Different small businesses require different tasks of employees, managers, and owners. A business that requires a lot of daily travel requires representatives of the business to go from one location to the next, perhaps several times per day. Employing public transportation for this strategy would not likely be very wise.
The business should acquire a car that is on standby for travel related duties. Now, there are two common ways to acquire a car: buying or leasing. The question many small business owners must ask themselves would be is it better to buy a car or lease one?
Buying Versus Leasing
The answer is going to depend on a number of factors. For some, buying will be the better option and for others leasing is the way to go. For those unsure of what decision to make, it is best to look at the pros and cons of both buying and leasing.
How Long Do You Intend To Keep The Car?
The main factor to look at would be how long you intend to own the car. For any business that wishes to keep the same car for five years or more with no compelling reason to procure a new one any earlier than that, buying the vehicle becomes the far better strategy.
For those business that might require a new car every three years, then leasing is the best option. The process of returning the leased vehicle and signing a contract for a new model is a lot easier than buying a new car and selling / trading in the old one.
How Much Mileage Will You Be Using?
Another factor to consider would be mileage. If the vehicle is going to be on the road a lot and the amount of mileage put on it is significant, leasing a vehicle is advisable. Be aware, though, that leases have mileage limits and going over that limit can be costly. Be sure to negotiate sufficient miles in your lease. (They are typically limited to 12,000 or 15,000 miles per year.)
Purchasing a car and putting 100,000 miles on it in four years leaves the business with a car with very little resale value and a lot of maintenance work. Many parts are going to have to be replaced and a major tune-up is going to be required. The car will still be driven a tremendous amount of miles meaning more repair work and maintenance is going to be necessitated.
On the other hand, if the amount of mileage to be put on the car is minimal, then buying one may be a fine investment. Even after many years, the vehicle could have an excellent trade in value since the mileage is low and the amount of maintenance performed on it was routine and minimal.
Explore The Tax Benefits
Businesses wishing to save money on the acquisition of a vehicle should look closer at some of the tax benefits that can be procured. In the United States, buying a car for business comes with some deductions. There are, however, far more savings available when leasing because the entire monthly lease amount can be deducted.
Not everyone may be interested in all the hassles associated with taking care of a car. While it is true that the business that leases a vehicle will be responsible for routine maintenance and caring for a car, there are quite a number of hassles eliminated when a vehicle is leased.
Read The Small Print
Leasing, however, can come with a number of costs. The business owner who pays a monthly premium on a leased car for three years might be paying what it would cost to own the car free and clear. That means the fourth years of leasing the same vehicle reflects money wasted. After all, a purchased vehicle would have been paid off if the same amount of money was paid in a three year period.
Ultimately, the effect the vehicle has the cash flow of a business factors into whether or not it is worth purchasing. The least costly option means less cash is drawn out of the business and put towards the cost of the vehicle. The revenues into the coffers of a business will always have ebbs and flows. There might come a time when cash flow is limited. The least costly vehicle option can only be a benefit in such a situation.
Yes, there are quite a number of different factors that must be weighed when trying to determine whether leasing or buying is right for a small business. The main point here is no one should ever rush into making a decision. Careful and deliberate thought must always go into the process so as to determine whether or not buying or leasing is the best option.
Bradley Taylor
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- Should Small Businesses Buy or Lease a Car? #smallbiz - November 18, 2013
I think leasing a car in better option for small or start ups businesses. Because they can’t pay this cost instantly and it will effect their finance. They should save or put money on their business. so from my perspective leasing is best option.
In my opinion, small businesses should always lease a car for their business purposes. They will be surprised at the amount of cash flow that they can limit and also at the same time, have a car for their own purpose. Leasing is generally preferred by most of the small firms.
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Hi Curtis,
That may be true in many cases, but not always. For example, leases are not as attractive if you need to run up high mileage.
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I agree!
If a small company needs to lease a car on regular basis, then its better to buy one because some or the other day it will be realized that the leasing amount seems to have gone equal to the buying amount of a car.
I know it will be different for each business considering this question but I think leasing actually sounds like the better idea. If you are constantly driving like some of the places I have worked at the cars get miles built up very quickly and being able to take it back to the company and let them worry about it sounds good to me.
Whether a small business should buy or lease a car is really similar to a family or individual facing the same question. It really comes down to how long you wish stick with an individual car. Depending on the business, mileage can also be a part of your decision. Something you may want to consider is whether the car will still be a good representation of your company in 3 years. If you wish to maintain a certain image, a new car every 3 or so years may be the way to go.
If one is starting with a small business, he really has to pay attention to simple yet very important things like this. And I think car wraps will be a great help. You have to have an identity, you know. Well thanks for this post. I am so excited to start my own business soon!
You got a point,
It gives in depth information and I have never read any article more comperehensive than this. Thanks for this valuable knowledge.Keep it up!
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There can be some great benefits fo leasing, especially businesses who can keep money in the business, rather than spending on a depreciating asset. But its not for everyone and overall, you could spend more money leasing than buying outright.
Great stuff:
If you are sincere in your work than it will give back much more as you can’t imagine.
Small business is good to start a business.
Thanks for sharing.
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The main factor to look at would be how long you intend to own the car. Thank you for sharing very nice information.
Small scale business is still a struggling business. They need more capital in order for their business to thrive. If they need a car for the business then maybe they should just get a used car so that it will be much cheaper compared to a brand new car.
I have also always chosen to own rather than lease. Owning the vehicle becomes a company asset that you can depreciate over time 🙂
I have always chosen to own rather than lease. Owning the vehicle becomes a company asset that you can depreciate over time.
Business car contract hire gives companies access to brand new vehicles without having to make a significant financial outlay. Instead of buying vehicles outright, business car contract hire (sometimes called business car leasing) allows companies to spread the cost of supplying vehicles to employees over set periods of time and with a much lower initial financial outlay. Contract hire is the most popular method of leasing vehicles, although there are other forms of leasing including finance lease, contract purchase and salary sacrifice (see below).
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Good post. I think if you are sincere with your work it will bring you a much more than car.
Thank You For Sharing the post that the small business is good to start a business because by starting a small business we can make Good contacts of businessman.
Great Post Bradley. The business world is full up with clever, sharp movers.Really you have good explains in your Post In my opinion this is one of the best way to expose your business. Thanks for sharing with us.