Business vehicle – lease or buy?

Owning and leasing a vehicle has its own benefits and disadvantages.

 Leasing:

  • Benefits:
    • Monthly lease expense can be claimed
    • Potential upgrade option after a certain period
    • Running costs such as petrol, repairs and registration can be claimed
  • Disadvantages
    • Monthly payments for a vehicle that is not owned
    • No depreciation claim
    • Potential personal use portion payment
    • Only GST can be claimed back on each monthly repayment

Purchasing a vehicle under hire purchase:

  • Benefits:
    • Can claim the interest portion of the repayments of as an expense
    • Repayments are usually smaller than lease payments
    • Vehicle owned at the end of the term
    • The purchase price can be written off as an expense fully over approximately 3 years for a car and longer for a van
    • GST claim for the full purchase price of the vehicle at the start if the business is GST registered
  • Disadvantages:
    • Potential FBT payment on the cost price
    • GST may have to be paid back when the vehicle is sold or traded in
    • If the sale price is more than the book value, depreciation recovered may have to be paid back when selling or trading in the vehicle
    • Deposit
    • Existing vehicle may need to be traded in