Should a Business Owner Lease or Buy?

At a recent networking event (Simply WOMEN), this question was asked: Is it better for a company to buy or lease a vehicle? Joe Dorsey, one of our most knowledgeable sales consultants at Golling's, helped me answer this question:

There are a couple questions to ask that will make a difference:
1. How many cars do you need?
2. How far will you be going in your vehicle?
3. What kinds of vehicles do you need?
4. How long do you think you will keep the vehicle(s)

Joe recommends leasing to businesses for several reasons:

1. When you lease your are not "stuck" with the vehicle. Every three years (or earlier if you choose) you can go back to the dealer and either pay off the lease and own the vehicle, sell it back, or lease another brand new vehicle. For a business this is nice because you have more options than purchasing the vehicle.

2.  When you lease your are covered from bumper-to-bumper, with the options to trade-in much faster. When you buy a new car, new truck, new SUV or a new mini-van you have a warranty that will run out in usually around 3 years, then you have to pay out of pocket for maintenance for your vehicle. With a lease, you have the same warranty, but you know that in 3 years you are giving the car right back to get a brand new car.

3. Write it OFF: When you lease you get a very simple tax plan. Businesses can right off the percentage of the lease payment they use for the business, so if you use the vehicle for 75% business activity you can right off 75% of the monthly lease payment multiplied by 12. (If there was a trade-in when the lease was signed the amount of the trade will also be considered for your right off also) When a vehicle is purchased, there are many other values involved such as mileage and depreciation. There is a great blog that describes this more in detail: http://www.realtax.com/professionals_lease.html

4. When you lease you don't pay to "own" the vehicle so your payment is lower. You lease a car for three years the payment is going to be based on the value of the vehicle, not getting to a pay off. If you want to buy the car, SUV, minivan or truck when the lease is up, the dealer will figure out the value of the vehicle and you can decide if you want to buy it, but many companies will lease a new vehicle to keep from incurring high maintenance costs on an older vehicle.

5. When you lease vehicles while having a fleet you manage wear and tear better. If you have more than one vehicle, you divide driving time and miles between all of your vehicles. Leases work well in this situation because you have less out-of-pocket expense up front when you acquire more than one vehicle, or if you add more vehicles to your fleet over time.