Automotive

Should I lease or buy a lexus RX?

  • Last Updated:
  • Jan 24th, 2013 7:20 pm
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Deal Guru
Dec 31, 2005
13306 posts
731 upvotes
JAGpilot wrote:
Jan 23rd, 2013 9:21 pm
What kind of job gives you $1000 + gas for a car allowance? Do you need to drive a fancy car to impress clients or is this just a baller company?
I used to have a thousand as a car allowance. When you factor in that this also has to cover insurance (and often anything other than gas) 1000 is not all that much. When we were taken over, the new plan was 650 so I chose to have the company car instead. Don't forget the 1000 is also going to be a taxable benefit.

So really 1000 is not that much.
take taxes of 300 or so
Insurance 200-300
that leaves 500-600 for a car. Which is not that nice a car once you factor in taxes etc...
If you do get an allowance then it will normally cover maintenance as well...typically only gas is then covered.

For these reason I prefer having a company car. You get the car. Insurance is provided. No expense what so ever for the business portion. You will get a tax hit for the portion you drive for personal.

Oh and do read fine print. Many companies are moving to an emission conscious mindset meaning that the allowance is cut significantly if the car (which you ar driving) is older than 4 or 5 years.
Deal Guru
Dec 31, 2005
13306 posts
731 upvotes
cambridge99 wrote:
Jan 23rd, 2013 10:41 pm
I can't believe all the bad advice you're getting here.

As a salaried employee with a car allowance you can absolutely deduct your employment expenses. You will need your employer to complete the T2200. Then based on your business mileage you can deduct your lease, insurance, maintenance, car washes, etc. Business mileage does not include commuting from your home to the office. It is based on how much you drive to see customers, different offices, suppliers etc.


The formula is bus. mileage/total mileage x total automobile expenses.

The T2200 allows you to write off all sorts of expenses if you are required by your employer to pay for those expenses.
But you cannot be reimbursed for these expenses if you are going to deduct them as expenses for tax purposes. If you receive a car allowance, which covers car, insurance, maintenance this is reimbursement then no, you cannot expense them again.

You also have to be cautious. Ie. to expense home office, you technically have to be in the home office more than 50% of the time (or generate the revenue from home). If you are in the field, this does not count (i.e. a sales rep who should be in the field 4 of 5 days technically doesn't qualify). People may argue, but we had one of big 4 and our corporate lawyers enforce this interpretation and as such would not issue T2200 to many reps as doing so would constitute fraud on their part.
Jr. Member
Dec 21, 2008
152 posts
22 upvotes
nalababe wrote:
Jan 23rd, 2013 11:28 pm
But you cannot be reimbursed for these expenses if you are going to deduct them as expenses for tax purposes. If you receive a car allowance, which covers car, insurance, maintenance this is reimbursement then no, you cannot expense them again.

You also have to be cautious. Ie. to expense home office, you technically have to be in the home office more than 50% of the time (or generate the revenue from home). If you are in the field, this does not count (i.e. a sales rep who should be in the field 4 of 5 days technically doesn't qualify). People may argue, but we had one of big 4 and our corporate lawyers enforce this interpretation and as such would not issue T2200 to many reps as doing so would constitute fraud on their part.
But the OP is paying tax on the $1000 allowance. The only thing he can't deduct is the gas which is directly paid by his employer. All other car expenses are fair game.
[OP]
Member
Jun 6, 2008
288 posts
30 upvotes
Nalababe , are you suggesting that I can't deduct those expenses against a taxable car allowance? I have paid tax on the allowance, at the source (the company deducts tax each pay as taxable income) If not, what machanism is available to deduct those expenses?

To clarify I get a t2200, and I am required to have a late model car to do my work, as expressed in my contract. In case it matters.
And the company does not pay for related maintenance or insurance or car washes or anything else (other than reimbursing gas). It does not specify what the car allowance is to be used for. (ie Right now I just pocket it because my car is paid for)
Office in home not an issue- not claiming that.

I was thinking along the same line as Cambridge99's answer, deduct % allocated to work duties of auto expenses remaining.
Jr. Member
Dec 21, 2008
152 posts
22 upvotes
babinni wrote:
Jan 24th, 2013 12:03 am
Nalababe , are you suggesting that I can't deduct those expenses against a taxable car allowance? I have paid tax on the allowance, at the source (the company deducts tax each pay as taxable income) If not, what machanism is available to deduct those expenses?

