If you need a car to run your Irish business, you may wonder whether it makes more sense to buy or lease. There are different factors to consider. On the one hand, if your company owns the car outright then you will have a long-term asset and might qualify to get more tax deductions (speak to your accountant to learn more). On the other hand, purchasing a car is a huge cost and monthly lease payments tend to be lower than car loan repayments. What will suit you better?
The major benefit of purchasing a car is that it becomes a company asset that offers a number of perks for business owners
You may enjoy lower vehicle insurance when owned by your business. Not always, but certainly tends to be a trend.
A disadvantage can be that purchasing a vehicle is a major expense, one which could require you to fund a depreciating asset. I don't want to get too technical but do want to share all areas to be mindful of.
If you opt not to purchase a car but choose to use a private vehicle for the business, you'll be able to claim expenses with a mileage fee for your private car. This can be very tax efficient.
The Advantages and Disadvantages of leasing
Typically, it comes down to cost and cash flow. When you rent a vehicle, you do not need to think of finding a lump sum for the initial purchase price The monthly lease payments tend to be lower than car payments.
However, on the flip side leasing will cost more at the end and those cheap monthly payments will not add as much as an asset for your company.
Another aspect to bear in mind is your insurance might end of costing more. Also be aware of the maximum number of km stipulated in your lease agreement. Some lessors require you to specify the number of KM you expect to do each year.
For example, if you exceed the limitation it can also mean extra fees at the end of your payment duration. If you drive a lot of miles/ km on a vehicle, leasing permits you to upgrade to a new automobile on a regular basis, and doing so may allow you to avoid costly repairs on an older vehicle.
Lot of decisions to consider, right?
Before you commit to buying or leasing a company car, do a cost-benefit analysis.
Take note of the car's total cost over the car loan or lease terms such as Anticipated mileage, petrol, parking, insurance and other costs.
We are here to help answer any questions.