If you need a car to operate your business, you may wonder whether it makes more sense to purchase or lease.<\/p>\n
On the one hand, if your business owns the car you\u2019ll have a long-term asset and may qualify for more tax deductions. On the other hand, buying a car is a huge expense and monthly lease payments tend to be lower than car loan payments; they may also be tax deductible.<\/p>\n
Why buy a company car?<\/strong><\/p>\n The major benefit of purchasing a car is that it becomes a company asset that offers a number of perks for business owners:<\/p>\n The big con for many business owners is that buying a car is a major expense\u2014one that may require you to finance a depreciating asset. You will, however, maintain the residual value on your investment as you pay it off, and once you own the car you can use it for as long as it can do its job.<\/p>\n If you decide not to buy a vehicle but choose to use a personal vehicle for business, you may also be eligible for itemized deductions come tax time. Be sure to check with your country\u2019s small business tax rules and regulations to confirm which vehicle-related expenses you may be able to write off.<\/p>\n The pros and cons of leasing The flip side, however, is that leasing tends to cost more in the end\u2014and those affordable monthly payments won\u2019t add up to an asset for your business. Another point to keep in mind is your insurance requirements may be different and amount to higher fees.<\/p>\n Also, be aware of the maximum number of miles stipulated in your lease agreement\u2014if you exceed the limit it can also mean additional fees at the end of your payment term.<\/p>\n If you\u2019ll be putting a lot of miles on a car, leasing allows you to upgrade to a new car on a regular basis \u2013 and doing so may allow you to dodge costly repairs on an aging vehicle.<\/p>\n As a final note on the \u201cplus\u201d side, just like business owners who purchase their company vehicle, those who lease can write off some of their business-related car expenses.<\/p>\n Final considerations<\/strong><\/p>\n Before you commit to buying or leasing a company vehicle, do a cost-benefit analysis. Take note of the car\u2019s total cost over the car loan or lease term including:<\/p>\n\n
\n<\/strong>For many small business owners, leasing a company car is the more attractive option. Typically, it comes down to cost and cash flow. When you lease a vehicle you won\u2019t have to come up with a down payment or collateral\u2014and monthly lease payments tend to be lower than car payments.<\/p>\n