If you drive your personal vehicle for business purposes, you can claim tax deductions. I addressed that in my last article when I talked about whether you should claim the standard mileage rate or actual expenses on your taxes. Yet, leasing vs buying a car may make a difference to you as a business owner, too. Does it make more sense for you to “rent” a car or own it? Let’s weigh the pros and cons.
If you’re trying to build your business’s worth and your personal net worth, every penny you make and spend matters. Honestly, your personal worth is probably tied to your business’s net worth, so that makes budgeting your expenses even more important. Although you may not worry about “small” business or personal purchases, “big” purchases can affect your business’s cash flow and have long-lasting personal tax advantages or consequences. Therefore, if you expense your car payments through your business or you claim your car as a depreciable business asset, you need to decide whether purchasing or leasing the vehicle is the best choice for you.
Here are the pros and cons of each choice as I see them:
You can take all of the pros and cons I just listed and weigh them back and forth in your mind. You can create charts and graphs and spreadsheets all day long. But ultimately, your decision about leasing vs. buying a car boils down to your answers to three questions:
For what it’s worth, here’s what I would recommend. When in doubt, buy. Don’t worry about leasing. If you don’t know for sure what to do, buy the car. According to cars.com, 80% of people in the United States buy their cars. Meaning although you may hear a lot about leasing, it’s not really a popular option, especially not among business owners because of the tax incentives they get if they buy a car.
RELATED ARTICLE: Decided that buying is the way to go? Check out the math I used to pay the lowest price and financing.
Maybe you’re debt-free and you don’t need major tax deductions. You like the thought of driving a new car all the time and having the dealership foot your maintenance bill. If that’s you, congratulations on reaching that business milestone. Maybe you should lease a car.