The decision to lease or buy vehicles is never an easy one, and it should always be based upon the unique requirements of each company. Understanding all the information associated with fleet funding can help bring clarity to the lease-versus-own decision.
Which is Best for You?
From specific cash flow and depreciation advantages to the cost control benefits of a maintenance and fuel program, leasing may be the answer you are looking for. Leasing not only releases capital without decreasing credit lines, it also has tax benefits, since the lease payment can be deducted as an expense.
Developing a customized fleet management program that realizes all the benefits of leasing is our goal with our personalized approach to fleet management.
- Today, current IRS regulations continue to favor corporate leasing versus ownership.
- Many companies make the decision to lease as a hedge against obsolescence.
- Leasing also eliminates the loss on vehicles sold at the end of the term, which provides an economically feasible way to replace vehicles with newer, safer, and more cost-efficient models, resulting in the increased efficiency of your entire fleet.
In addition to cash flow and return on equity, there are other considerations that should be examined when deciding whether to lease or own:
- The Tax Reform Act of 1986 extended the depreciation period for cars and light trucks from three to five years, so corporations must hold vehicles they own for six years or more to fully write them off.
- Lease payments are tax-deductible, so there is a significant benefit to writing these payments off as a business expense.
- There is no Alternative Minimum Tax (AMT) penalty for corporations taking a lease payment deduction in their regular calculations, which can make a significant difference for companies with extensive depreciation from other capital goods.