Question 1151376: Jenna’s job requires her to travel. She owns a 2006 Toyota 4Runner, but she also has the option to rent
a car for her travel. In either case, her employer will reimburse her the same amount for the mileage
driven using the rate set by the Internal Revenue Service. In 2015, that rate was 57.5 cents/mile. In this
lesson you will explore the question of whether it would be better for Jenna to drive her own car or to
rent a car.
(1) What do you need to know to calculate the cost of Jenna driving her own car?
(2) What do you need to know to calculate the cost of Jenna renting a car?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! if she rents a car, then she has to pay the daily rental cost plus any additional costs for any insurance or collision avoidance fees is she chooses to use those options.
most rentals give unlimited mileage, so this would not be a consideration unless where was a limit of free miles and she drove more than that.
then there's tax on top of that.
if she uses her own car, the would pay for the gas at least.
she might also consider annual maintenance costs per mile (oil change, tire rotation, mechanical repairs, wheel alignment, wear on the tires, wear on the vehicle itself since it will probably need to be replaced sooner than normal since it is being used for business which requires a lot more miles on it).
this option is much more complicated then you might think, since the vehicle might need to be replaced every 5 years instead of every 10.
the time value of money comes into play along with any financial charges for purchasing the vehicle.
she would effectively need to come up with a cost per mile for running the vehicle, which would then be the expense associated with the revenue of 57.5 center per mile that he employer would pay her.
if she rented for day, then there would be one cost.
if she leased a car long term for business use, then the cost would be different.
there would be the lease charge plus any additional mileage charges if she went over the nominal amount of miles the lease companies allow.
there is also additional insurance required on the leased car.
this is not a simple question to answer, but the general idea is to get the cost per mile for renting / leasing a vehicle versue the cost per mile for using her own car.
the revenue in both plans would be the same (57.5 cents per mile).
with the owning option, if the car was also used for peronal transportation then some costs would not be additional, such as garage costs for the car and insurance costs for the car.
these would presumaably be the same whether or not the car was used for business or solely for pleasure.
there might be some additional charges if used for business but i don't know what they would be.
as part of the costs, there is the additional discount that would be taken off for tax purposes if the car was used for business purposes that i'm also not aware of.
these expenses can be deducted from the revenue when calculating taxes owed to the government for the year.
bottom line.
not a simple question to answer.
these are at least some of the considerations that i know of.
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