Squeeze 6,000 travel professionals into a conference center and what you get–besides a big-league bar tab–is an accurate snapshot of their industry. The news that emerged from the Global Business Travel Association summit, held in Denver in August, was upbeat for airlines, hotels and anyone who owns their stock. Travel is up, and prices with it. That means small-business owners and their teams will need to spend even smarter in the coming months. Here are some ways to do it:

Hotels
The 12 percent surge in hotel occupancy since last year is that sector’s strongest rebound ever. New properties are in the pipeline, but most won’t open until 2014, so demand will remain high. Smith Travel Network’s Jan Freitag notes that with occupancies sitting at 70 percent, the average 50 percent figure for Sunday nights means that midweek (when most business travelers are on the go) “must be pretty rockin’.”

Savings can be found by booking in advance as much as possible. You might not know who’s going to next year’s convention, so you can’t buy a plane ticket, but you can reserve rooms and switch names later. And try to avoid New York City, which weighed in at nearly 80 percent occupancy and an average rate of $223 a night.

8.4 Percent — boost in business travel spending in 2010, after a drop of 7.8 percent in 2009¹

$758.7 Billion — amount spent by U.S. business travelers in 2010, an increase of 7.7 percent over 2009²

Sources: ¹The Global Business Travel Spending Outlook 2011-2015 study, sponsored by Visa; ²U.S. Travel Association

Airfares
Airlines in the U.S. earned some $6 billion in ancillary fees in 2010, charging for everything from a first checked bag to trail mix to pillows. “They’re here to stay,” says US Airways CEO Doug Parker. What isn’t, necessarily, is the selection of flights leaving your local airport. Airlines continue to trim schedules, eliminate unprofitable routes and downsize planes.

To avoid airline add-ons, it’s imperative to attain elite status on your favored carrier. (In some cases, that’s as easy as getting an affinity credit card.) For cheaper fares and a wider selection–or, in some cases, any selection at all–get accustomed to flying out of more distant airports on one or both ends of your journey, such as accessing Madison, Wis., via Milwaukee or Chicago. Since you’re loading the car anyway, it may occasionally make sense to drive all the way to your final destination. At least you know your bags will travel free.

Rental Cars
As auto sales rise, manufacturers aren’t eager to sell to rental car companies at their usual discounted rates. Or they’ll replace an order for small cars, a hot ticket now that gas prices are up, with harder-to-move SUVs. As a result, Hertz, Avis and the rest are holding on to their fleets longer than ever–up to 40,000 miles. And since older cars are more expensive to maintain, they’re passing that cost to you.

The green light at the end of the tunnel is Enterprise, which bought National and Alamo in 2007 and has been integrating its customer service model. If one of their brands doesn’t have a car in the category you selected, or if you’re dissatisfied with the selection, employees are empowered to find options elsewhere in their fleet, the industry’s largest, or to offer a pricier vehicle at the same price. That won’t help your bottom line–but if you’re going to pay $70 a day for a car, it might as well be a Lincoln.

The good news is that the health of the travel industry nearly always mimics that of the economy. So if the cost of travel is increasing, it could mean your business prospects are on the upswing, too.

This article was originally published in the November 2011 print edition of Entrepreneur with the headline: Up and Away.

Article source: Entrepreneur.com

 

Are you buying a new car for business? Uncle Sam has tax deals for you.

This year, there’s an even bigger break than in the past for buying a behemoth gas-guzzler. If you’re buying a smaller car, there’s a new reason to buy one costing more than $31,000 instead of less. There’s also a new nudge for leasing over buying.

Jason Schneider

That’s the upshot of recent guidance from the Internal Revenue Service concerning two changes in the law Congress made last year. The rules apply to cars bought after Sept. 8, 2010, and before Jan. 1, 2012. Experts say the adage “Don’t let the tax tail wag the dog” especially applies to buying cars for business use.

