Automotive

Yet another lease vs buy thread - for business owner

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Sr. Member
Jun 17, 2003
803 posts
566 upvotes
Toronto

Yet another lease vs buy thread - for business owner

Looking for some insight on my particular challenge.
Here's the background:
- I own my own business - solely owned corporation.
- I drive about 30-40% for business.
- I'm at a point where I don't really need to save every last penny if it means a little less hassle re: both negotiating for the car & paperwork for my taxes. But I'm still on RFD, so I'm obviously somewhat cheap. On that note:
- - I realize I don't want the corporation to own/lease the car directly. The standby charges & CCA don't seem that great when you need to use the car over 50% personal, and the paperwork burden is a pain. So I'll either lease or buy/finance and for simplicity, charge my company the allowable tax-free 54¢/km. Seems simplest.
- - I realize I probably want a new (to me, at least) car every 3 or so years. Yes, I realize I can probably save the most over the long time buying a 3 year old used car and driving it for a long time. But I'll get bored after 3yrs.
- - I'm not buying anything I can't afford, and staying pretty close to the $30k mark, given that the gov't doesn't give business owners much to work with if you spend much more than that.

So, I'm currently looking at trading in my car (let's say value = $8k) and either:
- buying a 1-2 year old car with 15000-25000 kms on it (let's say $27,500-30,000) and financing the difference, OR
- leasing a new one (list price - let's say $37k)

Yes, I realize I'll pay a bit more in the long run for leasing, but
- can I expect to have a dealer move more $$/% when negotiating a new car vs a 1-2 year used car? or the other way around?
- with CCA/depreciation, it seem like the tax deductions are more attractive for leasing, and it seems like other allude to this... has anyone got a detailed explanation here or have an article that breaks it down clearly with examples?

Lastly, if I do lease, am I right in strategy to negotiate an out-the-door price for a new vehicle, and then switch to a lease model at the end?
I feel like I have to get a PhD in car-buying just to avoid all the tricks & traps. Is there something like CarCostCanada but that helps me negotiate a smart lease?

Thanks folks.
9 replies
Sr. Member
Jan 13, 2005
981 posts
220 upvotes
Montreal
Yes, I realize I'll pay a bit more in the long run for leasing, but

You do not. Leasing is just a way of financing the car. Like buying and paying over a few years.

Whatever option has the lowest interest rate is the better option.

The rate at which you change your car will determine your cost. You could lease the car then buy it at the end, it makes no difference. (Of course paying 8% interest on the loan vs 1.9% loan will make you think twice about buying). Still, keeping the car for longer will be cheaper. I recommend this book if you can read French :http://www.brassardgouletyargeau.com/pu ... nance.aspx

Change the car every 3 years will cost you more than every 5 years. Regardless of buying or leasing.

Leasing has some advantages like: you know in advance the price that the dealer will let you buy the car at the end (if you wish so). You don't have to keep the car if you don't like it (say it could be a lemon).
Deal Addict
Jan 6, 2015
2860 posts
784 upvotes
Toronto, ON
Always negotiate the price up front. Than work on leasing at the end after the price is settled. Don't let the idiot sales person give you "monthly" numbers which mean jack *****.
Deal Fanatic
User avatar
Nov 7, 2006
7523 posts
460 upvotes
Toronto
Go in with the mindset that you will not buy out at lease end. It never works out IMHO.

The whole point about leasing, at least to me, is to drive a new car every 2 years (maybe 3 in some circumstances) and walk away...while having some perks for the tax deduction.

One way to get cheap monthly payment leasing is high residual and that negates the attractiveness to buyback at the end. Lease rate can be low but it won't be less than zero.

Best lease are those with big $$$ incentives off MSRP and the saving is accounted for in the lease obligation. Other than that, a 0.5% (or zero if there is one) lease rate combined with a high residual value to make payments low.
Deal Expert
User avatar
May 10, 2005
36997 posts
11419 upvotes
Ottawa
If you are a business owner then you have an accountant. That is the person to ask all your questions.
They have your business in mind as well as your taxes and benefits.
“Those people who think they know everything are a great annoyance to those of us who do.”
Deal Addict
User avatar
Nov 26, 2003
1286 posts
355 upvotes
IMO if you are just charging the tax free km rate to the company, whether you lease or buy will have no impact. So what you need to do is estimate what will have a lower annual cost to which I think the obvious answer is buying used, reselling in a few years, repeat.
Deal Expert
Feb 29, 2008
30106 posts
5547 upvotes
Montreal
If you own the car personally, which is what you seem to want to do, then CCA is irrelevant. In that case, you drive the car owned by yourself, and the corp pays you a per km allowance of 54 cents for all business trips only. This allowance is non taxable to the individual, and an expense for the corp.
Deal Addict
Sep 10, 2008
1016 posts
260 upvotes
Ottawa
camzie wrote: IMO if you are just charging the tax free km rate to the company, whether you lease or buy will have no impact. So what you need to do is estimate what will have a lower annual cost to which I think the obvious answer is buying used, reselling in a few years, repeat.
This is the correct advice. What you pay out of pocket to drive will have no connection to your corporate finances.

Lease or buy depends on a big pile of variables, but key are the interest rates and whether you expect to switch cars in a few years.
Deal Fanatic
Nov 23, 2008
7140 posts
3513 upvotes
camzie wrote: IMO if you are just charging the tax free km rate to the company, whether you lease or buy will have no impact. So what you need to do is estimate what will have a lower annual cost to which I think the obvious answer is buying used, reselling in a few years, repeat.
I second this. If you own outright a good, RELIABLE, non gas guzzler, you can drive it for hundreds of thousands of km and you'll be laughing all the way to the bank with your 54c per km that you charge to the company!
Deal Expert
Feb 29, 2008
30106 posts
5547 upvotes
Montreal
SomeOtherDude wrote: I second this. If you own outright a good, RELIABLE, non gas guzzler, you can drive it for hundreds of thousands of km and you'll be laughing all the way to the bank with your 54c per km that you charge to the company!
In the OPs case, that 54c applies to business mileage only or or 40% of total km driven annually.

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