This guide outlines the advantages and disadvantages of a car lease vs buy outright when it comes to business vehicles.
Leasing a car for your business is an option that many people overlook. It can be enticing to buy a car outright, but leasing may be more beneficial in the long run. Again, many people think it’s better to buy than lease cars when they are in the market for new vehicles because they believe buying gives them more control over their purchase decision and allows them to make changes in case something goes wrong with their vehicle down the road.
However, when you look at all of these factors a car lease vs buy outright, side by side, there are several reasons why a car lease might be a better option for your business. So, this guide will cover the pros and cons of both options, so you know which one is best for your business needs.
Car lease vs buy: what to consider
The decision on whether to do a car lease vs buy outright when it comes to your business is not easy. There are pros and cons to both options, and the best choice for you will depend on your specific needs and circumstances. Here are some of the key factors to consider:
Upfront costs
When you buy a car, you pay the entire cost of the vehicle upfront. This can be a significant amount of money, especially if you buy a new or luxury car. However, with leasing, you only have to pay a small down payment (usually around $500) and then make monthly payments until the end of your lease term. So when it comes to weighing up a car lease vs buy outright, leasing wins on upfront costs.
Monthly payments
Leasing generally costs less per month than buying a car. Lease payments tend to be lower because leases are often set up for 36 months, while car loans are longer.
Maintenance costs
Leasing also saves your money in maintenance fees since your monthly lease payment includes routine service and wear items like oil changes. However, with a purchase contract, these additional services can cost extra, which can add significantly to the total amount of money you have spent on servicing your vehicle over time. So in terms of maintenance when it comes to a car lease vs buy outright, leasing wins unless you have a free service plan.
Future resale value
When it is time to bring back or sell your leased vehicle at the end of its term (or buy out), there may not be much demand for older models with high mileage even if they still look good physically. It’s important to remember that many people won’t want to pay as much for the best-selling cars used by a business.
Conversely, when you buy a car and sell it later on, you can usually get back most (if not all) of what you originally paid for it. So when it comes to resale with a car lease vs buy outright, the outright purchase wins.
Freedom to switch cars
One of the biggest advantages of leasing is that you can switch vehicles every few years if your needs change or new models come out that you want to try. This flexibility is not available when you buy a car since it generally has to be sold before getting another one.
All in all, there are several factors to consider when deciding whether leasing or buying is better for your business vehicle needs. Leasing tends to have lower upfront costs and monthly payments.
Car lease vs buy: pros and cons of leasing
When you lease a car, the financial responsibility of the vehicle is transferred to the leasing company. You can use the car for your business without having to worry about depreciation costs or selling it later on.
Leasing also offers several tax benefits that can save you money. For example, you may be able to write off part of your monthly lease payments as a business expense.
However, there are some disadvantages to leasing as well.
- First, you will have less control over your vehicle since it belongs to the leasing company, and they may not allow you to make changes like painting it a different color or adding custom features.
- Second, if something goes wrong with the car (like a major repair), it’s usually up to you to cover the costs since this is not normally included in your monthly payment.
- Finally, if you are looking for a way to save money on taxes or do not want any responsibility when it comes time to sell your vehicle after its term is up, buying might be a better option.
Car lease vs buy: pros and cons of buying
When you buy a car, it is yours to do as you please. You can keep it as long as you want and sell it whenever you choose.
Additionally, buying a car usually allows you to get a higher resale value than leasing it. This is because when you lease a car, the leasing company takes into account depreciation costs when they calculate your monthly payment.
However, there are some downsides to buying a business vehicle too.
- First, the upfront costs can be high, especially if you purchase a new or luxury car.
- Second, monthly payments tend to be longer than leases, which can unnecessarily eat into your cash flow.
- Third, unless you take care of all the maintenance and repairs yourself, you will have to pay for routine servicing and wear items like oil changes. If this is not something you want to be added to your monthly expenses, leasing might be a better option.
Which is better for small business?
There is no one-size-fits-all answer when it comes to leasing or buying a car for your business, and it will depend on the answers to your main considerations. But you should also check the safety and reliability of any vehicles you are considering, for example Nissan Pathfinder’s reliability as a case in point. It’s important to weigh the pros and cons of each option and decide what works best for your unique situation.
Leasing tends to have lower upfront costs and monthly payments, but you are limited in what you can do with the vehicle. If something goes wrong, it’s usually up to you to cover the costs.
On the other hand, when you buy a car, it may be more expensive initially, but you have complete control over it and get to keep it as long as you want. You can also sell it whenever you choose, resulting in a higher resale value.
Ultimately, the answer to whether you should lease or buy a car for your small business will depend on several factors. Be sure to consider all of them before making a decision.
Conclusion
Leasing and buying both offer several benefits, but if the financial responsibility of owning a car does not appeal to your business needs or cash flow, then leasing may be the best choice while offering more tax advantages than purchasing. However, there are some downsides, such as limited control over how the vehicle looks (leasing) vs. higher maintenance costs (purchase). Thus it’s important when deciding between these two options that one carefully considers their own unique circumstances before making any decisions about what would work best with their business plans.
