One of the first purchases that a person just starting a business decides is a company car. And usually the question is – credit or leasing? Therefore, Tax Care checked what financing method for buying a company car is more attractive in terms of tax, which allows reducing the effective cost of buying a car.
We compared the terms of purchase of passenger cars worth 65 thousand. PLN and 180 thousand PLN assuming that:
1. in both cases the repayment lasts five years,
2. the commission is 5%,
3. own contribution is 10%
4. the entrepreneur is taxed on a straight-line basis
5. the car is a fixed asset for 5 years.
We also assumed that the entrepreneur chooses between credit and operational leasing (financial leasing is possible, but from a tax point of view it is very similar to credit, and definitely less popular among lessees). The calculations did not take into account the costs of motor insurance, such as AC, OC and GAP.
The effective cost of buying a car.
The simulation carried out by Tax Care shows that the effective cost of buying a car worth 65,000 PLN (including inclusion in the costs of interest on the loan and deduction of VAT), is PLN 57,465.45. The same car in leasing would cost the entrepreneur effectively PLN 56,413.27, so in the final analysis it would be over PLN 1,052 cheaper than a car in a loan. However, with both loans and leasing, the tax shield would mean that the purchase cost would be several thousand zlotys lower than the gross price.
In turn, the effective cost of buying a car worth 180 thousand. PLN would amount to PLN 184,811,80 thousand PLN for loans and PLN 164,819.80 for leasing. Therefore, the difference in the effective purchase cost reaches almost 20 thousand. Golden. What’s more, in the case of credit, the cost of acquisition would be almost 5,000. PLN higher than the gross price, while in the case of leasing – almost 15,000. PLN lower than the price in the salon. So it is clear that the use of leasing is particularly profitable for more expensive cars.
Limit on depreciation
What is the difference? Well, in the case of a passenger car, the entrepreneur has to take into account restrictions when settling costs. This applies to cars whose value is higher than 20 thousand. Euro (this amount is converted into PLN at the average exchange rate announced by the Bank of the Nation on the day the car is put into service). In this situation, the surplus over this amount cannot be counted as costs. However, such a restriction does not apply to cars leased – in this case, the lessee without restrictions includes the cost of all leasing installments, as well as the initial rent and handling charges. This form of financing will therefore be particularly beneficial for those entrepreneurs who buy an expensive passenger car.