To clarify I get a t2200, and I am required to have a late model car to do my work, as expressed in my contract. In case it matters.
And the company does not pay for related maintenance or insurance or car washes or anything else (other than reimbursing gas). It does not specify what the car allowance is to be used for. (ie Right now I just pocket it because my car is paid for)
Office in home not an issue- not claiming that.

I was thinking along the same line as Cambridge99's answer, deduct % allocated to work duties of auto expenses remaining.
That sounds like this section in CRA's guide. http://www.cra-arc.gc.ca/E/pub/tg/t4044 ... P289_20994
[OP]
Member
Jun 6, 2008
288 posts
30 upvotes
You can deduct your motor vehicle expenses if you meet all of the following conditions:

•You were normally required to work away from your employer's place of business or in different places. (YES - verified by employer on T2200)
•Under your contract of employment, you had to pay your own motor vehicle expenses. YES
•You did not receive a non-taxable allowance for motor vehicle expenses. Generally, an allowance is non-taxable when it is based solely on a reasonable per-kilometre rate. correct, I received a TAXABLE allowance•You keep with your records a copy of Form T2200, Declaration of Conditions of Employment, which has been completed and signed by your employer. Yes - have one every year

Sometimes, your employer will include an unreasonably low allowance as income on your T4 slip even though you do not want to claim any expenses. When this happens, have your employer complete and sign Form T2200, or get a letter from your employer stating that the allowance was unreasonably low. On line 229, deduct as an expense an amount equal to the allowance.


not quite sure how to interpret this last one- can I just enter my allowance in the box without any math ie 70% usage, or backup?
Newbie
Dec 1, 2012
47 posts
1 upvote
Lease your car... why?
- Less tax
- Maintenance free for 4 years
- Hassle free
- Every 4 years a new model of the same car you have comes into the field, so you always have a new car
- After 4 years the warranty is out, so you end up paying for maint. parts. and everything else so you end up paying a lot more..

Lease is a higher pay, but this way its hassle free in terms of maint, parts, car problems, every 4 year you get a new car, you can always transfer the lease to someone else with no worries, I just think it makes more sense in Canada especially when Cars dont have value here.. you end up losing more money if you buy it.
Deal Expert
User avatar
Jul 30, 2007
24830 posts
9660 upvotes
Toronto
OP, the % is determined based on the following when doing income tax return:

you will need to track your personal mileage and business mileage. That's why I mentioned in the earlier post to have good record keeping on a daily basis.

Keep all maintenance receipts as well.
Deal Expert
Feb 29, 2008
23102 posts
2758 upvotes
Montreal
babinni wrote:
Jan 24th, 2013 11:04 am
You can deduct your motor vehicle expenses if you meet all of the following conditions:

•You were normally required to work away from your employer's place of business or in different places. (YES - verified by employer on T2200)
•Under your contract of employment, you had to pay your own motor vehicle expenses. YES
•You did not receive a non-taxable allowance for motor vehicle expenses. Generally, an allowance is non-taxable when it is based solely on a reasonable per-kilometre rate. correct, I received a TAXABLE allowance•You keep with your records a copy of Form T2200, Declaration of Conditions of Employment, which has been completed and signed by your employer. Yes - have one every year

Sometimes, your employer will include an unreasonably low allowance as income on your T4 slip even though you do not want to claim any expenses. When this happens, have your employer complete and sign Form T2200, or get a letter from your employer stating that the allowance was unreasonably low. On line 229, deduct as an expense an amount equal to the allowance.


not quite sure how to interpret this last one- can I just enter my allowance in the box without any math ie 70% usage, or backup?
In this case, a reasonable taxable car allowance is just treated as added income. In this case, which seems yours, your expenses are deductible using the proration formula, but you MUST add 12000$ to your income annually. You need to carefully do the math to see if a non taxable per km allowance would be more tax efficient. Under this scenario, since your allowance is fixed, you want to maximize your deduction. My suggestion is to lease the car, minimize downpayment to get as close to 800$ a month, than buyout the car at the end of the lease, and claim the CCA on the residual value for the next few years.

If you read French, this is a good read:

http://gasconca.com/automobiles.html

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