Need advices to buyout expired car lease or re-finance, keep my cash (payment, collector)

[sleeplessinboise]

My friend owns a small law firm (S-corp), he has 2 associate attorneys, paralegal and office mgr. He owns the building through a separate LLC and rents it back to the firm. He leased a car through the company but that lease is up in a few months and he is intending on buying the car for the residual amount of $30K. I know that he only has about $50K in cash reserves for the company and it just seems like buying the car for cash makes sense. I am suggesting keeping your cash and take the monthly payment for financing it over 5 years. The car is worth $33K wholesale. Any thoughts on advantages spending cash or financing?

[MrGrumpy]

I guess it's just me but spending 30K on a car that is either off warranty or just about off warranty is not a smart move, unless you are getting some kind of collector's item. Might help if you let us know what kind of car it is.

[DurangoJoe]

Originally Posted by MrGrumpy

I guess it's just me but spending 30K on a car that is either off warranty or just about off warranty is not a smart move, unless you are getting some kind of collector's item. Might help if you let us know what kind of car it is.

If it's a business purchase, it would be considered a capital purchase at that price and the business would be able to write off depreciation every year. However, much depends on the make/model of the vehicle to really determine if the amount of the depreciation deduction is worthwhile.

At least with the lease, the lease payment is all expense and written off as a cost of doing business. I'm far from an expert on this but having been a small business owner before, that's my understanding of how it works.

[md21722]

It sounds like using 60% of business reserves to purchase a car is a bad idea unless that $50K is only for vehicle purchases or leasing! I suppose he thinks he is getting a deal on the car so it makes sense to purchase it. Even if purchasing it makes sense, I would think financing it makes more sense so he still has cash reserves.

[sleeplessinboise]

Originally Posted by SoButCounty

If it's a business purchase, it would be considered a capital purchase at that price and the business would be able to write off depreciation every year. However, much depends on the make/model of the vehicle to really determine if the amount of the depreciation deduction is worthwhile.

At least with the lease, the lease payment is all expense and written off as a cost of doing business. I'm far from an expert on this but having been a small business owner before, that's my understanding of how it works.

>>> Its a 2010 Lexus RX450H Hybrid with all options and 29K miles, good condition

Sounds like there really isn't much of an argument to save the cash and buyout the car, I appreciate all the comments, thanks!