A high depreciation cost is a benefit to the company, since it can otherwise offset income earned elsewhere in the company, thereby increasing profits over what they would have otherwise been.
They’re selling these for another reason than depreciation, but the comments here already seem to get that.
High depreciation is only valuable if there’s no additional cost associated with them. Teslas have high repair costs (and opportunity costs as it sits idle waiting for the dealership to get to it) and, since they’re selling them, there’s now a replacement cost.
It’s just when a business makes an “investment” aka cost, depending on the type of cost, they can use all or part of it (depending on classification) to offset “revenue” aka income, the more they offset then allows more income to be untaxed.
If you have a situation where a business has an asset (Teslas here) where the real life value (market value) suddenly drops, that business has to report additional depreciation, which does hurt the asset side of the balance sheet, but improves the income side
I don’t have any insight into lender agreements, so it could be something else entirely, like the lenders would want the rental company to add additional collateral if the value of the cars drops.
I’m just saying that it’s likely those other reasons driving the Tesla sell off.
I get that depreciation is a useful tool for business accountants but my point is that if a business has to sell the Teslas, it would be better for them to get a good resale price over more depreciation.
Depreciation is good for “oh well, at least we don’t have as much tax” as opposed to “let’s sell these assets at a loss to get more depreciation”.
The article implied it was the depreciation driving (you see what I did there?) the decision to sell. It’s more complicated that that. Of course a good sale price would be nice, all things being equal. It’s just that it’s not a binary choice.
I’ve been hearing ads to buy a Tesla from Hertz soon after they added them to their fleet. I suspect they have many other reasons why they’re going this route and this isn’t a short term play.
A high depreciation cost is a benefit to the company, since it can otherwise offset income earned elsewhere in the company, thereby increasing profits over what they would have otherwise been.
They’re selling these for another reason than depreciation, but the comments here already seem to get that.
High depreciation is only valuable if there’s no additional cost associated with them. Teslas have high repair costs (and opportunity costs as it sits idle waiting for the dealership to get to it) and, since they’re selling them, there’s now a replacement cost.
I might be wrong but that sounds like the broken window fallacy.
I get that it rhymes.
It’s just when a business makes an “investment” aka cost, depending on the type of cost, they can use all or part of it (depending on classification) to offset “revenue” aka income, the more they offset then allows more income to be untaxed.
If you have a situation where a business has an asset (Teslas here) where the real life value (market value) suddenly drops, that business has to report additional depreciation, which does hurt the asset side of the balance sheet, but improves the income side
I don’t have any insight into lender agreements, so it could be something else entirely, like the lenders would want the rental company to add additional collateral if the value of the cars drops.
I’m just saying that it’s likely those other reasons driving the Tesla sell off.
I get that depreciation is a useful tool for business accountants but my point is that if a business has to sell the Teslas, it would be better for them to get a good resale price over more depreciation.
Depreciation is good for “oh well, at least we don’t have as much tax” as opposed to “let’s sell these assets at a loss to get more depreciation”.
The article implied it was the depreciation driving (you see what I did there?) the decision to sell. It’s more complicated that that. Of course a good sale price would be nice, all things being equal. It’s just that it’s not a binary choice.
I’ve been hearing ads to buy a Tesla from Hertz soon after they added them to their fleet. I suspect they have many other reasons why they’re going this route and this isn’t a short term play.