| Author |
Message |
Brian Elfert
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 12:54 pm: | |
A stupid question:
I've been browsing various ads for buses and have seen a few ads that the tires are extra due to being leased. In one case, the seller will install worn tires with legal tread depth if the buyer doesn't want to pay for the existing tires.
I understand that the tire companies charge for tread wear over a certain period and replace tires as necessary.
Why would a bus company go this route instead of just replacing tires as they wear out? I don't think tires are expensive enough to become a capital expense.
Brian Elfert |
Jon W.
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 1:15 pm: | |
It probably has to do with the fact that a bus company can have tires represent a fixed cost, all of which is deductible, and the IRS may view tires as having a greater life than one year.
The IRS still thinks computers and software have to be capitalized over three years which is ridiculous because with the pace of technology they are often obsolete in one. A bus company may wear the tires out in one year, and still have to depreciate them for a year or two.
This is an opinion and is not clouded with facts. |
Jerry Liebler (Jerry_liebler)
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 1:32 pm: | |
I'd think it comes down to the bus company's getting a higher return on it's investment by putting it's capital into things other than tires, like busses.
Regards
Jerry 4107 1120 |
Brian Elfert
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 2:02 pm: | |
I wonder why the companies wouldn't lease the buses too if they are going to lease the tires?
The IRS is going to require depreciation for buses bought outright, but lease payments are expenses.
Brian Elfert |
califbob
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 2:14 pm: | |
Jerry you are right on.
We had around 200 trailers,28 footers.Thats 800 tires not to mention the tractors with 6 more. That's lot of money to tie up. The tire guy came in and checked every thing, that was a job we did't have to pay a guy todo. They took care of every thing to do with the tires,flats, rotating road calls. I know of some companies that buy new power with out tires and have the tire leasing guys supply right up front. |
califbob
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 2:18 pm: | |
Oh by the way.
I ruind a 12x22.5 Toyo the other day,$687.00.
Mutiply that by 800. Now we be talking big bucks |
Bryce Gaston (Busted_knuckle)
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 2:49 pm: | |
Brian,
Ok so you've heard all good and correct reason's they lease tires the 1 thing not mentioned is doing it this way they can have 2 spares per vehicle "new & mounted" sitting in a tire rack in the corner and as long as they're still in the rack when the "rep" comes and does his inventory and inspections/services there is no charge at all for this "over $1000 insurance" so that they'll never be with out a tire in the middle of a cold rainy night (most of the time you have to order bus sizes for reason already known). So this way the lease is 100% write off and they don't have to fork out that extra cash up front to be sure they'll always have spares on hand! That said it only really works for the large companys, as it is not cost effective for the company that owns less than 10 or more coaches (I know I've checked on it & I also don't have "BRAND NEW SPARES SITTING AROUND EITHER".
Now back to your other question most of the buses in large fleets are leased w/option and at the end of the lease (which they have already writen off at 100%) they either try to sell the buses right before the end of the lease where they can make extra $, or the buy out on the lease is so cheap they go ahead and do it (which again is another write off as they are now "purchasing" that same bus) then they still use them while listing them for sale at market value!(which they probably have less than 50% of that in them). It all breaks down to BIG BUSINESSES GETTING MORE WRITE OFFS!!! But hey if we could do it, we would too! |
Jon W.
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 3:28 pm: | |
"It all breaks down to BIG BUSINESSES GETTING MORE WRITE OFFS!!! But hey if we could do it, we would too!"
That just means they don't have to pay taxes on the dollars they spent to stay in business. It doesn't mean they have income without taxation. |
Marc Bourget
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 7:28 pm: | |
And . . . it appears you're forgetting the taxes paid by the leasing company. It's not as if the lease money goes into some tax protestor's "black hole" |
Bryce Gaston (Busted_knuckle)
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 7:50 pm: | |
No I am not forgetting these things, as it really is the big company tax breaks are a legitimate way of just getting bigger and not necessarily $ spent to stay in business but to grow, and on top of that I wasn't complaining or crying that taxes weren't being paid! Also I was refering to all of us as individules when I said "we" not us personally as a small company we get some tax benfits but we aren't in the league where the more ya spend the more breakes ya get (and we don't have it to spend yet!). |
Nick Morris (Nick3751)
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 8:11 pm: | |
Let's just not forget that no company/busness pays taxes if they're smart. They just adjust your prices so that the comsumer pays you taxes for you. |
Doug Wotring
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 8:18 pm: | |
Tax benefit is approx the same as buying tires.
New spares in the shop do not cost you
BIGGEST FACTOR: They are cheaper per mile
Second or Equally important:When you are 1500 miles from home and get a blowout, You call your tire rep and he gets you a matched tire....N F'ing around with truckstops telling you your bus tire size is odd or being forced to buy an overpriced Off brand or no0n matching tread. |
Buswarrior (Buswarrior)
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 8:24 pm: | |
Hello leasors.
