Why smart entrepreneurs lease their company car
11 juni 2019
A company car is of great importance to many entrepreneurs. For example, you may well have to travel across the country to speak to customers as an entrepreneur. Or you work at people's homes as a plumber or electrician, for example, and therefore cannot do without a company car with your tools in it. Whatever the reason, a company car is practical and often fiscally more attractive than a private car. Once you have determined that you need a company car, you still have to make a decision about purchasing or leasing the car. The advantage of buying is that you can deduct the annual depreciation from the profit. You can also sometimes use the purchase price of the car as an additional deduction from your profit. In addition, in some cases you are entitled to an investment deduction. However, this only applies to vans and not to passenger cars.
Why lease a company car?
But why would you choose to lease a company car? There are some good reasons for this. First of all, the risk involved in buying a car. When you buy the company car, you bear the full risk of the car. So you have to pay for the repairs and maintenance of the car. This can be very unfavorable if you have problems with the company car. You can partly cover the risks with insurance, but you will always have a deductible and also spend a lot of money on premiums. With a lease contract you run less risk, which means it can be beneficial to opt for leasing.
Financial Lease
The aforementioned advantage of depreciation after buying a car also applies to Financial Lease. You can simply put the payments on a Financial Lease on the balance sheet and can therefore also write off this. The investment deduction for company vans also applies in some cases when you opt for a Financial Lease. Once you have paid off the car in full with the Financial Lease Contract, the company car is yours and you can therefore simply sell it yourself. All in all, Financial Lease actually has the same advantages as buying a company car, plus the fact that you bear no risk. Smart entrepreneurs therefore usually choose to lease a company car instead of buying it.
Operational Lease
In addition to Financial Lease, there is also another form of leasing for entrepreneurs. This is Operational Lease and has the important advantage that the residual value of the car is included in the lease term. If you handle the car calmly and responsibly, this usually works to your advantage. In most cases, Operational Lease includes a purchase option in the contract. In this case, you can choose to buy the car at the estimated residual value after the contract expires. You can also hand the car over to the leasing company or choose to continue renting the car. Agreements have often been made in advance about the amount you pay per month.
Full service lease
The last lease form that entrepreneurs often choose is full service lease. The management and full financing of the company car(s) has been outsourced. With this form of leasing, the entrepreneur does not have to worry about financing and no working capital is required from the company. The purchasing power of the leasing company is used to finance the company car. For the rest, the conditions of a full-service leasing are very similar to those of operational leasing. Because there is a lot to choose from when it comes to leasing, there is actually a lease type for every entrepreneur. As a rule, it is more beneficial for entrepreneurs to lease a company car instead of buying it.
