Your PS at the end is a great, practical point as well. Considering that most entrepreneurs use their vehicles for personal and business use, I agree that most would exceed the typical lease mileage limits.

Since I’ve got a few startups under my belt I don’t get giddy about tax write-offs anymore, but it always makes a small part of me die when first time entrepreneurs say “don’t worry about this, I can write it off!”. Oh, ok. Well, then, piss away as much as you can, I guess…

My favorite real estate investor John T. Reed once put it eloquently, and I’ll paraphrase from memory:

Here’s the hierarchy of business spending:

Don’t spend if you can help it unless there’s an obvious ROI.
But if you decide after careful analysis that you *have* to invest in something that is worthy enough…
try to make it a 100% deductible. If you can’t do that…
try to make it accelerated depreciation. If you can’t do that…
try to make it straight line depreciation.

If no dice on any of these, seriously (seriously!) reconsider.

This concept has stuck with me through the years through 5 startups, and has helped tremendously. Especially the first part.

Very well written breakdown, Phil. I wish every entrepreneurial studies class in college spent a whole day reading and discussing this post.

PS. I wonder too what would happen if entrepreneurs actually sat down and realistically forecasted their driving. Then they can realize in advance that they’ll demolish the lease’s limit by a good 60%. What business owner can drive only 1000 miles per month, you know?

My advice is in fact most relevant for a small business, but becomes less relevant as the size and value of the vehicle, and/or the size of the business grows. i.e. a hauling company with 50 dump trucks that experiences heavy wear-and-tear on their vehicles may find it beneficial for the reasons you mention to maintain a leasing strategy.

Thanks for your comment.