“Many factors go into this decision, and you always have to crunch the numbers,” says Daniel Moore, a CPA practicing in Salem, Ohio.

Still, car expenses are often the biggest deduction for smaller businesses, so tax breaks matter. Here’s a quick review of rules old and new.

• What’s deductible. Unless a car is used 100% for business, expenses aren’t fully deductible. Taxpayers must figure the percentage of business versus personal use and apply the business percentage to total expenses to arrive at the deduction.

Commuting from home to work counts as personal use, but driving between two places of business doesn’t. The IRS is quick to question claims of 100% business use of a car, says Mr. Moore. “They’ll ask, ‘Do you leave it at the company overnight?’”

If you plan to use this deduction, also plan on keeping good records.

• Other deductions. Unreimbursed tolls and parking fees are deductible as a miscellaneous expense (by employees) or on Schedule C (by the self-employed), as long as they aren’t for commuting.

• How to figure the deduction. Taxpayers usually have a choice: Either deduct a flat 51 cents per business mile (in 2011), or write off IRS-approved depreciation plus actual costs for gas, maintenance and insurance, among other things.

This decision requires analysis. Using the flat allowance might make sense for a hybrid owner who uses little gas, while actual costs often work best for those with less-efficient cars.

• Depreciation deductions. In theory, this is an annual write-off that adds up to an asset’s cost over its useful life. In practice, lawmakers often speed up depreciation to juice certain activities—like car buying—in ways that make big differences.

The bottom line: This year Congress is running a large “bonus depreciation” special on cars weighing more than 6,000 pounds, such as the Cadillac Escalade and Nissan Armada. Taxpayers may deduct 100% of the car’s cost in the first year—subject to the personal use disallowance, of course.

Even better: If this deduction creates a loss, it may be used against other wages or carried back to generate a refund. BMW, General Motors, Ford, Jeep, Mercedes Benz, Porsche, Honda, Nissan, Toyota and Volkswagen all have vehicles qualifying for this break.

Depreciation is far less generous for cars weighing less than 6,000 pounds. Cars costing more than $15,300 get first-year depreciation of $11,060 this year, but those costing more than $30,625 get more in years two through six than those costing less.

Take, for example, two cars bought in December 2010 for business use, one costing $20,000 and one costing $31,000. Each gets $11,060 of depreciation for 2010, but the more expensive one gets a $4,900 deduction for 2011, while the $20,000 car gets only $3,200, says one expert.

“Congress is clearly biased against smaller cars,” says Joe Kristan, a CPA with Roth Co. in Des Moines.

• Buy or lease? The decision of whether to lease or buy requires careful consideration and often depends on the lease terms.

In general, however, experts say to look hard at leasing if you want an expensive car weighing less than 6,000 pounds and plan to replace it every two years or so. The allowed deduction is for the business-use percentage of the lease price plus regular expenses (gas and so on) minus a small adjustment (the lease inclusion amount) that is smaller this year than in the past.

Are there special tax breaks for business use of fuel-efficient cars? All taxpayers are eligible for a dollar-for-dollar tax credit up to $7,500 on “plug-in electric motor vehicles” like the Chevy Volt.

Buyers who plan to use one in a business would first take the credit, says Mr. Kristan, and then figure depreciation based on the remaining purchase price.

Article source: Wall Street Journal

 

At first blush, the mercantilists’ call for “free trade but fair trade” sounds reasonable. After all, who can be against fairness? Giving the idea just a bit of thought suggests that fairness as a guide for public policy lays the groundwork for tyranny. You say, “Williams, I’ve never heard anything so farfetched! Explain yourself.”

Think about the First Amendment to our Constitution that reads: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”

How many of us would prefer that the Founders had written the First Amendment so as to focus on fairness rather than freedom and instead wrote: Congress shall make no unfair laws respecting an establishment of religion, or prohibiting the fair exercise thereof; or abridging the fairness of speech, or of the press; or the right of the people to peaceably assemble in a fair fashion, and to fairly petition the Government for a redress of grievances”?

