The decision of whether to buy or lease your new company vehicle will have both operational and financial impacts on your business.
Published on February 6th, 2020. Last Updated on .
Whether for delivering goods to customers or driving to meet with important clients, a large number of businesses rely on a company vehicle for their day-to-day activities. If your business is considering obtaining a new company vehicle soon, you will have a number of important decisions to make along the way. You will need to consider what type of vehicle you require, how much you are willing to spend, and whether you will buy the vehicle or lease it. Indeed, the decision of whether to buy or lease your new company vehicle will have both operational and financial impacts on your business.
From an operational standpoint, you will have a little more freedom in your use of the vehicle if you decide to purchase it instead of leasing it. Lease agreements will almost always come with stipulations about how many miles the vehicle can be driven and will have fees for any damages that occur to the vehicle. On the other hand, if you own the vehicle you will be able to drive it as much as is necessary and will not have to worry about any small dings that occur from a shopping cart or errant tricycle.
From a financial and taxation standpoint, leasing a vehicle is usually more beneficial and straightforward. Assuming the vehicle is used only for business activities, you will usually be able to write your entire lease payment off as a business expense. Meanwhile, a purchased vehicle will go through a depreciation schedule over a period of several years. Generally, the annual tax benefit of the lease expense is higher than the depreciation, but this may be different in certain situations. As with any big financial decision, it is a good idea to speak with your accountant for guidance.
Given that both leasing and purchasing a company vehicle come with their own set of benefits and drawbacks, it is ultimately up to you as the business owner to decide which option makes the most sense for you. If you prefer the freedom of being able to use the vehicle whenever and however you want, purchasing may be for you. If, however, you would prefer to reap the tax benefits of leasing, that may be the way to go instead. In either case, be sure to take the time to thoroughly research all aspects of the deal and you will soon have a great new vehicle for your business.