Cheaper ways to own a not-cheap car

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amattie
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Cheaper ways to own a not-cheap car

Post by amattie »

This is meant to be a general question about strategies in car ownership and I will throw out a few ideas and hopefully people can help me make sense of them!

My wife and I are considering a car upgrade and someone told her she should lease a new car because the whole payment will be tax deductible as a business expense for her (she is self-employed and depends on the car a lot). That may well be true but my gut feeling is that leasing a new car is not a good value proposition and the tax benefit could be found in other ways.

That being said, does anybody have insight on car leasing? I seem to think that back home you walk into a dealership and have the option to lease or buy but it seems like here leasing is done through leasing companies rather than dealerships which suggests to me it is an even worse deal.

She was also told by someone else that if you buy a four-year-old car the whole value is tax-deductible whereas for a new car it is a smaller percentage. I guess this is a question for our accountant but maybe somebody here knows something about this.

But assuming this last case is true, I want someone to tell me what's wrong with this logic. Say you buy a four year old German car through the Japanese auction system for 2.5 million yen -- the price would be maybe 20% less then the price for the same vehicle at a dealership. (I bought our current vehicle at auction and it seems like a no-brainer in terms of used car value.). With a tax rate of 20 to 25% that would generate a tax bill savings of 500,000 to 600,000 yen for that year, right?

You drive that car for a year and put on less than 10,000 kilometers and then sell it back at auction as a five year old car. The tax bill savings of 600,000 yen should be enough to cover the initial consumption tax (10%) and the depreciation (maybe 10% if you are careful in your buying and sell). Of course there are the auction fees for the purchase and sale and other car taxes involved as well. So you're not going to come out even on the year but it's not going to cost you all that much to be driving a very nice car, right? And then you simply repeat the process for the next year.

Now maybe the tax man doesn't like you taking a 2.5 million yen deduction for a car every year so maybe it doesn't work this way. Or maybe that is no problem and it's just something of a loophole and not the government's business how often you feel like you need to buy a new car.

I really have no idea if this whole strategy is flawed in multiple ways or if it is actually crazy enough to work to some extent. That's why I'm posting -- so people who know more about this stuff than I do in shed some light!

I will say that the process of buying a car through an auction agent is quite painlesss and actually kind of fun! We used getcars.JP and found them to be great!

Thanks in advance for your help!
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RetireJapan
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Re: Cheaper ways to own a not-cheap car

Post by RetireJapan »

Very interesting. My wife tells me you can write off the whole car if it has a special number plate and can only choose from certain models. Or you can write off half the car for any model (half work, half personal).

Interested to see what others have to say :)
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amattie
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Re: Cheaper ways to own a not-cheap car

Post by amattie »

Thanks for that! It does sound a lot more sensible. I'll get my wife to double check with her source and accountant.
vapid
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Re: Cheaper ways to own a not-cheap car

Post by vapid »

That is interesting to hear. Would that apply even for folks who just have side jobs and fill out the Form B for tax purposes? All of the sudden your car can be a 50% deduction?

Where could one find a Japanese car auction site? I'd be interested in seeing what is available.
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