When it comes to buying or leasing a car for your business, there are a lot of different opinions on what you should do. Should you buy? Should you lease? Are there other options? What makes the most sense financially and for taxes? If you’re a business that needs to get a vehicle, here is what you need to know.
Leasing a Car
The first thing you should do is consider a car lease for your business. A car lease is an attractive way for your business to get a vehicle because you don’t have to do any capital expenditures. Leases show up as expenses on your taxes, and so you get to write off the full amount that you paid each month. If you buy a car, you have to amortize the cost of the car over time, which may make less sense financially.
Buying a Car
Buying a car could work in a variety of circumstances for your business. If you need something specialized, like a truck, you probably will have to buy instead of lease, since the vehicle will require customization. Also, if you want to paint the car or put any type of graphics on the vehicle, you will also probably have to buy. Many leases have stipulations against that.
Buying a car could also get you better pricing on the vehicle. So, while you have more complicated taxes, you may be able to get your vehicle cheaper, which is always a positive for businesses.
Finally, in some places, there are other options, like getting a contract hire for your business. A contract hire is where you rent a car for a specific period of time, and once the rental period if over, you give the car back. This can be a smart move if you only need the car or vehicle for a short period of time, like several weeks.
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