When I first opened the doors of my floral business, I wasn’t sure if I should purchase or lease cars for my business deliveries. While both options would require a monthly payment, insurance and maintenance costs, leasing cars offered a tax advantage and the ability to upgrade every few years.
Advantages of Leasing Cars
Leasing cars for my business offered me the tax advantage of not paying the hundreds of dollars in taxes a purchase would require. What’s more, I can deduct a portion of the lease installments as a business expense. Plus, The monthly payments are 30-50% less than a loan for the same fleet. Most lease agreements coincide with the manufacturer warranty so I don’t have to worry about costly mechanical repairs because nearly everything is covered. Another advantage of leasing cards is that I can return a vehicle after using it for a few years and pick up a newer model. I won’t lose equity in the vehicle and I’ll never owe more than it’s worth thanks to the included gap insurance.
Disadvantages of Leasing Cars
The main disadvantage of leasing cars for my business is the mileage limit. If I exceed the allowed mileage during my lease period I’ll be penalized up to $.39 per mile. I will also be charged for any damage or changes made to the leased vehicles. Before making any final decision, you should do what I did – weigh the cost of a loan and the long-term benefit of asset ownership against the cost of lease payments and tax and maintenance savings. Only then will you know whether it’s better to buy or to start leasing cars for your business.
