If you are looking to get a car for your business, you may be questioning yourself if it is better to buy or lease. Generally speaking, auto leasing is gaining a lot of popularity with the consumers in the US. People prefer to lease vehicles because they only expect to use the car for two to three years and even less in some cases without putting excessive mileage on it. Most of all, leasing allows them to drive a topnotch car without making a large upfront payment.
But should you consider leasing a vehicle for your business? In this post, we will look at different aspects to consider in a decision to buy or lease a vehicle for business, so you can make an informed decision.
Lease Installments Vs Loan Payments
Getting a loan to buy a vehicle means you have to pay back a specific amount of money even if the value of the car depreciates or goes below the amount of the loan. This can happen if your vehicle suffers an accident. In contrast, when you lease a car the residual value calculated at the end of the tenure can lower your lease cost, and if you get a closed lease, you can leave it without incurring any penalties.
Note: Here it is important to mention that those who are looking to avail tax benefits must have to prove the vehicle is being driven for business purposes at least 50 percent of the time.
Analysis of Leasing or Buying a Business Vehicle
Below are some comparisons between the two forms of getting a vehicle for business.
- Upfront Cost: The initial costs of buying and leasing vary greatly. When you obtain a loan to buy a car you have to make a large down payment. On the other hand, leasing requires you to pay a first-month installment or a security deposit, so you need to be thoughtful and consider these on a case by case basis.
- Ownership: The ownership is different for business since it involves tax benefits, so you need to contemplate your options wisely. When you lease a vehicle for business it doesn’t give you any tax benefits as you are only paying for the depreciation. While buying a vehicle can give you depreciation deductions.
- Mileage: It is safe to say that you can deduct mileage expenses in both the cases. Since higher mileage for a vehicle you own can decrease its resale value. Whereas a lease vehicle has mileage restrictions, and if you go over your limit you will have to pay the penalty.
- Maintenance/Repair: Excessive repair and maintenance on a vehicle you own can significantly reduce its resale, especially those little dings in the body. In case of a rental car, you may have to bear penalties if the wear and tear is
- At the End of Term: If you have purchased the car, then you are free to keep it as long as you want or sell it immediately and used the money to buy another one. With a leased vehicle, you have two options when the contract expires: Buy the car or turn it in. Sure, the dealership may proffer you a tempting deal to lease another vehicle.
Things You Should Ask Before You Reach a Conclusion
Got Cash to Make the Down Payment?
If you have enough cash to make the down payment, then opting for a car loan is not a bad idea. However, if you are looking to draw some cash from your business account to make the partial payment for purchasing the car, then it would be best to consider a lease. Some leases do not require the first payment, but most auto loans do.
How Many Miles Do You Need Each Year?
Before you reach a decision, make sure to determine how many miles you will be driving each year. Since auto leasing terms include a mileage restriction. Although you can get additional miles, you will have to pay more for the lease in order to cover it. Car loan agreements, however, don’t have such restrictions. You are free to drive as many miles as you want, but keep in mind that the vehicle will depreciate faster if you do more miles.
Who Will Be Driving Your Business Car?
You also need to consider who will be driving your business car when planning to buy or lease a company vehicle. Is it going to be you or one of your staff members? Of course, if you are going to drive it then you will have more control over the mileage, but if the vehicle is being driven by a worker, then you may not be able to control the personal use of the vehicle.
In this case, leasing a car is better because you will able to easily dispose of the vehicle after the lease expires. Additionally, you will be able to get an attractive lease deal from the dealer to get another car. Furthermore, you won’t have to bear the maintenance charges as the lease will cover them.
What If You Can’t Even Afford to Lease a New Company Car?
Well, here lease trading websites such as QuitALease.com can aid you to find some excellent used car lease deals. The online marketplace won’t even charge you if you decide to take over a car lease.
With an online lease swapping website, you will be able to find the best deal right away and you can assume one in no time. Since the process is as easy as 1, 2, 3. Not only this platform will help you assume someone’s auto lease, but also allow you to quite your car lease early without ruining your credit score, in case, your circumstances changes suddenly.
Here we have laid down some important facts about leasing and buying a car, so it becomes easy for you to reach a decision. But it is suggested that you should thoroughly research both options before taking the final decision.