Is Car Leasing Really Better for Business?
Perhaps you’ve been advised to lease a car for your business instead of acquiring one. There are actually sound reasons behind this concept.
Cars are Depreciating Assets
Overall, cars depreciate. The moment it leaves the dealership, its value starts going downhill. Unless a vehicle helps improve your sales substantially, buying it may become a financial burden to your company instead. For this reason, many experts advise businesses to lease instead of buying a car.
Tax Advantages and Leased Cars
In addition, your company will enjoy a host of tax advantages out of your car lease. All interest, tax and maintenance expenses associated with a leased car through a business are tax deductible.
With a company-leased vehicle, you can apply the standard mileage deduction of at least 50 cents per mile to offset part of your fuel cost. In addition, you may claim a deductible loss the moment you sell or trade a company-leased car.
However, remember that these tax advantages do not apply to vehicles used primarily for generating business revenues as in the case of taxis. However, you may deduct actual leased car expenses based on receipts for vehicle-related expenditures.
Also, take into account the car-related costs associated with personal use. Vehicle-related expense must be solely for business use for it to be tax deductible.
Parting with Old, Leased Cars
Parting with an old, leased car is easier than with one you acquired. You only need to turn in the vehicle you leased and maybe swap it with a newer, better one in as short as three years. With old, purchased cars, you need to trade or sell them to get back a portion of your investment.
Downsides of Leasing Cars for Business
Leasing a vehicle for business purpose has its disadvantages. You can’t customize it according to your branding requirements. You can drive it as much and as hard as you want because you must abide in the restrictions set by the car leasing company. Extreme usage entails extra costs.
Purchasing a car for business is a good decision when you want to drive it for more than five years, customize the vehicle, and drive it as much. Otherwise, better lease a car to take advantage of related tax deductions.