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Tax credits can influence truck sales

Jason Cannon January 31, 2013

By Jason Cannon

A small piece of the bridge over last year’s pending fiscal cliff included a depreciation allowance designed to spur capital investments and upgrades.

“Bonus Depreciation” was extended through the end of 2013, affording tax advantages to businesses that purchase new equipment.

Typically, a company making a qualifying equipment purchase could write off 20 percent of the cost. However, under the allowance, businesses will be able to write off 50 percent of the purchase.

While this could sound like a boon for fleets and their and expenditure plans, one industry expert isn’t optimistic the incentive will lead to a measurable spike in truck sales.

“You’ve still got this cloud hanging over the other 50 percent,” Stu MacKay, president of MacKay and Company, says of the share fleets would have to expense amid economic uncertainties. “I think there are companies that, if it fits their trade cycle and operating circumstances, they will probably take advantage of it.”

All businesses qualify for the bonus depreciation deductions, but there are some instances where it is not advantageous.

Under Section 179 of the Internal Revenue Code, businesses may expense, or immediately deduct, the first $25,000 of investments in machinery and equipment. The amount of qualifying investment eligible for the deduction decreases dollar-for-dollar for amounts in excess of $200,000. A business investing more than $225,000 will receive no immediate deduction.

However, Lisa DeCaprio, MST, tax supervisor with BlumShapiro says there is an exception beginning with Class 4 trucks, noting vehicles with a GVW greater than 14,000 pounds are not subject to luxury auto limitations or Section 179 limitations.

Dennis Boswinkle, sales manager for La Vergne, Tenn.’s Nacarato Volvo Truck dealership, says his sales force uses the potential for tax credits as his team nears the close of a sale, “reminding the customer to check with his tax accountant first to make sure it is a fit.”

Chris Marsh, sales manager for Boston, Mass.-based Tri-state Truck Center, says Bonus Depreciation isn’t a large part of his dealership’s marketing strategy, but it is something that is discussed with fleet customers prior to purchase.

Understanding how deprecation works, and helping fleet customers use that to their advantage could play a large part to successful sales calls.

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