If you are a business owner and you are on the verge of contemplating whether you buy a new car or lease one, then you should read on.
There are a number of considerations when it comes to costs concerns and non-financial costs benefits of a company car. Before you make the big decision, you must first make sure that you know what you really want.
Consider the number of miles you drive per year
If your business needs a lot of traveling, owning a car can be advantageous. Car leasers often charge more if mileage consumed is more than the agreed contract. It is better to buy your own company car if this is the case for your business. You can save more compared to paying leases to car lessors.
Consider if you want to keep a car for a long time
Owning a car gives you the advantage to keep it for a long time. You can maximize its use until it breaks down. You can save more than when you always buy new units and lease cars year after year.
Consider the monthly payments you spend
If you purchase a new car via applying for a car loan or lease one, there will still be monthly payments you need to pay. In this regard, lease payments are usually lower than monthly car loan payments.
Consider the tax benefits
For both purchased and leased cars, a business owner can deduct the related expenses by using the standard mileage or actual expenses incurred in buying or leasing a car. You can also include expenses on parking fees and tolls, gasoline, oil, insurance, garage rent, parking and registration fees, repairs, tires and even a percentage of the interest on your car loan.
Consider the advantages of each option
For rented vehicles, you can deduct the business percentage of your lease expenditures. You can deduct a certain amount on your tax return for a certain year. The same applies if you purchased your vehicle, you can also deduct the interest of your car loan based on the percentage of business usage.
When it comes to the disposal of your vehicle, a company car has deductible losses or taxable gains due to depreciation. On the other hand, if you return the rented car to the lessor, there would be no deductible losses or taxable gains.
Consider maintenance or repair costs
If you purchase your own car, maintenance and repair will be shouldered by the business owner. For leased cars, you can negotiate with the car dealer if regular maintenance can be covered.
Consider concerns in cases of accidents
Whether you lease or purchase your business car, when an accident happens, you as the business owner still has the liability. You will still shoulder insurance costs and expenses.
Whatever your decision as to buying or leasing your company car, it is still best if you jot down the pros and cons of your options. Be sure to study the effect of it on your business, and choose one that would be most advantageous for you.