Businesses of all sizes in various trades rely on vehicles for many purposes. Businesses seeking out cars are often faced with the decision of leasing or buying a car. Leasing comes with cheaper monthly payments, no maintenance expenses, and possible tax advantages, among others. Despite these upsides, leasing truly may not be a better solution for some companies, although these cases are not incurred frequently.
Below is a short guide detailing the benefits of car leasing for your business.
Potential Income Tax Benefits
When an asset is owned, companies must depreciate the value of the equipment over its useful life. Leased assets, in this case the company car, are not depreciated, which takes a number of years to completely finish.
The company car’s business use percentage is multiplied times the monthly lease payment. This product is how much of the lease payments can be deducted. As long as the business use percentage of a vehicle is 100% business, every penny paid towards monthly lease payments can be deducted from income.
Your Employees Will Never Have to Maintenance your Company Car
Businesses outsource functions because their structure does not feature the wherewithal necessary. As most businesses do not have resident mechanics on salary, employees who likely know little to nothing about car repairs may be faced with fixing a break down. If you outright purchased a car for your company, your employees would be faced with repairs, or your business would be forced to pay a professional mechanic.
When a company car is leased instead of purchased, any repairs, break downs, or maintenance needs are covered by the lessor. This will save your non-mechanic employees time and your company money from paying untrained employees to fix your company car.
Never Worry About Selling your Company Car
Selling items does come with the upside of their payout, however, selling cars is difficult and stressful. Participants in used car websites, social media groups, and circles are typically highly critical of listed vehicles. Many people expressing interest in used vehicles are likely seeking out a lower price tag than newer vehicles. Such criticism would mitigate your company’s efforts of earning as much as possible. Reselling it yourself in a used market may not be worth the time required.
Preparing and marketing a company car for sale is physically demanding, mentally straining, and is not a normal, efficient part of your business’ functions. As such, selling efforts may not produce optimal results.
Leasing a company car does not feature any of the above worries. Leased cars are returned to their dealerships to be repaired, shined up, and sold or leased again. On face value, it seems like leasing a vehicle is not a good option because it is not yours to own. However, leasing a vehicle is far less stressful and time consuming than car buying.
Buying a Company Car is Often Expensive
Leases are usually several times less expensive than purchasing a vehicle. Monthly installments towards the lease, individually, are lower than financing agreements for company cars. Leases also feature a small security deposit, usually no more than a few hundred dollars, along with applicable taxes and fees. A lease’s security deposit is always refundable.
Purchasing cars outright with cash is obviously more expensive in the interim than leasing or financing. Financing, in which monthly payments are each greater than lease payments, is more expensive over time than purchasing or leasing. Financing requires sizable down payments that are more expensive than multiple installments put together. Unlike security deposits required by leasing, down payments for financing are rarely refundable.