If you are running a startup, you may be wondering whether to buy or lease a business vehicle. If you need a business vehicle, you have to choose between buying and leasing one. This is a tough choice because you have to consider many factors before settling your mind. Below are eye-opening insights that may help you choose wisely.
Choose Between Loan Expenses and Lease Expenses
Buying a car might compel you to take a loan. Depending on your financial standing, you may have to service the loan for some time. To make the right choice, you will need to consider the upfront costs for both options. Take each case and weigh the advantages and disadvantages depending on your case.
If you have ready money to set aside for a down payment, you may buy the business car. However, if you have none, leasing is a better option. Nearly all vehicle loans require a down payment, but you can get leases that don’t necessarily need a down payment. Either way, remember to consider the tax advantages of both options to your business.
What Distance Will the Vehicle Cover?
Some businesses use their vehicles daily and cover more miles. If you intend to lease, consider the leasing company requirements. Nearly all leasing companies have a mileage limit. If you cover more miles than indicated on the agreement, you would have to pay more for it.
If the vehicle is to serve in the business for long, buying is a good idea. After clearing the loan, the car will be under your business name. However, after completing the lease period, you will have nothing to show for it. This is one reason most businesses consider buying a used SUV rather than leasing one.
Weigh the Pros and Cons of Purchasing a Car
Buying a car offers significant benefits. Since you own the vehicle, you can use it for business and non-business purposes. You can also brand it and use it without any restrictions. It also offers a tax advantage because it is considered a business expense. On the downside, you pay a lot of money upfront and still bear maintenance costs. If you choose to change your vehicle, it can take time to dispose of it and buy another.
Consider Pros and Cons of Leasing the Car
The most significant advantage of leasing is that you spend less money upfront and incur zero maintenance costs. You also pay less on monthly contributions and can change the vehicle easily when the need arises. When it comes to disadvantages, you can’t brand a leased vehicle. There are usage and mileage limitations that you should not exceed. You are also likely to spend a lot of money in the long run.
Most business owners find it hard to choose between leading and buying a business vehicle. If you are in this situation, you need to weigh both options. Take your time to do calculations and consider both the present and future needs of your business. These guiding tips are critical and can help you make a good financial decision.