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Save Dollars by Switching to LED Lighting

Jul 15, 2016

Utilities represent a large variable expense for most dealerships. To lower these costs, a growing number of stores are switching to light-emitting diode (LED) lighting, both inside the dealership and in the parking lot. A change to energy-saving LED lighting also may save your business tax dollars with a deduction that’s scheduled to expire this year.

What are the benefits?

LED lights offer many potential advantages when compared to standard lighting. For example, they:

  • Reduce energy costs significantly – by at least 75%, according to the U.S. Energy Department,
  • Have a much longer life than standard lights, requiring little maintenance for the first 10 years,
  • Provide more natural-looking lighting, enabling you to better showcase car colors, and
  • Can be focused more narrowly, making it easier to spotlight specific vehicles.

LED lighting also offers a security advantage: They can be synchronized with motion sensors and turned on or off immediately in your parking lot.

Additionally, LED lighting can yield tax benefits. Through the end of this year, Section 179D offers a deduction of up to $1.80 per square foot for the installation of high-efficiency indoor lighting that reduces total energy and power costs by 50% or more.

Does it make financial sense?

The best way to determine if switching to LED lighting makes financial sense for you is to perform a cost-benefit analysis. Say that the total one-time cost of switching to LED lights for a midsize dealership is $65,000. This includes $58,000 in light fixtures and controls and $7,000 in installation costs.

Then assume that the lights will save the dealership $18,000 annually in energy costs and $2,000 annually in maintenance costs. In this scenario, the dealership would recoup its initial investment in a little over three years via the annual savings in energy and maintenance costs. The investment will pay off sooner when you factor in the tax break.

Talk to an expert

Consult with your CPA for more details on the potential tax benefits of switching to LED lighting at your dealership.

Dealer Insights - July-August 2016

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