Business Lease Or Buy A Car
If you need a business car you have at least two options: either lease it or buy it. I think that your choice should be influenced by a number of factors that include your budget and what would work better for your business.
If you wonder if you should choose a business lease or buy a car you should consider that if you need to loan the money for the car’s purchase you will have to pay back all the money you lent even if the car you purchased is totaled in an accident. On the other hand, if you choose a lease you will be able to reduce the loss because of the residual value. That means the special situation it occurs will be taken into consideration depending on the type of lease you have chosen.
The down payment is another issue that worries many people interested in a car purchase. Most of the times, a dealer requests his clients to pay, for example, 10% of the car’s price the day the car is sold. That request can be hard to respect by some of us. Therefore you should know that finding a business lease that doesn’t require a down payment is easier. A drawback of a business lease is the mileage limit. When you decide to go for a lease you should estimate the annual mileage that you will be driving the car, because any extra mile will add to an extra fee. If you buy the car, you will be able to drive it for as many miles as you want, but you should keep in mind that with every mile driven its value depreciates faster.
Business Lease Or Buy A Car
Another chapter is represented by maintenance. Most leases, even for business cars, also impose a certain level of maintenance. Some extra money will have to be paid for routine maintenance that usually includes oil changes and tire rotations. But the same rules apply even if you are the owner of the car. If you want to keep the business cars you purchase in good shape you will have to invest in maintenance as well.
Another difference between a business lease and a car purchase is that at the end of the lease you will have to return the car to the leaser or, if he offers you the option, you can negotiate a purchase price. In the other situation, once you finish paying the car loan you will become the car’s owner and you will be able to decide its future faith. You can choose to keep it, sell it to a third party or trade it in for another vehicle. In the same time, when a business lease expires there’s no reason why you couldn’t just lease another new car.
Important in the process of deciding if you should go for a business lease or buy a car are also the taxes and the depreciation involved. I can tell you that the monthly payments you pay on your lease are tax deductible depending on how much you use the car for your business. On the other hand, when you buy a car through a car loan only the interest rate will be considered as a business expense and will the subject of tax deduction. As for depreciation, both a leased car and a purchased car can be the subject of depreciation, even of accelerated depreciation in the case of special conditions.
In the end you can choose to take interest in a business lease or buy a car only if you have an objective picture of your financial possibilities.
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