How supportive would you be to a person who argued that he was for free religion but fair religion, or he was for free speech but fair speech? Would you be supportive of government efforts to limit unfair religion and unfair speech? How might life look under a regime of fairness of religion, speech and the press?

Suppose a newspaper published a statement like “President Obama might easily end his term alongside Jimmy Carter as one of America’s worse presidents.” Some people might consider that fair speech while other people denounce it as unfair speech. What to do? A tribunal would have to be formed to decide on the fairness or unfairness of the statement. It goes without saying that the political makeup of the tribunal would be a matter of controversy.

Once such a tribunal was set up, how much generalized agreement would there be on what it decreed? And, if deemed unfair speech, what should the penalties be?

The bottom line is that what’s fair or unfair is an elusive concept and the same applies to trade. Last summer, I purchased a 2010 LS 460 Lexus, through a U.S. intermediary, from a Japanese producer for $70,000. Here’s my question to you: Was that a fair or unfair trade? I was free to keep my $70,000 or purchase the car. The Japanese producer was free to keep his Lexus or sell me the car. As it turned out, I gave up my $70,000 and took possession of the car, and the Japanese producer gave up possession of the car and took possession of my money. The exchange occurred because I saw myself as being better off and so did the Japanese producer. I think it was both free and fair trade, and I’d like an American mercantilist to explain to me how it wasn’t.

Mercantilists have absolutely no argument when we recognize that trade is mostly between individuals. Mercantilists pretend that trade occurs between nations such as U.S. trading with England or Japan to appeal to our jingoism. First, does the U.S. trade with Japan and England? In other words, is it members of the U.S. Congress trading with their counterparts in the Japanese Diet or the English Parliament? That’s nonsense. Trade occurs between individuals in one country, through intermediaries, with individuals in another country.

Who might protest that my trade with the Lexus manufacturer was unfair? If you said an American car manufacturer and their union workers, go to the head of the class. They would like Congress to restrict foreign trade so that they can sell their cars at a pleasing price and their workers earn a pleasing wage. As a matter of fact, it’s never American consumers who complain about cheaper prices. It’s always American producers and their unions who do the complaining. That ought to tell us something.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

COPYRIGHT 2010 CREATORS.COM

Article source: Creators.com

 

When many young people endeavor to purchase their first automobile, they face a wide variety of choices.  One of the choices available is to lease or buy.  If buying, you can purchase the automobile with cash or finance it.  It is highly important to make the right decisions when purchasing a car, since the wrong move can turn that shiny new street cruiser into an automotive prison that locks up your financial resources for years on end.

Most people who are deciding how to purchase a car on paper will reply that it is best to buy with cash.  This is certainly true for people who have enough disposable cash to buy their cars outright, but what about people who need to finance?  The first and most important point of consideration is to make certain that you are not buying more car than you can afford.  One rule that many people support is called the 20/4/10 rule.  Namely that if you are financing a car, put 20% down, finance it for 4 year or less, and make sure the payments do not exceed 10% of your income.  This will ensure that you have positive equity when you drive the car off the lot, which can prove very important if the car is wrecked or stolen.

There are many traps that people can get themselves into with automobiles:

• Lease Trap: Leasing a car sounds great at the beginning, but you rarely get a good deal on the price and there are typically fees and charges that are due when your lease matures.  If you do not have the cash to ‘buy out’ the lease at its expiration, the nice people at the dealership will be happy to ‘bury’ the charges you owe them into a new lease.
• Dealer Financing Trap: Many dealers attract buyers with 100% financing, zero percent interest, easy qualifying, or some other gimmick.  All of this sounds great and induces many people to buy cars at or near the full retail price.  (When you are being financed by the dealer, you have very little power to negotiate a lower price)  However, if something happens to the car, your insurance will reimburse based on market value, which will most likely be less than your car is worth.  Now you have a bill that is due for the remainder between the price you paid and the car’s value when it was wrecked or stolen and that beautiful financing has suddenly evaporated.
• Friends and Relatives Trap: This one almost goes without saying, but great danger can lurk when you purchase an automobile from friends or family.  Before engaging in this sort of transaction, make sure to have the car checked by a competent mechanic or mentally prepare yourself to potentially absorb some unexpected expenses without complaining.

