Deciding whether you should buy or lease vehicles for your business can be quite tricky. You could buy a vehicle that will leave you with some equity but will depreciate over time or you could lease a vehicle where you will enjoy reliable, newer cars but will have to make a payment every month. Here are some factors you should consider to help you decide which option would be better for your business.
Number of miles you drive each year
Lease agreements do come with a cap on the number of miles that you use the vehicle for each year. If you go over this you will pay an extra fee, which is usually a price per extra mile, so can work out quite costly. Take some time to think about the journeys you are likely to make over a year and use a mileage calculator to add them all up. You then need to weigh up which is the better option if you go over the mileage for a lease agreement, either paying for the extra miles or adding a high number of miles to a vehicle you have purchased.
How long you keep a car
If you like to change cars often then leasing might be the best option for you. It is an easy way to budget towards having a new car every three or so years. You will never be free from monthly payments but you will always have a shiny new car to drive around in. If you are happy to drive a car until things start to go wrong, however, then you might prefer to purchase a vehicle. At least this way, once in a while you will have a reprieve from those finance payments and be left with some equity to put towards your next car. Make sure you read our car reviews if you are on the lookout for a new car.
How much do you want to spend on monthly payments
When you lease a car the monthly payments are generally cheaper than the finance payments when you buy a new car. That being said, once the finance is paid off on a new car the monthly payments will cease. When you lease, the payments are continuous.
Purchased vs leased vehicle expenses
It doesn’t matter whether you purchase or lease a car, you are still liable for any expenses related to the maintenance of the vehicle. The advantage of leasing a car is that your vehicle doesn’t really have time to age and so it should cost you very little to maintain. Unless you are purchasing a new car frequently maintenance costs will stack up if you buy a car.
There are tax advantages to leasing a car in that you can write off a proportion of your lease payment based on how much the vehicle is used for business purposes. This means that if you use the car for business 80% of the time you can deduct 80% of your monthly lease payment from your tax liability. This could save you some money over the long term.
Consider these things when looking for a new car and you’ll be able to make the right decision.