Which is better: buying or leasing a car

which is better: buying or leasing a carDecisions, Decisions…

It’s time to upgrade the ‘ole girl, and you and your spouse just can’t stop arguing decide which is better: buying or leasing a car? You’re thinking you don’t want to be bothered with mileage overages, and your better half is thinking of the small-business tax benefits of leasing.

It’s important to look at the big picture when making a large purchase.  Consider these key points before making a decision

Cash On Hand

Do you have an extra $400-$500 in your cash flow to cover the extra payments each month?  If your answer is no then you can’t afford either option right now. 

My suggestion would be to take the $2k you’ve saved up and upgrade to a slightly newer ‘ole girl if it’s absolutely necessary.

Mileage = $$$

Do you typically drive more than 20 000 km each year?  You might think this is of no concern to you but many people have been forced to buy out their leased vehicle at the end of a term because overages were more than what the car was worth.

Think ahead 4 years – will you have an extra $8000 lying around to pay the dealership?  Will you have access to the CREDIT to borrow this money?  Will you be able to afford the payments on this new loan?  If you can’t be sure then you might be better off just purchasing a car instead of leasing.

Small Business Tax Implications

Purchasing a car with CASH

  • You can depreciate the car over several years based on federal capital cost allowance guidelines
  • The depreciation amount is based on your Business-Use-of-Vehicle percentage

Purchasing a car with a LOAN

  • You can expense the business-use portion of the INTEREST you paid on the loan
  • You can depreciate the car over several years based on federal capital cost allowance guidelines
  • The depreciation amount is based on your Business-Use-of-Vehicle percentage

Leasing a car

  • You can expense the business-use portion of the LEASE PAYMENTS subject to federal tax guidelines

Questions?  Thoughts?  Comments?  Let’s hear it!

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