Should You Lease or Buy Your Business Vehicles?
As a business owner you have soon discovered that there are a slew of never ending business decisions to make.
Whenever you are making decisions for your business usually they are going to have some type of financial implication to them. This is no different when you are trying to decide whether you should lease or buy your business vehicles. Even if it is just one vehicle that you need to decide on making the right choice here can impact your business finances. You need to look at what your decision will do concerning your business as well as your business tax situation.
What may be the right answer for one business owner may not be the right answer for your situation.
There are pros and cons to both leasing and buying business vehicles, so you want to look at them all for both circumstances and then base your decision on your specific findings.
Buying the vehicle:
First you have to decide what amount of money you have available to make the purchase. You may have enough for a down payment but then you are going to have to borrow the rest. This purchase will give you an asset, but it will also give you a liability until you pay the loan back. If there is a chance that you will need to borrow money for other areas of your business before this loan is paid back then you need to keep this in mind. This loan could have an affect on your borrowing situation in the future.
From a tax point of view there are some expenses associated with the purchase of the vehicle that you may be able to claim. You may be able to claim the interest on the loan, and you will have the depreciation as well. Plus there will be the maintenance and repairs that you may have to deal with.
Leasing the vehicle:
If you go this route there are some advantages as well. You probably won’t need as large of a down payment for the lease, and the monthly payments will likely be lower than the payments you would be making under the loan agreement. If you look for all the perks that can come with leasing, these can also save you money. Many times the repairs needed are covered under the lease and this could end up in a substantial saving.
For the tax situation you may be able to use your lease payments as a deduction, but to do so you will have to adhere to the limits for this that have been put in place by the tax department.
Your decision making for your business vehicles is just one of many that you have to make for your business and this is where the experience and expertise of a quality and experienced accountant can be of great value to you. Your accountant can play a very important role in the overall financial success of your business.