Another benefit of leasing is you have no worn out tires to deal with.
Depending on your jurisdiction, disposal of old tires can be an expence, stockpiling them in the yard is an invite to arson.
If you can swing it, there are many benefits besides the taxes. Most of the big transit companies are leasing, and they aren't in a taxable position.
happy coaching!
buswarrior |
Luke Bonagura (Lukeatuscoach)
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 8:53 pm: | |
HI Folks:
For a bus company to lease tires is Basic Economics 101.
The first bus company I worked for in the early 60's (30 buses), leased their tires from Firestone. Their lease included maintenance. That meant that the company installed and removed tires from their coaches and Firestone did the rest. And that was back in the days of 2 and 3 piece lock rings on tube type tires!!!!
When I took over a bankrupt bus operator 15 years ago, we started with 6 buses and first thing I did was call the Goodyear Lease Sales Dept. I passed their credit requirements, they set up an account, and my first shipment from them was 10 tires (No Cost to My Company).
As our tires wore, we started to install the Rental Goodyears on the steer axles, at first and then moved back on each coach with New Tires, except on Tag Axles. At that point, we reported our individual coach mileage each month, and then Goodyear Invoiced us a mileage rate (contracted in advance)for their tires on each bus.
Eventually the fleet had all Goodyear Rentals on it, and our Highway coaches all had New mounted spares, for which there was no charge because they were not running miles.
Here is how it works: Goodyear and the other tire companies program "X" number of miles into each tire, which the bus company pays out as they run up miles. Goodyear supplied us with a "tire regroover" that we would use when the original tread became too thin. We would regroove those tires and use them on the rear axles or on the tags on our MCI's. When we exceeded the miles that Goodyear had programmed, then they rebated us for the extra miles that we got out of them, at year end. Most years my first 2 or 2+ months of the New Year cost us nothing, as we worked off our rebates!!!
How did we do that???? We are a bus repair shop and we checked out tire inflation weekly, and that extended the life of the tires, along with providing maximum Safety for our passengers.
When there was a tire failure, (which were few), we did not have to argue with a dealer. They were put on our tire rack, the rep. would look at it and unless it showed abuse, we got full credit for that tire. Additionally, when the worn out tires piled up, Goodyear would send in a truck to take them away at no cost to us.
So to make a long story short, it had nothing to with "Taxes", but everything to do with "Cash Flow"!!!
When the buses ran miles, we paid and when the buses did not run, there was no cost. But at all times there was a rack full of New and partially "Used" tires, (along with NEW spares on each coach), that sat on our tire rack that cost us nothing!!!!
I hope, for those not familiar with the bus industry, this sheds some light on what Tire Leasing is about.
I Hope this HELPS!!!
Happy & SAFE!! Bussin' to ALL.
LUKE at US COACH |
Bryce Gaston (Busted_knuckle)
Rating: N/A
Votes: 0 (Vote!) | | Posted on Monday, February 27, 2006 - 9:23 pm: | |
Thank you Luke it's a better explanation than I gave or had to give as it was explained to me by a Goodyear rep here the benefit was in the lease being 100% deductible of course he didn't point out the other benefits the way you did. He had me under the impression that we paid a prorated amount per month on any tire on the ground based on the average life of the tires, but he also wasn't real crazy about sending anything in writing or coming by to further explain the benefits so that my Dad would see why it made sense(which I agree with Dad the way he explained it it didn't make sense to us at the time but we only had 2 coaches, so we probably weren't big enough fish for him!) Anyway I do appreciate your input and someday when we get more coaches I may check on it again! |
Nick
Rating: N/A
Votes: 0 (Vote!) | | Posted on Tuesday, February 28, 2006 - 2:35 am: | |
Many years ago I worked for Goodyear at the Sun Tran Bus Company in Tucson, AZ. Sun Tran leased their tires from Goodyear and provided a tire work shop area, and Goodyear provided the tires and employees to maintain the tires. Sun Tran mechanics were not allowed to change tires or even air them up, it was the responsibilty of the Goodyear crew. |
FAST FRED
Rating: N/A
Votes: 0 (Vote!) | | Posted on Tuesday, February 28, 2006 - 6:01 am: | |
Another reason is many Skools rent tires is with "NEW" tires the percieved liability is less.
Seems many Skools get new tires every summer and the carcasses go on trucks ect.
FAST FRED |
Jarlaxle
Rating: N/A
Votes: 0 (Vote!) | | Posted on Tuesday, February 28, 2006 - 10:14 am: | |
Most school buses around here seem to run Bandag-recapped Goodyears on the drive axles. |