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Depreciation

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853) was signed into law by President Obama on Dec. 17, 2010. The legislation includes an extension of the Small Business Jobs and Credit Act of 2010's "bonus depreciation" allowance through the end of 2011, and increases that amount from 50 percent to100 percent. Here's what it means to fleets.

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The Need to Extend 50-Percent Bonus Depreciation

First-year 50-percent depreciation, known as bonus depreciation, expired Jan. 1, 2010. An amendment to retroactively extend bonus depreciation through the end of calendar-year 2010 has been added as an amendment to H.R. 5297. Bonus depreciation has been benefical to commercial fleets, especially those with long-life assets. As an industry, we need to urge members of Congress to pass H.R. 5297. But this is easier said than done due to the many other contentious issues in the bill.

Fleet Predictions for the 2010 Calendar-Year

Barring the occurrence of unforeseen calamities beyond our control, here are my predictions as to how current fleet industry trend lines will play out in the next 12 months.

Predictions for Fleet in 2009

When looking ahead to the next 12 months, I foresee reduced operating costs for fleets offset by increased depreciation expense caused by anemic resale values and decreased incentive monies. Here’s why I believe this will be the case, along with other predictions for 2009.

The Hidden Cost of Personal Use

With fuel prices remaining elevated, many companies are wondering whether they are charging enough for personal use. At some companies, this discussion is long overdue. When re-evaluating personal use charges, a common mistake is to focus solely on the cost of fuel, which is understandable because, after all, fuel is the catalyst for these discussions. However, doing so ignores the other “hidden” costs of personal use, which have also risen.

How Will Future Residual Values Impact Hybrid

While hybrids can reduce fleet fuel expense, the two other major fleet expenses — maintenance/repair and depreciation — must also be considered to determine if hybrids are the answer to reducing overall fleet costs.

Analyzing Depreciation Trends: 2007 vs. 2006

Depreciation continues to be the largest fleet expense; however, fuel, as a percent of total fleet cost is growing (rapidly). Fuel expense is influencing vehicle acquisition strategies, with a direct bearing on future depreciation.

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