Many business owners find themselves asking ‘is it better to own a business vehicle or to lease one?’ And while there is no set-in-stone answer to this question, there are several factors that play a major part in making the best choice. Let’s take a quick look at these factors to help you decide whether or not you need to purchase your next vehicle (even if it means taking out a loan) or if you need to lease it.
What type of auto payment can you afford?
When you take out a loan for a vehicle, you will be paying a certain amount of money each month and once the loan is paid back in full, you will then own the vehicle. If you choose to sell the car once the loan is paid back, you will have the money you make from the sale to put toward your next purchase (or lease if you choose to make the switch to leasing). When leasing a vehicle, though, the monthly payments you make toward the car don’t account for any type of ownership of the car; this means once your lease is up, you won’t be able to sell the car and get any of your money back. Some places that have autos for sale or lease do allow you to purchase the car after a lease has ended, but you will likely not be credited on the monies you have paid toward your monthly lease payments.
In regards to payments, leasing tends to be cheaper. For example, a new car purchased with a loan may cost you $369/month in payments for 60 months, whereas the same car can likely be leased for only about $250/month for 36 months. If you have a lower monthly budget for a business vehicle, car leasing may be the best choice. Click Here for Small Business loan.
Who is going to be driving a vehicle?
One of the main things to consider when it comes to vehicle leasing is that you will likely be limited to a number of miles you can put on the car each year. If you go over the mileage limit, you will have to pay extra money; this is why it is important to determine who will be driving the car. If it is you, then you of course can keep a close eye on the mileage. If it’s one of your employees, though, you have less control as to how many miles is actually put on the vehicle.
What are the terms of the auto purchase or vehicle leasing?
Many dealerships and car lots offer enticing their auto sales with maintenance packages included within the leasing or purchasing price. It is very advantageous to take advantage of one of these maintenance packages because it helps deter maintenance costs. In regards to whether it is best to lease or purchase a business vehicle based on maintenance expenses, the decision is really up to you because you can get a maintenance package deal on either.
What are the tax advantages of leasing or purchasing?
As far as tax deductions go, if a car is leased, its monthly payments can be deducted from your taxes. If you choose to purchase a car, though, only the interest on the loan can be deducted. In fact, from a tax deduction standpoint, car and truck leasing for business purposes tends to provide more benefits than buying a business vehicle. Still yet, both leased or owned vehicles are eligible for depreciation deductions on your taxes.
What is the best place to lease or buy a vehicle for business?
You will likely want to buy or lease a new vehicle for your company at least once every three to four years, but this of course depends on the wear and tear you put on the car or truck. The best places to buy or lease a company vehicle are at your local dealerships.