When thinking of buying vs. leasing we usually think of cars, but did you know that you can lease just about anything? Personal computers, apartments and houses, business equipment, and even employees can all be leased. Which is the best way?
First, there is no best way because each decision should be made on an individual basis. I know that we want to know an exact answer, but there really is none. Let’s look at buying vs. leasing a car for a business owner.
If you lease a car for your business you are generally able to deduct your lease payments as expenses. When financing or buying the same car you will generally be able to deduct your interest payments and a portion of the purchase price as depreciation, which may be an amount that is lower than your loan payments.
It sounds like leasing may be a better deal, right? In many cases it is for tax purposes, but in recent years there has been bonus depreciation, which would allow for a large deduction during the first year that your car is in service. But are taxes the only factor to consider?
Other factors to consider are how long you intend to keep your car, how many miles you drive, how well the car maintains its value, or just personal preference (meaning that you may want to drive a newer car every two to three years). The decision should be thought out carefully, and similar questions should be asked when purchasing or leasing other items, such as computers, equipment, or furniture.