Once you have decided on the new car you want, it’s time to make a major decision - lease or buy?
Approximately one-third of U.S. car owners lease their vehicles, but buying may be the better alternative if:
• You tend to drive the car for six or more years
• You have enough cash to make a 10% down payment
• You see the car as an investment
On the other hand, leasing may be indicated if:
• You see the car as a depreciating asset
• You want smaller down payments and lower monthly charges
• You tend to drive the car 4 years or less
• You drive less than 15,000 miles a year
Among other important variables are the income tax consequences, whether the car would be used only in your business, and the car’s resale value at the end of the lease term. As a general rule, if the car is predominantly a business vehicle, leasing will usually produce a better tax result, although not necessarily the best overall result.
A valuable piece of business advice is to buy assets that appreciate and rent assets that depreciate. Given the proper circumstances, this could be true of car leasing.
A competent tax professional should be consulted to assist you in making an informed “lease or buy” decision.
BACK TO TAX TIPS LISTING