# Vehicle finance vs lease for self-employed



## Zzed

Hi,

I'm a self-employed consultant with a steady client that requires a car for my job.

I was wondering if I should finance or lease a new car?

Approximately what percentage of owning the vehicle is tax deductible? (including parking spot, maintenance, gas, auto insurance)

Thanks for your help.


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## FrugalTrader

First, if you buy a vehicle that used for both personal and business, you'll need to track your business travel (km's). So what you can claim depends on the percentage you use for business.

If you finance, you can claim the percentage of interest, depreciation, maintenance, license, insurance, gas etc.

Lease payments are considered depreciation payments, so the whole payment is eligible to be deducted if the car is 100% business, otherwise, the percentage used for business can be applied.

Another tip is to perhaps keep a log book for business KM'S travelled.

Note that I'm not an accountant, so the tax pro members will likely have more insight into this.


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## Ihatetaxes

My accountant has always told me to lease and I write off from 50-75% of the cost depending on the year and how much business driving I do. You can't include your commute to and from your office for this.

For the first time in 20 years I bouught my current vehicle and paid cash so while I have less to claim against my taxes (just depreciation on the capital cost, plus a percentage of fuel and maintenance costs) I love not having a car payment so that works for me.

I am telling myself I will never lease again but I am so addicted to cars I hope its a promise I can keep.


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## I'm Howard

Self employed keep costs to a minimum, don't let the Tax Tail wag the business dog.

Deductions, Max RRSP's, keep personal debt to a minimum, what you don't spend, Invest.


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## Zzed

I work from a home office, and travel to client sites, I currently share a car with my sig other (under her name), which I consider to be for personal use. 

So the new car will essentially be for work purpose only. i'll have to rent a parking spot for it as well, since we only have one for our unit.

Eventually we may not need a second car anymore, so I suppose a lease option would be the best bet, since more of it can be tax deducted, is that correct?


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## kcowan

Lease is the cleanest and simplest. That plus the parking spot and gas/oil etc and you are done. Make sure that you allow for extra charges upon lease termination.


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## I'm Howard

http://www.leasebusters.com


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## Homerhomer

If you want to keep the car for many years then buy, if you prefer to drive new car every 4 years or so then lease, it is as simple as that.

If you think that you may not need second car at all then buy used car to get you where you need to go and then sell it, trying to get out of the lease before maturity is pretty expensive option.


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## marina628

We leased a car for busienss for many years and had no issues.In 2010 we bought a 'people mover' SUV 7 passenger as we have clients who visit us from Europe and South Africa and we have to get these guys at Airport , host them here and go on meetings with them.We plan events in Canada on their Behalf so need to carry huge boxes of crap around too.
We took possession of a 2011 Mustang GT 500 two months later,this car has custom paint job for the Business logo and really is just for image .It has gotten us some new business as well as in our Industry you need to show your potential clients you are successful and know what you are doing ,what better way then show up in a $100,000 sports car 
Anyway we paid CASH for the sports car and the 'people mover' was $44,000 and we financed $14,000 only.We put through our claim for the HST of almost $20,000 about 8 months ago and CRA audited us ,asked for car logs.We had one car 3 months and the other 5 weeks before our year end.We sent all the logs to them for that time frame.
Then they asked do we have a personal car , we do and we use it all the time.Also my husband is ONLY driver now as I have not driven since i was in an accident many years ago.
Anyway they asked us two months ago to give us up to date auto logs which we did and they basically accused us of lying because the sports car had only 700km on it more on new log as old log.Reason is we keep it in storage for the winter *duh!*.That seemed to piss them off and we told them the sports car is investment in our image so it will be used maybe 3000km a year.Really we only have the one company car we use year round.
They still have not paid us the HST refund and then asked us what car we have for personal use which we told them.
We have done 15,000 km combined on two company cars in 8 months and done about 15,000 on our personal car.We bought these as we needed write offs but also practically we needed the people mover but WANTED the sportscar.
We do 1-2 meetings in the city a week and have the lunch receipts and contracts of mid to high $xx,xxx to prove these are legitimate meetings.I really do not know what else we have to do to get this HST check lol .We took the small loan thinking we will use HST check to pay it off .


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## I'm Howard

Rev Canada have too many people working for them, they have become very agressive and are most confrontational trying to provoke a response.

Cars can be a real pain, they will demand documentation ad infinitum, trying to wear you down.

They will make a career out of your tax return.


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## marina628

I just hope they have to pay interest lol


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## cardhu

Homerhomer said:


> If you want to keep the car for many years then buy, if you prefer to drive new car every 4 years or so then lease, it is as simple as that.


+1


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## Charlie

I've found that between interest and capital cost allowance vs lease the tax deductions are pretty similar over time. So I tend to advise people to go for the better 'deal' that fits their lifestyles and car objectives.

I usually find buying cheaper -- the lease company actuaries are pretty good at their jobs and at valuing cars .


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## fraser

I have had a two car expense audits by CRA. One many years ago, the other within the last few years. Both were desk audits, ie they asked me to send in the receipts, and they were not interested in anything else such as entertainment expenses etc. It must has been a CRA project. In any event it turned out to be a non event. They did not seem interested in the business/personal split (which was about 55/45)-only in the operating expenses etc. They were both non issues. Good job too, because my km logs were not as accurate as they should have been!


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