Should You Buy or Lease a Car for Business

Scouting for the best car lease deals and finance offers is a waste of time unless you know what you want. In every business, time is money, and neither should be wasted. If you want to maximize your car leasing vs. buying decision, ask yourself the following questions: 

• How much of a monthly payment can my business afford?

• Does my company have any established credit? 

• If so, what is my business credit score? If not, who will be the personal guarantee to cosign for the lease or finance agreement? 

• What does the business require from the car I will lease or finance? 

• What type of car best suits my business needs?

• What specific features should a car I lease or buy for business have? 

• What tax benefits and deductions do I want to claim for my business with this car? 

• Can my business afford to pay for maintenance? 

Business owners may want to brainstorm the answers to these questions. You can also bring your colleagues and employees into the discussion to filter their ideas. Consult with your accountant to discuss any tax deductions you can take by leasing or buying a car for business.

A company car lease can be one of the many perks of becoming a business owner. Many micro-businesses, or those just starting out, often find leasing a car easier than financing one right away. This fact is especially true for businesses without established credit. 

What are the advantages of leasing a vehicle for business?

Business car leases come with several advantages, including: 

• Tax deductions

• Drive new cars in their best years

• Upgrade to the latest models every couple of years

• Maintenance is covered under warranty

• No hassle of selling the car or disposing of it 

Business car lease requirements are often laxer than finance requirements. You may also afford a lower monthly lease payment than a similar finance payment. Paperwork and approval processes require less time with a lease, and you may be able to find a zero-down lease agreement to save money. 

What are the disadvantages of leasing a vehicle for business?

Finding the best time to lease a car can be challenging, especially if your business just opened. Fledgling companies often choose to lease a car for business needs to pay less upfront, but most commercial leases come with several restrictions, including: 

• Mileage limits

• Limits for the number of drivers 

• Early termination fees 

• Customizations, including graphics or signage, prohibited

• Minimal leeway for what’s considered “normal” wear and tear

Business leases can accrue lease equity, but you lose any equity accrued once the lease terminates. Business owners also don’t own anything after the lease has ended. A business lease will also cost businesses more in the long run.

Leasing tax benefits 

When you lease a car for business, you cannot deduct any depreciation on the vehicle, even if you use it more than 50% of the time for business purposes. However, you can still deduct your lease payments if you meet the same qualifications. Business owners can choose between deducting actual expenses and the standard mileage rate. 

Deducting actual expenses requires recording every cost related to the upkeep of your company car, from gas and maintenance to insurance and registration. It’s time-consuming but can unlock rewarding tax deductions for your business. You can also take the standard mileage deduction for an easier route. However, you must stick with the same deduction type for the life of the lease. 

Speak to your accountant to see how you can deduct your business lease. You can find more resources on leasing vs. buying vs. subscribing to a car for business on FINN’s blog. You can also learn more by reading an in-depth article on the topic.

Buying a car for business can be a better alternative for businesses keen on advertising their brand with a vehicle and offering a service. For example, construction or landscaping companies may wish to purchase a vehicle to advertise their services as they park the car at jobs around town. However, many businesses must establish themselves before they can afford and qualify for financing a business car lease or purchase. 

What are the advantages of buying a vehicle for business?

Having a “work truck” or “work vehicle” can help employees look forward to their day and enjoy a perk of the job. Putting miles on a company vehicle is much better than a personal one. Buying a company car can also help business owners obtain tax benefits and advertise their services wherever that vehicle goes. 

In addition to customizing a financed or purchased company car, business owners can sell it whenever they want. Long-term costs are lower. Business owners also don’t have to worry about mileage limits or restrictions on what activities they can do with the car (such as ridesharing, which is not allowed on a lease). A paid-off company car also becomes part of the company’s valuable assets, which a company can then leverage for loans and other types of financial assistance. 

What are the disadvantages of buying a vehicle for business?

Buying a vehicle, let alone for business, can be tricky for most people. When you buy a car, you often must make a down payment and pay taxes, titling, and registration fees on top of that amount. These costs (due at signing) can price buying a vehicle out of a business’ price range quickly. 

Physical assets like company cars are also an increased liability. These cars may require maintenance out of warranty, repairs the business must pay for with profits. Higher lease payments can have tight budgets already maxed out. Companies must also commit long-term to a car, which is challenging in the business world, where companies rise and fall like tides. 

Buying tax benefits 

Business owners can deduct expenses and the cost of ownership on their taxes for a car they purchase. You can also deduct depreciation and interest. Speak to a tax professional to inquire about what deductions you can take when you own or finance a company car.

Buying or leasing a car for business involves several considerations, with various tax deductions standard for both choices. Companies that focus on brand recognition and crisscross the country weekly often do better with buying a car for business. Even financed cars offer businesses the chance to add brand imagery and as much mileage as necessary without fear of penalty. 

Companies prioritizing a specific brand image concerning car choice will find leasing can address these needs at a lower monthly rate. Leases offer a consistently updated fleet of company cars that helps business owners put their best foot forward. Monthly payments are lower because you don’t own anything at the end of a lease, but having one less physical asset can be ideal for some businesses. 

FINN offers a new solution, one built by a business for business. FINN’s car subscription fleet of business vehicles gives entrepreneurs and their companies a chance to look and feel the part. Work with a dedicated fleet manager and coordinate with real-time availability and rapid delivery. Make a memorable first impression with a car subscription service built to support your business for years.