If you need a car to operate your business, you may wonder whether it makes more sense to purchase or lease.
On the one hand, if your business owns the car you’ll 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.
Learn more about the benefits and drawbacks of buying versus leasing a vehicle for your business:
Why buy a company car?
The major benefit to purchasing a car is that it becomes a company asset that offers a number of perks for business owners
- You can write off your gas, mileage and maintenance expenses
- Your interest payments on a car loan and depreciation costs may also qualify as eligible business expenses
- You may enjoy lower insurance and liability rates on a vehicle owned by your business
The big con for many business owners is that buying a car is a major expense—one 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.
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’s small business tax rules and regulations to confirm which vehicle-related expenses you may be able to write off.