CapEx and OpEx accounting

This relates to how we approach car ownership: CapEx vs. OpEx: Key Differences Explained

... needs that are categorized as capital expenditures (CapEx) or operating expenses (OpEx). CapEx involves major, long-term purchases like buildings and equipment. OpEx, however, covers routine, day-to-day expenses like salaries and rent. Understanding the distinctions can clarify their financial impacts and tax treatments.

KEY TAKEAWAYS

• Capital expenditures are a company’s major, long-term expenses while operating expenses are a company’s day-to-day expenses.
• Examples of CapEx include physical assets, such as buildings, equipment, machinery, and vehicles.
• Examples of OpEx include employee salaries, rent, utilities, and property taxes.
• Items covered by OpEx often have a useful life of one year or less, while CapEx tends to pay for a benefit to the company for longer than one year.
• Capital expenditures are treated differently from operating expenses when it comes to tax implications. While operating expenses are typically deductible for tax purposes, capital expenditures must be capitalized and depreciated over time.

​

Some cite the purchase price of a vehicle to claim "it is an expensive car." Correct AT THE TIME OF CAPITAL PURCHASE, after purchase, this capital investment depreciates, it ages until "end of life." For example my Tesla purchase March 26, 2019:

• $42,000 including options, net $22,000
  • discounted by rade-in or salvage value of 2017 Prius Prime at "end of life"
  • Edmunds estimated value:
  • 
  • Is this an "expensive" car on January 16, 2026?
• Operational cost 4.5 miles/kWh
  • Solar roof cost, $0,00/kWh
    • 14.1 kWh/day or 14.1 * 4.5 = 63.45 miles per day free
  • Utility company cost: ~$0.12/kWh
    • Estimated excess of 63 miles per day - (7 / 4.5) * 0.12 = $0.002 per day
  • SuperCharger costs ~$0.28/kWh
    • Out of town day trip ~500 miles: 11.07+6.10+10.03+7.83+6.51 = $41.54
  • Total for 500 miles + (15 * 70) = 1,550 miles or $0.027/mile

The most generous offer, $5,000, does not strike me as being "an expensive car." But at less than $0.03/mile, it is affordable to drive when and where I want. So let's compare it with my past Prius performance, 56 MPG at the towest price seen, $2.50/gal:

• 1,550 mi / 56 MPG = 27.679 gal or $69.20 gasoline costs (assumed lowest which is higher than local)
• ($41.54 - $69.8) / $69.20 = -40.8% cheaper

So my six year old Tesla is not only cheaper than any new car, it is 40% cheaper to operate than my last Prius. Yes that car was a 2017 Prime but the limited EV range, ~25 miles, and too easily tripped into gas mode made it a 56 MPG car.

Bob Wilson