The optimal situation for a person who must finance is to arrange for their financing ahead of time.  This allows them to walk into a dealership knowing exactly how much car they can afford to buy, exactly what the rate will be, and exactly what the payments will end up at for a given price level.  This allows you to negotiate the ‘price’ instead of the ‘payment’ with the sales representative.  If the best deal they can offer isn’t to your liking, you have the power to walk out and go somewhere else because your financing is not captive to one particular dealer.  Even if the rate you get from the bank is higher than the one offered by the dealer, you will have the ability to negotiate down the price and reduce your risk of loss if the car is damaged or stolen.

In the end, it is highly important to avoid turning our car into an automotive prison.  By planning ahead and making prudent decisions, this goal can be easily accomplished while walking down the path of financial success.

 

One of the most prescient concepts in economics is the notion that “all changes occur at the margins”.  Expressed another way, this means that when things change, it happens in small incremental movements.  One of the commonly cited axioms of economics is that “rational people think at the margin”.  What this means is that our decisions should be framed in the context of what impacts our next action or decision, and ignore costs that are sunk or decisions that have already been made.

The importance of this concept comes into play when making both personal and financial decisions.  When deciding whether to fix an old car that has broken down, the only factors relevant to the decision should be the facts at hand.  It does not matter how much money you have already spent to fix the car . . . it only matters what you do with the current situation.  (Note that from a financial perspective, it is optimal to repair your existing automobile unless the cost of repairs exceeds the value of your car in reasonable working order.  The decision to get rid of your old car and buy a new one is almost never financial optimal.  This doesn’t mean that you should never get a new car, only that the purchase is a ‘lifestyle’ decision and not a ‘financial’ one.)

The inevitable result of thinking ‘at the margin’ is a narrowing of focus onto the decisions and opportunities at hand instead of dwelling on mistakes and missed opportunities of the past or fantasizing about expected opportunities in the future.  The only time that anybody ever has to act is now.  The past is gone, and the future has not yet come.  Action must always occur in the present tense.  This is not a renouncement of the benefits that come from planning for the future, but a realization that the future is built on many successive decisions, and that each decision we make builds the road for future decisions.

By zeroing-in on the decisions that you can influence today, it will create a remarkable degree of emotional freedom.  This liberation will come when you are no longer shackled by old decisions and no longer nervous about what will come in the future.  The future is and has always been uncertain.  However, people who have grown accustomed to making rational decisions develop the confidence that they can adapt to whatever future situations unfold.  The most important thing is to use the information and resources at hand to make the best decisions possible.  This crystallizes a seemingly infinite number of possible future options into one decision . . . your next one.  The result of that decision will set the stage for future decisions, but so will external events that are beyond your control.

The single area where most people run into trouble is that they under-estimate the extent to which their future will be shaped by things that they do not control.  Thinking about the unknown is inherently frightening, because we cannot plan for something we do not know will happen.  However, the unknown should not be allowed to become a crutch that scares us into inaction, but should also be appropriately heeded so that actions are not taken that greatly depend on a specific future outcome that is far from guaranteed.

The extent to which we can control our lives always is, always has been, and always will be at the margins.  We can influence small iterative changes that compound over time to produce tremendous results.  On balance, it is best if our actions create outcomes that are robust or adaptable to future changes in the marketplace.  While we may not know what these changes will be, we can be confident in our ability to adapt to them.  By shifting our focus to present things that happen ‘at the margin’ it will allow us to enhance our circle of influence by improving the effectiveness of our decision making.