If you’re a small business owner and you spend a lot of time on the road, you might decide to invest in a new car. However, before you let yourself be enticed to test drive your new wheels, you should consider evaluating whether leasing or buying is the best option for you. Some of the most important considerations include costs, mileage and insurance. Let’s take a closer look at each.
Buying a car is a major financial decision. Most people need financing, which usually comes in the form of a multi-year loan that’s paid off in monthly installments. The advantage of financing a car is that it can build equity—and when the loan is paid in full, you’re the owner of the vehicle.
Leasing involves a smaller financial commitment. You typically pay approximately 20 percent of the sum up front followed by monthly payments that are usually lower than car loan installments.
You should also consider the cost of maintaining the vehicle. When you buy, you’ll have the car for longer, which means that you’ll likely face more long-term maintenance costs. When you lease a vehicle, you typically replace it within two to three years, so you’re less likely to encounter major maintenance costs.
The Wall Street Journal article titled “How to Lease a Car and Get the Best Deal” advises taking your estimated mileage into account. If you average more than 10,000 to 15,000 miles per year, that’s usually more than a lease contract allows. Some leasing companies allow a higher mileage for an additional fee.
Regardless of whether you buy or lease, you need auto insurance coverage. If you’re leasing the car, you should check to see if gap insurance is included in your policy.
Make an Informed Decision
With these considerations in mind, you should be able to complete a general assessment of what makes the most financial sense for your situation. However, it’s always advisable to discuss your options with your accountant, as well as your insurance agent. But once you’ve made the best decision for you and your business, you can move on to the fun part: deciding which car to purchase!