December Truck/SUV sales. Is there more to the story than low gas prices? Yes.

I got the graphic below from a Wall Street Journal article on the big jump in "large vehicle" sales in December in the US.  They give credit to easy credit and low gas prices.

Wall Street Journal

However, I think they might be missing one other key factor.

The purchasers of large vehicles and SUV's over 6,000 pounds who use them for "business purposes" are entitled to a depreciation allowance.  In 2014 the allowance was $25,000. This means a business could deduct up to $25,000 on there taxable income when they purchased a large vehicle/SUV.  This effectively reduces the price a business pays for the SUV---it is a subsidy through the tax code for the purchase of the vehicle.

That $25,000 depreciation allowance was only good for 2013 and most of 2014. However, in mid-December, the Congress extended this depreciation allowance for a very short time (the rest of month!) AND increased it to $500,000! Yes, read that again.  There are many caveats as to how this allowance can be taken, but the bottomline is, well, the bottomline: Many companies, small medium and large, probably purchase more vehicles in December before the legislation changes again.

Read more about the details HERE at Forbes.  It gets more complicated, of course.

Here is the ppt I put together to show students how this plays out on a basic supply and demand graph.  If you cannot read it, then go to the source HERE.  Comments welcome on any errors or omissions.

Subsidy for SUV's and December's Increase in Demand for Large Vehicles from Gene Hayward