    Driving:
    UberXL
    The accident is a potential as well. the insurance is real... and FYI some of us dont carry collision insurance


    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
     
  4. You better start collecting engines, transmissions, suspension parts . . .

    I suggest becomming friends with a few carjackers . . .

    You may find yourself stranded
    Far from home . . . .
     

    Attached Files:

  5. oldfart

    oldfart

    Location:
    Fort Myers
    Driving:
    UberXL

    Its not always depreciating; you cant get to less than zero
     
    T&W likes this.
  6. 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
     
  7. 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.
     
    Christinebitg likes this.
  8. Christinebitg

    Christinebitg

    Location:
    Houston
    Driving:
    UberX
    I believe the correct description is EBITDA

    "Earnings before interest, depreciation, amortization, and amortization." Someone can correct me, though. It's been a while since used that.

    Christine
     
  9. This is how you get an actuary to fall in love with you. :)
     
    Christinebitg likes this.
  10. jack1981

    jack1981

    Location:
    USA
    Driving:
    UberSELECT
    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.
     
  11. Christinebitg

    Christinebitg

    Location:
    Houston
    Driving:
    UberX
    Oh sorry. The T is taxes.
     
  12. jack1981

    jack1981

    Location:
    USA
    Driving:
    UberSELECT
    Depreciation is an actual cost but one that is "realized" at the time of selling/disposing the asset.
     
  13. oldfart

    oldfart

    Location:
    Fort Myers
    Driving:
    UberXL
    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"
     
  14. Seamus

    Seamus

    Location:
    New York
    Driving:
    UberX
    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.)
     
    Christinebitg likes this.
  15. oldfart

    oldfart

    Location:
    Fort Myers
    Driving:
    UberXL
    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
     
  16. UberLaLa

    UberLaLa

    Location:
    LaLa Land
    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...
     
  17. oldfart

    oldfart

    Location:
    Fort Myers
    Driving:
    UberXL
    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
     
    UberLaLa likes this.
  18. weykool

    weykool

    Location:
    oc
    Depreciation and amortization are the same thing.
    Depreciation is for tangible assets like a car.
    Amortization is for non tangible assets like goodwill.

    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.
     
  19. dmoney155

    dmoney155

    Location:
    Toronto
    Driving:
    UberSELECT
    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.
     
  20. UberLaLa

    UberLaLa

    Location:
    LaLa Land
    I doubt anything you might be driving for Select will go 300k. More like 200k tops.
     

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