Entrepreneurship & Small Business

company lease not as good as car loan for US contractor?

  • Last Updated:
  • Oct 28th, 2017 4:20 pm
[OP]
Newbie
Jun 19, 2017
67 posts
21 upvotes

company lease not as good as car loan for US contractor?

Everyone always says having the company leasing a car is better financially if you are a contractor as you can write off the lease value as an expense. However if you have work travel to the US and no Canadian billing, it seems to me with 20% business use, you end up having to pay even more tax from your personal income as a tax benefit of 80% and not less than $1000 of HST for the benefit. To me it seems this particular case it makes more sense to just buy the car on a car loan and claim the 20% as business use mileage.

My accountant says in this situation it's less tax overall to just take a car loan and buy a 3 year old car. Compared to a lease on a car, best case it is a wash so better to own the car and get money back on the trade-in when it happens in future.

Does anyone have a second opinion or agree with the accountant?
1 reply
Deal Addict
Feb 5, 2009
2809 posts
928 upvotes
Newmarket
gymrat999 wrote: Everyone always says having the company leasing a car is better financially if you are a contractor as you can write off the lease value as an expense. However if you have work travel to the US and no Canadian billing, it seems to me with 20% business use, you end up having to pay even more tax from your personal income as a tax benefit of 80% and not less than $1000 of HST for the benefit. To me it seems this particular case it makes more sense to just buy the car on a car loan and claim the 20% as business use mileage.

My accountant says in this situation it's less tax overall to just take a car loan and buy a 3 year old car. Compared to a lease on a car, best case it is a wash so better to own the car and get money back on the trade-in when it happens in future.

Does anyone have a second opinion or agree with the accountant?
Not everyone says lease is always better, and the once who do are simply wrong.
Since you mention taxable benefit I assume you are a corporation, with 20% business use almost in no circumstances it makes sense for the corporation to purchase or lease the car because of the taxable benefits (it should be leased or purchased personally), and if the automobile use for business is less than 50% you can't claim any itc. Rules are different for self employed.
In most cases it is better to lease a car if you plan on getting a new car every 4 years or less, if you plan on keeping them for long term or run them to the ground you are better off buying.

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