If you are a self-employed entrepreneur, you probably need a car to run your company. But which is more advantageous: leasing a car or buying one? In this article, we will compare the different advantages and disadvantages of both options so you can make a decision.
The difference between leasing or buying a car as a self-employed person?
The difference between leasing and buying a car lies in ownership and financial obligations. When buying a car, you become the owner after making payments. Buying offers full control and value accumulation, but requires higher initial costs and ongoing maintenance.
Leasing , on the other hand, offers lower monthly payments and less worry about maintenance, but you do not build up equity and have to return the car at the end of the lease, in an operating or short lease. View the different leasing options here.
The pros and cons of car leasing
| ✅Advantages | ❌Cons |
| Predictable monthly costs | Higher monthly costs |
| No major investment required | Contractual obligations |
| Including maintenance and repairs | No immediate ownership |
| No worries about depreciation | Potential extra costs (more driving than expected) |
Tip:
For more info, be sure to view our article on the pros and cons of car leasing for a sole proprietor!
Buying a company car: the pros and cons
| ✅Advantages | ❌Cons |
| Negotiation opportunities and offers | Maintenance and repair costs |
| Possibility to pay once | Large investment |
| You can personalise the car ? | Arrange insurance and road tax yourself |
| Sell the car when you want to | Value of car drops over time |
The difference in deductibility of costs
There are also tax aspects to leasing or buying a car. When leasing a car , lease costs are usually deductible as business expenses. This means you have to pay less tax.
When buying a car, the purchase price and the cost of maintenance, insurance and road tax are also deductible as business expenses. But there are limits to how much you can deduct, depending on the car’s CO2 emissions and the type of fuel.
Tip:
Wondering which expenses you can still deduct as self-employed? Then view our list of deductible professional expenses for your accounts!
Lease or borrow a car?
Besides leasing and buying, you can also consider borrowing a car. This means you take out a loan to pay for the car. The car is then yours, but you have to pay back the loan with interest.
The advantage of borrowing is that you can buy the car without having to pay the full purchase price in one go. The disadvantage is that you have to pay interest on the loan, which increases the total cost of the car.
Which is more advantageous car leasing or buying? 🔎
If you are a sole proprietor, the choice between leasing or buying depends on your personal and business needs. Leasing can be a good option if you need a new car regularly and don’t want to worry about maintenance and insurance. Buying may be a better option if you want to keep the car for a long period and you want to have full control over it.
It is important to consider all costs before making a decision. This includes the purchase price or lease cost, the cost of maintenance and insurance, and the tax implications.
