Business Car Lease

Are you using your personal vehicle for business purposes?

Have you considered leasing or purchasing a car in your company’s name?

In today’s post we’re going to cover the ins and outs of business car leasing. When you lease, your monthly payments are usually lower than when you buy and you get a new vehicle more often.

As with any aspect of your business and personal finances, it’s crucial to keep them completely separate. True separation includes but is not limited to banking, credit usage, expenses, purchases, travel and transportation.

First things first, if you’re using your personal vehicle for business purposes, you can deduct your business use of the vehicle. Two of the methods of calculating this are actual expenses and standard mileage deduction.

Actual expenses include depreciation, lease payments, gas, insurance, etc. The decision on which deduction you should use depends on how much you use the vehicle for business.  Consult with your tax adviser for selecting the best option for your business. Remember, business use of a vehicle is a legitimate deductible expense and should be claimed.

The fact is leasing a vehicle in your company’s name keeps your business transaction with the business. Business car leases are designed exclusively with the business owner in mind. Many business auto leasing and financing programs enable business owners to keep their personal names off of the vehicle contract and title.

Other benefits of business car leasing include:

• Building credit in the company’s name only
• Lease payment will not show up on your personal credit reports
• Added protection from liability, since business owner’s name stays off the vehicle’s title and contract
• Allows for increased cash to be invested in the business

Now remember, a business car lease will still require a personal guarantor. The guarantor on the business lease contract will be responsible for payment in the event the business defaults. If the business and guarantor refuse to pay, the default will then be reported to both the business and guarantor’s credit reports.

Prior to applying for a business car lease gather the documents you need such as business tax returns, financial statements and bank/trade references. In addition, review your company’s business credit reports & scores including your personal credit if you will be signing as the guarantor.

Whether it’s a fleet of trucks, a small fleet of executive vehicles or a car for your business, business car leasing has real advantages for a business. Not only are a wide range of car-related expenses tax deductible; with a business car lease the company has the opportunity to build business credit while protecting the business owner’s personal credit.

It’s important to note that if a business vehicle is also used for personal use, the tax benefits only apply to the business use proportion of the expenses.

Before you decide on whether to apply for a personal car lease or business car lease, discuss the options with your accountant or financial adviser so you can determine which option is best based on your financial and tax situation.

Stay tuned for our next post on business auto financing.

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About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com,  have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.