Questions to help determine if it’s better to buy or lease a vehicle for your company.

When your business needs a vehicle, is it better to buy or lease? It depends on several factors, including cash flow, how many miles will be driven, tax considerations and more. The following questions will help you decide.

How much do you have for a down payment?

A vehicle purchase typically requires a 10% to 20% down payment. Vehicle leases require lower down payments, and sometimes no down payment at all.

How is cash flow?

Lease payments cost less than loan payments, helping ease cash flow but you’ll always have a monthly payment. With a purchase, once the loan’s paid off you no longer have monthly payments.

Do you need a customized vehicle?

When you buy a vehicle, you can customize it to your needs. Lease terms won’t allow for modifications to the vehicle.

How will your needs change?

Leases can be as short as 24 months, allowing flexibility for changing business needs. For example, a start-up company that does deliveries may initially find the cargo space of a van adequate but as the business grows a delivery truck might be needed. A lease makes it easy to swap out to a larger vehicle. However, if you end the lease early there will be an early termination fee.

How many miles will you drive?

Mileage limits are standard on leases. Typically, 12,000 or 15,000 miles are allowed each year. Exceed the limit and extra charges from $0.10 to $0.25 per mile kick in. An extra 2,500 miles at a quarter each? That’ll cost $625. If you anticipate more mileage than a lease allows, it could be better to buy.

How will leasing or buying affect your taxes?

Lease payments and maintenance are considered business expenses and reduce taxable income. If you finance the purchase with an auto loan, interest on the loan, maintenance, repairs and depreciation are tax-deductible.

Also, under Section 179 depreciation for certain business vehicles may be taken for the full purchase price in the year the vehicle is purchased. Check with the IRS or your tax professional to determine which tax rules apply to your situation.

When buying is right for you, we have financing

When you decide to buy a company car, delivery truck or commercial truck and trailer, our commercial vehicle loans offer flexible financing. Plus, our knowledgeable commercial loan officers make the process easy. Contact us online or call 800.991.2221

 

All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications, and collateral conditions.