Does leasing a company vehicle make sense?

[lendaddy]

I have researched leasing a personal car before and walked away unimpressed. Now I need a new company truck (for me) and am wondering what the advantages are of corporate leasing vs buying if any.

[widebody911]

I've never understood why people lease personal vehicles. Is it just so they can get into more vehicle than they normally could afford?

[concentric]

The main advantage is that you don't pay for it

I know there are certain bulk discounts for companies that lease fleet vehicles, but I'm not sure if those would apply for just one vehicle or not.

[lendaddy]

Well either way(since it's my business) I pay But I am getting at tax insues I guess. I pay equipment tax to the county on all my equipment, and am wondering if leases get around this at all?

[turbo6bar]

Corporate leasing permits the corporation to directly deduct the yearly cost of the vehicle (lease payments, gas, maintenance, etc.). A corporate purchased vehicle is depreciated over time, and you also can deduct the gas and expenses. Now, if your company buys a large truck (over ~6000 lb GVW), you can accelerate the depreciation.

There's also a difference when you get rid of the vehicle. When you trade in your lease, you tax liability is zero. If you sell a purchased vehicle, you have to pay depreciation recapture. So, if you plan to keep the vehicle for a long time, purchasing might be best, but if you plan to keep the vehicle for a short time, leasing might be optimum.

FWIW, I am NOT a tax expert. You should verify everything I say, and when in doubt assume I am 100% incorrect.

[lendaddy]

thanks, good info!

[cegerer]

I recently switched from leasing vehicles for my company to purschasing them. When all is done and said, there is virtually no difference in the final cost between leasing and purchasing. Vehicles are a pure expense and there's no way to get a round it. We would generally get 2 year / 75K-95K mile leases. The reason for the switch was I got tired of being locked into a vehicle. Purchasing gives you the option of getting rid of a vehicle you either don't like or don't have a need for any longer.

As pointed out, the Section 179 accelerated depreciation schedule for purchased vehicles over 6000GVW can be attractive. It was, however, changed this year to where only 25% of the value can be depreciated unless the GVW is over 14,000 pounds.

Also, some people have a misconception about leasing. They're bothered by the notion of driving "someone else's car". Well, unless you pay cash during a purchase, guess what? You're driving the bank's car, not your's.

[john70t]

Cash is King.
Usually.

[cegerer]

Good point John. There are instances where a better price can be negotiated on an outright purchase (although I would never actually pay 'cash'! Not when 2.9% financing is available ). In general, I have found dealers to be unwilling to 'deal' on leases. OTOH, most companies offer occasional lease deals that can't be touched on an outright purchase.

[qikcpa]

Im a tax "expert". at least my hat says so. I tell most of my clients your looking at a 6 on one hand half dozen on the other. Leasing may have a slight tax advantage because of the luxury car depreciation limitations. While from a business standpoint it has its disadvantages. I hate to see people pay & pay and never own anything. Try the below site for a detailed analysis of your particular situation.

http://www.youngmoney.com/calculators/auto_buying/auto_loan_comparison

[vanwyk4257]

I would consult your CPA. If you're going to buy you may want to see if the depreciation bonus for equipment, etc. that's available through the end of this tax year would apply to a vehicle as well. Also, I believe that if the vehicle is over a certain GVW you can depreciate it on a more rapid schedule. If you need a recommendation on a CPA you can email me. I'm located in West Michigan as well and do small business/commercial lending so I know quite a few good CPAs. My email address is michael.vanwyk@huntington.com if you need any names. Good Luck!