3 Reasons to Get a Company Car : Insurance, Lease & Gas

Look, I like to make money and I like to save money. That’s just the way it is and being a small business owner, I’m going to have the company pay for as many of my expenses as possible so I don’t have to pay out of my own wallet. That’s the American Dream.

As any money-savvy business owner knows, there are always ways to save money without sacrificing quality. Obtaining a company car is no different. Being a business owner, I am always working, 24/7, and while driving the car or getting gas, is no different. While it may seem more financially sound to own the company car, here are three reasons why leasing is a much better option.

1. Leases are Tax Write Offs

While it’s somewhat of a pain, you will need to log all the time spent in the car, focusing mostly on miles. The IRS will allow you to write off either the standard rate or the actual cost of the miles used. The standard rate is set each year and can be checked on the IRS’ Website.

Once obtaining the standard rate, to find the standard rate deduction, multiply the activity miles by the standard rate. To find the actual cost deduction, divide business miles by total miles. Then multiply by the total cost.

It’s also important to keep track of your annual lease payments. As with miles, this is tax deductible. To find how much is available, deduct the business-use percentage of the lease payments.

2. Maintenance and Gas is Tax Deductible

Car maintenance and gas are inescapable aspects of any type of car ownership. Except with a leased business car, when you get an oil change, it’s tax deductible. Just remember to keep track of it.

Any type of car maintenance and gas used for business purposes is tax deductible. The percentage of available tax-deduction is relative to the percentage of business use that you are claiming.

Remember, the higher the percentage of business use, the higher the tax-deductible amount.

3. Car Insurance as a Business Expense

You will naturally want to have car insurance for your leased car. Be sure to have insurance that covers liability, damages and other losses. These premiums can be deducted. Again, instead of paying for your car insurance yourself, the company now does it. If you think about it, by transitioning your car payment and insurance to your company, you can save yourself around $500 to $700 per month in personal expenses, not to mention gas.

Of course, conditions apply. The amount that can be claimed depends on factors like claiming the standard mileage reduction and the percentage of business use. If you use the IRS’ standard mileage rate, you can’t deduct insurance because it is already taken into account.

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Comments

  1. Kevin's Gravatar Comment by Kevin on February 2nd, 2010 at 9:53 pm

    Nice…you’re wrong on politics AND your financial advice sucks. Leasing a car is never a good financial decision. EVER.

  2. Alliance United's Gravatar Comment by Alliance United on January 27th, 2011 at 3:52 am

    Need information from professional in auto insurane. I am aware a number individuals who sent in their personal details in to one of the many “online automobile insurance quotes” and after this they have solicitors around them, emails, on the phone, junk postal mail as well as one case of Social Security Identity theft. Thus my real question is: Are these online automobile insurance quotes truly safe? Doesn’t it seem appropriate to stay with a local auto insurance agent you can do business with either on the telephone or even in person.

  3. Anon's Gravatar Comment by Anon on May 20th, 2011 at 5:16 am

    Kevin — you’re correct when it comes to personal vehicles, but when you’re talking about company cars and tax write-offs, leases are MUCH better. You cannot deduct car loan payments as a business, but you can deduct depreciation. However, when you run the numbers, you’ll save a lot more by leasing the car and writing it off than buying it.

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