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Are you looking to Lease or Buy Business Vehicles?

Updated: Sep 23, 2019


Lease oder Buy Business Vehicles

Wondering whether to lease or buy business vehicles? Then buckle-up and get ready for an information-packed road trip through the world of business car leasing and purchasing. We’ll answer the top questions regarding car leasing and car buying for a business, including:


  • What is business car leasing?

  • How do business car leases work?


Here, you’ll find everything you need in order to make the right choice regarding leasing vs buying a business vehicle.

What is business car leasing?


Business car leasing is a form of financial agreement between a business and a finance company whereby the business owner is able to essentially rent a vehicle for an extended period of time (usually a number of years, but can be shorter). Whether your business absolutely needs a vehicle in order to operate, or if it will just make your everyday business management easier, car leasing for businesses can be the perfect solution to your business’s financial needs.


Important: Of course, the type of business will affect the kind of industry loans a business needs, as well as the specific circumstances that business finds itself in.

How do business car leases work?


There are several points regarding car leasing for businesses that should be considered before putting the pedal to the metal. To begin with, business car leasing requires that the lessee be able to prove that the vehicle is used for business-related travel at least 50% of the time. Additionally, while monthly payments tend to be lower for leases, there are fees for exceeding the limit on how many km you’ll be permitted to travel per year with a leased vehicle.


When the lease term is complete, the lessee may either purchase the car or return it. That flexibility is one of the main points that make leasing such an attractive prospect for small business owners. But on the flip-side, by leasing a vehicle you won’t be entitled to some of the tax deductions that you would be if you purchase it instead.


Note: Be sure to learn the differences between business vehicle loans and business equipment financing. Although they’re similar in some ways, in certain instances you’ll find that one or the other may be preferable.


Lease vs Buy a business vehicle: Pros & Cons



Upfront costs


Oftentimes there won’t be any down-payment required when car leasing for business. In comparison, purchasing a business vehicle will require a down-payment for the most part. If everything else about purchasing a vehicle appears more attractive to you than business car leasing besides the down-payment, then consider taking a business vehicle loan which can help cover those initial costs.


Tax deductions


Tax benefits of leasing a car for business is one of the main focuses when people consider the topic of ‘lease vs buy a business vehicle’. Whether you decide to purchase or lease a business vehicle, there are tax deductions that you may be eligible for – though they will differ. In either case, you’ll only be entitled to calculate deductions on the loan one of two ways:

By actual expenses, meaning the percentage of time that the vehicle is used for business purposes.
By the standard mileage deduction, which calculates the amount deducted on a per-mile-driven basis.

Additionally, the tax benefits of leasing a car for business only pertain to the interest on the car loan. In comparison, purchasing a business vehicle allows you to claim deductions on a large portion of the total cost. The depreciation value of a purchased vehicle is also deductible, but the same is not true for leased business vehicles.


Restrictions


Since leasing is really a form of long-term borrowing, the company that owns the vehicle will impose certain rules on how you’ll be allowed to use it. For instance, there will be a limit as to how many km you’ll be permitted to drive over the span of the lease. If you were to exceed that limit, you would face fees that can be pretty hefty.


Also, since you will have been the one to sign the lease agreement, only you would be permitted to drive that vehicle. While that doesn’t sound so bad, it may complicate business matters if and when you’re not around to operate the vehicle.


In contrast, purchasing a vehicle means it’s yours to do with what you like. That’s definitely an important factor to consider when thinking about whether to lease or buy a business vehicle.


How to finance

There are many types of vehicles to lease or buy

Business vehicles: Leasing or Purchasing

Business owners can finance their business vehicle lease or purchase with commercial vehicle loans. Applying for business vehicle financing through banks will most likely result in rejection, statistically speaking – according to On Deck more than 80% of small business loan applications are denied funding by their banks.

Fortunately, Become has developed innovative solutions using financial technology to defy business loan approval odds and make the business funding process easier and more likely to result in approval. Beyond those advancements in business financing, the application process through Loanguru is quick to complete and intuitive to use. Wondering how to get a business car lease? Here you go!



Step-by-step guide to applying for business vehicle loans:

  • Choose your desired loan amount and select ‘Get Loan Offer’.

  • Fill in the requested information (including time in the industry, revenue, business, etc.).

  • Submit your business's bank statements information for analysis.

  • Review offers and select your preferred lender and terms.

  • Receive the funds to your business bank account.



Fulfil your need for speed

With the insights provided throughout this article, you’ll be hitting every green light on your way towards obtaining business vehicle financing. You now know how to get a business car lease and judge for yourself which is better in the push-and-pull of the ‘lease vs buy a business vehicle’ debate.


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