As a business owner, it can be hard to know whether you should lease your vehicle fleet or own it outright. In the end, there are a lot of advantages to both, but it can be hard to know which one is right for your business. Each business has a number of different needs when it comes to its vehicle fleet. Moreover, each business will have a different budget. For instance, some startup businesses are working with bootstrap capital that makes it hard to make any large initial investments. Not only are there fiscal concerns to consider, but there are also tax concerns – both buying and leasing vehicles have different tax implications. So, is it better to rent, buy, or lease cars for your business?
First and foremost, you have to look at the initial cost investment of purchasing a fleet of vehicles versus leasing. Obviously, plunking down a large sum of money on new business vehicles could set you back in the cash flow department. While making this investment may appear to be a smart move – because you’ll have business assets – it may actually prove to be unwise, because the assets will inevitably depreciate. Leasing on the other hand is usually a lot less fiscally impactful, especially on new businesses.
Also, you have to look at the tax obligations when trying to decide whether or not to lease or buy your business vehicle fleet. Usually, leasing your vehicle fleet has less tax savings than purchasing your fleet. This mainly has to do with claiming assets – you can’t claim leased vehicles as assets. If you purchase your fleet, you can write off the initial investment and even the annual depreciation of the vehicles. So, you may want to consult with a tax professional to see what you can write off.
Next, you have to weigh the cost of insurance when deciding between buying and leasing your fleet. In most cases, leasing your vehicles is more expensive when it comes to car insurance. The reason for this is simple: because you don’t own the vehicles outright, there may be more of a liability in the instance of a collision. Not only that, but you may also have to purchase a gap insurance policy, which covers the total value of the vehicle – minus depreciation. By purchasing your fleet, you will often have lower insurance rates. Also, insurance rates differ between states, so it may be smart to shop around. For example, CO auto insurance quotes maybe different than the quotes you’ll find in another state.
Lastly, when you are deciding whether to purchase or lease your fleet of vehicles, you also want to think about your commitment. In some cases, you may simply want to lease your fleet and then return your vehicles when a new car model has been released. This can save your business a tremendous amount of money on maintenance costs. When it comes to saving money on repairs and upgrades, leasing your fleet is the best way to go. When it comes to saving money on insurance and taxes, purchasing your fleet is the best way to go. In the end, it is simply a matter of what is best for your business.