If you own a business and need a car, you may wonder if you should lease or buy. For most people, buying a car might make more sense from a financial point of view.
But for a business owner, a regular car lease or luxury car lease can be a good choice. Here is more information so you can make up your mind.
The major difference between buying and leasing a car is the amount of taxes paid. When you buy a vehicle, you usually pay the tax upfront and for the full cost of the car. You can deduct this tax on a car you buy for business use. When you lease, you will pay taxes on the lease as part of the monthly payment. But the amount of tax you pay will be less because you are only paying taxes on a percentage of the full value of the car.
One advantage of owning a car for business is you can use depreciation deductions. Each year you own the car, it lowers in value, which you can write off on your taxes. You cannot do this on a leased vehicle.
You can usually get into a leased car for less money up front than a purchased car. As a business owner, it is up to you whether this is what you want or not. For a business with current cash flow problems, leasing could be the right move. But if cash flow is not an issue, buying could be the right move.
Wear and Tear
On a car you buy, the wear and tear can lower the resale value, which could bite you when you decide to sell the car. With a leased car, you can get an extra charge if the wear and tear is deemed ‘excessive.’
End of Term
With a purchased vehicle, you can do whatever you want with your car once you own it in full. With a car lease, you can decide if you want to buy a car or lease another. Some business owners might want to lease a car so they can continue to ride around in a newer vehicle.
Buying or leasing a car for business is an individual choice. Leasing a car for business can be a good choice especially because of the lower upfront costs. In any case, you now have more information to make your next car purchase or lease decision.