Is It Better to Lease or Buy a Car if Self-Employed?

Factors to Consider When Making the Decision

When deciding whether to lease or buy a car, there are several factors to consider, especially if you are self-employed. Here are some key points to keep in mind:

Tax Implications:

  • Leasing: Lease payments are typically deductible as a business expense, up to certain limits. However, you may have to include an “income inclusion” amount in your income if the car exceeds a certain value.
  • Buying: Loan payments are not directly deductible, but you can deduct business-related car expenses, such as gas, maintenance, and repairs.

Upfront Costs:

  • Leasing: Leases often have lower upfront costs, including down payments and monthly payments, compared to buying.
  • Buying: Buying a car typically requires a larger down payment and higher monthly payments.

Long-Term Costs:

  • Leasing: Over the long term, leasing is usually more expensive than buying, as you do not build equity in the car.
  • Buying: Buying a car can be more cost-effective in the long run, especially if you keep the car for several years and pay off the loan.


  • Leasing: Leases typically have mileage limits, and exceeding these limits can result in additional charges.
  • Buying: There are no mileage restrictions when you buy a car.

Personal Preferences:

  • Leasing: Leasing offers the flexibility to drive a newer car every few years without the long-term commitment of ownership.
  • Buying: Buying a car gives you the freedom to customize and modify it as you wish, and you can sell it whenever you want.

Advantages of Leasing for Self-Employed Individuals:

  • Tax deductions: Lease payments can be deducted as a business expense, reducing your taxable income.
  • Lower upfront costs: Leases typically have lower upfront costs, which can be beneficial for self-employed individuals with limited cash flow.
  • Flexibility: Leases offer the flexibility to upgrade to a newer car every few years, which can be appealing for those who want to stay up-to-date with the latest technology.

Advantages of Buying for Self-Employed Individuals:

  • Long-term savings: Buying a car can be more cost-effective in the long run, especially if you keep the car for several years and pay off the loan.
  • Equity: When you buy a car, you build equity in the vehicle, which can be a valuable asset.
  • Customization: Buying a car gives you the freedom to customize and modify it as you wish, making it more suitable for your business needs.

The decision of whether to lease or buy a car depends on your individual circumstances and financial goals. If you are self-employed, leasing can offer tax advantages and lower upfront costs, while buying can provide long-term savings and equity. Carefully consider the factors discussed above to make the best decision for your business and personal needs.

ACCOUNTANT EXPLAINS: Should You Buy, Lease or Finance New Car?


Is it better to buy or lease a car under an LLC?

Consider a lease, there are (usually) better tax benefits, the vehicle’s basic maintenance is (usually) packaged with the lease, the price per month is (usually) lower, and you can swap it out every few years.

Is it better to lease or buy a car for business tax write off?

The argument for buying a car for business depends on how long a lease on a car is and often you plan on keeping the car. Buying can be a better option if you want to keep the vehicle for longer than three or four years. You can claim tax benefits, including depreciation, and your overall costs are lower.

Is it financially better to own or lease a car?

In the short term, it’s generally cheaper to lease a car due to less stringent down payment requirements, lower monthly payments and minimal maintenance and repair costs. In the long run, however, you may be able to save more by buying a car because you’ll retain all the equity you build as you pay down the loan.

Can I deduct my car payment if I am self employed?

It’s natural for freelancers who use their cars to expect to claim a car tax write-off on their 1099 tax. But if you bought a car and are making monthly payments, or you’re leasing a car, the payments are not actually tax-deductible.

Should I lease a car if I’m self-employed?

Although many self-employed people realize a tax advantage through leasing a car, your specific situation may vary. If you buy a car, you must normally depreciate it, which means spreading the deduction over the useful life of the car and taking a part of the cost over several years.

Should you lease a car for business?

If you lease a car, you might realize a tax advantage over buying one. One of the tax benefits of leasing a car for business is that the IRS allows you to deduct your lease payments, typically in full. If you also use the car for personal reasons, you must prorate your lease payments based on the percentage driven for business reasons.

Can I claim mileage if I lease a car for business?

Keep in mind that whether you lease or own your car used for business, you have to pick between standard mileage rate (deducting business miles driven) and claiming actual expenses (which would include car payments or lease payments.

Should you buy or lease a car?

Ultimately, a vehicle purchase or lease is a big expense for your business. Look at the problem from all angles before committing. How much you drive: Lease contracts typically limit the number of miles the car can be driven to 10,000 or 15,000 miles per year. Once you exceed that limit, you may be penalized 10 to 30 cents per additional mile.

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